<PAGE> 1
As filed with the Securities and Exchange Commission ________ ____, 1996
Registration No. ________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1993
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2CONNECT EXPRESS, INC.
(Name of Small Business Issuer in its Charter)
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FLORIDA 5731 65-0674664
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(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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1700 N.W. 65TH AVENUE
PLANTATION, FLORIDA 33313
(954) 797-7960
FACSIMILE: (954) 797-8636
(Address and Telephone Number
of Principal Executive Offices and Principal Place of Business)
MARC D. FISHMAN
CHIEF EXECUTIVE OFFICER AND PRESIDENT
1700 N.W. 65TH AVENUE
PLANTATION, FLORIDA 33313
TELEPHONE: (954) 797-7960
FACSIMILE: (954) 797-8636
(Name, Address and Telephone Number of Agent for Service)
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Copies to:
ARNOLD M. JAFFEE, ESQ. CHARLES B. PEARLMAN, ESQ.
ADORNO & ZEDER, P.A. ATLAS, PEARLMAN, TROP & BORKSON, P.A.
2601 SOUTH BAYSHORE DRIVE 200 EAST LAS OLAS BOULEVARD
SUITE 1600 SUITE 1900
MIAMI, FLORIDA 33133 FORT LAUDERDALE, FLORIDA 33301
TELEPHONE: (305) 858-5555 TELEPHONE: (954) 763-1200
FACSIMILE: (305) 858-4777 FACSIMILE: (954) 766-7800
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM OFFERING MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SECURITY(1) PRICE REGISTRATION FEE
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Common Stock, par value
$.01 per share (2) ........... 1,150,000 Shs. $ 8.00 $9,200,000 $2,787.88
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Redeemable Common Stock
Purchase Warrants (3)......... 747,500 Wts. .10 74,750 22.65
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Common Stock, par value
$.01 per share (4) (5)........ 747,500 Shs. 12.00 8,970,000 2,718.18
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Underwriter's Warrants (6).... 115,000 Wts. .01 1,150 .35
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Common Stock, par value
$.01 per share (7)............ 115,000 Shs. 9.60 1,104,000 334.55
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Common Stock, par value
$.01 per share (8)............ 375,000 8.00 3,000,000 909.09
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Total $6,772.70
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(1) Estimated solely for purposes of computation of the registration fee
pursuant to Rule 457.
(2) Includes 150,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(3) Includes 97,500 Redeemable Common Stock Purchase Warrants ("Warrants")
issuable upon exercise of the Underwriters' over-allotment option.
(4) Represents shares of Common Stock issuable upon exercise of the Warrants.
(5) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution
provisions of the Warrants.
(6) Includes 15,000 Underwriter's Warrants issuable upon exercise of the
Underwriters' over-allotment option.
(7) Represents shares of Common Stock issuable upon exercise of the
Underwriter's Warrants.
(8) Represents shares being registered for resale by certain shareholders of
the Registrant.
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 SUCH SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering of 1,000,000 shares of Common Stock and
650,000 Redeemable Common Stock Purchase Warrants (the "Prospectus") and one to
be used in connection with the sale of 375,000 shares of Common Stock by
certain selling stockholders (the "Selling Stockholder Prospectus"). The
Prospectus and the Selling Stockholder Prospectus will be identical in all
respects except for the alternate pages for the Selling Stockholder Prospectus
included herein which are labeled "Alternate Page for Selling Shareholder
Prospectus."
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2CONNECT EXPRESS, INC.
CROSS REFERENCE SHEET
Showing Location in Prospectus of Part I Items of Form SB-2
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Item Number and Heading
in Form SB-2 Registration Statement Location in Prospectus
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1. Front of Registration Statement and Outside
Front Cover Page of Prospectus................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................... Inside Front Cover Page; Outside Back Cover Page
3. Summary Information and Risk Factors.......... Prospectus Summary; Risk Factors
4. Use of Proceeds............................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price............... Outside Front Cover Page; Risk Factors; Underwriting
6. Dilution...................................... Risk Factors; Dilution
7. Selling Security Holders...................... Not Applicable
8. Plan of Distribution.......................... Outside Front Cover Page; Underwriting
9. Legal Proceedings............................. Not Applicable
10. Directors, Executive Officers, Promoters
and Control Persons........................... Management; Principal Shareholders
11. Security Ownership of Certain Beneficial
Owners and Management......................... Management; Principal Shareholders
12. Description of Securities..................... Risk Factors; Capitalization; Management; Description of
the Securities; Shares Eligible for Future Sale
13. Interest of Named Experts and Counsel......... Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Management
15. Organization Within Last Five Years........... Management; Principal Shareholders; Certain
Transactions
16. Description of Business....................... Prospectus Summary; Business
17. Management's Discussion and Analysis or Plan
of Operation.................................. Management's Plan of Operation
18. Description of Property....................... Proposed Business
19. Certain Relationships and Related Transactions Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters........................... Outside Front Cover Page; Risk Factors; Dividend Policy;
Description of the Securities; Shares Eligible for Future
21. Executive Compensation........................ Management; Executive Compensation
22. Financial Statements.......................... Financial Statements
23. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure.................................... Not Applicable
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<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER ___, 1996
PROSPECTUS
1,000,000 SHARES OF COMMON STOCK
650,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
2CONNECT EXPRESS, INC.
The 1,000,000 shares (the "Shares") of Common Stock, par value $.01 per
share (the "Common Stock"), and 650,000 Redeemable Common Stock Purchase
Warrants (the "Warrants") offered hereby are being issued and sold by 2Connect
Express, Inc. ("2Connect" or the "Company"). Each Warrant entitles its holder
to purchase one share of Common Stock at a price of $_____ per share (150% of
the initial public offering price of the Common Stock), subject to adjustment
in certain events at any time commencing ______, 1998 (one year from the date
of the Prospectus) through _______, 2002 (five years from the date of this
Prospectus). The Common Stock and Warrants will be separately tradeable as of
the date of this Prospectus. Investors may purchase Common Stock, Warrants or
both securities. Application has been made for inclusion of the Common Stock
and Warrants on the Nasdaq Small Cap(R) market under the symbols CNCT and
CNCTW, respectively.
The Warrants may be redeemed by the Company at any time upon 20 days'
notice commencing _______, 1998 (one year after the date of this Prospectus)
at a price of $.01 per Warrant if the average closing bid price of the Common
Stock is at least $_____ per share (170% of the initial public offering price
of the Common Stock) for a period of 20 consecutive trading days ending within
10 days prior to the date the Warrants are called for redemption. See
"Description of Securities--Redeemable Common Stock Purchase Warrants."
Prior to this offering, there has been no public market for the Common
Stock or Warrants and there can be no assurance that such a market will develop
after the completion of this offering or, if developed, that it will be
sustained. The initial public offering price of the Shares and the Warrants
and the exercise price and other terms of the Warrants will be determined by
agreement between the Company and Sovereign Equity Management Corporation (the
"Managing Underwriter") and will not necessarily be related to the assets, book
value or any other established criterion of value. See "Risk Factors" and
"Underwriting." It is presently anticipated that the initial public offering
price of the Common Stock will be between $6.00 and $8.00 per share and the
initial public offering price of the Warrants will be between $.09 and $.11 per
Warrant.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" ON PAGES 4 THROUGH 11 AND "DILUTION."
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THE WARRANTS OFFERED HEREBY ARE NOT EXERCISABLE UNTIL ONE YEAR FROM THE
DATE OF THIS PROSPECTUS. HOLDERS OF THE WARRANTS WILL BE ABLE TO EXERCISE THE
WARRANTS ONLY IF A CURRENT PROSPECTUS UNDER THE SECURITIES ACT OF 1933 RELATING
TO THE UNDERLYING SHARES OF COMMON STOCK IS THEN IN EFFECT AND SUCH SECURITIES
ARE QUALIFIED FOR SALE OR EXEMPT FROM QUALIFICATION UNDER THE APPLICABLE
SECURITIES LAWS OF THE STATES IN WHICH THE VARIOUS HOLDERS OF WARRANTS RESIDE.
ALTHOUGH THE COMPANY HAS UNDERTAKEN TO USE ITS BEST EFFORTS TO MAINTAIN THE
EFFECTIVENESS OF A CURRENT PROSPECTUS RELATING TO THE SHARES OF COMMON STOCK
UNDERLYING THE WARRANTS, THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL BE
ABLE TO DO SO.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Public Underwriting Discounts Proceeds to Company(2)
and Commissions(1)
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Per Share............... $ $ $
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Per Warrant............. $ $ $
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Total(3) $ $ $
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(1) Does not reflect additional compensation to be received by the
Underwriters in the form of: (i) a non-accountable expense allowance equal
to 3% of the gross proceeds of this offering, and (ii) 100,000 warrants
(the "Underwriter's Warrants") at an exercise price of $___ per warrant
(120% of the initial public offering price of the Common Stock),
exercisable for a period of four years, commencing one year after the
effective date of the Registration Statement of which this Prospectus is
a part. The Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company,
estimated to be $550,000.
(3) The Company has granted to the Underwriters a 45-day option to purchase
up to 150,000 additional shares of Common Stock and 97,500 additional
Warrants upon the same terms and conditions offered hereby, solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions, and
Proceeds to Company will be $________, $_______, and $________,
respectively. See "Underwriting."
The Common Stock and Warrants are offered by the several Underwriters,
subject to prior sale, when, as and if received and accepted by them, subject
to their right to reject orders in whole or in part and subject to certain
other conditions. It is expected that delivery of the Common Stock and the
Warrants will be made against payment at the offices of Sovereign Equity
Management Corporation, Boca Raton, Florida, on or about ____________, 1997.
SOVEREIGN EQUITY MANAGEMENT CORPORATION
______________, 1997
<PAGE> 5
DEPICTION OF 2CONNECT STORE
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OR WARRANTS OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
The Company intends to furnish to its security holders annual reports
containing audited financial statements and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.
<PAGE> 6
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and the financial statements,
including the notes, thereto appearing elsewhere in this Prospectus. Investors
should carefully consider the information set forth under the heading "Risk
Factors." Unless otherwise indicated, all financial information and share data
in this Prospectus assumes no exercise of the Underwriters' over-allotment
option or the Underwriter's Warrants.
THE COMPANY
The Company, a development stage company which was incorporated in April
1996, intends to become a specialty retailer of Internet, cellular, PCS,
paging, telephone, satellite and other communication-related services and
products under the name "2Connect".
Since inception, the Company has developed a business plan for the
Company's operations and proposed expansion in South Florida; hired the
executive and support personnel necessary to support the Company's proposed
expansion in South Florida for the next six months; hired its first Market
Developer, Store Manager, Assistant Store Manager, Web Master and other Sales
Associates; developed a standard 2Connect store design for its shopping mall
and power center stores; engaged a site selection and construction oversight
contractor to aid the Company in selecting and securing store sites and to
oversee store construction; entered into a lease for the first 2Connect store
site location; commenced the development of its first 2Connect store;
identified and commenced negotiations for eight additional 2Connect store site
locations in South Florida; entered into agreements with service providers and
product vendors; developed a marketing strategy; and raised an aggregate of
$3,237,350 in net proceeds through private equity offerings. The Company
expects to open its first 2Connect store in Coral Springs, Florida, in
November 1996.
The Company will seek to differentiate its 2Connect stores and establish a
foundation for growth by emphasizing the following strategic elements:
ONE-STOP SHOP. The 2Connect stores are intended to serve as a
central retail location for customers to purchase Internet,
cellular, paging, PCS, telephone and satellite TV services, in
each instance from one or two leading service providers, and
related products and accessories from an array of leading
manufacturers. As an independent retailer, the Company will be
able to select from among the available service providers and
manufacturers in choosing services and products to offer its
customers.
QUALITY IN-STORE SERVICE. The Company believes that it will be
able to attract and retain customers by providing a high level of
service and consultation and by educating its customers as to the
many benefits and advantages of the services and products offered
by the Company.
COMPETITIVE PRICING/VALUE TO CUSTOMERS. The Company believes that
it will be able to offer savings to its customers by providing
individualized communications solutions designed to meet its
customers' particular needs. The Company will provide free
in-store analysis of customers' communications and information
service bills (Internet, cellular, PCS, paging, long distance
telephone and TV programing), and advise customers of potential
savings and ways to increase the value of their communications and
information services. The Company also believes that it will be
able to offer competitive pricing on products and accessories.
ATTRACTIVE STORE DESIGN AND LAYOUT. The design and layout of the
2Connect stores is intended to be visually appealing and inviting,
and functional in its presentation of the services and products to
be offered.
<PAGE> 7
OPPORTUNITY TO SAMPLE SERVICES AND PRODUCTS. The 2Connect stores
will provide customers with the opportunity to sample within the
store many of the services and products available for sale, and
Company personnel will be available to provide guidance and
instruction for many of these services and products.
INDEPENDENT DISTRIBUTION CHANNEL. The Company seeks to create, to
the extent possible, an independent distribution channel for
Internet, PCS, cellular, paging, long distance telephone, and
satellite TV services and products that is capable of retailing
any brand or type of such services or products, irrespective of
advances in technology, changes in consumer preferences, shifts in
service or product brand name recognition or changes in government
regulation.
QUALITY MANAGEMENT AND EMPLOYEES. The Company seeks to attract,
develop and motivate its employees through competitive
compensation, benefits and bonus programs, comprehensive training
programs, and defined career paths and advancement opportunities.
The Company has established a Market Development Program. Under
this program, the Company will hire a Market Developer in each
geographic market where the Company intends to establish 2Connect
stores. These Market Developers will be selected on the basis of
their retail operating experience, knowledge of the Company's
proposed business and of the particular geographic market, and
they will be responsible for overseeing and managing the
development of 2Connect stores within their respective geographic
markets, including the financial performance of the 2Connect
stores, store operations, product and service pricing, and
promotional activities. Market Developers will be compensated
based upon the financial performance of the 2Connect stores under
their supervision. The Company believes that its Market
Development Program will provide incentive to the Market
Developers to actively manage and develop 2Connect stores and
dedicate Company resources to maintain the good will of 2Connect
customers who have subscribed for services through 2Connect, and
will enhance its ability to open new 2Connect stores.
The Company expects that the 2Connect stores will generate revenue from
four primary sources. The Company expects to receive an activation commission
from Internet on-line service providers, cellular and PCS telephone service
carriers, pager service carriers, and long distance telephone service carriers
when a customer initially subscribes for the related services. The amount of
the activation commission paid by the service carriers is based upon various
service plans offered by these carriers. The second source of revenue the
Company expects to receive is from monthly payments made by the service
carriers to the Company based upon a percentage of the customers' usage. These
payments, generally referred to as residual payments, are calculated based on
the amount of the service billings generated by the base of customers activated
by the Company on the particular service provider's system. The third source
of revenue the Company expects to receive is from the sale of in-store services
such as use of Internet stations, creation of web pages, and technician
consulting. The fourth source of revenue the Company expects to receive is
from the sale of the various hardware products, accessories, and information
services offered at the 2Connect stores.
The Company's executive offices are located at 1700 N.W. 65th Avenue,
Plantation, Florida 33313. The Company's telephone number is (954) 797-7960.
<PAGE> 8
THE OFFERING
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Common Stock Offered by the Company.................... 1,000,000 shares
Redeemable Common Stock Purchase Warrants Offered
by the Company......................................... 650,000 Warrants
Common Stock to be Outstanding after this Offering..... 6,410,000 shares of Common Stock(1)
Warrants to be Outstanding after this Offering......... 650,000 Warrants
Use of Proceeds........................................ The Company intends to apply the
net proceeds from this offering to
the development of 2Connect
stores; organizational, general
and administrative expenses; and
working capital and general
corporate purposes. See "Use of
Proceeds."
Risk Factors........................................... An investment in the Common Stock
and Warrants offered hereby
involves a high degree of risk.
See "Risk Factors."
Proposed NASDAQ Small Cap(R) Market Symbols:
Common Stock........................................... CNCT
Warrants............................................... CNCTW
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(1) Excludes (i) 650,000 shares of Common Stock underlying the Warrants which
have an exercise price equal to $___ per share; (ii) 598,000 shares
issuable upon exercise of stock options outstanding with a weighted
average price of $.80 per share; (iii) 1,402,000 shares reserved for
issuance upon exercise of options that may be granted under the Company's
1996 Stock Option Plan; (iv) 100,000 shares of Common Stock reserved for
issuance upon exercise of options that may be granted under the Company's
Directors' Option Plan; and (v) 100,000 shares of Common Stock issuable
upon exercise of the Underwriter's Warrants (exercise price $____). See
"Executive Compensation--Director Compensation", "--1996 Stock Option
Plan", "Description of Securities--Warrants" and Note 6(a) of Notes to
Financial Statements.
CONCURRENT OFFERING
The Registration Statement, of which this Prospectus forms a part,
contains a separate prospectus with respect to a concurrent offering (the
"Concurrent Offering") by certain selling shareholders of 375,000 shares (the
"Shelf Registration Shares") of Common Stock. The holders of the Shelf
Registration Shares have agreed not to, directly or indirectly, sell, transfer,
hypothecate, or otherwise encumber their Shelf Registration Shares for a period
of 180 days following the date of consummation of the Concurrent Offering. See
"Risk Factors--Shares Eligible For Future Sale".
<PAGE> 9
RISK FACTORS
Prospective investors should carefully consider the factors set forth
below, in addition to the other information contained in this Prospectus, in
evaluating the Company and its proposed business before making an investment
decision.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK.
This Prospectus contains many forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including statements regarding, among other
items, (i) the Company's proposed business and (ii) the Company's expansion
strategy. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties, certain of
which are beyond the Company's control. Actual results could differ materially
from these forward-looking statements as a result of the factors described in
"Risk Factors." In light of these risks and uncertainties, there can be no
assurance that the results anticipated by the forward-looking information
contained in this Prospectus will in fact transpire.
RECENT ORGANIZATION; DEVELOPMENT STAGE COMPANY; ANTICIPATED OPERATING LOSSES.
The Company was organized in April 1996, and is in the development stage.
The Company has not yet commenced operations of any 2Connect stores, has not
generated any operating revenue to date, and will not generate any revenue from
operations until after the Company opens its first 2Connect store, which the
Company anticipates will occur in November 1996. Because the Company intends
to increase its level of activities substantially following the consummation of
this offering and, in connection therewith, will incur significant costs and
expenses relating to the opening of the 2Connect stores, the Company
anticipates that it will incur losses until, at the earliest, the Company
establishes a number of 2Connect stores generating sufficient revenue to offset
its operating costs and the costs of its proposed continuing expansion. There
can be no assurance that the Company will be able to successfully establish any
2Connect stores or a sufficient number of stores to generate meaningful revenue
or achieve profitable operations. The Company is subject to numerous risks,
expenses, problems and difficulties typically encountered in establishing a new
business. See "Proposed Business."
PROPOSED PLAN OF OPERATION.
The Company's proposed plan of operation and prospects are dependent upon,
among other things, achieving market acceptance of the 2Connect retail concept,
hiring and retaining skilled management, market managers, store managers, and
other personnel, identifying and acquiring suitable 2Connect store sites,
identifying in a timely manner the type or types of 2Connect stores on which
the Company should focus its development efforts, identifying and engaging
reliable construction contractors, in a timely manner developing and
constructing 2Connect stores, procuring supply contracts favorable to the
Company pursuant to which the Company will offer to its customers Internet,
cellular, PCS, paging, telephone, satellite and other communication services,
procuring product supply contracts favorable to the Company, and successfully
managing growth, if any. The Company has no experience in developing or
operating 2Connect stores, or in developing a retail 2Connect store system, and
the lack of success or closing of any 2Connect stores developed by the Company
(and any continuing lease obligations and/or the write-off of non-recoverable
construction and development costs) could have a material adverse effect upon
the Company. There can be no assurance that the Company will be able to
successfully implement its business plan or that unanticipated expense,
problems or difficulties will not result in material delays in its
implementation. In the event that the Company is not successful in
implementing its business plan, purchasers of the Common Stock or Warrants
offered hereby could lose all or a substantial portion of their investment.
See "Proposed Business."
4
<PAGE> 10
POSSIBLE NEED FOR ADDITIONAL FINANCING.
The Company is dependent upon the proceeds of this offering, existing
cash, anticipated supplier incentives, and cash flow from operations, if any,
and other financing to implement its proposed business plan. The Company
believes that the proceeds from the sale of the Shares and Warrants offered
hereby will enable the Company to satisfy its anticipated financing needs for a
period of at least 12 months following this offering. However, the capital
requirements relating to implementation of the Company's business plan will be
significant. Based on the Company's current assumptions relating to
implementation of its business plan (including the timetable of, and cost
associated with store development), the Company will seek to develop, utilizing
the proceeds of this offering, existing cash, certain anticipated supplier
incentives, and cash flow from operations, if any, 11-16 stores during the 12
months following consummation of this offering. If the Company's plans change,
its assumptions prove to be inaccurate, or the capital resources available to
the Company otherwise prove to be insufficient to implement its business plan
(as a result of unanticipated expenses, problems or difficulties, or
otherwise), the Company will be required to seek additional financing or
curtail its activities. There can be no assurance that the Company will have
sufficient capital resources to permit the Company to open the number or type
of stores currently planned or to otherwise implement such plan. Although the
Warrants will be outstanding upon the consummation of this offering, the
Warrants will not be exercisable for a period of 12 months from the date of
this Prospectus and, in any event, the Company will not be able to depend on
the exercise of the Warrants to provide additional capital at least until such
time, if any, as the market price of the Common Stock exceeds the exercise
price of the Warrants. There can be no assurance that the market price of the
Common Stock will ever reach such level or that the Warrants will be exercised.
There can be no assurance that any additional financing will be available to
the Company on acceptable terms, or at all. Any additional financing may
involve substantial dilution to the interests of the Company's then existing
shareholders.
RAPID EXPANSION; GROWTH STRATEGY.
The Company plans to pursue an aggressive growth strategy, the success of
which will depend upon its ability to develop and open 2Connect stores, and to
operate them profitably. The Company intends to open its first store in
November 1996, and expects to develop and open between 11-16 stores during the
12 months following consummation of this offering, although there can be no
assurance that it will be able to do so. The Company's planned expansion will
present numerous operational and competitive challenges to the Company's
senior management and employees. The members of the Company's management team
have limited experience in developing or successfully operating new business
concepts. There can be no assurance that the Company's management will be
successful in developing or operating 2Connect stores in accordance with the
Company's business plan. See "Proposed Business -- Store Location and
Expansion Strategy."
Achievement of the Company's expansion plans will depend in part upon its
ability to: (i) obtain suitable sites at acceptable costs in potentially highly
competitive real estate markets; (ii) compete successfully in new markets;
(iii) hire, train, and retain qualified personnel, including Market Developers
who are able to develop and manage new markets; (iv) integrate new 2Connect
stores into existing services controls, distribution, inventory and information
systems; (v) maintain service quality controls; and (vi) estimate costs and
avoid significant cost overruns. The Company will incur significant start-up
costs in connection with opening new 2Connect stores, including costs
associated with construction, inventory, fixtures and equipment, and employee
training. There can be no assurance that the Company will achieve its planned
expansion goals, manage its growth effectively, or operate its 2Connect stores
profitably. The failure of the Company to achieve its expansion goals on a
timely basis, if at all, manage its growth effectively, or operate stores
profitably would have a material adverse effect on the Company's results of
operations. See "Use of Proceeds," "Management's Plan of Operation" and
"Proposed Business--Store Location and Expansion Strategy."
The Company may incur substantial expenses identifying and investigating
proposed areas of store development. There can be no assurance that any
expenditures for investigating proposed areas for store development will ever
be recouped. As of the date of this Prospectus, the Company has only
undertaken to open stores in South Florida. The Company has not identified
areas outside of South Florida where additional 2Connect stores will be built,
nor has it conducted the necessary diligence or secured locations, local
5
<PAGE> 11
government permits, construction contractors, Market Developers, store
personnel, or service providers for any 2Connect stores in geographic markets
outside South Florida.
SERVICE PROVIDER RELATIONSHIPS.
The Company's ability to operate successfully and to pursue its expansion
plans will depend in part upon its ability to establish and maintain good
relationships with third-party providers of the various services and products
to be offered at the 2Connect stores. The Company has no operating history of
working with these service providers. These service providers may choose to
directly compete against the Company in delivering their services to consumers,
and, as a result, decide to stop offering their services through the Company,
which would have a material adverse effect upon the Company's business and
prospects. See "Proposed Business -- Service Provider Contracts" and
"Competition."
RELIANCE ON KEY PERSONNEL.
The Company's success will depend to a large degree upon the efforts and
abilities of its officers and key management employees, particularly Marc
Fishman, the Company's Chairman, Chief Executive Officer and President, Steve
Stedman, the Company's Vice President-Finance and Controller, Michael Wichelns,
the Company's Vice President-Operations, Jeff Manly, the Company's Vice
President-Merchandising, and Kevin Killoran, the Company's Manager of Marketing
and Store Development. The loss of the services of one or more of its key
employees could have a material adverse effect on the Company's business and
prospects. The Company has entered into employment and noncompetition
agreements with each of its officers (except for Marc Fishman, whose Employment
Agreement does not limit his right to compete with the Company). Additionally,
in order to implement its plan of operation, the Company will be dependent upon
its ability to hire qualified Market Developers, store managers and other
employees. There can be no assurance that the Company will be able to hire and
retain additional qualified and competent personnel on terms suitable to the
Company, or that the people retained will perform to the standards the Company
will need to successfully execute its strategy. See "Proposed
Business--Business Strategy," "-- Employees," and "Management--Executive
Officers and Directors."
RISK OF OBSOLESCENCE.
The communications industry is characterized by rapidly changing
technology and frequent new service and product introductions. The Company's
success will depend upon its ability to identify and market those services and
products which are in demand. The Company's success will also be affected by
its ability to effectively manage its product inventory levels, and minimize
the levels of slow-moving and obsolete products. See "Proposed
Business--Management Information Systems."
RAPID ADVANCES OF INDUSTRY.
The communications and information industries are fast paced and rapidly
changing. There can be no assurance that the Company's plans as they exist
today will be viable in the future. Shifts in technology, consumer buying
patterns, and government regulations could hinder the Company's strategy and
growth plans.
NEW CONCEPT; UNCERTAINTY OF MARKET ACCEPTANCE.
Mass marketing of Internet, cellular, paging, telephone and satellite
services and related products is a relatively new concept and, consequently,
although there is market demand for these services and products, the level of
market acceptance of a retailer that focuses exclusively on these services and
related products is subject to uncertainty. Moreover, the 2Connect name is not
a recognized brand. The Company has not conducted and does not plan to conduct
concept feasibility or market studies. In addition, the Company has no
marketing experience, has not engaged in any marketing activity to date, and
has not formulated a definitive marketing plan. There can be no assurance that
the Company will be able to formulate a successful marketing
6
<PAGE> 12
plan or that there will be significant market acceptance of the 2Connect
stores. The Company lacks reliable data regarding the level of demand for and
market acceptance of the 2Connect store concept. The Company believes that the
third party service providers of Internet, cellular, PCS, paging, telephone and
satellite TV services are the most widely recognized and utilized retailers of
such services. The Company also believes that a wide variety of retailers have
already developed reputations for offering certain Internet, cellular, PCS,
paging, telephone and satellite TV services and/or products. Accordingly,
achieving consumer awareness of the 2Connect concept is likely to require
substantial effort and expenditures by the Company, and there can be no
assurance that the Company will be successful in this regard. See "Proposed
Business."
BROAD DISCRETION AS TO USE OF PROCEEDS; POTENTIAL CHANGE IN USE OF PROCEEDS.
Substantially all of the anticipated net proceeds of this offering will be
allocated to the development of 2Connect stores, working capital and other
corporate purposes. Accordingly, Management will have broad discretion with
respect to the expenditure of the net proceeds of this offering. Purchasers of
the securities offered hereby will be entrusting their funds to the Company's
management, upon whose judgment such purchasers must depend.
Notwithstanding its plan to develop its business as described in this
Prospectus, future events, including the problems, expenses, difficulties,
complications and delays frequently encountered by businesses, as well as
changes in the economic climate or changes in the distribution of
communications and information technology, may make the reallocation of funds
necessary or desirable. Any such reallocation will be at the discretion of the
Board of Directors. No assurance can be given that any such reallocation, can
or will be successful.
COMPETITION.
The Company is subject to intense competition from existing channels of
distribution, such as service providers, dealers, and retailers. There can be
no assurance that the Company will be able to compete effectively. It is
conceivable that existing retailers could alter their business strategies to
compete more effectively in the communications and information services
category. Additionally, other start-up operations could open in the Company's
targeted markets, thus hindering the Company's growth plans.
The Company believes that if it is correct that there is a need for
accessible retail locations to provide mass market customers with Internet,
cellular, paging, telephone, and satellite services, other existing retailers
will focus on this emerging market, new retailers such as the Company will
emerge to service portions or all of this market, and carriers will seek to
horizontally integrate through entry into the market. On September 11, 1996,
Sprint Corp. announced that it will provide one-stop shopping for phone
services, paging services, prepaid phone cards, Internet access, long-distance
service and eventually local phone service in about 300 square feet of each of
the 6,800 Radio Shack stores. See "Proposed Business--Competition."
CONTROL BY MARC D. FISHMAN.
Upon completion of this offering, Marc D. Fishman, the Company's Chairman,
Chief Executive Officer and President, will own approximately 20.3%
(approximately 19.8% if the Underwriters exercise their over-allotment option
in full) of the outstanding shares of the Common Stock. Pursuant to a ten-year
Voting Trust entered into in June 1996, Mr. Fishman will have the right to vote
approximately 48.4% (approximately 47.3% if the Underwriters exercise their
over-allotment option in full) of the outstanding shares of the Common Stock.
Accordingly, the Company anticipates that Mr. Fishman is likely to continue to
have the ability to control the Company and direct its affairs and business.
7
<PAGE> 13
IMMEDIATE AND SUBSTANTIAL DILUTION.
Purchasers of the Common Stock offered hereby will experience immediate
and substantial dilution of $5.65 per share in the net tangible book value of
their shares. See "Dilution."
ABSENCE OF PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE
VOLATILITY OF STOCK PRICE.
Prior to this offering, there has been no public market for the Common
Stock or the Warrants. There can be no assurance that active trading markets
will develop or, if developed, be sustained upon completion of this offering,
or that the market prices of the Common Stock or the Warrants will not decline
below the initial public offering prices. The initial public offering prices
of the Common Stock and the Warrants will be determined by negotiation between
the Company and the Underwriters, do not necessarily bear any relationship to
the Company's asset value, net worth or other established criteria of value,
and may not be indicative of the prices of the Common Stock or the Warrants
that may prevail in the public market after this offering. Securities of
issuers having relatively limited capitalization or securities recently issued
in an initial public offering are particularly susceptible to volatility based
on the short term trading strategies of certain investors. See "Underwriting."
POSSIBLE DELISTING FROM THE NASDAQ STOCK MARKET AND MARKET LIQUIDITY; LIMITED
UNDERWRITING HISTORY.
The Company's Common Stock and Warrants are expected to be initially
included in the Nasdaq Small Cap(R) Market. If the Company is unable to
satisfy Nasdaq's requirements for continued listing, the Common Stock and
Warrants may be delisted from The Nasdaq SmallCap(R) Market. In such event,
trading, if any, in such securities would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the OTC Bulletin
Board, established for securities that do not meet the Nasdaq SmallCap(R)
Market listing requirements. Consequently, the liquidity of the Company's
securities could be impaired, not only in the number of securities which could
be bought and sold, but also through delays in the timing of transactions,
reduction in security analysts' and the news media's coverage of the Company,
if any, and lower prices for the Company's securities than might otherwise be
attained.
A significant number of shares of Common Stock and Warrants may be sold to
customers of the Underwriters. Such customers may subsequently engage in the
sale or purchase of the securities through or with the Underwriters. Although
they have no obligation to do so, the Underwriters may become market makers and
otherwise effect transactions in securities of the Company, and, if they
participate in such market, may be dominating influences in the trading of the
securities. The prices and the liquidity of the securities may be
significantly affected by the degree, if any, of the participation of the
Underwriters in such market, should a market arise.
Sovereign Equity Management Corporation, the Managing Underwriter for this
offering, was registered as broker dealer in 1987. The Managing Underwriter
has only participated in one public offering as a manager. The Managing
Underwriter intends, though is not obligated, to make a market in the Common
Stock of the Company and in the Warrants upon completion of this offering.
Prospective purchasers of Common Stock or Warrants offered hereby should
consider the limited experience of the Managing Underwriter in evaluating an
investment in the securities of the Company. See "Underwriting."
RISKS OF LOW-PRICED STOCKS; PENNY STOCK REGULATIONS.
If the Company's securities were delisted from the Nasdaq SmallCap(R)
Market, they may become subject to Rule 15g-9 under the 1934 Act, which imposes
additional sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and institutional
accredited investors. For transactions covered by this rule, a broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's Common Stock and
8
<PAGE> 14
Warrants and may affect the ability of purchasers in this offering to sell any
of the Common Stock or Warrants acquired pursuant to this Prospectus in the
secondary market.
The regulations of the Securities and Exchange Commission (the
"Commission") define a "penny stock" to be any equity security that has a
market price (as therein defined) less than $5.00 per share or with an exercise
price of less than $5.00 per share, subject to certain exceptions. The penny
stock restrictions will not apply to the Company's Common Stock or Warrants if
the Common Stock is listed on The Nasdaq SmallCap(R) Market and has certain
price and volume information provided on a current and continuing basis or
meets certain minimum net tangible assets or average revenue criteria. There
can be no assurance that the Company's securities will qualify for exemption
from these restrictions. If the Company's Common Stock or Warrants were
subject to the rules on penny stocks, the market liquidity for the Common Stock
or Warrants could be severely adversely affected.
WARRANTS TO BE OUTSTANDING.
The Company has agreed to sell Warrants covering up to 650,000 shares of Common
Stock, exercisable at a price of ____ per share (150% of the initial public
offering price of the Common Stock). The Warrants are exercisable for a period
of five years commencing one year from the date of this Prospectus. For the
term of the Warrants, the holders thereof are given an opportunity to profit
from a rise in the market price of the Company's Common Stock, with a resulting
dilution in the interests of the then existing shareholders. The terms on
which the Company may obtain additional financing during that period may be
adversely affected by the existence of such securities. The holders of the
Warrants may exercise them at a time when the Company might be able to obtain
additional capital through a new offering of securities on terms more favorable
than those provided by the Warrants. See "Description of
Securities--Redeemable Common Stock Purchase Warrants."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS.
Commencing one year from the date of this Prospectus, the Warrants may be
redeemed by the Company at a redemption price of $.01 per Warrant upon not less
than twenty (20) days' written notice, if the average closing bid price of the
Common Stock is at least $______ during the twenty (20) consecutive trading
days ending within ten (10) days of the date the Warrants are called for
redemption. Redemption of the Warrants could force the holders to exercise the
Warrants and pay the exercise price therefor at a time when it may be
disadvantageous for the holder to do so, to sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants, or to
accept the redemption price, which, at the time the Warrants are called for
redemption, is likely to be substantially less than the market value of the
Warrants. If holders of the Warrants elect not to exercise the Warrants upon
notice of redemption thereof, and the Warrants are subsequently redeemed prior
to exercise, the holders thereof would lose the benefit of the difference
between the market price of the underlying Common Stock as of such date and the
exercise price of such Warrants, as well as any possible future price
appreciation in the Common Stock. As a result of an exercise of the Warrants,
existing shareholders may be diluted and the market price of the Common Stock
may be adversely affected. If a Warrantholder fails to exercise his rights
under the Warrants prior to the date set for redemption, then the Warrantholder
will be entitled to receive only the redemption price, $.01 per Warrant. See
"Description of Securities--Redeemable Common Stock Purchase Warrants."
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS.
Holders of the Warrants will only be able to exercise the Warrants if (a)
a current prospectus under the Securities Act relating to the shares of Common
Stock issuable upon exercise of the Warrants is then in effect and (b) such
securities are qualified for sale or exemption from qualification under the
applicable securities laws of the states in which the various holders of
Warrants reside. Although the Company has undertaken to use its best efforts
to maintain the effectiveness of a current prospectus covering the Common Stock
underlying the Warrants, and may not call the Warrants for redemption unless
there is a current and effective registration statement covering the issuance
of the Common Stock upon exercise of the Warrants, there can be no
9
<PAGE> 15
assurance that the Company will be able to do so. Unless there is an effective
and current registration statement covering the issuance of the Common Stock
upon exercise of the Warrants, the Company will not accept payment for, or issue
Common Stock with respect to, the exercise of any Warrants, and any payments
made by a Warrant holder will be refunded by the Company. The value of the
Warrants may be greatly reduced if a current prospectus covering the Common
Stock issuable upon the exercise of the Warrants is not kept effective or if
such securities are not qualified or exempt from qualification in the states in
which the holders of Warrants reside. See "Description of
Securities--Redeemable Common Stock Purchase Warrants."
The Company has registered or qualified the Warrants for sale in a limited
number of states. Although the Company is not aware of any states which
prohibit the registration or qualification of securities of the type offered by
the Company and anticipates that it will qualify for available after-market
exemptions in a majority of states within several months after the completion
of this offering, there can be no assurance that an exception permitting the
exercise of the Warrants will be available in any jurisdiction other than those
in states which the Common Stock and Warrants were initially registered or are
exempt from registration at the time a holder seeks to exercise Warrants.
UNDERWRITER'S WARRANTS
In connection with the offering, the Company will sell to the Managing
Underwriter, for nominal consideration, warrants to purchase an aggregate of
100,000 shares of Common Stock (the "Underwriter's Warrants"). The
Underwriter's Warrants will be exercisable for a period of four years,
commencing one year after the date of closing of this offering, at an
exercise price of 120% of the initial public offering price of the Common
Stock. The holders of the Underwriter's Warrants will have the opportunity to
profit from a rise in the market price of the Common Stock, if any, without
assuming the risk of ownership. The Company may find it more difficult to
raise additional equity capital if it should be needed for the business of
the Company while the Underwriter's Warrants are outstanding. At any time
when the holders thereof might be expected to exercise them, the Company would
probably be able to obtain additional capital on terms more favorable than
those provided by the Underwriters' Warrants.
The Managing Underwriter has "piggyback" and demand registration rights
with respect to the Common Stock underlying the Warrants subject to the
Underwriter's Warrants. Any future exercise of these registration rights could
impair the Company's ability to raise capital through the public sale of its
securities. See "Dilution," "Shares Eligible for Future Sale" and
"Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE.
Sales of a substantial number of shares of Common Stock into the public
market following this offering could materially adversely affect the prevailing
market price for the Common Stock. Upon completion of this offering, the
Company will have outstanding 6,410,000 shares of Common Stock. Of outstanding
shares, the 1,000,000 shares sold in this offering will be freely tradeable
without restriction under the Securities Act, unless purchased by "affiliates"
of the Company as that term is defined in Rule 144 under the Securities Act.
Of the other 5,410,000 outstanding shares of Common Stock, 375,000 shares (the
"Shelf Registration Shares") of Common Stock have been registered for resale to
the public by certain stockholders pursuant to the Selling Stockholder
Prospectus and, subject to the lock-up agreement with the Underwriters, will be
freely tradeable without restriction under the Securities Act. The Shelf
Registration Shares are subject to a lock-up agreement with the Underwriters
under which the holders of the Shelf Registration Shares have agreed not to
sell or otherwise dispose of any of their Shelf Registration Shares for 180
days after the date of this Prospectus without the prior written consent of the
Managing Underwriter. Of such 5,035,000 remaining outstanding shares of Common
Stock: (i) 1,300,000 shares will become eligible for sale under Rule 144
promulgated under the Securities Act ("Rule 144") on April 19, 1998; (ii)
600,000 shares will become eligible for sale under Rule 144 on April 20, 1998;
(iii) 1,505,000 shares will become eligible for sale under Rule 144 on May 15,
1998; (iv) 505,000 shares will become eligible for sale under Rule 144 on May
17, 1998; and (v) 1,125,000 shares will become eligible for sale under Rule 144
on August 30, 1998.
10
<PAGE> 16
Upon consummation of this offering, the Company will have 2,850,000 shares
of Common Stock reserved for issuance, which figure includes: (i) 650,000
shares of Common Stock issuable upon exercise of the Warrants; (ii) 598,000
shares of Common Stock issuable upon exercise of stock options (weighted
average exercise price $.80 per share); (iii) an aggregate of 1,502,000 shares
of Common Stock reserved for issuance upon exercise of options that may be
granted under the Company's 1996 Stock Option Plan and 1996 Director's Stock
Option Plan; and (iv) 100,000 shares of Common Stock issuable upon exercise of
the Underwriter's Warrants.
The Company intends to file registration statements on Form S-8 under the
Securities Act to register up to 2,100,000 shares of Common Stock reserved for
issuance under its 1996 Stock Option Plan and the Director's Option Plan, thus
permitting the resale of such shares by nonaffiliates in the public market
without restriction under the Securities Act.
All of the Company's officers, directors and shareholders owning more than
1% of the Company's outstanding Common Stock have agreed not to sell or
otherwise dispose of any of their shares of Common Stock for a period for a
period of 24 months from the date of this Prospectus without the prior written
consent of the Managing Underwriter and the Company.
Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that market sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities. See "Description of Securities," "Management - Director
Compensation," "Management -- 1996 Option Plan," "Underwriting" and "Shares
Eligible for Future Sale."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock and the 650,000 Warrants offered hereby, after deducting
underwriting discounts and estimated offering expenses, are estimated to be
approximately $5,808,500 (approximately $6,730,482 if the Underwriters'
over-allotment option is exercised in full) based on an assumed initial public
offering price of $7.00 per share of Common Stock and $.10 per Warrant. The
Company intends to use such proceeds as follows:
<TABLE>
<CAPTION>
Approximate
Approximate Percentage of
Application of Proceeds Dollar Amount Net Proceeds
- ----------------------- ------------- -------------
<S> <C> <C>
Store development(1)........................................ $3,500,000 60.0%
Organizational, general and administrative costs(2)......... 500,000 9.0%
Working capital and general corporate purposes.............. 1,808,500 31.0%
---------- -----
Total............................................... 5,808,500 100.0%
========== =====
</TABLE>
- ----------
(1) Represents those proceeds from this offering which comprise part of the
estimated costs relating to opening 11-16 2Connect stores, which includes
site selection costs; leasehold improvements; furniture, fixtures and
equipment; signage; opening store inventories; store development, related
professional fees and expenses and certain store pre-opening expenses,
including salaries, training, travel, advertising, and promotion, but
excludes lease payments. See "Proposed Business -- Proposed Store
Locations and Expansion Strategy."
(2) Represents those proceeds from this offering which comprise part of the
estimated costs in connection with the Company's administrative
operations, including employee compensation, headquarter lease and
utilities, professional services, and miscellaneous corporate expenses.
11
<PAGE> 17
If the Underwriters exercise their over allotment option in full, the
Company will realize additional net proceeds of approximately $921,982.50,
which will be applied to working capital.
Pending use of the net proceeds for the above purposes, the Company
intends to invest such funds in short-term, investment-grade, interest-bearing
obligations.
The Company anticipates that the proceeds, if any, received from any
exercise of the Warrants or the Underwriter's Warrants will be utilized for
working capital and other corporate purposes.
The Company believes that the proceeds from the sale of Common Stock and
Warrants offered hereby will enable the Company to satisfy its anticipated
financing needs for a period of at least 12 months following this offering.
However, the capital requirements relating to implementation of the Company's
business plan will be significant. Based on the Company's current assumptions
relating to implementation of its business plan (including the timetable of,
and cost associated with, store development), the Company will seek to develop,
utilizing the proceeds of this offering, existing cash, certain anticipated
supplier incentives, and cash flow from operations, if any, 11-16 stores
during the 12 months following consummation of this offering. If the Company's
plans change, its assumptions prove to be inaccurate, or the capital resources
available to the Company otherwise prove to be insufficient to implement its
business plan (as a result of unanticipated expenses, problems or difficulties,
or otherwise), the Company would be required to seek additional financing or
curtail its activities. There can be no assurance that the Company will have
sufficient capital resources to permit the Company to open the number or type
of 2Connect stores proposed in its business plan or to otherwise implement such
plan.
DIVIDEND POLICY
The Company has never paid any dividends. The Company anticipates that
future earnings, if any, will be retained to finance the continuing development
of its business. Accordingly, the Company does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future.
12
<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996, (i) on an actual basis and (ii) as adjusted to reflect the
sale of the 1,000,000 shares of Common Stock and 650,000 Warrants offered by
the Company hereby (at an assumed initial public offering price of $7.00 per
share of Common Stock and $.10 per Warrant), and the application of the net
proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------
ACTUAL AS ADJUSTED
------------ -------------
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par value. Authorized
25,000,000 shares; issued and outstanding
5,410,000 shares actual and 6,410,000
shares as adjusted (1)........................ $ 54,100 $ 64,100
Additional Paid-in capital...................... 3,194,950 8,993,450
Deficit accumulated during the development
stage........................................ (375,137) (375,137)
---------- ----------
2,873,913 8,682,413
Less subscriptions receivable................... (11,700) (11,700)
---------- ----------
Total shareholders' equity................... 2,862,213 8,670,713
---------- ----------
Total capitalization......................... $2,862,213 $8,670,713
========== ==========
</TABLE>
- -------------
(1) Does not include 598,000 shares of Common Stock subject to options
outstanding at September 30, 1996 having a weighted average exercise price
of $.80 per share . See "Management--Director Compensation,"
"Management--1996 Stock Option Plan," "Executive Compensation--Option
Grants," and Note 6(a) of Notes to Financial Statements.
13
<PAGE> 19
DILUTION
The net tangible book value of the Company as of September 30, 1996 was
approximately $2,862,213 or $0.53 per share of Common Stock. Net tangible book
value per share represents the amount of total tangible assets of the Company
less total liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale of the 1,000,000 shares of Common
Stock and 650,000 Warrants offered hereby at an assumed initial public offering
price of $7.00 per share and $.10 per Warrant, respectively, and the receipt by
the Company of the net proceeds therefrom, the pro forma net tangible book
value of the Company as of September 30, 1996 would have been $8,670,713 or
$1.35 per share. This represents an immediate increase in pro forma net
tangible book value of $0.82 per share to existing shareholders and an
immediate dilution of $5.65 per share to new investors ("New Investors")
purchasing shares of Common Stock in this Offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $7.00
Net tangible book value per share before offering.......................... $0.53
Increase in net tangible book value per share attributable to New Investors 0.82
-----
Pro forma net tangible book value per share after offering................... 1.35
-----
Dilution per share to New Investors.......................................... $5.65
=====
</TABLE>
The following table summarizes, as of September 30, 1996, the number of
shares of Common Stock purchased from the Company, the total cash consideration
paid, and the average price per share paid by existing shareholders and to be
paid by purchasers of shares of Common Stock offered hereby at an assumed
initial offering price of $7.00 (before deducting the underwriting discounts
and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CASH CONSIDERATION AVERAGE
--------------------- -------------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
--------- ---------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.... 5,410,000 84.4% $ 3,762,050 35% $0.70
New investors............ 1,000,000 15.6 7,000,000 65 7.00
--------- ------ ----------- ----
Total............ 6,410,000 100% $10,762,050 100%
========= ====== =========== ====
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the
number and percentage of shares purchased by New Investors will be 1,150,000
and 17.5%, respectively, the amount and percentage of total cash consideration
paid by New Investors will be $8,050,000 and 68.1%, respectively, and the
existing shareholders' percentage of shares of Common Stock purchased and
percentage of total consideration paid will be 82.5% and 31.9%, respectively.
The computations in the tables above exclude: (i) 598,000 shares of Common
Stock issuable upon the exercise of stock options outstanding at September 30,
1996 at a weighted average exercise price of approximately $.80 per share;
(ii) 1,402,000 shares of Common Stock reserved for issuance upon exercise of
options that may be granted in the future under the Company's 1996 Stock Option
Plan; and (iii) 100,000 shares of Common Stock reserved for issuance upon
exercise of options that may be granted in the future under the Company's
Director's Option Plan. To the extent such options are exercised, there will
be further dilution to new investors. See "Capitalization," "Management--1996
Stock Option Plan," "Management--Director Compensation," and Note 6(a) of Notes
to Financial Statements.
14
<PAGE> 20
SELECTED FINANCIAL INFORMATION
The selected statement of operations data set forth below with respect to
the period from April 19, 1996 (date of inception) to September 30, 1996 and
the selected balance sheet data at September 30, 1996 are derived from the
financial statements of the Company that have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. The selected financial data
should be read in conjunction with "Management's Plan of Operation" and the
financial statements and related notes included elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
PERIOD FROM APRIL 19, 1996
(INCEPTION) TO
SEPTEMBER 30, 1996
----------------------------
<S> <C>
General and administrative expenses:
Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $164,864
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . 109,144
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,473
----------
Total general and administrative expenses. . . . . . . . . . . . 386,481
----------
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . (386,481)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,344
----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (375,137)
Net loss per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.06)
==========
Number of shares used in calculating net loss per share . . . . . . . . . . . . . 5,939,621(1)
==========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
ACTUAL AS ADJUSTED(2)
-------------------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash $2,854,124 $8,662,624
Working capital 2,819,944 8,628,444
Total assets 2,900,393 8,708,893
Total shareholders' equity 2,862,213 8,670,713
</TABLE>
(1) All common stock and common stock equivalents issued by the Company
prior to the date of this Prospectus have been included in the calculation of
the number of shares used in calculating net loss per share (using the
treasury stock method).
(2) Adjusted to give effect to the sale of 1,000,000 shares of Common
Stock and 650,000 Warrants offered by the Company hereby at an assumed initial
public offering price of $7.00 per share and $0.10 per Warrant, and the
application of the net proceeds therefrom.
15
<PAGE> 21
MANAGEMENT'S PLAN OF OPERATION
The following should be read in conjunction with the Financial Statements
of the Company and the Notes thereto, and the other financial and other
information included elsewhere in this Prospectus. This Prospectus contains
certain statements regarding future trends which are subject to various risks
and uncertainties. Such trends, and their anticipated impact on the Company,
could differ materially from those discussed in this Prospectus. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Risk Factors" and elsewhere in this Prospectus.
GENERAL.
The Company was organized in April 1996, and is in the development stage.
The Company has not yet commenced operations of any 2Connect stores, has not
generated any operating revenue to date, and will not generate any revenue from
operations until after the Company opens its first 2Connect store, which the
Company anticipates will occur in November 1996. Because the Company intends
to increase its level of activities substantially following the consummation of
this offering and, in connection therewith, will incur significant costs and
expenses relating to the opening of the 2Connect stores, the Company
anticipates that it will incur losses until, at the earliest, the Company
establishes a number of 2Connect stores generating sufficient revenue to offset
its operating costs and the costs of its proposed continuing expansion. There
can be no assurance that the Company will be able to successfully establish any
2Connect stores or a sufficient number of stores to generate meaningful revenue
or achieve profitable operations.
The Company expects that the 2Connect stores will generate revenue from
four primary sources. The Company expects to receive an activation commission
from service providers when a customer initially subscribes for the related
services. The amount of the activation commission paid by the service carriers
is based upon various service plans offered by these carriers. The second
source of revenue the Company expects to receive is from monthly payments made
by the service carriers to the Company based upon a percentage of the
customers' usage. These payments, generally referred to as residual payments,
are calculated based on the amount of the service billings generated by the
base of customers activated by the Company on the particular service provider's
system. The third source of revenue the Company expects to receive is from the
sale of in-store services such as use of Internet stations, creation of web
pages, and technician consulting. The fourth source of revenue the Company
expects to receive is from the sale of the various hardware products,
accessories, and information services offered at the 2Connect stores.
The Company also expects to receive service-provider and product-vendor
funding and allowances in the form of cooperative advertising allowances,
market development funds, new store allowances, and rebates, although there
can be no assurance that the Company will regularly receive such funding or
allowances. Cooperative advertising allowances are provided by service
providers and product vendors ("service and product vendors") for store
advertising that features their services or products. Cooperative advertising
allowances are generally available to mass market retailers of cellular, PCS,
paging, telephone, and satellite TV services and products. Market development
funds are additional funds provided by the service and product vendors for
marketing and advertising. Market development funds are only provided to
selected mass market retailers of cellular, PCS, paging, telephone, and
satellite TV services and products. New store allowances are funds provided by
the service and product vendors to offset the costs of developing new stores.
These funds, which can be used as determined by the retailers receiving them,
are provided by service and product vendors only to selected mass market
retailers as they develop new stores. Rebates are discounts or allowances that
are generally available from service and product vendors to mass market
retailers of cellular, PCS, paging, telephone, and satellite TV services and
products for exceeding sales volume targets.
Since inception, the Company has developed a business plan for the
Company's operations and proposed expansion in South Florida; hired the
executive and support personnel necessary to support the Company's proposed
expansion in South Florida for the next six months; hired its first Market
Developer, Store Manager, Assistant Store Manager, Web Master and other Sales
Associates; developed a standard 2Connect store design for its shopping mall
and power
16
<PAGE> 22
center stores; engaged a site selection and construction oversight contractor to
aid the Company in selecting and securing store sites and to oversee store
construction; entered into a lease for the first 2Connect store site location;
commenced the development of its first 2Connect store; identified and
commenced negotiations for eight additional 2Connect store site locations in
South Florida; entered into agreements with service providers and product
vendors; developed a marketing strategy; and raised an aggregate of
$3,237,350 in net proceeds through private equity offerings.
In the period from April 19, 1996 (inception) to September 30, 1996, the
Company incurred general and administrative expenses of $386,481, which
includes expenses of $164,864, $109,144 and $112,473 for salaries, professional
services and other items, respectively.
LIQUIDITY AND CAPITAL RESOURCES.
As of the date of this Prospectus, the Company has approximately
$2,800,000 in cash and cash equivalents. The Company anticipates receiving
$5,808,500 in net proceeds from the sale of the Common Stock and the Warrants
offered hereby.
The Company anticipates that its cost of developing each 2Connect store
will range from $ 453,000 to $ 568,000, primarily depending on the size of the
store and the extent of required leasehold improvements. These costs include
site selection costs, leasehold improvements, furniture, fixtures and
equipment, signage, opening store inventories, development-related professional
fees and expenses and certain pre-opening expenses, including salaries,
training, advertising and promotion, but excludes lease payments. The Company
anticipates that approximately 60 days are required from the date a site is
made available to the Company to renovate, equip and furnish the store, obtain
the necessary licenses and approvals, and open a store. The Company does not
anticipate that the costs or time period required to develop and open a
2Connect store in a shopping mall or a power center mall will significantly
vary. See "Proposed Business -- Store Location and Expansion Strategy."
The Company is dependent upon the proceeds of this offering, existing
cash, certain anticipated supplier incentives, and cash flow from operations,
if any, or other financing to implement its proposed business plan. The
Company believes that the proceeds from the sale of the Common Stock and
Warrants offered hereby will enable the Company to satisfy its anticipated
financing needs for a period of at least 12 months following this offering.
However, the capital requirements relating to implementation of the Company's
business plan will be significant. Based on the Company's current assumptions
relating to implementation of its business plan (including the timetable of,
and cost associated with, store development), the Company will seek to develop,
utilizing the proceeds of this offering, existing cash, certain anticipated
supplier incentives, and cash flow from operations, if any, 11-16 stores during
the 12 months following consummation of this offering. If the Company's plans
change, its assumptions prove to be inaccurate, or the capital resources
available to the Company otherwise prove to be insufficient to implement its
business plan (as a result of unanticipated expenses, problems or difficulties,
or otherwise), the Company would be required to seek additional financing or
curtail its activities. There can be no assurance that the Company will have
sufficient capital resources to permit the Company to open the number or type
of 2Connect stores proposed in its business plan or to otherwise implement such
plan.
Although the Warrants will be outstanding after the date hereof, the
Warrants will not be exercisable for a period of 12 months from the date of
this Prospectus and, in any event, the Company will not be able to
depend on the exercise of the Warrants to provide additional capital at least
until such time, if any, as the market price of the Common Stock exceeds the
exercise price of the Warrants. No assurance can be given that the market
price of the Common Stock will ever reach such level or that the Warrants will
be exercised. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. Any additional
financing may involve substantial dilution to the interests of the Company's
then existing shareholders.
17
<PAGE> 23
In addition, any implementation of the Company's business plan subsequent
to the 12-month period following this offering will require capital resources
substantially greater than the proceeds of this offering or otherwise currently
available to the Company. The Company anticipates that cash flow from
operations, if any, will be utilized to fund future capital expenditures. If
cash flow from operations is not available in sufficient amounts, the Company
may seek additional debt or equity financing. There can be no assurance that
the Company will generate sufficient, or any, cash flow from operations or that
additional financing will be available on acceptable terms, or at all, to fund
the Company's future plans for capital expenditures.
Since inception, the Company's development has been funded by the proceeds
of three private offerings of Common Stock which raised $3,237,350 in net
proceeds. In the first private offering, which closed on May 15, 1996, the
Company sold 1,505,000 shares of Common Stock for aggregate net proceeds of
$30,100, in the second private offering, which closed on May 17, 1996, the
Company sold 505,000 shares of Common Stock for aggregate net proceeds of
$356,950, and in the third private offering, which closed on August 30, 1996,
the Company sold 1,500,000 shares of Common Stock for aggregate net proceeds of
$2,850,300.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation"
was issued. SFAS No. 123 establishes a fair value method for accounting for
stock-based compensation plans either through recognition or disclosure. The
Company intends to account for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and, accordingly, will not recognize compensation expense for stock
option grants made at an exercise price equal to or in excess of the fair
market value of the underlying Common Stock at the date of grant.
18
<PAGE> 24
PROPOSED BUSINESS
The following should be read in conjunction with the Financial Statements
of the Company and the Notes thereto, and the other financial and other
information included elsewhere in this Prospectus. This Prospectus contains
certain statements regarding future trends which are subject to various risks
and uncertainties. Such trends, and their anticipated impact on the Company,
could differ materially from those discussed in this Prospectus. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Risk Factors" and elsewhere in this Prospectus.
Prospective investors must consider that as of the date of this Prospectus, the
Company has not yet begun store operations, and plans to open its first store
in November 1996. See "Risk Factors.--Forward Looking Statements and
Associated Risks."
GENERAL.
The Company, a development stage company which was incorporated in April
1996, intends to become a specialty retailer of Internet, cellular, PCS,
paging, telephone, satellite and other communication-related services and
products under the name "2Connect". Since inception, the Company has developed
a business plan for the Company's operations and proposed expansion in South
Florida; hired the executive and support personnel necessary to support the
Company's proposed expansion in South Florida for the next six months; hired
its first Market Developer, Store Manager, Assistant Store Manager, Web Master
and other Sales Associates; developed a standard 2Connect store design for its
shopping mall and power center stores; engaged a site selection and
construction oversight contractor to aid the Company in selecting and securing
store sites and to oversee store construction; entered into a lease for the
first 2Connect store site location; commenced the development of its first
2Connect store; identified and commenced negotiations for eight additional
2Connect store site locations in South Florida; entered into agreements with
service providers and product vendors; developed a marketing strategy; and
raised an aggregate of $3,237,350 in net proceeds through private equity
offerings. The Company expects to open its first 2Connect store in Coral
Springs, Florida in November 1996.
BUSINESS STRATEGY
The Company will seek to differentiate its stores and establish a
foundation for growth by emphasizing the following strategic elements:
ONE-STOP SHOP. The 2Connect stores are intended to serve as a
central retail location for customers to purchase Internet,
cellular, paging, PCS, telephone and satellite TV services, in
each instance from one or two leading service providers, and
related products and accessories from an array of leading
manufacturers. As an independent retailer, the Company will be
able to select from among the available service providers and
manufacturers in choosing services and products to offer its
customers.
QUALITY IN-STORE SERVICE. The Company believes that it will be
able to attract and retain customers by providing a high level of
service and consultation and by educating its customers as to the
many benefits and advantages of the services and products offered
by the Company.
COMPETITIVE PRICING/VALUE TO CUSTOMERS. The Company believes that
it will be able to offer savings to its customers by providing
individualized communications solutions designed to meet its
customers' particular needs. The Company will provide free
in-store analysis of customers' communications and information
service bills (Internet, cellular, paging, PCS, long distance
telephone, and TV programing), and advising customers of potential
savings and ways to increase the value of their communications and
information services. The Company also believes that it will be able
to offer competitive pricing of products and accessories sold in
connection with communication services.
19
<PAGE> 25
ATTRACTIVE STORE DESIGN AND LAYOUT. The design and layout of the
2Connect stores is intended to be visually appealing and inviting,
and functional in its presentation of the services and products to
be offered.
OPPORTUNITY TO SAMPLE SERVICES AND PRODUCTS. The 2Connect stores
will provide customers with the opportunity to sample within the
store many of the services and products available for sale, and
Company personnel will be available to provide guidance and
instruction for many of these services and products.
INDEPENDENT DISTRIBUTION CHANNEL. The Company seeks to create, to
the extent possible, an independent distribution channel for
Internet, cellular, paging, PCS, telephone, and satellite TV services
and products that is capable of retailing any brand or type of
such services or products, irrespective of advances in technology,
changes in consumer preferences, shifts in service or product
brand name recognition or changes in government regulation.
QUALITY MANAGEMENT AND EMPLOYEES. The Company seeks to attract,
develop and motivate its employees through competitive
compensation, benefits and bonus programs, comprehensive training
programs, and defined career paths and advancement opportunities.
The Company has established a Market Development Program. Under
this program, the Company will hire a Market Developer in each
geographic market where the Company intends to establish 2Connect
stores. These Market Developers will be selected on the basis of
their retail operating experience, knowledge of the Company's
proposed business and of the particular geographic market, and
they will be responsible for overseeing and managing the
development of 2Connect stores within their respective geographic
markets, including the financial performance of the 2Connect
stores, store operations, product and service pricing, and
promotional activities. Market Developers will be compensated
based upon the financial performance of the 2Connect stores under
their supervision. The Company believes that its Market
Development Program will provide incentive to the Market
Developers to actively manage and develop 2Connect stores and will
enhance its ability to open new 2Connect stores.
20
<PAGE> 26
SERVICES AND PRODUCTS.
The 2Connect stores are intended to serve as a central retail location for
customers to purchase Internet, cellular, paging, PCS, telephone and satellite
TV services, in each instance from a leading service provider, and related
products and accessories from an array of leading brand-name manufacturers.
Listed below are the services and products the Company plans to offer for sale
in each of its 2Connect stores:
<TABLE>
<CAPTION>
INTERNET WIRELESS TELEPHONE SATELLITE
-------- -------- --------- ---------
<S> <C> <C> <C>
Access Accounts: Cellular Services & Phones Local Phone Services Programming Services
Internet Access Accounts Pagers & Services Long Distance Services Products and
E-Mail Accounts PCS Services & Phones Smart Telephone Products Accessories
Special Interest Personal Communicators and Services Installation
Subscriptions Long Distance Prepaid Cards
900 Megahertz Telephones
Products, Hardware, Telephone Accessories
Software & Accessories:
Internet PCs
Web TV Systems
Modems
Software
Accessories
Books and Magazines
Other Internet Services:
Web Page Design
Internet Training
Personal Consulting
(Rent-a-Tech)
In-Store Pay-Per-Use
Internet Stations
Internet Domain Registration
</TABLE>
INTERNET.
The Company intends to offer all of the services, software, products,
accessories and information its customers will need to connect to the Internet,
including the following:
Access Accounts
INTERNET ACCESS ACCOUNTS. Internet access accounts are required for
individuals to connect their computers or other hardware to the Internet.
The Company intends to offer Internet access accounts from a leading, third
party service provider. Customers will be able to select plans from a
variety of available options based upon their individual usage
requirements.
E-MAIL ACCESS ACCOUNTS. E-Mail (Electronic Mail) accounts enable
individuals to send and receive electronic messages world-wide through the
Internet. The Company intends to offer basic E-Mail subscription accounts
to customers from the Company's third-party Internet access provider.
SPECIAL INTEREST SUBSCRIPTIONS. Special interest subscriptions include
Internet services that enable individuals or businesses to access
specialized services such as customized newspapers, home banking from a
computer, personalized electronic travel services, and other services. The
Company intends to offer special interest Internet subscriptions from an
array of leading electronic publishers and service providers.
21
<PAGE> 27
Hardware, Software and Accessories
INTERNET COMPUTERS ("INTERNET PCs"). Internet PCs are computers that are
configured and equipped with the appropriate peripherals and software that
enable the user to access the Internet, E-Mail and other communication
services. The Company intends to offer a single Internet PC targeted
toward novice Internet and computer users from a leading brand-name
manufacturer.
INTERNET TELEVISION SYSTEMS ("WEB TV SYSTEMS"). Web TV Systems enable
users to access the Internet's World Wide Web with his or her existing
television equipment. A Web TV System is comprised of a converter device
(similar to a cable TV converter box), a remote control, and a wireless
keyboard. The Company intends to offer Web TV Systems from leading
brand-name manufacturers.
MODEMS. Modems are computer peripherals that enable computers to
communicate via telephone lines (and in the near future via cable TV and
satellite). The Company intends to offer an assortment of modems with
varying speeds and features from competing brand-name manufacturers.
SOFTWARE. The Company intends to offer an assortment of Internet and
communication computer software titles from leading software developers.
Categories of software initially will include Internet Browsers (required
for computer users to access and browse the Internet's World Wide Web),
Internet Security (software that is primarily used by parents to limit
children's access to distasteful content sometimes found on the Internet),
Internet Telephone software (software that enables users to make and
receive phone calls over the Internet thereby eliminating long distance
charges), Web Page Design programs (software that allows users to design
their own Internet Web Pages on their computers), E-Mail Programs (software
required to send and receive E-Mail from a computer), and other
communication software programs.
ACCESSORIES. As a convenience to customers, the Company intends to offer a
limited selection of computer accessories such as computer cables, computer
mouse pads, diskettes, surge protectors and other miscellaneous
accessories.
BOOKS AND MAGAZINES. The Company intends to offer a selection of leading
titles of books and magazines related to the Internet and communication
services.
Other Internet Services
WEB PAGE DESIGN. Internet Web Pages are personalized "pages" or
locations/addresses on the Internet's World Wide Web where individuals
and/or businesses can display information about themselves, their
businesses, or any other information. The Company intends to offer, at an
additional charge to customers, in-store assistance by Company employees in
designing, creating, and maintaining Internet Web Pages.
INTERNET TRAINING. The Company intends to offer, at an additional charge
to customers, in-store Internet training classes with training provided by
Company employees.
PERSONAL CONSULTATION ("RENT-A-TECH"). The Company intends to offer, at an
additional charge to customers, personal consulting services to provide
customers with Internet and communication services solutions.
IN-STORE PAY-PER-USE INTERNET STATIONS. The Company intends to have within
each 2Connect store between two and six Internet computers where customers
can sit down and explore the Internet on their own. Operation of the
Internet computer stations will be regulated by prepaid "2Connect cards"
which will permit the use of the stations for specified amounts of time.
Each Internet station will present customers with concise instructions to
help guide users. The Company intends to provide, adjacent to each
station, information on recommended Internet sites to visit, with topics
organized by lifestyle.
22
<PAGE> 28
The Company's in-store Internet stations will also allow customers the
ability to send E-mail from the store, and to access and try the various
special interest subscriptions available for sale.
INTERNET DOMAIN NAME REGISTRATION. Internet addresses (or "Domain Names")
are unique addresses assigned to individuals and/or businesses through the
Internet Society. The most common form of addresses are those for Internet
Web Pages. The Company intends to offer such registration services, for a
fee, to its customers.
As the Internet is shaped by evolving technologies and newly available
services, the Company intends to aggressively offer new services and products
to allow its customers to more fully utilize the Internet's potential.
WIRELESS.
The Company intends to offer cellular and paging services, PCS services,
and Personal Communicators (also generally known as Personal Digital Assistants
or PDAs), and related services, hardware and accessories, including the
following:
CELLULAR SERVICES, PHONES AND ACCESSORIES. The Company intends to offer
cellular telephone service from a single leading third-party service provider
in each store's geographic area of operation. The Company intends to offer a
wide assortment of cellular telephone hardware and a broad selection of
cellular phone accessories such as batteries, home and car chargers, vehicle
adapter kits, cases and starter kits from leading brand-name manufacturers.
PAGERS, SERVICES AND ACCESSORIES. The Company intends to offer various types
of wireless pagers, including numeric (standard pagers that can only display
numbers), alphanumeric (pagers that can display numbers and/or text), 2-way
(alphanumeric pagers that give users the ability to respond to messages with
the touch of a button), and voice (pagers with audio capabilities), and
related paging services. The Company intends to offer paging services from
one or two of the leading paging service providers in each store's geographic
area of operation. The Company also intends to offer a broad assortment of
pager hardware and a complete selection of pager accessories from a leading
brand name manufacturer.
PCS SERVICES, PHONES AND ACCESSORIES. PCS ("Personal Communication Services")
is a new wireless communication service that is being marketed as an
alternative to cellular phones. PCS telephones and service operate in a manner
similar to cellular telephones, but utilize different transmission
frequencies. Differences exist in the service features available, the service
coverage areas, and the service plan pricing options and structure. The
Company intends to offer PCS service from a single, leading service provider
in geographic markets where such service is available. The Company also
intends to offer an assortment of competing brands of PCS phone hardware and
accessories from a leading manufacturer.
PERSONAL COMMUNICATORS. Personal Communicators (also known as Personal
Digital Assistants or PDAs) are an emerging category of wireless communicators
and personal organizers. Personal communicators are palm-top sized devices
that are capable of performing basic data management features such as an
address book, to-do lists, calendar and schedulers, expense tracking and
spreadsheets and, with appropriate peripherals, advanced communication
functions such as E-Mail, remote faxing, paging, Internet access, computer
linking, and other forms of data transmission and reception. The Company
intends to offer a wide assortment of Personal Communicators from competing
brand name manufacturers, along with the accompanying accessories, peripherals
and software. The Company also intends to offer subscriptions to Personal
Communicator services such as E-Mail and Internet access from leading
brand-name service providers.
23
<PAGE> 29
TELEPHONE.
The Company intends to offer for sale a wide variety of telephone
services, along with the required hardware and accessories geared toward the
individual or home user, including the following:
Local Telephone Services
The Company does not intend to initially offer basic local telephone service
to its customers. However, the Company does intend to offer ISDN (Integrated
Services Digital Network) service, a digital phone service that provides
high-speed data access and will be primarily offered by the Company for
high-speed Internet communications over telephone lines. In the event that
multiple companies begin offering local telephone service in the same
geographic market, as to which no assurance can be given, the Company intends
to offer basic telephone sign up and service, second phone line sign up and
service, ISDN sign up and service, and premium telephone services, including,
among others, Caller ID, call waiting, voice mail, call forwarding, and call
back from either the leading/existing Bell operating company in the geographic
market, or through a leading third-party service provider.
Long Distance Telephone Services
The Company intends to offer long distance calling plans and other long
distance services such as calling cards and personal 800 numbers from one
or two national long distance service providers.
Smart Telephone Products and Services
CALLER ID PRODUCTS. Caller ID is a recently developed technology that
allows users to identify incoming callers before they answer their
telephone. Caller ID products come in two forms: freestanding Caller ID
boxes, which feature an alphanumeric display board and plug into a
telephone, and telephones with a built-in alphanumeric display board. The
Company intends to offer a wide assortment of Caller ID products from
competing brand-name manufacturers.
"SMART TELEPHONES". Smart Phones, when combined with Smart Phone service
subscriptions, enable a user to send and receive E-Mail, view stock quotes,
local weather, sports scores and other information, access bank account
information, and more. The Company intends to offer an assortment of Smart
Phones from competing leading brand-name manufacturers as well as an
assortment of Smart Phone service subscriptions from leading third-party
smart phone service providers.
Long Distance Prepaid Telephone Calling Cards
Long distance prepaid telephone calling cards are cards that are sold with
prepaid long distance calling time. The Company intends to offer a selection
of private label "2Connect" prepaid calling cards, as well as other "Novelty"
or special occasion cards. Long distance service and cards will be provided
by a third party service provider.
900MHz Cordless Telephones
900MHz cordless telephones are the most technologically advanced type of
cordless telephones currently available. 900MHz telephones operate on a
different frequency than traditional cordless telephones, and provide for
enhanced reception clarity, greater range and enhanced security features. The
Company intends to offer a broad range of 900MHz cordless telephones from
competing, leading brand-name manufacturers.
24
<PAGE> 30
Telephone Accessories
The Company intends to offer a broad selection of telephone accessories, such
as cords, modular jacks, replacement antennas, cordless telephone batteries
and other accessories from leading brand-name manufacturers.
SATELLITE.
The Company intends to offer a variety of digital satellite television
programming along with the accompanying hardware, accessories and installation,
including the following:
PROGRAMMING SERVICES. The Company intends to offer satellite services that
allow users to select and subscribe to packages of general programming and of
specific sports, entertainment and other programming packages. The Company
intends to offer a wide variety of programming package options from leading
brand-name service and content providers.
PRODUCTS AND ACCESSORIES. Satellite TV programming requires specific hardware
and accessories including satellite dishes, converter boxes, multi-signal
devices (for different channel reception within the same household) and other
items. The Company intends to offer this hardware and accessories from a
leading, brand-name manufacturer.
INSTALLATION. The Company intends to offer "self-installation" kits for
satellite TV systems from leading manufacturers, as well as fee-based
professional in-home installation through a third party installer.
PROPOSED STORE LOCATION AND EXPANSION STRATEGY.
The Company will seek to open 11-16 stores during the 12 months following
the consummation of this offering. The Company anticipates that its first 8-10
stores will be located in South Florida. Subject to the Company's development
and operation experiences at its first 8-10 stores, the Company intends next to
seek to develop stores in other metropolitan areas, including Central Florida,
and the Atlanta, Georgia, the New York-New Jersey, and the Chicago
metropolitan areas.
The Company intends to develop 2Connect stores in two general venues:
shopping malls and power centers.
SHOPPING MALLS. The Company intends to develop 2Connect stores located
in-line in super-regional and regional shopping malls. These stores are
expected to range in size from 1,750-3,000 square feet. The Company believes
that it will benefit from the exposure to existing customer traffic in these
malls.
POWER CENTERS. The Company also intends to develop 2Connect stores in
"power centers." Power centers are generally anchored by one or more
super-stores, and typically contain a variety of smaller specialty stores.
These stores are expected to range in size from 1,200-5,000 square feet. The
Company believes that it will benefit from the exposure to existing customer
traffic in these power centers, and from the ability to showcase its products
and services on a larger scale.
The Company will monitor the results of its mall-based stores and power
center stores to determine which, if either, will generate positive operating
income. The Company may also locate 2Connect stores in locations other than in
shopping malls and power centers, depending on the particular opportunities
that become available. The Company intends to base its future 2Connect store
site selections on the experiences of its 2Connect stores, market size and
demographics.
The Company has retained The Colfax Group, Dallas, Texas, a national site
selection and construction management firm, to provide assistance in site
selection, lease negotiations, permit procurement, construction contractor
selection, and construction supervision and inspection.
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<PAGE> 31
The Company anticipates that its cost of developing each 2Connect store
will range from $453,000 to $568,000, primarily depending on the size of the
store and the extent of required leasehold improvements. These costs include
site selection costs, leasehold improvements, furniture, fixtures and
equipment, signage, opening store inventories, development related professional
fees and expenses, and certain pre-opening expenses, including salaries,
training, advertising and promotion, but excludes lease payments. The
Company anticipates that approximately 60 days are required from the date a
site is made available to the Company to renovate, equip and furnish the store,
obtain the necessary licenses and approvals, and open a store. The Company
does not anticipate that the costs or time period required to develop and open
a 2Connect store in a shopping mall or a power center mall will significantly
vary.
The Company has entered into a lease for, and commenced development of,
its first 2Connect store in a super-regional mall in Coral Springs, Florida.
The Company has identified, but not yet secured, six locations in
super-regional malls as well as two locations in power centers, all of which
are in South Florida.
The Company intends to develop numerous stores in each geographic market
it targets for development, depending on the size of the market and the
market's demographics. The Company believes that developing stores in such
clusters may enable it to realize certain efficiencies in procuring services
and products supplied by third parties, market management, recruiting, hiring,
advertising, training and marketing.
STORE LAYOUT AND DESIGN
The 2Connect stores have been designed with the intent of blending
high-tech services and products into a comfortable, inviting store setting. A
glass storefront with bold red and white exterior signage will lead into a
brightly lit store with carpet and a curved, floating ceiling designed to have
an open and spacious effect. Colorful oversized wall graphics, combined with
warm finishes and decor that allow the services and products to remain the
focal point at each store, are intended to create an upbeat and appealing store
environment.
All products will be displayed on adjustable fixtures where customers can
handle the products and experience selected services, either assisted or
unassisted prior to purchase. Services, products and accessories will be
laid-out and presented in a logical order and within easy reach. Hardware
products will be displayed on fixtures along the perimeter walls, with large
signs that explain the services available for each category. Accessories and
impulse and promotional items will be placed in the center of the store,
adjacent to their corresponding service and product categories. Each product
presented will be accompanied by information explaining the features and
benefits of that particular product.
The Company plans to have four twenty-inch color television monitors
pointing at different angles in the front window of each 2Connect store, which
will be visible to passing shoppers and in-store shoppers. This bank of
television monitors will display various Internet activities, such as Web Pages
being designed for customers, Internet demonstrations, and promotional videos.
A "Web Master Station" can also be seen through the front window adjacent to
the bank of monitors. This Web Master Station will feature an Internet
specialist, known as a "Web Master", who will design customer Web Pages and
provide Internet demonstrations. The Web Master and Web Master Station to be
located near the front window of each 2Connect store is intended to stop
traffic in front of the stores, and to draw customers into each store.
Each 2Connect store will have between two and six Internet computers where
customers can sit down and explore the Internet on their own. Operation of the
Internet computer stations will be regulated by prepaid "2Connect cards" which
will permit the use of the stations for pre-determined amounts of time. Each
station will present the customers with concise instructions to help guide
users. The Company intends to provide, adjacent to each station, information
on recommended Internet sites to visit, with topics organized by lifestyle.
For example, a customers interested in sports, travel or real estate will be
able to look at the list of recommended web sites, and then visit those sites
themselves. These 2Connect Internet computer stations are intended to be a
focal point of interest within the 2Connect stores.
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The center of each 2Connect store will feature a sign up counter where
customers can complete the required paperwork associated with subscribing for
particular services.
Each 2Connect store will maintain its inventory in-house.
The standard 2Connect store design was developed with the assistance of
Pentagram Architecture, Inc., New York, New York, and Pentagram Design, Inc.,
Austin, Texas (collectively "Pentagram"), one of the world's leading design
firms. The Company believes that the resulting store designs, interior and
exterior signage and the logos will differentiate and support the 2Connect
brand. The Company has developed a standard store design which can be adapted
to each store format and size.
STORE OPERATIONS.
The Company expects that most 2Connect stores will be open from 9:00 a.m.
to 9:00 p.m., seven days a week. These hours may be modified at an individual
store or in a market based on shopping patterns and shopping mall hours of
operations. The Company expects that most stores will have three to four full
time sales associates and five to six part time sales associates, all of whom
will be trained to assist customers in the various services and product
categories offered by the Company. Each 2Connect store will have at least one
Web Master. Each 2Connect store will also employ a Manager and an Assistant
Manager.
SERVICE PROVIDER CONTRACTS.
INTERNET SERVICES. The Company intends to offer Internet and E-mail
access accounts pursuant to a supply agreement (the "Internet Service
Agreement") with a leading third-party service provider. The Company
anticipates that the Internet Service Agreement will be nonbinding and
nonexclusive. The Company believes that on the national and regional level
there is a high level of competition among providers of Internet and E-mail
access accounts and, accordingly, does not believe it is dependent on any
particular group of Internet service providers.
CELLULAR SERVICES. The Company intends to offer cellular telephone
service pursuant to a supply agreement (a "Cellular Service Agreement") with a
single leading third-party service provider in each store's geographic area of
operation. The Company anticipates that the Cellular Service Agreements that
it will enter into may be exclusive and for a period of up to two years. The
Company believes that most of its stores, including its South Florida stores,
will be developed in areas where there may be only two cellular telephone
service providers and, accordingly, the Company will be dependent upon such
providers with respect to the provision of cellular phone services. The
Company believes its dependency on such providers of cellular phone services
will be lessened to the extent that PCS services are perceived by customers as
a viable alternative to cellular phone services.
PAGING SERVICES. The Company intends to offer paging services pursuant to
a supply agreement (a "Paging Service Agreement") with one or two leading
third-party service providers in each store's geographic area of operation. The
Company anticipates that the Paging Service Agreements it will enter into will
be nonexclusive and for a period of up to one year. The Company believes that
on the national and regional level there is a high level of competition among
providers of paging services and, accordingly, the Company does not believe it
is dependent on any particular or group of paging service providers.
PCS SERVICES. The Company intends to offer PCS services pursuant to a
supply agreement (a "PCS Service Agreement") with a single leading third-party
service provider in each store's geographic area of operation. The Company
anticipates that the PCS Service Agreements it will enter into will be
nonexclusive and for a period of up to six months. The Company believes that
PCS services have only recently begun to be offered. The Company anticipates
that many of its stores, including its South Florida stores, may be developed
in areas where there may be none, one or only two PCS service providers and,
accordingly, the Company will be dependent upon such providers with respect to
the provision of PCS services. The Company believes that its dependency on
such providers of PCS services will be lessened to the extent that cellular
phone services are perceived by customers as a viable alternative to PCS
services.
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<PAGE> 33
LONG DISTANCE SERVICES. The Company intends to offer long distance
telephone services pursuant to a supply agreement (a "Long Distance Service
Agreement") with one or two national third-party service providers. The
Company anticipates that the Long Distance Service Agreements that it will
enter into will be non-exclusive and for a period of up to one year. The
Company believes that there is a high level of competition among providers of
long distance and prepaid telephone card services and, accordingly, does not
believe it is dependent on any particular supplier.
SATELLITE TV PROGRAMMING. The Company intends to offer satellite TV
programming services pursuant to a supply agreement (the "Satellite Supply
Agreement") with one or two leading brand-name service providers. The Company
anticipates that the Satellite Supply Agreements will be nonexclusive and for a
period of up to one year. Although the Company believes that there are at
least four nationwide providers of satellite TV programming services, the
Company believes that it is important for it to offer the programming services
of at least one or two providers which the Company believes offer superior
services. Accordingly, with respect to satellite TV services, but not its
overall business strategy, the Company is dependent on the two higher quality
satellite TV service providers.
EMPLOYEES.
The Company offers competitive wages and benefits, and has established a
bonus program that is designed to reward the achievement of operating targets
by distributing a portion of its net income to its employees in accordance with
a specified formula which is based on position, job performance, and the
Company's realization of the applicable store or geographic area's net income
goals. The Company believes that the training and knowledge of its employees
and the consistency and quality of the service they deliver will be central to
the Company's success. The Company also believes that its bonus program will
help build successful long-term relationships with its employees.
The Company expects to dedicate substantial resources to employee
training. All full-time 2Connect store employees will participate in a
comprehensive orientation program which will introduce them to the Company's
mission and culture. Each Sales Associate, Assistant Store Manager and Store
Manager will be trained in customer service and sales techniques, in the
different services and product categories, and in how to match a customer's
specific needs and usage patterns to the best priced and most appropriate
2Connect service plans, hardware and accessories. The Company has developed
comprehensive training materials, including handbooks, self assessments and
other training aids. The Company also expects to utilize periodic
vendor-provided training. Members of the sales team will regularly participate
in training so that they can stay abreast of new services, technologies, and
operating procedures. Market Developers and Store Managers are expected to
receive additional specialized training in effective communication skills,
employee motivation, customer retention techniques, team building, and
post-sales marketing.
In the period from inception through the date of this Prospectus, the
Company has hired 17 full time employees and 6 part time employees, including
its Chief Executive Officer and President, its Vice President for Finance, its
Vice President for Merchandising, its Vice President for Operations, its
Manager of Marketing and Store Development, its Manager of Training, Store
Communications, Policies and Procedures, its Manager of Information Systems,
its receptionist and clerical assistant, its Manager of Marketing (on an
interim contract basis), its Merchandising Manager, its first geographic
Market Developer, its first store manager, its first assistant store manager,
its first Web Master, three full time sales associates, and six part time
sales associates.
The Company employs 17 full time and 6 part time persons. The Company
believes that it has good relationships with its employees.
MANAGEMENT INFORMATION SYSTEMS.
The Company expects to link each of the 2Connect stores to the Company's
headquarters through its point-of-sale system that utilizes integrated software
for merchandising, inventory, tracking service activation and usage, and
accounting. The Company believes that its management information system, when
designed and operational, will maintain a record, updated daily, of the sale of
each service subscription and activation, service
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residuals (based on monthly customer usage), and each merchandise item from its
order to receipt to sale. The Company's management information system will also
be designed to create store-level, area, and Company-wide data bases, and
generate customized mailings.
MARKETING AND ADVERTISING.
The Company believes its marketing and advertising efforts will be
concentrated in two areas: in-store and media.
IN-STORE. The Company believes its unique store design, presentations and
store signage will be a significant factor in establishing, differentiating
and reinforcing the 2Connect brand. Each 2Connect store will feature signage
and other materials that are designed to provide concise information as to the
available services and products. The Company will seek to present customers
with simple explanations of category features and benefits, as well as pricing
and sign-up information. The Company believes its brand will also be
differentiated and reinforced by its delivery of quality in-store service and
by maintaining competitive prices.
MEDIA. The Company intends to use a wide variety of traditional media
advertising methods to promote brand awareness and to attract consumers to the
2Connect stores. The Company has developed both grand opening and ongoing
advertising strategies utilizing traditional advertising vehicles such as
newspaper print, targeted direct mail, radio, press releases and special
events, that it anticipates will be substantially funded by service providers
and product manufacturers.
The Company expects to receive service-provider and product-vendor funding
and allowances in the form of cooperative advertising allowances, market
development funds, and new store allowances, although there can be no assurance
that the Company will regularly receive such funding or allowances. Cooperative
advertising allowances are provided by service providers and product vendors
("service and product vendors") for store advertising that features their
services or products. Cooperative advertising allowances are generally
available to mass market retailers of cellular, paging, PCS, telephone, and
satellite TV services and products. Market development funds are additional
funds provided by the service and product vendors for marketing and
advertising. Market development funds are only provided to selected mass
market retailers of cellular, paging, PCS, telephone and satellite TV services
and products. New store allowances are funds provided by service and product
vendors to offset the costs of developing these new stores. These funds, which
can be used as determined by the retailers receiving them, are provided by
service and product vendors only to selected mass market retailers as they
develop new stores.
COMPETITION.
The Company believes it will be subject to intense competition from new
and existing distributing channels for Internet, cellular, PCS, paging and
satellite TV services and products.
In the event of perceived initial market acceptance of the 2Connect store
retailing concept, there is likely to be a rapidly increasing number of market
entrants offering comparable services and products through retail distribution
channels.
The Company believes that certain of its existing competitors may attempt
to adjust their retailing strategies to be more closely aligned with the
retailing concept to be pursued by 2Connect. For instance, certain of the
Company's competitors that have developed highly successful independent retail
store chains previously focusing on providing a high level of customer service
in connection with the sale of Internet, cellular, PCS, paging, long distance
telephone or satellite TV products (i.e. Tandy Corporation, doing business as
Radio Shack and Incredible Universe, and Circuit City Stores, Inc.) may decide
to dedicate additional resources to the retailing of a broad range of the
complimentary services. These retailers may have one or more of the following
competitive advantages, among others: brand name recognition, an existing store
system, superior buying power, an existing customer base, substantial financial
resources and a history of financial performance, prime
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real estate locations, an experienced sales and management staff, and knowledge
of local customer shopping habits.
The Company also recognizes that, even if its competitors were unable to
or choose not to replicate certain aspects of the Company's retailing strategy,
these competitors, including ABC Cellular Corp. and Let's Talk Cellular, Inc.,
might develop or have developed a retailing concept that the Company will not
be able to successfully compete against. For instance, a number of the
Company's competitors have developed highly successful independent retail store
chains by focusing on providing a high level of customer service in connection
with the sale of certain, but not each type of, service and product to be
offered by the Company. In addition, certain of the Company's competitors have
developed highly successful independent retail store chains focusing on
providing a high level of customer service in connection with a range of
services and products which is broader than the Company's proposed range (i.e.,
Sound Advice, Inc. and Beyond Electronics, Inc.). The Company recognizes that
the retailers mentioned above may possess any or all of the competitive
advantages identified in the preceding paragraph. In addition, such
competitors have already developed a work force experienced in the sale of
certain types of services, may offer a broader range of services within a
particular service category, may offer a broader range of services and
products, and may offer their customers greater expertise in the services and
products they offer.
The Company believes that ultimately its most formidable competitor may be
its suppliers, namely the service providers of Internet, cellular, paging, PCS,
long distance telephone and satellite TV services. Certain service providers,
such as Sprint Corp., AT&T Wireless Services, Inc. and BellSouth
Telecommunications, Inc., currently offer at retail locations all or most of
the services the Company intends to offer. Sprint Corp., Sprint Spectrum L.P.
and Tandy Corporation ("Sprint-Tandy") recently announced that they will
jointly develop one-stop shopping locations primarily for Sprint Corp. and
Sprint Spectrum L.P. for cellular, PCS, and paging services and products in
about 300 square feet of each of the 6,800 Radio Shack stores in the United
States. The Company believes that Sprint Corp. has developed at least 10
retail stores in the mid-Atlantic region of the United States that offer
primarily cellular services and products, and that Sprint Corp. and Sprint
Spectrum L.P. have developed at least 10 retail stores in the mid-Atlantic
region of the United States that offer primarily PCS service and products.
AT&T Wireless Services, Inc. has established at least 112 retail stores in the
United States that offer cellular, PCS and paging services and products.
Similarly, BellSouth Telecommunications, Inc. has established at least 15
retail stores in the southeastern region of the United States which offer
cellular and paging services and products. These competitors may have one or
more of the following competitive advantages, among others: brand name
recognition, an established store system, absolute control over their source of
supply, an existing customer base, substantial financial resources and a history
of financial performance, an experienced sales and management staff and
knowledge of consumer use patterns.
The Company will also compete with the service providers of Internet,
cellular, PCS, paging, long distance telephone and satellite TV services for
customers on another level. Unlike the Company, the service providers can
market their services directly to customers without a retail distribution
channel through telephone and other direct forms of subscription. Although the
Company hopes the retail setting will provide it with an opportunity to attract
customers that would not otherwise subscribe for certain service services, the
Company recognizes that service providers engaged in direct marketing may enjoy
all the competitive advantages described above. The Company also recognizes
that certain providers have substantial experience with conducting direct
marketing campaigns.
FACILITIES.
The Company leases approximately 6,500 square feet for executive offices
in Plantation, Florida. The Company believes its executive offices are
sufficient to meet the Company's needs over the next twelve months. The
Company's lease for its executive offices has a five year term without renewal,
and does not contain a right to purchase early termination by the Company or by
its landlord. The Company has entered into a lease with a ten year term
without renewal for its first 2Connect store. The 2Connect store lease is for a
1,754 square foot in-line store located adjacent to the food court in the Coral
Square Shopping Center located in Coral Springs, Florida.
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PROPRIETARY INFORMATION.
The Company has applied for U.S. trademark protection for the name
2Connect and for the Company's 2Connect logo. Both applications are currently
pending. The Company anticipates future registrations of various taglines and
logos.
LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
All of the current officers of the Company were previously employed by
Communicate! Powerstores, Inc. ("Communicate!"). Communicate! was intended to
be a superstore retailer of communication products, services, and technical
support for the small business and home office market. Marc Fishman, the
Company's President, Chief Executive Officer and Chairman of the Board,
conceived the business concept for Communicate! and, together with a New York
based financial and corporate development company, began development of
Communicate! This financial and development company received a majority of the
stock in Communicate! and its Chairman and CEO served as Chairman and CEO of
Communicate! Mr. Fishman held a 28% equity interest in Communicate!, which
had raised a total of approximately $5,000,000 in private equity and debt
offerings. Mr. Fishman resigned from Communicate! on May 18, 1996, after
several disagreements with the CEO over the management and executive decisions.
Kevin Killoran, a co-founder of the Company, and the Company's Manager of
Marketing and Store Development and Secretary, resigned from Communicate! on
May 19, 1996. The Company believes that Communicate! dismissed substantially
all of its employees on May 24, 1996 due to financial difficulty.
The following table sets forth certain information with respect to the
executive officers, certain key employees and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- ---------------------------------------------------------
<S> <C> <C>
Marc D. Fishman 30 President, Chief Executive Officer and
Chairman of the Board of Directors
Steve Stedman 40 Vice President - Finance; Controller
Michael Wichelns 38 Vice President - Operations
Jeff Manly 40 Vice President - Merchandising
Kevin Killoran 26 Secretary; Manager of Marketing and Store
Development
</TABLE>
MARC D. FISHMAN. Mr. Fishman is the founder, and has been the President, Chief
Executive Officer, and Chairman of the Board of Directors of the Company since
the Company's inception on April 19, 1996. Prior to working for the Company,
from November 1994 to May 1996, Mr. Fishman was President, Director and Chief
Merchandising Officer of Communicate! From September 1991 to November 1994,
Mr. Fishman was employed at Office Depot, Inc., a publicly traded company
headquartered in Delray Beach, Florida, most recently as a senior merchandising
executive.
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STEVE STEDMAN. Mr. Stedman has served as the Vice President-Finance and
Controller of the Company since June 1996. Prior to joining the Company, from
October 1995 to May 1996, Mr. Stedman was Corporate Controller at Communicate!
From February 1980 to October 1995, Mr. Stedman was employed at Color Tile,
Inc., a closely held company with publicly traded debt, most recently as
Treasurer and Vice President of Finance, Retail Operations. ColorTile, Inc.,
which is a retailer of floor and wall coverings, and related accessories, filed
for protection under Chapter 11 of the Bankruptcy Laws of the United States in
January 1996.
MICHAEL WICHELNS. Mr. Wichelns has served as the Vice President-Operations of
the Company since June 1996. From July 1995 to May 1996, Mr. Wichelns was
Executive General Manager of Express Services at Communicate! From April 1989
to June 1995, Mr. Wichelns was employed at Office Depot, Inc., most recently as
Director of the Business Services Division.
JEFF MANLY. Mr. Manly has served as the Vice President-Merchandising of the
Company since June 1996. From April 1996 to May 1996, Mr. Manly served as the
Director of the Computer Division at Communicate! From September 1995 to April
1996, Mr. Manly was the Merchandising Manager for the Computer Hardware
Division of Best Buy, Inc., a publicly traded company, which is a leading
retailer of consumer electronics and computer products. From July 1991 to May
1995, Mr. Manly was Senior Merchant for the Computer Hardware Division of
Office Depot, Inc.
KEVIN KILLORAN. Mr. Killoran is a founder and has served as the Manager of
Marketing and Store Development of the Company since June 1996, and as the
Secretary of the Company since August 1996. From its inception in November
1994 until May 1996, Mr. Killoran was Director of In-Store Marketing at
Communicate! From May 1992 to August 1994, Mr. Killoran held positions of
increasing responsibility at Office Depot, Inc., most recently as Mr. Fishman's
management assistant for the Wireless Communications Products and Business
Machine categories.
The Directors currently serve for one-year terms and until their
successors have been elected and qualified. Each officer serves at the
discretion of the Board of Directors (the "Board").
DIRECTOR COMPENSATION
Outside directors are reimbursed for out-of-pocket expenses incurred in
attending Board meetings. Employee directors are not compensated for services
provided as directors or for out-of-pocket expenses related to attendance at
Board of Director meetings.
The Company's 1996 Directors' Stock Option Plan (the "Directors' Option
Plan") was adopted by the Board and approved by the Company's shareholders in
September 1996. A total of 100,000 shares of Common Stock has been reserved
for issuance under the Directors' Option Plan. The Directors' Option Plan
provides for the automatic grant of nonstatutory stock options to non-employee
directors of the Company.
The Directors' Option Plan provides that each non-employee director shall
be granted a nontransferable option to purchase on the date such person becomes
a director of the Company (the "First Option") such number of shares of Common
Stock that have a fair market value of $25,000. Beginning on October 1, 1997,
and on each October 1 thereafter, each non-employee director shall be granted
an option to purchase such number of shares of Common Stock that have a fair
market value of $25,000 (a "Subsequent Option") if, on such date, he or she
shall have served on the Company's Board of Directors for at least six months
immediately prior to such date.
Each First Option and Subsequent Option shall be exercisable in full on
the date of grant. The exercise price of stock options granted under the
Directors' Option Plan shall be set by the Company's Board of Directors, but
shall not be lower than the lesser of (i) fair market value of a share of the
Company's Common Stock on the date of the grant of the option, or (ii) what is
then the last sale price at which the Company sold shares of its Common Stock
on or prior to the date of grant of the option. Options granted under the
Directors' Option Plan have a term of 10 years. In the event of a merger of
the Company with or into another corporation or a sale of substantially all of
the Company's assets, each option would be assumed or an equivalent option
substituted by the successor corporation.
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The Directors' Option Plan will terminate in September 2006. The Board of
Directors may amend or terminate the Directors' Option Plan at any time;
provided, however, that no such action may adversely affect any outstanding
option without the optionee's consent and the provisions affecting the grant
and terms of options may not be amended more than once during any six-month
period. In accordance with Rule 16b-3 of the Securities and Exchange Act of
1934, certain amendments to the Directors' Option Plan require shareholder
approval. Officers of the Company are not eligible to participate in the
Directors' Option Plan.
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "1996 Plan"), which was adopted
by the Board and approved by the Company's shareholders on April 19, 1996,
provides for the granting to employees of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), and for the granting to employees and consultants of
non-statutory stock options. A total of 2,000,000 shares of Common Stock has
been reserved for issuance under the 1996 Plan. As of September 30, 1996,
options to purchase 598,000 shares were outstanding and 1,402,000 shares
remained available for future grant under the 1996 Plan.
The 1996 Plan is administered by the Board of Directors or a committee of
the Board (in either case, the "Committee"), which Committee is required to be
constituted to comply with Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended and applicable laws. The Committee has the power to
determine the terms of the options granted, including the exercise price, the
number of shares subject to the option and the exercisability thereof, and the
form of consideration payable upon exercise. Options granted under the 1996
Plan are not generally transferable by the optionee, and each option is
exercisable during the lifetime of the optionee only by such optionee.
Incentive stock options granted under the 1996 Plan must be exercised within
three months of the end of the optionee's status as an employee or consultant
of the Company, or within twelve months after such optionee's termination by
death or disability, but in no event later than the expiration of the option's
term.
The exercise price of all incentive stock options granted under the 1996
Plan must be at least equal to the fair market value of the Common Stock on the
date of grant. With respect to any participant who owns stock possessing more
than 10% of the voting power of all classes of the Company's outstanding
capital stock, the exercise price of any incentive stock option granted must
equal at least 110% of the fair market value of the Common Stock on the grant
date, and the term of the option must not exceed five years. The term of all
other incentive stock options granted under the 1996 Plan may not exceed ten
years, and the term of non-statutory stock options may not exceed twenty years.
EXECUTIVE COMPENSATION
The Company was incorporated in April, 1996. The following table sets
forth certain information regarding the annual compensation which would have
been paid by the Company with respect to the year ending December 31, 1996, had
the Company employed such persons for the full year, for services in all
capacities of (i) the Company's Chief Executive Officer (the "CEO") and, (ii)
the three other most highly-compensated executive officers of the Company whose
compensation would have been or exceeded $100,000 in their first full year of
employment with the Company (together with the CEO, the "Named Executive
Officers").
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY OPTION AWARDS (#)
- --------------------------- ------------------- ----------------------
<S> <C> <C>
Marc D. Fishman, Chairman, CEO and
President................................... $150,000(1) 200,000
Steve Stedman, Vice President - Finance
and Controller.............................. $100,000(1) 100,000
Michael Wichelns, Vice President -
Operations.................................. $100,000(1) 100,000
Jeff Manly, Vice President - Merchandising.. $100,000(1) 100,000
</TABLE>
- -------------
(1) Such figure represents the named individual's annual salary. The
named individual's employment with the Company commenced June 17, 1996.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Fishman,
Stedman, Wichelns, and Manly, each dated June 17, 1996. Mr. Fishman's
employment agreement has a three year term, with automatic one year renewals,
terminable by Mr. Fishman in writing upon the end of a term. Mr. Fishman may
be terminated by the Company only for "cause," as defined in his employment
agreement. Messrs. Stedman, Wichelns and Manly's employment agreements each
have a one year term, with automatic one year renewals, terminable by either
the Company or, respectively, Messrs. Stedman, Wichelns or Manly in writing
upon the end of a term. Pursuant to their agreements, each of Messrs.
Stedman, Wichelns and Manly has agreed not to compete with the Company for a
period of one year following termination of their respective employment
agreement.
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<PAGE> 40
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table contains information concerning stock option grants
pursuant to the Company's 1996 Stock Option Plan during 1996 to each of the
Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED TO
OPTIONS EMPLOYEES THROUGH EXERCISE PRICE EXPIRATION
NAME GRANTED(1) SEPTEMBER 30 1996 PER SHARE DATE
- ---- ---------- ------------------ -------------- -------------
<S> <C> <C> <C> <C>
Marc D. Fishman 100,000 17.2% $ .81 June 16, 2001
100,000(2) 17.2% $ .73 June 16, 2016
Steve Stedman 100,000 17.2% $ .73 June 16, 2006
Michael Wichelns 100,000 17.2% $ .73 June 16, 2006
Jeff Manly 100,000 17.2% $ .73 June 16, 2006
</TABLE>
- -----------
(1) Except as otherwise noted, the options shown in the table are incentive
stock options that vest equally on the first, second and third
anniversaries of the date of grant.
(2) These options are immediately exercisable non-qualified stock options
that were granted on June 17, 1996. These options expire twenty years
from the date of grant.
OPTION VALUE TABLE
The following table contains information concerning the value of
unexercised stock options held by each of the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED OPTIONS (1)
- ---------------------------------------------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXCERCISABLE UNEXERCISABLE
- -------------------- ------------------------- ------------------- ------------------------------
<S> <C> <C> <C> <C>
Marc D. Fishman 100,000 100,000 $627,000 $619,000
Steve Stedman 100,000 $627,000
Michael Wichelns 100,000 $627,000
Jeff Manly 100,000 $627,000
</TABLE>
- -----------
(1) For the purposes of this table, it has been assumed that the value of the
shares of Common Stock issuable upon the exercise of options is $7.00.
35
<PAGE> 41
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND RELATED MATTERS
Under Florida law, a director is not personally liable for monetary
damages to the corporation or any other person for any statement, vote,
decision, or failure to act unless (i) the director breached or failed to
perform his duties as a director and (ii) a director's breach of, or failure to
perform, those duties constitutes (1) a violation of the criminal law, unless
the director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (2) a transaction from
which the director derived an improper personal benefit, either directly or
indirectly, (3) a circumstance under which an unlawful distribution is made,
(4) in a proceeding by or in the right of the corporation or in a proceeding in
which the corporation procures a judgment in its favor or by or in the right of
a shareholder, conscious disregard for the best interest of the corporation or
willful misconduct, or (5) in a proceeding by or in the right of someone other
than the corporation or a shareholder, recklessness or an act or omission which
was committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety, or property. A
corporation may purchase and maintain insurance on behalf of any director or
officer against any liability asserted against him and incurred by him in his
capacity or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under Florida law.
The Company's Bylaws limit, to the maximum extent permitted by Florida
law, the personal liability of directors and officers for monetary damages for
breach of their fiduciary duties as directors and officers. The Bylaws provide
further that the Company shall indemnify to the fullest extent permitted by
Florida law any person made a party to an action or proceeding by reason of the
fact that such person was a director, officer, employee or agent of the
Company. The Bylaws also provide that directors and officers who are entitled
to indemnification shall be paid their expenses incurred in connection with any
action, suit or proceeding in which such director or officer is made a party by
virtue of his being an officer or director of the Company to the maximum extent
permitted by Florida law.
Prior to this offering, the Company expects to enter into separate
indemnification agreements with its executive officers and directors containing
provisions which are in some respects broader than the specific indemnification
provisions contained in the Company's Bylaws. The indemnification agreements
may require the Company, among other things, to indemnify such directors and
officers against certain liabilities that may arise by reason of their status
as directors and officers (other than liabilities arising from willful
misconduct of a culpable nature), to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified,
and to provide directors' and officers' insurance, if available on reasonable
terms. The Company believes these agreements are necessary to attract and
retain qualified persons as directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
CERTAIN TRANSACTIONS
COMMON STOCK OWNERSHIP
In connection with the organization of the Company and the issuance of
1,900,000 shares of Common Stock in April 1996, the Company issued 1,300,000
shares and 300,000 shares of Common Stock for nominal consideration to Messrs.
Marc Fishman and Kevin Killoran, respectively. Messrs. Fishman and Killoran
may be deemed to be founders of the Company.
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<PAGE> 42
FUTURE TRANSACTIONS
All future transactions, including loans, between the Company and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of
independent and disinterested outside directors on the Board of Directors, and
will be on terms no less favorable to the Company than those that could be
obtained from unaffiliated third parties.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock immediately prior to this offering, and
as adjusted to reflect the sale of Common Stock offered by this Prospectus, (i)
by each person (or group of affiliated persons) who is known by the Company to
own beneficially more than five percent of the Company's Common Stock, (ii) by
each of the Named Executive Officers, (iii) by each of the Company's directors
and nominees for director and (iv) by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
---------------------- ----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Marc D. Fishman (1)(2) 3,205,000 59.2% 3,205,000 50.0%
Robert S. Davimos(3) 390,000 7.2% 390,000 6.1%
Kevin Killoran 300,000 5.5% 300,000 4.7%
Steve Stedman 0 * * *
Michael Wichelns 0 * * *
Jeff Manly 0 * * *
All Directors and Executive Officers
as a group (4 persons)(1)(2) 3,205,000 59.2% 3,205,000 50.0%
</TABLE>
- -----------
* Less than 1%
(1) Includes 100,000 shares subject to options that are currently exercisable
by Mr. Fishman.
(2) Includes 1,805,000 shares which are not owned by Mr. Fishman, but which
are held in a voting trust of which Mr. Fishman is the trustee, and for
which Mr. Fishman has sole voting power.
(3) Does not include 183,000 shares of Common Stock owned by members of the
family of Robert S. Davimos. Richard H. Davimos (father of Robert S.
Davimos), Richard H. Davimos, Jr. and John L. Davimos (brothers of Robert
S. Davimos), and Carol Miller (mother of Robert S. Davimos), who have in
the aggregate purchased 183,000 shares of Common Stock. Robert S. Davimos
disclaims beneficial ownership of the shares held by Richard H. Davimos,
Richard H. Davimos, Jr., John L. Davimos, and Carol Miller.
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<PAGE> 43
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, $.01 par value. The Company is not authorized to issue any
preferred stock.
COMMON STOCK.
Each outstanding share of Common Stock is entitled to one vote on all
matters submitted to a vote of shareholders. Subject to the restrictions
summarized below, dividends may be paid to the holders of Common Stock when and
if declared by the Board of Directors out of funds legally available for
dividends. See "Dividend Policy."
Holders of Common Stock have no conversion, redemption, cumulative voting,
or preemptive rights. All outstanding shares of Common Stock are fully paid
and nonassessable. In the event of any liquidation, dissolution or winding up
of the affairs of the Company, the holders of Common Stock will be entitled to
share ratably in its assets remaining after provision for payment of creditors.
VOTING TRUST.
Marc Fishman is the sole Trustee of a Voting Trust (the "Voting Trust")
entered into among Marc Fishman, Kevin Killoran, and the purchasers of shares
of Common Stock in the initial private offering of the Company. As of
September 30, 1996, 3,105,000 of 5,410,000 shares of outstanding Common Stock
were held in the Voting Trust. The Voting Trust will remain in effect until
June 2006 and applies to all shares of Common Stock held by the Voting Trust's
participants, including shares acquired after the date of the Voting Trust.
As Trustee, Mr. Fishman may vote the shares held in the Voting Trust as he
determines to be in the best interests of the Company, in his sole discretion.
As a result, Marc Fishman will have the ability to control the outcome of all
matters submitted to a vote of the Company's shareholders. Any participant in
the Voting Trust may withdraw any or all of his or her shares of Common Stock
at any time after this offering of Common Stock pursuant to this Prospectus, if
the withdrawn shares are immediately sold pursuant to a bona fide sale to a
party who is not a participant in the Voting Trust.
REDEEMABLE COMMON STOCK PURCHASE WARRANTS.
Pursuant to this Prospectus, the Company is offering Warrants to purchase
an aggregate of 650,000 shares of Common Stock. None of the Warrants have been
issued prior to this offering.
Each Warrant entitles its holder to purchase one share of Common Stock at
an exercise price of $_____________ per share (150% of the initial public
offering price of the Common Stock). The Warrants, which may be exercised
after one year from the date of this Prospectus, expire on ______________
, 2001 (five years from the date of this Prospectus). The Warrants may be
redeemed by the Company at any time, upon 20 days' notice, commencing one year
after the date of this Prospectus, at a redemption price of $.01 per Warrant
upon 20 days prior written notice, if the average closing bid price of the
Common Stock is at least $____ per share (170% of the initial public offering
price of the Common Stock) for the 20 consecutive trading days ending not more
than 10 days prior to the date of any redemption notice. Warrant holders shall
have exercise rights until the close of the business day preceding the date
fixed for redemption.
In order for a holder to exercise a Warrant, there must be a current
registration statement on file with the Commission pertaining to the shares of
Common Stock underlying the Warrants, and such shares must be registered or
qualified for sale under the securities laws of the state in which such Warrant
holder resides or such exercise must be exempt from registration in such state.
The Company will be required to file post-effective amendments to the
Registration Statement, of which this Prospectus forms a part, during the nine
month period from the date hereof, when events require such amendments. In
addition, the Company has agreed with the Managing Underwriter to use its best
efforts to keep the Registration Statement covering the shares of Common Stock
underlying the Warrants current and effective. There can be no assurance,
however,
38
<PAGE> 44
that such Registration Statement (or any other Registration Statement filed by
the Company to cover shares of Common Stock underlying the Warrants) can be kept
current. If a Registration Statement covering such shares of Common Stock is
not kept current for any reason, or if the shares underlying the Warrants are
not registered in the state in which a holder resides, the Warrants will not be
exercisable and will be deprived of any value.
Holders of the Warrants will be protected against dilution upon the
occurrence of certain events, including, but not limited to the issuance of any
Common Stock or other securities convertible or exercisable for Common Stock at
a price per share less than the exercise price or the market price of the
Common Stock, or in the event of any stock dividend, stock split,
reclassification, recapitalization, stock combination or similar transaction.
However, holders of the Warrants will have no voting rights and will not be
entitled to dividends. In the event of liquidation, dissolution or winding up
of the Company, holders of Warrants as such will not be entitled to participate
in any distribution of the Company's assets.
ANTI-TAKEOVER PROVISIONS OF FLORIDA LAW
Florida has enacted legislation that may deter or frustrate takeovers of
Florida corporations. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds, beginning at 20% of
the Company's outstanding voting shares, will not possess any voting rights
unless such voting rights are approved by a majority vote of a corporation's
disinterested shareholders. The Affiliated Transactions Act generally requires
majority approval by disinterested directors or supermajority approval of
disinterested shareholders of certain specified transactions (such as a merger,
consolidation, sale of assets, issuance or transfer of shares or
reclassifications of securities) between a corporation and a holder of more
than 10% of the outstanding voting shares of the corporation, or any affiliate
of such shareholder.
The directors of the Company are subject to the "general standards for
directors" provisions set forth in the Florida Business Corporation Act. These
provisions provide that in discharging his or her duties and determining what
is in the best interests of the Company, a director may consider such factors
as the director deems relevant, including the long-term prospects and interests
of the Company and its shareholders and the social, economic, legal or other
effects of any proposed action on the employees, suppliers or customers of the
Company, the community in which the Company operates and the economy in
general. Consequently, in connection with any proposed action, the Board of
Directors is empowered to consider interests of other constituencies in
addition to the Company's shareholders, and directors who take into account
these other factors may make decisions which are less beneficial to some, or a
majority, of the shareholders than if the law did not permit consideration of
such other factors.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
The authorized but unissued shares of Common Stock are available for
future issuance without shareholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future public offerings
to raise additional capital, corporate acquisitions and employee benefit plans.
The existence of authorized but unissued and unreserved Common Stock may
enable the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger, or
otherwise, and thereby protect the continuity of the Company's management.
TRANSFER AGENT AND WARRANT AGENT.
The transfer agent and registrar for the Common Stock and the Warrants is
American Stock Transfer & Trust Company.
39
<PAGE> 45
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock or
Warrants of the Company. Future sales of substantial amounts of Common Stock
in the public market could adversely affect market prices prevailing from time
to time.
Upon completion of this offering, the Company will have outstanding
6,410,000 shares of Common Stock outstanding and 2,850,000 shares of Common
Stock reserved for issuance. Of outstanding shares, the 1,000,000 shares sold
in this offering will be freely tradable without restriction under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act. Of the other 5,410,000
outstanding shares of Common Stock, 375,000 shares (the "Shelf Registration
Shares") of Common Stock have been registered for resale to the public by
certain stockholders pursuant to the Selling Stockholder Prospectus, and,
subject to the lock-up agreement with the Underwriters, will be freely tradable
without restriction under the Securities Act. The Shelf Registration Shares
are subject to a lock-up agreement with the Underwriters under which the
holders of the Shelf Registration Shares have agreed not to sell or otherwise
dispose of any of their Shelf Registration Shares for 180 days after the date
of this Prospectus without the prior written consent of the Managing
Underwriter. Of such 5,035,000 remaining outstanding shares of Common Stock:
(i) 1,300,000 shares will become eligible for sale under Rule 144 promulgated
under the Securities Act ("Rule 144") on April 19, 1998; (ii) 600,000 shares
will become eligible for sale under Rule 144 on April 20, 1998; (iii) 1,505,000
shares will become eligible for sale under Rule 144 on May 15, 1998; (iv)
505,000 shares will become eligible for sale under Rule 144 on May 17, 1998;
and (v) 1,125,000 shares will become eligible for sale under Rule 144 on August
30, 1998.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least two
years (including the holding period of any prior owner except an affiliate) is
entitled to sell in "broker's transactions" or to market makers, within any
three-month period, a number of shares that does not exceed the greater of (i)
1% of the then outstanding shares of Common Stock (approximately 64,100 shares
immediately after this offering) or (ii) generally, the average weekly trading
volume in the Common Stock during the four calendar weeks preceding the sale.
Sales under Rule 144 are also subject to the filing of a Form 144 with respect
to such sale and certain other limitations and restrictions. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the ninety days preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least three years, would be
entitled to sell such shares without having to comply with the manner of sale,
volume limitation or notice filing provisions described above.
Upon consummation of this offering, the Company will have 2,850,000 shares
of Common Stock reserved for issuance, which figure includes; (i) 650,000
shares of Common Stock issuable upon exercise of the Warrants (exercise price
$10.50); (ii) 598,000 shares of Common Stock issuable upon exercise of stock
options (weighted average exercise price $.80); (iii) an aggregate of 1,502,000
shares of Common Stock reserved for issuance upon exercise of options that may
be granted under the Company's 1996 Stock Option Plan and 1996 Director's Stock
Option Plan; and (iv) 100,000 shares of Common Stock issuable upon exercise of
the Underwriter's Warrants (exercise price $8.40, assuming a public offering
price of $7.00 per share).
The Company intends to file registration statements on Form S-8 under the
Securities Act to register up to 2,100,000 shares of Common Stock reserved for
issuance under its 1996 Plan and the Director's Option Plan, thus permitting
the resale of such shares by nonaffiliates in the public market without
restriction under the Securities Act.
All of the Company's officers, directors and shareholders owning more than
1% of the Company's outstanding Common Stock have agreed not to sell or
otherwise dispose of any of their shares of Common Stock for a period for a
period of 24 months from the date of this Prospectus without the prior written
consent of the Managing Underwriter and the Company.
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<PAGE> 46
Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that market sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities. See "Description of Securities," "Management--Director
Compensation," "--1996 Option Plan," and "Underwriting."
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
the Underwriters, for whom Sovereign Equity Management Corporation is acting as
Managing Underwriter, have severally agreed to purchase from the Company the
respective number of shares of Common Stock and Warrants set forth opposite the
name of such Underwriter below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES NUMBER OF WARRANTS
- ---- ---------------- ------------------
<S> <C> <C>
Sovereign Equity Management
Corporation................... __________ __________
Total......................... __________ __________
</TABLE>
The Underwriters are committed to purchase all shares of Common Stock and
the Warrants offered hereby, if any are so purchased. The Underwriting
Agreement contains certain provisions whereby, if any Underwriter defaults in
its obligation to purchase such shares, and the aggregate obligations of the
Underwriters so defaulting do not exceed ten percent of the shares offered
hereby, some or all of the remaining Underwriters must assume such obligations.
The Underwriters propose to offer the shares of Common Stock and Warrants
directly to the public initially at the offering prices set forth on the cover
page of this Prospectus and to certain dealers at such price less a concession
not in excess of $______ per share and $______ per Warrant. The Underwriters
may allow, and such dealers may re-allow, concessions not in excess of $____ per
share and $ _____per share and $_____ and $____ per Warrant to certain other
dealers. The offering of the Common Stock and the Warrants is made for
delivery when, as and if accepted by the Underwriters and subject to prior sale
and withdrawal, cancellation or modification of the offer without notice. The
Underwriters reserve the right to reject any order for the purchase of Common
Stock or Warrants. After the public offering of the Common Stock and the
Warrants, the public offering price and the concessions may be changed by the
Managing Underwriter.
The Managing Underwriter has advised the Company that it does not
anticipate sales to discretionary accounts by the Underwriters to exceed five
percent of the total number of shares of Common Stock or Warrants offered
hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.
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<PAGE> 47
The Company has also agreed to pay to the Managing Underwriter an expense
allowance on a non-accountable basis equal to 3% of the gross proceeds derived
from the sale of the shares of Common Stock and the Warrants underwritten, of
which $25,000 has been paid to date.
The Underwriters have agreed to indemnify the Company against any
liabilities by reason of misstatements or omissions to state material facts in
connection with the statements made in the Registration Statement, based on
information relating to the Underwriters and furnished in writing by the
Underwriters specially for inclusion therein.
The Underwriters have been granted an option by the Company, exercisable
within 45 days after the date of this Prospectus, to purchase up to an
additional 150,000 shares of Common Stock and an additional 97,500 Warrants at
the initial public offering price offered hereby, less underwriting discounts
and commissions. Such option may be exercised only for the purpose of covering
over-allotments, if any, incurred in the sale of the shares of Common Stock or
Warrants offered hereby. To the extent such option is exercised in whole or
in part, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase the number of the additional shares of Common Stock and
Warrants proportionate to its initial commitment.
All of the Company's directors, officers and shareholders owning more than
1% of the Company's outstanding Common Stock have agreed not to, directly or
indirectly, sell, transfer, hypothecate or otherwise encumber any of their
shares for twenty-four (24) months following the date of this Prospectus
without the prior written consent of the Managing Underwriter and the Company.
The Company has agreed that for five (5) years after the effective date of
this Prospectus, the Managing Underwriter will have the right to designate an
observer to attend meetings of the Company's Board of Directors.
In connection with this Offering, the Company has agreed to sell to the
Managing Underwriter, for nominal consideration, the Underwriter's Warrants to
purchase from the Company 100,000 shares of Common Stock. The Underwriter's
Warrants are initially exercisable for shares of Common Stock at a price of $
per share of Common Stock (120% of the initial public offering price of
the Common Stock) for a period of four (4) years commencing one (1) year from
the date of this Prospectus and are restricted from sale, transfer, assignment
or hypothecation for a period of twelve (12) months from the date hereof,
except to officers and principals of the Managing Underwriter. The
Underwriter's Warrants also provide for adjustment in the number of shares of
Common Stock issuable upon the exercise thereof as a result of certain
subdivisions and combinations of the Common Stock. The Underwriter's Warrants
grant to the holders thereof certain rights of registration for the Common
Stock issuable upon exercise of the Underwriter's Warrants. For the life of
the Underwriter's Warrants, the holders thereof are given, at a nominal cost,
the opportunity to profit from a rise in the market price of the Common Stock
with a resulting dilution in the interest of other shareholders. The Company
may find it more difficult to raise capital for its business if the need should
arise while the Underwriter's Warrants is outstanding. At any time when the
holders of the Underwriter's Warrants might be expected to exercise it, the
Company would probably be able to obtain additional capital on more favorable
terms.
In March 1995 the NASD issued an order against a member firm and two
individuals, including Glen T. Vittor, President of the Underwriter, in
connection with failure to honor two trades. The order bars Mr. Vittor from
acting as a principal, suspends him for one year from association with any NASD
member, requires him to requalify as a registered representative, and requires
payment of a fine and restitution. Mr. Vittor has appealed the order to the
SEC. The SEC stayed the order except for the bar from acting as a principal.
Sovereign Equity Management Corporation, the Managing Underwriter, was
registered as a broker-dealer in 1987. The Managing Underwriter has
participated in only one public offering as a Manager. The Managing Underwriter
intends, though it is not obligated, to make a market in the Common Stock and
the Warrants of the Company upon completion of this offering. Prospective
purchasers of Common Stock or Warrants offered hereby should consider the
limited experience of the Managing Underwriter in evaluating an investment in
the Common Stock or the Warrants.
Prior to this offering, there has been no public market for the Common
Stock or the Warrants. Consequently, the initial public offering price for the
Common Stock and for the Warrants, and the other terms of the Warrants, will be
determined by negotiations between the Company and the Managing Underwriter and
are not necessarily related to the Company's asset value, net worth or other
established criteria of value. Among the factors considered in such
negotiations will be the prospects for the Company's business, the history of
and an
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<PAGE> 48
assessment of the Company's management, the Company's business plans and
development, the Company's capital structure, and the general condition of the
securities market at the time of this offering.
The foregoing is a summary of the principal terms of the Underwriting
Agreement described above and does not purport to be complete. Reference is
made to a copy of each such agreement which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. See "Additional
Information."
LEGAL MATTERS
The validity of the Common Stock and Warrants offered hereby will be
passed upon for the Company by Adorno & Zeder, P.A., Miami, Florida.
Atlas, Pearlman, Trop & Borkson, P.A., Fort Lauderdale, Florida has acted as
counsel for the Underwriters in connection with certain legal matters relating
to the Common Stock and Warrants offered hereby. As of September 30, 1996,
a shareholder of Adorno & Zeder, P.A. owned 50,000 shares of the Company's
Common Stock.
EXPERTS
The financial statements of 2Connect Express, Inc. as of September 30,
1996 and for the period from April 19, 1996 (date of inception) to September
30, 1996 have been included herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form SB-2 (together with all amendments thereto, the
"Registration Statement"), under the Securities Act with respect to the shares
of Common Stock and the Warrants offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules filed therewith, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock and
Warrants offered hereby, reference is hereby made to the Registration Statement
and to the exhibits and schedules filed therewith. Statements contained in
this Prospectus regarding the contents of any contract or other document
referred to are not necessarily complete and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being deemed to be qualified in its
entirety by such reference. The Registration Statement, including all exhibits
and schedules thereto, may be inspected without charge at the principal office
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, or at the regional offices of the Commission at
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661
and Seven World Trade Center, New York, New York 10048. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, upon the payment of
the prescribed fees. The Commission maintains a site on the World Wide Web
(http://www.sec.gov.) That contains reports, registration statements, proxy and
information statements, and other information.
43
<PAGE> 49
2CONNECT EXPRESS INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report.................................. F-2
Balance Sheet as of September 30, 1996........................ F-3
Statement of Operations and Deficit Accumulated during
the Development Stage from April 19, 1996
(date of inception) to September 30, 1996.................... F-4
Statement of Shareholders' Equity from April 19, 1996
(date of inception) to September 30, 1996.................... F-5
Statement of Cash Flows from April 19, 1996 (date of
inception) to September 30, 1996............................ F-6
Notes to Financial Statements................................. F-7
</TABLE>
F-1
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
2 Connect Express, Inc.:
We have audited the accompanying balance sheet of 2 Connect Express, Inc. (a
development stage enterprise) as of September 30, 1996 and the related
statements of operations and deficit accumulated during the development stage,
shareholders' equity and cash flows for the period from April 19, 1996 (date of
inception) to September 30, 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 2 Connect Express, Inc. (a
development stage enterprise) as of September 30, 1996 and the results of its
operations and its cash flows for the period from April 19, 1996 (date of
inception) to September 30, 1996 in conformity with generally accepted
accounting principles.
Miami, Florida
October 3, 1996, except as to the last
three paragraphs of Note 8,
which are as of October 29, 1996
<PAGE> 51
2 CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
BALANCE SHEET
September 30, 1996
<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets:
Cash $ 2,854,124
Due from employee 4,000
-----------
Total current assets 2,858,124
Property and equipment, net 29,492
Other assets 12,777
-----------
Total assets $ 2,900,393
===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 21,592
Accrued expenses 16,588
-----------
Total liabilities 38,180
-----------
Shareholders' equity:
Common stock, $0.01 par value. Authorized 25,000,000 shares; issued and
outstanding 5,410,000 shares 54,100
Paid-in capital 3,194,950
Deficit accumulated during the development stage (375,137)
-----------
2,873,913
Less subscriptions receivable (11,700)
-----------
Total shareholders' equity 2,862,213
Commitments
-----------
Total liabilities and shareholders' equity $ 2,900,393
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 52
2 CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
Period from April 19, 1996 (date of inception) to September 30, 1996
<TABLE>
<S> <C>
General and administrative expenses:
Salaries $ 164,864
Professional services 109,144
Other 112,473
---------
Total general and administrative expenses 386,481
---------
Operating loss (386,481)
Interest income 11,344
---------
Net loss and deficit accumulated during the development stage $(375,137)
=========
Net loss per share $ (0.06)
=========
Number of shares used in calculating net loss per share 5,939,621
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 53
2 CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
STATEMENT OF SHAREHOLDERS' EQUITY
Period from April 19, 1996 (date of inception) to September 30, 1996
<TABLE>
<CAPTION>
Deficit
Common stock accumulated
-------------------------- during the
Number of Par Paid-in development Subscriptions
shares value capital stage receivable Total
------ ----- ------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, at inception -- $ -- -- -- -- --
Issuance of common stock on
April 19 & 20, 1996 (founders
shares at nominal
consideration) 1,900,000 19,000 (19,000) -- -- --
Issuance of common stock on May 15,
1996 ($0.02 per share)
1,505,000 15,050 15,050 -- -- 30,100
Issuance of common stock on May 17,
1996 ($0.73 per share)
505,000 5,050 363,600 -- (11,700) 356,950
Issuance of common stock on
August 30, 1996 ($2.25 per
share and net of $524,700 of
issuance costs)
1,500,000 15,000 2,835,300 -- -- 2,850,300
Net loss -- -- -- (375,137) -- (375,137)
--------- ---------- --------- -------- ------- ---------
Balance, at September 30, 1996
5,410,000 $54,100 3,194,950 (375,137) (11,700) 2,862,213
========= ========== ========= ======== ======= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 54
2 CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
Period from April 19, 1996 (date of inception) to September 30, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (375,137)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation expense 890
Changes in assets and liabilities:
Due from employee (4,000)
Other assets (12,777)
Accounts payable 21,592
Accrued expenses 16,588
-----------
Net cash used in operating activities (352,844)
-----------
Cash flows from investing activities:
Purchase of property and equipment (30,382)
-----------
Net cash used in investing activities (30,382)
-----------
Cash flows from financing activities:
Net proceeds from issuance of common stock 3,237,350
-----------
Net cash provided by financing activities 3,237,350
-----------
Net increase in cash 2,854,124
-----------
Cash, beginning of period --
-----------
Cash, end of period $ 2,854,124
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 55
2CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(1) ORGANIZATION, BUSINESS AND RISK FACTORS
(a) ORGANIZATION AND BUSINESS
2 Connect Express, Inc., (a development stage enterprise) (the
"Company"), which was incorporated in April 1996, intends to
become a specialty retailer of Internet, cellular, paging,
telephone, satellite and other communication-related products
and services under the name "2Connect". Since inception, the
Company has developed a business plan for the Company's
operations and proposed expansion in South Florida; hired the
executive and support personnel necessary to support the
Company's proposed expansion in South Florida for the next six
months; hired its first market developer and store manager;
developed a standard 2Connect store design for its shopping
mall and power center stores; engaged a site selection and
construction oversight contractor to aid the Company in
selecting and securing store sites and to oversee store
construction; identified and is in the process of finalizing a
lease for the first 2Connect store site location; commenced the
development of its first 2Connect store; identified and
commenced negotiations for eight additional 2Connect store site
locations in South Florida; identified and commenced
negotiations with its proposed service providers and product
vendors; developed a marketing strategy; and raised an
aggregate of $3,237,350 in net proceeds through private
offerings. The Company expects to open its first 2Connect
store in Coral Springs, Florida in November 1996. Although
these financial statements are as of September 30, 1996, the
Company's fiscal year end is December 31.
(b) DEVELOPMENT STAGE COMPANY AND RISK FACTORS
The Company is considered to be a development stage company as
defined in Statement of Financial Accounting Standards No. 7,
"Accounting and Reporting by Development Stage Enterprises." The
Company, as a development stage enterprise, has yet to generate
revenue and has no assurance of future revenues. The Company is
subject to a number of risks that may affect its ability to
become an operating enterprise or impact its ability to remain
in existence, including risks relating to the Company's recent
organization, the possible need for additional financing, the
need to negotiate contracts and establish and maintain
successful relationships with service providers, reliance on key
personnel, the risk of technological obsolescence, the
uncertainty of market acceptance of the Company's business
concept and competition.
(2) SIGNIFICANT ACCOUNTING POLICIES
<PAGE> 56
-2-
2CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(a) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of
property and equipment is calculated on a straight-line basis
over the estimated useful lives of the assets. Leasehold
improvements are amortized on a straight-line basis over their
useful lives or the term of the related lease, whichever is
less.
Maintenance and repairs are charged to operations when incurred.
Substantial expenditures for improvements that increase the
capacity or extend the useful lives of the assets are
capitalized.
<PAGE> 57
-3-
2CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(b) INCOME TAXES
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
(c) NET LOSS PER SHARE
Net loss per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding
during the period. In accordance with a Securities and Exchange
Commission Staff Accounting Bulletin, common stock and common
stock equivalents issued within a twelve-month period prior to
the initial filing of a registration statement relating to an
initial public offering are treated as outstanding for the
entire period (using the treasury stock method and the estimated
public-offering price of $7 per share).
(d) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.
(3) PROPERTY AND EQUIPMENT, NET
Property and equipment, net at September 30, 1996 consists of the
following:
<TABLE>
<CAPTION>
Estimated
useful life
-----------
<S> <C> <C>
Machinery and equipment $ 23,491 3-5 years
Furniture and fixtures 6,286 7 years
Leasehold improvements 605 Lease term
-----------
30,382
Less accumulated depreciation (890)
-----------
Property and equipment, net $ 29,492
===========
</TABLE>
<PAGE> 58
-4-
2CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(4) INCOME TAXES
The income tax benefit for the period from April 19, 1996 (date of
inception) to September 30, 1996 was $-0-, which differed from the
amount computed by applying the United States federal income tax rate
of 34 percent to the pretax loss as a result of the following:
<TABLE>
<S> <C>
Computed "expected" tax benefit $ 127,547
Increase (reduction) in income taxes resulting from:
State income taxes 20,633
Increase in the valuation allowance for deferred tax assets (148,180)
--------
$ -
========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at September 30, 1996 are presented
below:
<TABLE>
<S> <C>
Deferred tax assets:
Start-up and organizational costs $ 148,180
Less: valuation allowance (148,180)
--------
Total net deferred tax asset $ -
========
</TABLE>
(5) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of financial instruments (accounts payable and
accrued expenses) approximated fair value at September 30, 1996 because
of the short maturity of these items.
(6) SHAREHOLDERS' EQUITY
(a) STOCK OPTIONS
The Company has two fixed stock option plans. Under the
Company's 1996 Stock Option Plan, the Company may grant options
to employees for up to 2 million shares of common stock. Under
the Directors Stock Option Plan, the Company may grant options
to nonemployee members of the Company's board of directors for
up to 100,000 shares of common stock, and any options granted
fully vest upon grant. Under the 1996 Stock Option Plan, the
exercise price of each option must equal or exceed the fair
market price of the Company's common stock on the date of
grant, and
<PAGE> 59
-5-
2CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
an option's maximum term is 20 years. Under the Directors
Stock Option Plan, the exercise price of each option must not
be lower than the lesser of (i) the fair market price of the
Company's common stock on the date of grant of the option or
(ii) what is at the date of grant, the last sale price at which
the Company sold shares of its common stock, and an option's
maximum term is 10 years. All options granted during the
period from April 19, 1996 (date of inception) to September 30,
1996 were granted under the 1996 Stock Option Plan and vest
equally over the first, second and third anniversaries of the
date of grant, other than options which were granted on
June 17, 1996 to an executive officer of the Company to
purchase 100,000 shares of common stock, which are immediately
exercisable.
A summary of the status of the Company's two stock option plans
as of September 30, 1996 and changes for the period from April
19, 1996 (date of inception) to September 30, 1996 is presented
below:
<TABLE>
<CAPTION>
Weighted average
Shares exercise price
------ --------------
<S> <C> <C>
Outstanding at inception - -
Granted 598,000 $ 0.80
------- -------
Outstanding at September 30, 1996 598,000 0.80
======= =======
Options exercisable at September 30, 1996 100,000 $ 0.73
======= =======
</TABLE>
The Company applies APB Opinion No. 25 and related
interpretations in accounting for its stock option plans.
Accordingly, no compensation expense has been recognized in
connection with stock options granted. Had compensation cost for
the Company's stock option plans been determined consistent with
Financial Accounting Standards Board Statement No. 123, the
Company's net loss and net loss per share for the period from
April 19, 1996 (date of inception) to September 30, 1996, would
have been increased by approximately $31,000 and $0.01 per
share, respectively. The weighted average fair value per share
of options granted during the period from April 19, 1996 (date
of inception) to September 30, 1996 is $0.21. The fair value of
each option grant is estimated on the date of grant using the
minimum-value method with the following assumptions used for
grants in 1996: expected dividends of zero; a risk-free interest
rate of 6.92 percent; and an expected life of 5 years.
(b) VOTING TRUST
The Company's chief executive officer is the trustee of a voting
trust entered into among himself (1,300,000 shares), the
Company's director of marketing and store
<PAGE> 60
-6-
2CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
development (300,000 shares) and certain other shareholders of
the Company (1,505,000 shares). The voting trust has a term of 10
years expiring June 2006 and applies to all shares of common
stock of the voting trust's participants, including shares
acquired after entry into the voting trust. Any participant in
the voting trust may withdraw any or all of his or her shares of
common stock at any time after the Company's initial public
offering, if the withdrawn shares are immediately sold pursuant
to a bona fide sale to a party who is not a participant in the
voting trust. As a result, the Company's chief executive officer
has voting control of the Company for all matters in which
shareholders vote. The Company's chief executive officer is
expected to continue to have voting control even after the
completion of the Company's initial public offering.
<PAGE> 61
- 7 -
2CONNECT EXPRESS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(7) COMMITMENTS
(a) LEASES
The Company is obligated under noncancelable operating leases
for office space and equipment that expire at various dates
through 2001. Rent expense for the period from April 19, 1996
(date of inception) to September 30, 1996 was $2,070.
Minimum future rental payments under noncancelable operating
leases as of September 30, 1996 consist of the following:
<TABLE>
<S> <C>
Three months ending December 31, 1996 $ 6,525
Year ending December 31:
1997 44,839
1998 48,586
1999 48,536
2000 44,975
2001 31,857
--------
$225,318
========
</TABLE>
(b) EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with several
of its officers and employees including the president. Under the
terms of these agreements, the Company is obligated to pay base
salaries over the next three years as follows:
<TABLE>
<S> <C>
Three months ending December 31, 1996 314,167
Year ending December 31:
1997 382,083
1998 150,000
1999 68,750
</TABLE>
(8) SUBSEQUENT EVENTS
On October 1, 1996, the Company's board of directors approved the
Company's filing of form SB-2 with the Securities and Exchange
Commission ("SEC"). This filing with the SEC provides for the issuance
and sale of 1,000,000 shares of common stock and 650,000 redeemable
common stock purchase warrants. Company management expects the filing
to occur during October 1996.
On October 29, 1996, the Company entered into a noncancelable
operating lease (the "Lease") for a store site location that expires
in 2006.
Minimum future rental payments under the Lease consist of the
following:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1996 $ 4,823
1997 57,880
1998 58,055
1999 58,533
2000 61,949
Thereafter 357,280
--------
$598,520
========
</TABLE>
In addition to the minimum future rental payments due under the Lease,
the Company is required to pay an annual amount equal to 6% of the
store's annual adjusted gross revenue (as defined in the lease
agreement) in excess of approximately $1,500,000.
<PAGE> 62
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING THE OFFER IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................................................1
Risk Factors..........................................................
Use of Proceeds.......................................................
Dividend Policy.......................................................
Capitalization........................................................
Dilution..............................................................
Selected Financial Information........................................
Management's Plan of Operation........................................
Proposed Business.....................................................
Management............................................................
Executive Compensation................................................
Certain Transactions..................................................
Principal Shareholders................................................
Description of Securities ............................................
Shares Eligible for Future Sale.......................................
Underwriting..........................................................
Legal Matters.........................................................
Experts...............................................................
Additional Information ...............................................
Index to Financial Statements......................................F-1
</TABLE>
------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
[2CONNECT LOGO]
1,000,000 SHARES
OF
COMMON STOCK
650,000 REDEEMABLE COMMON
STOCK PURCHASE WARRANTS
----------
PROSPECTUS
----------
SOVEREIGN EQUITY
MANAGEMENT CORPORATION
____________, 1997
================================================================================
<PAGE> 63
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED OCTOBER __, 1996
PROSPECTUS
375,000 SHARES OF COMMON STOCK
2CONNECT EXPRESS, INC.
This Prospectus may be used in connection with the distribution of up
to 375,000 shares (the "Shares") of Common Stock, par value $.01 per share (the
"Common Stock"), of 2Connect Express, Inc. ("2Connect" or the "Company")
proposed to be disposed of from time to time by the Selling Shareholders named
herein. See "Selling Shareholders." The Company will not have any interest in
the proceeds of the sale of Shares offered hereby. Application has been made
to include the Common Stock on the Nasdaq Small Cap (R) Market under the symbol
CNTC.
The Selling Shareholders have advised the Company that they may from
time to time sell all or part of the Shares in one or more transactions (which
may involve block transactions) in the over-the-counter market, on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") (or any
exchange on which the Common Stock may then be listed), in negotiated
transactions, or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders and/or purchasers of
the Shares from whom they may act as agent (which compensation may be in excess
of customary commissions). The Selling Shareholders may also pledge the Shares
as collateral for margin accounts or loans and the Shares could be resold
pursuant to the terms of such accounts or loans. The Selling Shareholders and
any participating brokers and dealers may be deemed to be "underwriters" as
defined in the Securities Act of 1933, as amended (the "Securities Act"). See
"Plan of Distribution."
Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that such a market will develop after the
completion of this offering or, if developed, that it will be sustained.
------------
THESE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" ON PAGES 4 THROUGH 11.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==============================================================================================================
Underwriting Discounts Proceeds to
Price to Public and Commissions(1) Selling Shareholders
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........... $ $ $
- --------------------------------------------------------------------------------------------------------------
Total(3)............ $ $ $
==============================================================================================================
</TABLE>
(1) See "Plan of Distribution."
THE DATE OF THIS PROSPECTUS IS NOVEMBER __, 1996
<PAGE> 64
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock of
the Company beneficially owned by each Selling Shareholder, registered for sale
pursuant to this Prospectus and beneficially owned by each Selling Shareholder
assuming the sale of all the shares of Common Stock offered in this Prospectus
and the consummation of the Concurrent Offering.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES REGISTERED BENEFICIAL OWNERSHIP
PRIOR TO OFFERING IN THIS OFFERING AFTER OFFERING
------------------------ ---------------- -------------------------
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Allan Fishman 135,000 2.49 10,000 125,000 1.95
13661 Deering Bay Dr.
Miami, FL 33158
Richard Gurian 60,000 1.10 1,250 58,750 .92
507 Jacaranda Way
Plantation, FL 33324
Jeannine Gurian 159,000 2.93 5,000 154,000 2.4
4015 Palm Aire Dr., West
Apt. 1002
Pompano, FL 33069
Nathan E. Nacklas 12,000 .22 2,500 9,500 .15
401 N.E. Mizner Blvd., #904
Boca Raton, FL 33432
Richard H. Davimos 110,000 2.00 17,500 92,500 1.4
TTEE The Richard H. Davimos Trust
u/a/d 5/12/92 FBO Richard H. Davimos
1401 South Ocean Blvd., #500
Boca Raton, FL 33432
Carol E. Miller 10,000 .18 1,250 8,750 .14
736 Ashburton Dr.
Naples, FL 33963
Lynn Tilton 15,000 .28 1,250 13,750 .21
5814 N.W. 35th Way
Boca Raton, FL 33496
Timothy Gulla 35,000 .64 5,000 30,000 .47
51 Cragmere Rd
Suffern, N.Y. 10901
Don Brennan 14,000 .26 2,250 11,750 .18
51 Cragmere Rd
Suffern, N.Y. 10901
Stephen Joseph Szabo 22,500 .41 2,500 20,000 .31
16201 Avila Blvd
Tampa, FL 33613
E. Jackson Boggs 6,000 .11 1,000 5,000 .08
819 S. Grove Park Ave
Tampa, FL 33609
</TABLE>
<PAGE> 65
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES REGISTERED BENEFICIAL OWNERSHIP
PRIOR TO OFFERING IN THIS OFFERING AFTER OFFERING
------------------------ ---------------- -------------------------
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Lawrence & Lori Turel 25,000 .46 2,500 22,500 .35
3860 Queens Way
Boca Raton, FL 33434
Thomas T. Irvin 20,000 .37 5,000 15,000 .23
Rte. 1 Box 341
Mt. Aery, GA 30563
Lawrence Saks 10,000 .18 2,500 7,500 .12
8723 S.W. 113 Ct
Miami, FL 33173
You A. Deng & Lian Jun Xu 5,000 .09 1,250 3,750 .06
1070 N.E. 181 Street
N. Miami Beach, FL 33162
Pictet Bank & Trust 250,000 4.6 62,500 187,500 2.93
c/o Charlotte House
P.O. Box N-4837
Nassau, Bahamas
Cecil C. McCall & Jean P. McCall 10,000 .18 2,500 7,500 .12
1813 Baldwin Farms Dr.
Marietta, GA 30068
James R. Russell & Mary L. Russell 50,000 .92 12,500 37,500 .59
2205 Gay Way
Birmingham, AL 35216
Michael Weiss 10,000 .18 2,500 7,500 .12
14 Doti Ct
Huntington, N.Y. 11743
Clyde & Martha Everett 10,000 .18 2,500 7,500 .12
164 Grandview Ave
Valparaiso, FL
Harry C. Holland, Inc. 30,000 .55 7,500 22,500 .35
1013 Elmwood
Norman, OK 73072
Harry C. Holland TTEE - The Harry C 20,000 .37 5,000 15,000 .23
Holland Revocable Trust
Neil J. Karlin 4,000 .07 1,000 3,000 .05
687 Ocean Blvd
Golden Beach, FL 33160
Daniel Barral 7,000 .13 1,750 5,250 .08
3457 Forrest Drive
Hollywood, FL 33021
Ines Barral 5,000 .09 1,250 3,750 .06
3457 Forrest Dr.
Hollywood, FL 33021
</TABLE>
<PAGE> 66
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES REGISTERED BENEFICIAL OWNERSHIP
PRIOR TO OFFERING IN THIS OFFERING AFTER OFFERING
------------------------ ---------------- -------------------------
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Mitchell Denburg 5,000 .09 1,250 3,750 .06
1221 N. Ocean Blvd
Gulf Stream, FL 33483
Patricia V. Gardner 10,000 .18 2,500 7,500 .12
1014 Temple Grove
Winter Park, FL 32789
Dr. Lester Dubins 10,000 .18 2,500 7,500 .12
1626 Spruce St
Berkeley, CA 94709
Robert Hicks 10,000 .18 2,500 7,500 .12
2 Danbury Ct
Little Rock, AR 72227
Michael T. Holland/Cynthia Holland 10,000 .18 2,500 7,500 .12
17 Longlea Dr.
Little Rock, AR 72212
Brenda & Sam Hochberg 22,222 .41 5,555 16,667 .26
13673 Deering Bay Dr.
Miami, FL 33158
Judith A. Droder 15,000 .28 3,750 11,250 .18
396 Coconut Palm Rd
Boca Raton, FL 33432
Louis D. Kipp/Angel Arrabal 10,000 .18 2,500 7,500 .12
3701 S.W. 132 Avenue
Miramar, FL 33027
Peter T. Callas 5,000 .09 1,250 3,750 .06
355 S.W. 16th Street
Boca Raton, FL 33432
Anthony Russo 5,000 .09 1,250 3,750 .06
8 Kiwanis Dr.
Wayne, NJ 07470
William Smith 10,000 .18 2,500 7,500 .12
8 Hamilton Ct
Whippany, NJ 07981
Robert & Beatrice Krantz 50,000 .92 12,500 37,500 .59
608 88th Street
Surfside, FL 33154
Mills Sales Corp. 15,000 .28 3,750 11,250 .18
P.O. Box 2182
Macon, GA 31203
Alan M. Silberstein 10,000 .18 2,500 7,500 .12
784 Park Ave
New York, N.Y. 10021
</TABLE>
<PAGE> 67
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES REGISTERED BENEFICIAL OWNERSHIP
PRIOR TO OFFERING IN THIS OFFERING AFTER OFFERING
------------------------ ---------------- -------------------------
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
First Capital Resource 10,000 .18 2,500 7,500 .12
Kenneth H. Rose Revocable Trust 20,000 .37 5,000 15,000 .23
4523 Bay Beach Lane, H-1
Ft. Myers Beach, FL 33931
Nick & Dolores Giannini 10,000 .18 2,500 7,500 .12
800 Newberry
Mt. Prospect, IL 60056
Thomas Ballweg 10,000 .18 2,500 7,500 .12
3521 Westlake Dr.
Augusta, GA 30907
J. Stuart Johnson 40,000 .74 10,000 30,000 .47
560 Spinnacker Ln
Longboat Key, FL 34228
Bartz-Michalski Trust 10,000 .18 2,500 7,500 .12
2119 S. 82 Street
West Allis, WI 53219
Peter H. Feehan 10,000 .18 2,500 7,500 .12
P.O. Box 87
Deposit, N.Y. 13754
Myron & Lorie Ace 10,000 .18 2,500 7,500 .12
14524 Riverside Dr.
Ft. Myers, FL 33905
William R. Jenkins 10,000 .18 2,500 7,500 .12
3630 Country Club Dr.
Gastonia, NC 28056
Ronald A. Freeman 5,000 .09 1,250 3,750 .06
760 Bass Rd
Macon, GA 31210
Sharon A. Morris 10,000 .18 2,500 7,500 .12
2080 Pearwood Path
Roswell, GA 30076
Michael H. Otis 20,000 .37 5,000 15,000 .23
10517 Rochester Way
Tampa, FL 33626
Finamek Asset Mgmt 10,000 .18 2,500 7,500 .12
c/o Guillermo Bauder
Avenue Francisco De-Miranda
Edificio Parque Cristal Torre
Este, Piso 3 Ofc 3-10
HST Partners 20,000 .37 5,000 15,000 .23
75 West End Ave., R35A
New York, N.Y. 10023
</TABLE>
<PAGE> 68
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES REGISTERED BENEFICIAL OWNERSHIP
PRIOR TO OFFERING IN THIS OFFERING AFTER OFFERING
------------------------ ---------------- -------------------------
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Richard D. Crotteau 10,000 .18 2,500 7,500 .12
417 W. Brow Rd
Lookout Mt., TN 37350
Jerry E. Friedman 20,000 .37 5,000 15,000 .23
9467 N. Fairway Cir
Milwaukee, WI 53217
Liu An-Ping Hwang 10,000 .18 2,500 7,500 .12
7400 E. Hampden Ave., #12
Denver, CO 80231
Lawrence & Jacqueline Kunhert 20,000 .37 5,000 15,000 .23
8397 Black Walnut Dr.
E. Amherst, N.Y. 14051
David L. Brown 10,000 .18 2,500 7,500 .12
1106 Bergan Rd
Oreland, PA 19075
Donald A. Krain 10,000 .18 2,500 7,500 .12
527 Revere Rd
Merion, PA 19066
Kari M. Beier 20,000 .37 5,000 15,000 .23
131 Lakeview Rd
Franklin, VA 23851
Kenneth D. Rickel 20,000 .37 5,000 15,000 .23
139 High Oaks Dr.
Warren, N.J. 07060
Palmerston Securities 10,000 .18 2,500 7,500 .12
c/o W.K. Moss
8 Heriot Rd
London NW4 2DG England
10,000 .18 2,500 7,500 .12
AK Industrial Contractors
c/o Mike Arnett
P.O. Box 1444
Searcy, AR 72143
Leonard Casciola 10,000 .18 2,500 7,500 .12
2001 Carter Mill Way
Brookeville, MD 20833
J. Felix Campos/Hilaire Fernandez 5,000 .09 1,250 3,750 .06
10224 Vestal Ct
Coral Springs, FL 33071
Steve L. Foster 10,000 .18 2,500 7,500 .12
220 Sibley Trail
Searcy, AR 72143
</TABLE>
<PAGE> 69
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES REGISTERED BENEFICIAL OWNERSHIP
PRIOR TO OFFERING IN THIS OFFERING AFTER OFFERING
------------------------ ---------------- -------------------------
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Eliahu S. Kreis 10,000 .18 2,500 7,500 .12
1222 Somerset Dr.
McLean, VA 22101
Jed M. Pollack 10,000 .18 2,500 7,500 .12
5 Myrtle Dr.
Great Neck, NY 11021
Marie A. Geisel 10,000 .18 2,500 7,500 .12
36 South Sherman Ave
Berkeley Heights, NJ 07922
Ronald K. Setzkorn 10,000 .18 2,500 7,500 .12
1221 Willow Rend
Clarksville, TN 37043
Delaware Charter Guarantee and Trust 10,000 .18 2,500 7,500 .12
Corp. FBO Dolores D. Giannini, IRA
800 Newberry Lane
Mt. Prospect, IL 60056
Charles Schwab & Co. Inc. 11,111 .21 2,778 8,333 .13
FBO Bruce S. Foerster, IRA
5860 Pine Tree Dr.
Miami Beach, FL 33140
Thomas R. Creamer 10,000 .18 2,500 7,500 .12
3842 Inverness Common
Livermore, CA 94550
Michael T. Holland/Cynthia A. Holland 10,000 .18 2,500 7,500 .12
17 Longlea Dr.
Little Rock, AR 72212
Thomas R. Matthews 10,000 .18 2,500 7,500 .12
2523 Rockwood Way
Stone Mt., GA 30087
Robert Krantz 47,445 .88 11,861 35,584 .56
608 88th Street
Surfside, FL 33154
Paul Forest Varner 5,000 .09 1,250 3,750 .06
Jeff H. Varner 5,000 .09 1,250 3,750 .06
28 Dolphin Green
Apt. 14
Port Washington, NY 11050
Kenneth Daiveyko 10,000 .18 2,500 7,500 .12
c/o Klarberg, Raiola & Assoc
500 Fifth Ave., Ste. 2000
New York, N.Y. 10110
</TABLE>
<PAGE> 70
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES REGISTERED BENEFICIAL OWNERSHIP
PRIOR TO OFFERING IN THIS OFFERING AFTER OFFERING
------------------------ ---------------- -------------------------
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Richard C. Postle 20,000 .37 5,000 15,000 .23
4 Litzsinger Lane
St. Louis, MO 63124
Gregory P. Beam 4,000 .07 1,000 3,000 .05
7110 S.W. 41 Court
Davie, FL 33314
Richard Carter 10,000 .18 2,500 7,500 .12
3843 Great Rd., Apt. 201
Acton, MA 01720
Joseph Caruso 10,000 .18 2,500 7,500 .12
1829 Boat Point Dr.
Point Pleasant, NJ 08742
Kenneth L. Bagwell TTEE Kenneth L 10,000 .18 2,500 7,500 .12
Bagwell Revocable Trust u/a/d
10/25/96
9999 Collins Ave., #11-A
Bal Harbour, FL 33154
Roy A. Beckett 5,000 .09 1,250 3,750 .06
14710 N.W. Oak Hills Dr.
Beaverton, OR 97006
Ann Goldfarb 5,000 .09 1,250 3,750 .06
2750 N.E. 183 Street, Apt. T-2302
N. Miami Beach, FL 33160
Frank & Helen Goldfarb 1,000 .02 250 750 .01
19531 N.E. 18th Court
Miami, FL 33179
Grace M. Gulla 3,222 .06 805 2,417 .04
2975 Southwest 22nd Avenue
Suite 201
Delray Beach, FL 33445
James K. Murray, Jr 4,000 .07 1,000 3,000 .05
1901 Holly Lane
Tampa, FL 33629
Frank Agliano 4,000 .07 1,000 3,000 .05
45 Spanish Main
Tampa, FL 33609
Olle Nilsson 4,000 .07 1,000 3,000 .05
Smith Barney Inc. 10,000 .18 2,500 7,500 .12
IRA Custodian for IRA of
Roderick T. Wilson
610 N. Ocean Blvd
Delray Beach, FL 33483
</TABLE>
<PAGE> 71
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES REGISTERED BENEFICIAL OWNERSHIP
PRIOR TO OFFERING IN THIS OFFERING AFTER OFFERING
------------------------ ---------------- -------------------------
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- -------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Michael Ira Goldberg 5,000 .09 1,250 3,750 .06
20131 N.E. 21st Avenue
N. Miami Beach, FL 33179
William A. Hoffman 10,000 .18 2,500 7,500 .12
7204 Mandarin Dr.
Boca Raton, FL 33433
David S. Lundeen 25,000 .46 6,250 18,750 .29
8309 Club Ridge Dr.
Austin, TX 78735
John Dudley Davenport 5,000 .09 1,250 3,750 .06
1858 S.W. 17th Street
Boca Raton, FL 33486
Dennis Montgomery 20,000 .37 5,000 15,000 .23
1012 S.W. Halsey
Trout Dale, OR 97060
</TABLE>
<PAGE> 72
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
PLAN OF DISTRIBUTION
The Selling Shareholders have advised the Company that they may from
time to time sell all or part of the Shares in one or more transactions (which
may involve block transactions) in the over-the-counter market, on the Nasdaq
Small Cap (R) Market (or any exchange on which the Common Stock may then be
listed), in negotiated transactions, or a combination of such methods of sale,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Shareholders may
effect such transactions by selling the Shares to or through broker-dealers,
and such broker-dealers may receive compensation in the form of underwriting
discounts, concession or commissions from the Selling Shareholders and/or
purchasers of the Shares from whom they may act as agent (which compensation
may be in excess of customary commissions). The Selling Shareholders may also
pledge the Shares as collateral for margin accounts or loans and the Shares
could be resold pursuant to the terms of such accounts or loans. The Selling
Shareholders and any participating brokers and dealers may be deemed to be
"underwriters" as defined in the Securities Act.
The Selling Shareholders have agreed not to, directly or indirectly,
sell, transfer, hypothecate, or otherwise encumber any of their Shares for a
period of 180 days following the date of this Prospectus, without the prior
written consent of Sovereign Equity Management Compensation, the managing
underwriter of the Concurrent Offering described below. The Selling
Shareholders have also severally agreed to indemnify the Company against
certain liabilities, including liabilities under the Securities Act, in
connection with their ownership of, and authority to sell, their respective
Shares.
In order to comply with certain state securities laws, if applicable,
the Shares will not be sold in a particular state unless the Shares have been
registered or qualified for sale in such state or an exemption from
registration or qualification is available and complied with.
CONCURRENT OFFERING
The Registration Statement, of which this Prospectus forms a part,
contains a separate prospectus with respect to a concurrent offering (the
"Concurrent Offering") by the Company of 1,000,000 shares of Common Stock and
650,000 warrants.
<PAGE> 73
ALTERNATE PAGE FOR SELLING SHAREHOLDER PROSPECTUS
===============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING THE OFFERING IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------
===============================================================================
===============================================================================
2CONNECT EXPRESS, INC.
375,000 SHARES
OF
COMMON STOCK
------------
PROSPECTUS
------------
_______________, 199_
===============================================================================
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Bylaws limit, to the maximum extent permitted by
Florida law, the personal liability of directors and officers for monetary
damages for breach of their fiduciary duties as directors or officers. The
Bylaws provide further that the Company shall indemnify to the fullest extent
permitted by Florida law any person made a party to an action or proceeding by
reason of the fact that such person was director, officer, employee or agent of
the Company. The Bylaws also provide that directors and officers who are
entitled to indemnification shall be paid their expenses incurred in connection
with any action, suit, or proceeding in which such director or officer is made a
party by virtue of his or her being an officer or director of the Company to the
maximum extent permitted by Florida law.
Prior to the offering, the Company expects to enter into separate
indemnification agreements with its officers and directors containing provisions
which are in some respect broader than the specific indemnification provisions
contained in the Company's Bylaws. The indemnification agreements may require
the Company, among other things, to indemnify such directors and officers
against certain liabilities that may arise by reason of their status as
directors and officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Company believes that these agreements are necessary to attract and retain
qualified persons as directors and officers.
Reference is made to the following documents filed as Exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Document Exhibit Number
-------- --------------
<S> <C>
Underwriting Agreement..............................................1.1
Registrant's Articles of Incorporation..............................3.1
Registrant's Bylaws.................................................3.2
</TABLE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions and the Representatives' nonaccountable
expense allowance, payable in connection with the sale of the Common Stock being
registered hereby. All amounts are estimates, except the registration fee and
the NASD filing fee.
II-1
<PAGE> 75
<TABLE>
<CAPTION>
Item Amount
- ------------------------------- ------
<S> <C>
SEC registration fee .................................................$6,772.70
NASD filing fee ...................................................... 2,735
Nasdaq listing fee ................................................... 7,000
Blue Sky fees and expenses ........................................... 60,000*
Printing and engraving expenses ...................................... 55,000*
Road show expenses ................................................... 15,000*
Legal fees and expenses .............................................. 150,000*
Auditors' fees and expenses .......................................... 20,000*
Transfer Agent and Registrar fees .................................... 3,500*
Representative's non-accountable
expense allowance ................................................. 211,950*
Miscellaneous expenses ...............................................18,042.30*
Total ....................................................... $550,000*
--------
- --------------------
* Estimated
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following is a summary of the transactions by Registrant since the
Registrant's incorporation on April 19, 1996, involving sales of Registrant's
securities that were not registered under the Securities Act of 1933, as amended
(the "Securities Act"):
On April 19 and 20, 1996, the founding shareholders of the Company
(Marc Fishman, Kevin Killoran, Allan Fishman, Thomas Vittor, Richard Gurian, Tim
Flavin, Charles Northington, Richard Thal, David Lansburgh, Scott Zimmerman,
David Kusiel, Lowell Williams, John Semyan, and James Holbrook) received
1,900,000 shares of Common Stock for nominal consideration. The issuances of
these 1,900,000 shares were deemed exempt from registration under the Securities
Act in reliance on Section 4(2) of such Act. In addition, the recipients of the
1,900,000 shares of founders' Common Stock represented their intentions to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the share certificates.
On May 15, 1996, the Company closed a $30,100 offering of 1,505,000
shares of Common Stock at $.02 per share. The purchasers of the Common Stock at
$.02 per share (Allan Fishman, Thomas Vittor, Scott Zimmerman, Robert S.
Davimos, Jeannine Gurian, Henry Allen, Philip Gurian, Robert Zara, Bauman Ltd.,
Gary Kelman, H&H Partnership, Laura Fiero, Reinerman Ltd., Arnold Jaffee, Yale
Fishman, Leon Katz, Logan Davis, Nathan Nacklas, Richard H. Davimos, Jr., and
Osmond Howe) would have forfeited their shares if they failed to purchase shares
of Common Stock in subsequent offerings so that the Company would have received
$350,000 in capital contributions by the consummation of the first follow-up
offering of Common Stock, and $2,500,000 in capital contributions by the
consummation of the second follow-up offering of Common Stock.
On May 17, 1996, the Company closed a $368,650 offering of 505,000
shares of Common Stock at $.73 per share (purchasers: Richard Gurian, Robert S.
Davimos, Jeannine Gurian, H&H Partnership, Richard H. Davimos, Richard H.
Davimos, Jr., John L. Davimos, Melissa Warman, Carol Miller, Mario Arace, Lynn
Tilton, Osmond Howe, Frank Hernandez, Wayne Sewell, Michael Clair, Elliot
Starman, J. Barrie Farrington, Timothy Gula, and Don Brennan). The issuance of
the 1,505,000 shares of Common Stock at $.02 per share and the 505,000 shares of
Common Stock at $.73 per share were deemed exempt from registration under the
Securities Act in reliance on Rule 506 promulgated under the Securities Act.
II-2
<PAGE> 76
All recipients had adequate access to information about the Registrant.
The Registrant believes that all of the purchasers of the Common Stock in this
offerings at $.02 per share and $.73 per share were accredited investors as
defined in Rule 501 promulgated under the Securities Act.
On August 30, 1996, the Company closed a $3,375,000 offering of
1,500,000 shares of Common Stock at $2.25 per share. Sovereign Equity Management
Corporation, the Managing Underwriters in this offering, served as the Placement
Agent in the 1,500,000 share offering, for which it received a fee in the form
of a Placement Agent's discount of $337,500 (10% of the gross proceeds of this
offering) and a non-accountable expense allowance of $101,250 (3% of the gross
proceeds of this offering). The Company believes that the issuance of the
1,500,000 shares of Common Stock at $2.25 per share was deemed exempt from the
registration requirements of the Securities Act in reliance on Rule 506
promulgated under the Securities Act. All recipients of the Common Stock in this
offering at $2.25 per share had adequate access to the information about the
Registrant, and the recipients represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution. Appropriate legends were affixed to the share
certificates. The Registrant believes that all of the purchasers of the Common
Stock in the $2.25 per share offering were accredited investors as defined in
Rule 501 promulgated under the Securities Act.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C>
1.1 Form of Underwriting Agreement(1)
3.1 Articles of Incorporation of Registrant, as amended to date
3.2 Bylaws of Registrant
4.1 Specimen Common Stock Certificate of Registrant
5.1 Opinion of Adorno & Zeder, P.A.(1)
10.1 1996 Stock Option Plan
10.2 Directors' Option Plan
10.3 Employment Agreement with Marc D. Fishman
10.4 Employment Agreement with Steve Stedman
10.5 Employment Agreement with Michael Wichelns
10.6 Employment Agreement with Jeff Manly
10.7 Form of Redeemable Common Stock Purchase Warrant(1)
10.8 Underwriter's Warrant(1)
11.1 Statement Re Computation of Net Loss Per Share(1)
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Adorno & Zeder, P.A. (included as part of Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
27 Financial Data Schedule (for SEC use only)
</TABLE>
- ----------------------------------
(1) To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a) (3) of
the Securities Act;
II-3
<PAGE> 77
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and this offering of the securities at that time to be the initial bona
fide offering.
(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of this offering.
(4) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriters to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officer or controlling persons of
the registrant, pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(6) For determining any liability under the Securities Act, to treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the issuer under Rule 424(b) (1), or (4), or 497(h) under
the Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(7) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-4
<PAGE> 78
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
of the requirements for filing on Form SB-2 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Plantation, Florida on November 5, 1996.
2CONNECT EXPRESS, INC.
By: /s/ Marc D. Fishman
---------------------------------------
Marc D. Fishman
President, Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Marc D.
Fishman as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any Registration Statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission.
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.
/s/ Marc D. Fishman President, Chief Executive Officer and November 5, 1996
- ------------------- Chairman of the Board of Directors
Marc D. Fishman (Principal Executive Officer)
/s/ Steve Stedman Vice President, Finance and Chief November 5, 1996
- ------------------- Financial Officer
Steve Stedman (Principal Financial and
Accounting Officer)
<PAGE> 79
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------
2CONNECT EXPRESS, INC.
---------------------
================================================================================
<PAGE> 1
EXHIBIT 3.1
STATE OF FLORIDA
[SEAL]
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of
Incorporation of CONNECT EXPRESS, INC., a Florida corporation, filed on April
19, 1996, as shown by the records of this office.
The document number of this corporation is P96000034309.
Given under my hand and the
Great Seal of the State of Florida
at Tallahassee, the Capital, this the
Nineteenth day of April, 1996
[SEAL] /s/ Sandra B. Mortham
CR2EO22 (2-95) -----------------------------
Sandra B. Mortham
Secretary of State
<PAGE> 2
ARTICLES OF INCORPORATION
OF
CONNECT EXPRESS, INC.
The undersigned hereby adopts the following Articles of
Incorporation for the purpose of forming a corporation under the provisions of
Chapter 607 Florida Statutes:
ARTICLE I. NAME
The name of this corporation is Connect Express, Inc. (the "Corporation").
ARTICLE II. - ADDRESS
The principal business address and mailing address of the Corporation is:
c/o A Z Registered Agent Corporation
2601 S. Bayshore Drive
Suite 1600
Miami, Florida 33133
ARTICLE III. - CAPITAL STOCK
The maximum number of shares which this Corporation is
authorized to have outstanding at any time is 10,000,000 shares of Common Stock
having a par value of $0.01 per share.
ARTICLE IV. - INITIAL REGISTERED
OFFICE AND AGENT
The initial registered office of this Corporation shall be at
2601 S. Bayshore Drive, Suite 1600, Miami, Florida 33133, and the initial
Registered Agent of this Corporation at such office shall be A Z Registered
Agent Corporation.
ARTICLE V. - INCORPORATOR
The name and street address of the person signing these
Articles of Incorporation is Arnold M. Jaffee, Esq., 2601 S. Bayshore Drive,
Suite 1600, Miami, Florida 33133.
IN WITNESS WHEREOF, the undersigned has executed these Articles
of Incorporation on April 16, 1996.
/s/ Arnold M. Jaffee
-----------------------
Arnold M. Jaffee, Esq.,
Incorporator
<PAGE> 3
CERTIFICATE OF DESIGNATION OF REGISTERED AGENT
AND REGISTERED OFFICE
AND ACCEPTANCE OF APPOINTMENT OF REGISTERED AGENT
1. The name of the Corporation is:
Connect Express, Inc.
2. The name and address of the Registered Agent and the registered
office is: A Z Registered Agent Corporation, 2601 S. Bayshore Drive, Suite
1600, Miami, Florida 33133.
Pursuant to Section 607.0501, Florida Statutes, the undersigned
has been named to act as the Registered Agent of Connect Express, Inc., at the
place designated in this certificate and the undersigned agrees to accept such
appointment and to act in that capacity. The undersigned further agrees that
the undersigned will comply with Section 607.0505, Florida Statutes, relating
to the proper and complete performance of the duties of the Registered Agent of
the Corporation and that the undersigned is familiar with and accepts the
obligations of the position of Registered Agent for the Corporation.
Date: April 16, 1996
A Z REGISTERED AGENT CORPORATION
By:/s/ Arnold M. Jaffee
--------------------
Arnold M. Jaffee,
Vice President
<PAGE> 4
[SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
June 25, 1996
2CONNECT EXPRESS, INC.
2601 S. BAYSHORE DRIVE, SUITE 1600
C/O A Z REGISTERED AGENT CORPORATION
MIAMI, FL 33133
Re: Document Number P96000034309
The Articles of Amendment to the Articles of Incorporation for CONNECT EXPRESS,
INC. which changed its name to 2CONNECT EXPRESS, INC., a Florida corporation,
were filed on June 25, 1996.
The certification requested is enclosed. To be official, the certification for
a certified copy must be attached to the original document that was
electronically submitted and filed under FAX audit number H96000008814.
Should you have any question regarding this matter, please telephone (904)
487-6050, the Amendment Filing Section.
Linda Stitt
Corporate Specialist
Division of Corporations Letter Number: 296A00031529
<PAGE> 5
STATE OF FLORIDA
[SEAL]
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on June 25, 1996, to Articles of Incorporation for CONNECT EXPRESS, INC.
which changed its name to 2CONNECT EXPRESS, INC., a Florida corporation, as
shown by the records of this office.
I further certify the document was electronically received under FAX audit
number H96000008814. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is P96000034309.
Given under my hand and the
Great Seal of the State of Florida
at Tallahassee, the Capital, this the
Twenty-fifth day of June, 1996
Authentication Code: 296A00031529-062596-P96000034309-1/1
[SEAL] /s/ Sandra B. Mortham
CR2EO22 (1-95) --------------------------------
Sandra B. Mortham
Secretary of State
<PAGE> 6
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
CONNECT EXPRESS, INC.
The undersigned, President of CONNECT EXPRESS, INC., a corporation
organized and existing under and by virtue of the Florida Business Corporation
Act (the "Corporation"), does hereby certify:
1. The name of the Corporation is Connect Express, Inc.
2. The following provision of the Articles of Incorporation of
the Corporation be and it hereby is amended in the following particulars:
Article I be and it hereby is amended to read in its entirety
as follows:
"The name of this corporation is 2Connect Express, Inc."
3. The foregoing amendment was adopted by the sole Director of
the Corporation, without the necessity of shareholder approval, by written
consent dated June 24, 1996.
IN WITNESS WHEREOF, the undersigned President of the
Corporation has executed these Articles of Amendment this 24th day of June,
1996.
/s/ Marc D. Fishman
--------------------------
Marc D. Fishman, President
<PAGE> 7
STATE OF FLORIDA
[SEAL]
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on September 11, 1996, to Articles of Incorporation for 2CONNECT EXPRESS,
INC., a Florida corporation, as shown by the records of this office.
I further certify the document was electronically received under FAX audit
number H96000012633. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is P96000034309.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Eleventh day of September, 1996
Authentication Code: 696A00042347-091196-P96000034309-1/1
[SEAL] /s/ Sandra B. Mortham
CR2EO22 (1-95) -------------------------------
Sandra B. Mortham
Secretary of State
<PAGE> 8
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
2CONNECT EXPRESS, INC.
The undersigned, President of 2CONNECT EXPRESS, INC., a
corporation organized and existing under and by virtue of the Florida Business
Corporation Act (the "Corporation"), does hereby certify:
1. The name of the Corporation is 2Connect Express, Inc.
2. Article III of the Articles of Incorporation of the
Corporation is hereby amended to read, in its entirety, as follows:
"The maximum number of shares which this Corporation is
authorized to have outstanding at any time is 25,000,000 shares of Common Stock
having a par value of $0.01 per share."
3. The foregoing amendment was recommended by the Board
of Directors to the shareholders on September 9, 1996.
4. The foregoing amendment was approved by the
shareholders of the Corporation pursuant to Section 607.1003(5) on September 9,
1996.
IN WITNESS WHEREOF, the undersigned President of the
Corporation has executed these Articles of Amendment this 9th day of September
1996.
/s/ Marc D. Fishman
-------------------
Marc D. Fishman
President
<PAGE> 9
[SEAL]
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
September 11, 1996
2CONNECT EXPRESS, INC.
2601 S. BAYSHORE DRIVE, SUITE 1600
C/O A Z REGISTERED AGENT CORPORATION
MIAMI, FL 33133
Re: Document Number P96000034309
The Articles of Amendment to the Articles of Incorporation for 2CONNECT
EXPRESS, INC., a Florida corporation, were filed on September 11, 1996.
The certification requested is enclosed. To be official, the certification for
a certified copy must be attached to the original document that was
electronically submitted and filed under FAX audit number H96000012633.
Should you have any question regarding this matter, please telephone (904)
487-6050, the Amendment Filing Section.
Linda Stitt
Corporate Specialist
Division of Corporations Letter Number: 696A00042347
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
CONNECT EXPRESS, INC.,
a Florida corporation
ARTICLE I
OFFICES
Section 1. The location of the registered office of the
corporation shall be as stated in the Articles of Incorporation, which location
may be changed from time to time by the board of directors.
Section 2. The corporation may also have offices or branches
at such other places, both within and without the State of Florida, as the
board of directors may from time to time determine or as the business of the
corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. All meetings of the shareholders shall be held at
the registered office of the corporation, or at such other place either within
or without the State of Florida as shall be designated from time to time by the
board of directors and stated in the notice of the meeting.
Section 2. Annual meetings of shareholders shall be held on
the first Tuesday of the third month of each fiscal year of the corporation if
not a legal holiday in the state in which the meeting shall be held, and if a
legal holiday, then on the next secular day following, at such time as
determined by the board of directors, or at such other date and time as shall
be designated from time to time by the board of directors and stated in the
notice of the meeting. At the annual meeting, the shareholders shall elect a
board of directors and transact such other business as may properly be brought
before the meeting. If the annual meeting is not held on the date designated
therefor, the board of directors shall cause the meeting to be held as soon
thereafter as convenient.
Section 3. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Articles
of Incorporation, may be called by the chairman of the board or president, and
shall be called by the chairman of the board or president at the request in
writing of a majority of the board of directors or at the request in writing of
the holders of not less than 10% of all the shares entitled to vote at a
meeting.
<PAGE> 2
Such request shall state the purpose or purposes of the proposed meeting.
Section 4. The officer or agent who has charge of the stock
transfer book for shares of the corporation shall make and certify a complete
list of the shareholders entitled to vote at a shareholders' meeting, or any
adjournment thereof. The list shall be arranged in alphabetical order with
each class and series and show the address of each shareholder and the number
of shares registered in the name of each shareholder. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
Section 5. Except as may be provided by statute, written
notice of an annual or special meeting of shareholders stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be delivered, either personally or by mail, not less than 10 nor
more than 60 days before the date of the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the shareholder
at his address as it appears on the stock transfer books of the corporation
with first-class postage thereon prepaid. Oral notice may be given, provided
that such oral notice is reasonable under the circumstances. Personal notice
may be communicated in person, by telephone, by telegraphy, teletype, telefax,
or any other form of electronic or written communication. Personal notice is
effective when communicated if received directly by the person to be notified
in a comprehensible manner.
Section 6. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise expressly required by statute or by
the Articles of Incorporation. All shareholders present in person or
represented by proxy at such meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. If, however, such quorum shall not be initially present at
any meeting of shareholders, a majority of the shareholders entitled to vote
thereat shall nevertheless have power to adjourn the meeting from time to time
and to another place, without notice other than announcement at the meeting,
until a quorum shall be present or represented. At such adjourned meeting, at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified. If
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
-2-
<PAGE> 3
Section 7. When an action other than the election of
directors is to be taken by vote of the shareholders, it shall be approved if
the votes cast by the holders of the shares represented at the meeting and
entitled to vote on the subject matter favoring the action exceed the votes
cast opposing the action, unless a greater plurality is required by express
requirement of the statutes or of the Articles of Incorporation, in which case
such express provision shall govern and control the decision of such question.
Except as otherwise expressly required by the Articles of Incorporation,
directors shall be elected by a plurality of the votes cast at an election.
Section 8. Each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such shareholder except as
otherwise expressly required in the Articles of Incorporation. A vote may be
cast either orally or in writing. Each proxy shall be in writing and signed by
the shareholder or his authorized agent or representative. A proxy is not
valid after the expiration of 11 months after its date unless the person
executing it specifies therein the length of time for which it is to continue
in force. Unless prohibited by law, a proxy otherwise validly granted by
telegram shall be deemed to have been signed by the granting shareholder. All
questions regarding the qualification of voters, the validity of proxies and
the acceptance or rejection of votes shall be decided by the presiding officer
of the meeting.
Section 9. Attendance of a person at a meeting of
shareholders in person or by proxy constitutes a waiver of notice of the
meeting except where the shareholder attends a meeting for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting was not lawfully called or convened.
Section 10. Unless otherwise provided by the Articles of
Incorporation, any action required to be taken at any annual or special meeting
of the shareholders, or any other action which may be taken at any annual or
special meeting of the shareholders may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, shall be signed by holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Within 10 days after obtaining such authorization by written
consent, notice shall be given to those shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action be a merger, consolidation, or sale of
assets for which dissenters rights are provided for by statute, the notice
shall contain a clear statement of the rights of shareholders dissenting
therefrom to be paid the fair value of
-3-
<PAGE> 4
their shares upon compliance with further provisions of such statute regarding
the rights of dissenting shareholders.
ARTICLE III
DIRECTORS
Section 1. The business and affairs of the corporation shall
be managed by or under the direction of its board of directors which may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the shareholders.
Section 2. The number of directors which shall constitute the
whole board shall be determined from time to time by resolution of the board of
directors but shall not be less than one nor more than nine (9). In the
absence of an express determination by the board, the number of directors,
until changed by the board, shall be that number of directors elected at the
most recently held annual meeting of shareholders or, if no such meeting has
been held, the number elected by the incorporator in the initially filed
Articles of Incorporation or otherwise. The directors shall be elected at the
annual meeting of the shareholders, except as provided in Section 3 of this
Article, and each director elected shall hold office until his successor is
duly elected and qualified or until his resignation or removal. Directors need
not be shareholders or officers of the corporation.
Section 3. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by the affirmative vote of a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, or by the shareholders,
and the directors so chosen shall hold office until the next annual election of
directors by the shareholders and until their successors are duly elected and
qualified or until their resignation or removal. Any director may be removed,
with#or without cause, by the shareholders at a meeting of the shareholders
called expressly for that purpose.
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Florida. Unless otherwise restricted by the Articles of Incorporation, members
of the board of directors, or any committee designated by the board, may
participate in a meeting of the 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 section shall constitute presence in person at such
meeting.
-4-
<PAGE> 5
Section 5. The first board of directors shall hold office
until the first annual meeting of shareholders. Thereafter, the first meeting
of each newly elected board of directors shall be held promptly following the
annual meeting of shareholders on the date thereof. No notice of such meeting
shall be necessary to the newly elected directors in order to legally
constitute the meeting, provided a quorum shall be present. In the event such
meeting is not so held, the meeting may be held at such time and place as shall
be specified in a notice given as hereinafter provided for special meetings of
the board of directors.
Section 6. Regular meetings of the board of directors may be
held at such time and at such place as shall from time to time be determined by
the board of directors or by the chairman of the board or president. Any
notice given of a regular meeting need not specify the business to be
transacted or the purpose of the meeting.
Section 7. Special meetings of the board may be called by the
chairman of the board or president on four days' notice to each director by
mail or 48 hours' notice either personally or by telephone, telegram or
facsimile transmission; special meetings shall be called by the chairman of the
board or president in like manner and on like notice on the written request of
two directors. The notice need not specify .the business to be transacted or
the purpose of the special meetings. The notice shall specify the place of the
special meeting.
Section 8. At all meetings of the board, a majority in the
number of directors of the whole board determined pursuant to Article III,
Section 2 of these Bylaws shall constitute a quorum for the transaction of
business. At all meetings of a committee of the board a majority of the
directors then members of the committee in office shall constitute a quorum for
the transaction of business. The act of a majority of the members present at
any meeting at which there is a quorum shall be the act of the board of
directors or the committee, unless the vote of a larger number is specifically
required by statute, by the Articles of Incorporation, or by these Bylaws. If
a quorum shall not be present at any meeting of the board of directors or a
committee, the members present thereat may adjourn the meeting from time to
time and to another place without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Unless otherwise provided by the Articles of
Incorporation, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if, before or after the action, all members of the board or committee
consent thereto in writing. The written consents shall be filed with the
minutes of proceedings of the board or committee. Such consents shall have the
same effect as a vote of the board or committee for all purposes.
-5-
<PAGE> 6
Section 10. A majority of the full board of directors may, by
resolution, designate one or more committees, each committee to consist of two
or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the board, shall have
and may exercise the powers of the board of directors in the management of the
business and affairs of the corporation; provided, however, such a committee
shall not have the power or authority to:
(a) approve or recommend to shareholders actions or
proposals required by statute to be approved by the shareholders,
(b) fill vacancies on the board of directors or any
committee thereof,
(c) adopt, amend, or repeal the Bylaws of the
corporation,
(d) authorize or approve the reacquisition of shares
unless pursuant to a general formula or method specified by the board of
directors, or
(e) authorize or approve the issuance or sale or
contract for sale of shares or determine the designation and relative rights,
preferences, and limitations of a voting group except that the board of
directors may authorize a committee (or a senior executive officer of the
Corporation) to do so within limits specifically prescribed by the board of
directors.
Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors. A committee, and each member thereof, shall serve at the pleasure
of the board.
Section 11. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
Section 12. By resolution of the board of directors and
irrespective of any personal interest of any director, the board may establish
reasonable compensation of directors for services to the corporation as
directors, officers or members of a committee. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 13. A director may resign by written notice to the
corporation. The resignation is effective upon its receipt by
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<PAGE> 7
the corporation or a subsequent time as set forth in the notice of resignation.
Section 14. Attendance of a director at a meeting constitutes
a waiver of the meeting except where a director attends of any business because
the meeting is not lawfully called or convened.
ARTICLE IV
Section 1. Whenever, under the provisions of the statutes or
of the Articles of Incorporation or of these Bylaws, written notice is required
to be given to any director, committee member or shareholder, such notice may
be given in writing by mail (registered, certified or other first class mail)
addressed to such director, shareholder or committee member at his address as
it appears on the records of the corporation, with postage thereon prepaid.
Such mailed notice shall be deemed to be given at the time when the same shall
be deposited in a post office or official depository under the exclusive care
and custody of the United States postal service.
Section 2. Whenever any notice is required to be given under
the provision of the statutes or of the Articles of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the shareholders, directors or a
committee, need be specified in any written waiver of notice.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors at its first meeting after each annual meeting of
shareholders. There shall at least be a president appointed. Any number of
offices may be held by the same person, but the board by resolution may require
that at least two persons shall be officers for purposes of compliance with
Article VI, Section 1, hereof.
Section 2. The board of directors may from time to time
appoint such other officers and agents as it shall deem necessary who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board.
-7-
<PAGE> 8
Section 3. The salaries of all officers of the corporation
shall be fixed by the board of directors.
Section 4. The officers of the corporation shall hold office
at the pleasure of the board of directors. Any officer elected or appointed by
the board of directors may be removed at any time by the board of directors
with or without cause. Any vacancy occurring in any office of the corporation
by death, resignation, removal or otherwise shall be filled by the board of
directors. An officer may resign by written notice to the corporation. The
resignation is effective upon its receipt by the corporation or at a subsequent
time specified in the notice of resignation.
Section 5. Unless otherwise provided by resolution of the
board of directors, the president shall be the chief executive officer of the
corporation, shall, in the absence or non-election of a chairman or vice
chairman of the board of directors, preside at all meetings of the shareholders
and the board of directors (if he shall be a member of the board), shall have
general and active management of the business and affairs of the corporation
and shall see that all orders and resolutions of the board of directors are
carried into effect. He shall execute on behalf of the corporation, and may
affix or cause the seal to be affixed to, all instruments requiring such
execution except to the extent the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation, and he shall have the authority to vote any shares of stock
owned by the corporation.
Section 6. The vice-presidents shall act under the direction
of the president and in the absence or disability of the president shall
perform the duties and exercise the powers of the president. They shall
perform such other duties and have such other powers as the president or the
board of directors may from time to time prescribe. The board of directors may
designate one or more executive vice-presidents or may otherwise specify the
order of seniority of the vice-presidents. The duties and powers of the
president shall descend to the vice-presidents in such specified order of
seniority.
Section 7. The secretary shall act under the direction of the
president. Subject to the direction of the president he shall attend all
meetings of the board of directors and all meetings of the shareholders and
record the proceedings in minutes which he shall keep on behalf of the
Corporation. He shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
shareholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the president or the board of
directors. He shall keep in safe custody the seal of the corporation and, when
authorized by the president
-8-
<PAGE> 9
or the board of directors, cause it to be affixed to any instrument requiring
it. He shall be responsible for maintaining the stock transfer book and minute
book of the corporation and shall be responsible for their updating.
Section 8. The assistant secretaries shall act under the
direction of the president. In the order of their seniority in office, unless
otherwise determined by the president or the board of directors, they shall, in
the absence or disability of the secretary, perform the duties and exercise the
powers of the secretary. They shall perform such other duties and have such
other powers as the president or the board of directors may from time to time
prescribe.
Section 9. The treasurer shall act under the direction of the
president. Subject to the direction of the president he shall have custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the president or the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation. He may affix or cause to be affixed the seal of the corporation
to documents so requiring the seal.
Section 10. The assistant treasurers in the order of their
seniority of office, unless otherwise determined by the president or the board
of directors shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. They shall perform such other
duties and have such other powers as the president or the board of directors
may from time to time prescribe.
Section 11. To the extent the powers and duties of the
several officers are not provided from time to time by resolution or other
directive of the board of directors or by the president (with respect to other
officers), the officers shall have all powers and shall discharge the duties
customarily and usually held and performed by like officers of the corporations
similar in organization and business purposes to this corporation.
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<PAGE> 10
ARTICLE VI
CERTIFICATES OF STOCK
AND SHAREHOLDERS OF RECORD
Section 1. The shares of stock of the corporation shall be
represented by certificates signed by, or in the name of the corporation by,
the chairman, the president or a vice-president and by the secretary or an
assistant secretary of the corporation. Each holder of stock in the
corporation shall be entitled to have such a certificate certifying the number
of shares owned by him in the corporation.
Section 2. Any of or all the signatures on the certificate
may be a facsimile if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or its employee.
In case any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer at the date of issue. The seal of the corporation or a
facsimile thereof may, but need not, be affixed to the certificates of stock.
Section 3. The board of directors may direct a new
certificate for shares to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost or destroyed. When authorizing such issue of a new
certificate, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate, or his legal representative, to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its stock transfer book for shares of the corporation.
Section 5. In order that the corporation may determine the
shareholders entitled to notice of, or to vote at, any meeting of shareholders
or any adjournment thereof, or to express consent to, or to dissent from, a
proposal without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or for the purpose of any other
action, the board of directors may fix, in advance, a date as a record
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<PAGE> 11
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other action. The stock
transfer books of the corporation shall not be closed.
If no record date is fixed:
(a) The record date for determining the shareholders
of record entitled to notice of, or to vote at, a meeting of shareholders shall
be at the close of business on the day before the first notice is delivered to
shareholders, or, if no notice is given, at the close of business on the day
next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders for
any other purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
A determination of shareholders of record entitled to notice
or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting which has not been adjourned for more than 120 days; provided, however,
that the board of directors may fix a new record date for the adjourned meeting
and must do so if the meeting is adjourned for more than 120 days.
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered upon its stock transfer book for shares
of the corporation as the owner of shares for all purposes, including voting
and dividends, and shall not be bound to recognize any equitable or other claim
to interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Florida.
ARTICLE VII
INDEMNIFICATION
Section 1. The corporation shall indemnify against liability,
and advance expenses to, to the fullest extent authorized or permitted by the
provisions at 607.0850 Fl.Stat. (other than 607.0850(7)), Florida Business
Corporation Act, as amended, (or any amendment or successor provision thereof
or any other statutory provision authorizing or permitting such indemnification
or advancement of expenses which is adopted after the date this Article VII is
adopted) any person, and his heirs, executors, administrators and legal
representatives, who is or was a party to any proceeding by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation or
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<PAGE> 12
is or was serving as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise at the
request of the corporation. Officers and directors who are so entitled to be
indemnified shall be paid their expenses in advance of a final disposition of
the proceeding to the maximum extent authorized or permitted by the provisions
of 607.0850(6) Fl.Stat. or any amended or successor section.
Section 2. Article VII, Section 1 of these Bylaws shall not
be construed to mean that indemnification and advancement of expenses by the
corporation pursuant to 607.0850(7) Fl.Stat. is not permitted. The corporation
may indemnify and advance expenses to any person pursuant to Section
607.0850(7) Fl.Stat., or any amended or successor section, to the extent and in
the manner desired by the corporation and permitted by law.
Section 3. Terms used in this Article VII shall have the
meanings ascribed to them in 607.0850(11) Fl.Stat. or any amended or successor
section.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. All checks, drafts or demands for money and notes
of the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the board of directors may from time to time designate.
Section 2. The fiscal year of the corporation shall be fixed
from time to time by resolution of the board of directors, but shall end on
December 31st of each year if not otherwise fixed by the board.
Section 3. The board of directors may adopt a corporate seal
for the corporation. The corporate seal shall have inscribed thereon the name
of the corporation and the words "Corporate Seal, Florida." The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 4. The corporation shall keep within or without the
State of Florida books and records of account and minutes of the proceedings of
its shareholders, board of directors and executive committee, if any. The
corporation shall keep at its registered office or at the office of its
transfer agent within or without the State of Florida a stock transfer book for
shares of the corporation containing the names and addresses of all
shareholders, the number, class and series of shares held by each
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thereof. Any of such stock transfer book, books, records or minutes may be in
written form or in any other form capable of being converted into written form
within a reasonable time.
Section 5. These Bylaws shall govern the internal affairs of
the corporation, but only to the extent they are consistent with law and the
Articles of Incorporation. Nothing contained in the Bylaws shall, however,
prevent the imposition by contract of greater voting, notice or other
requirements than those set forth in these Bylaws.
ARTICLE IX
AMENDMENTS
Section 1. The Bylaws may be amended or repealed, or new
Bylaws may be adopted, by action of either the shareholders or the board of
directors. The shareholders may from time to time specify particular
provisions of the Bylaws which shall not be altered or repealed by the board of
directors.
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<PAGE> 1
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
NO. SHARES
CONNECT EXPRESS, INC.
THIS CERTIFIES THAT ___________________________________________ is the owner of
_________________________________________________Shares of the Capital Stock of
of the CORPORATION, fully paid and non-assessable
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and its
Corporate Seal to be hereunto affixed this _______________day of
_______________ A.D. 19__
_________________________ _____________________________
PRESIDENT SECRETARY
SHARES _____ EACH
<PAGE> 2
CERTIFICATE
FOR
SHARES
OF THE
CAPITAL STOCK
ISSUED TO
DATE
For Value Received, _____, hereby sell, assign and transfer unto
_________________________________________________________________________ Shares
of the Capital Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ____________________________________ Attorney
to transfer the said Stock on the books of the within named Company with full
power of substitution in the premises.
Dated __________________ 19__
In presence of _____________________________________________
________________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN ON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 10.1
2CONNECT EXPRESS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE: The purpose of this Stock Option Plan is to
advance the interests of 2Connect Express, Inc. by providing an opportunity to
certain directors, officers, key employees, consultants and advisors of the
Corporation to purchase shares of Common Stock of the Corporation through the
exercise of options granted pursuant to this Stock Option Plan, either through
Incentive Options or Nonqualified Options.
2. DEFINITIONS: Wherever used herein, the following terms shall
have the following meanings:
(a) "Plan" shall mean this Stock Option Plan.
(b) "Corporation" shall mean 2Connect Express, Inc., a
Florida corporation, or any successor thereof.
(c) "Committee" shall mean any administrative stock
option committee designated by the Board of Directors of the
Corporation from time to time, or, if none is designated, the Board of
Directors itself.
(d) "Participant" shall mean any individual designated by
the Committee under Section 5 hereof for participation in the Plan.
(e) "Non-Employee Director" shall mean a director who is
not an officer of the Company (as defined in Rule 16b-1(f) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any subsequently amended definition therein) or of any subsidiary, is
not otherwise currently employed by the Company or any subsidiary, and
is not otherwise excluded from being a non-employee director under
Rule 16b-3 under the Exchange Act.
(f) "Nonqualified Option" shall mean an option to
purchase Common Stock of the Corporation which meets the requirements
set forth in the Plan but does not meet the definition of an incentive
stock option set forth in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
(g) "Incentive Option" shall mean an option to purchase
Common Stock of the Corporation which meets the requirements set forth
in the Plan and also meets the definition of incentive stock option
set forth in Section 422 of the Code and which is granted to an
individual subject to having personal income taxed under the Code.
(h) "Reload Option" shall mean an option granted to a
Participant equal to the number of shares of already owned Common
Stock delivered by the Participant to pay for exercise of an option,
as more fully described in Section 15,
<PAGE> 2
below.
3. ADMINISTRATION: The Plan shall be administered by the
Committee. If the Company is a reporting company under the Exchange Act, the
Committee shall consist solely of at least two Non-Employee Directors. Subject
to the provisions of the Plan, the Committee is authorized to interpret the
Plan, to promulgate, amend and rescind rules and regulations relating to the
Plan and to make all other determinations necessary or advisable for its
administration. Interpretation and construction of any provision of the Plan
by the Committee shall be final and conclusive. The foregoing provisions of
this Section 3 to the contrary notwithstanding, the Board of Directors may also
exercise any power given to the Committee under the Plan.
4. MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN: The Committee may
from time to time provide for the option and sale of up to but not exceeding an
aggregate of 2,000,000 shares of Common Stock, $.01 par value, of the
Corporation which may consist in whole or in part of the authorized and
unissued or reacquired Common Stock of the Corporation. The Committee and the
Board of Directors may issue Nonqualified Options and Incentive Options, as
well as both of such options. Shares covered by canceled or expired options
under the Plan shall again be available for option and sale. Shares which are
issued upon exercise of options or which are withheld in payment of income tax
withholding shall again be available for reservation for the issuance of
options but only to the extent Reload Options are granted in such transaction.
In the event that the outstanding Common Stock of the Corporation
shall be increased by a stock dividend or changed into or exchanged for a
different number or kind of shares of stock or other securities of the
Corporation or of another corporation, whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination of
shares or otherwise, the number, price and kind of shares available for option
and the shares subject to any option shall be appropriately and equitably
adjusted in such manner as the Committee or the Board of Directors shall, in
its discretion, determine. The Committee and the Board of Directors shall have
the power under such conditions to accelerate the exercisability of any
outstanding options.
5. PARTICIPANTS: The Committee or the Board of Directors shall
determine and designate from time to time, in its discretion, those directors,
officers, key management employees of the Corporation (or of any subsidiary in
which the Corporation owns more than fifty (50%) percent of the total combined
voting power of all classes of stock), consultants or advisors to whom options
are to be granted and who thereby become Participants under the Plan. The term
"key management employees" shall be construed to include any and all key
personnel (whether or not officers of the Corporation) who may be so designated
by the Committee for participation in the Plan.
6. ALLOTMENT OF SHARES: The Committee or the Board of Directors
shall
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<PAGE> 3
determine and fix the number of shares of stock to be offered to each
Participant; provided, that no Incentive Option may be granted under the Plan
to any one Participant which would result in his being able to exercise for the
first time in any calendar year an aggregate fair market value, determined as
of the date the option is granted, of underlying stock subject to all incentive
stock options granted to that Participant under any incentive stock option plan
maintained by the Corporation exceeding $100,000.
7. OPTION PRICE: The option price per share for options granted
under the Plan shall be such price as determined by the Committee or the Board
of Directors, as the case may be, in their discretion, but shall not be less
than: (i) with respect to an Incentive Option, the fair market value of the
stock on the date on which such option is granted; provided, that with respect
to an Incentive Option grant to an employee who at the time of the grants owns
(after applying the attribution rules of Section 424 of the Code) more than 10%
of the total combined voting stock of the Corporation or of any parent or
subsidiary, the option price shall not be less than 110% of the fair market
value of the stock subject to the Incentive Option on the date such option is
granted; and (ii) with respect to a Nonqualified Option, such percent of the
fair market value of the stock on the date on which such option is granted as
shall be determined from time to time by the Committee or the Board of
Directors, as the case may be. Fair market value of a share shall be
determined by the Committee or the Board of Directors, as the case may be, and
shall be the mean, if the stock is publicly traded, the average of the highest
and lowest quoted selling prices of the Corporation's stock on such date or if
there are no sales, the closing bid and asked prices of the Corporation's stock
on such date, or if there are no sales or reported bid and asked prices of the
Corporation's Common Stock on such date, on the next following day on which
there are sales or quoted prices.
8. GRANTING AND EXERCISE OF OPTION: The granting of options
hereunder shall be effected in accordance with determinations made by the
Committee or the Board of Directors, as the case may be, pursuant to the
provisions of the Plan, by execution of instruments in writing in form approved
by the Committee.
At the time the option is granted, the Committee or the Board of
Directors, as the case may be, shall specify whether the option is an Incentive
Option or a Nonqualified Option, and shall determine the date or dates upon
which the option may be exercised. Except as provided in Sections 11 and 12
herein, Incentive Options may be exercised only while the Participant is an
employee or director, as the case may be, of the Corporation or any subsidiary
thereof.
Any Participant shall exercise his option by written notice to the
Corporation's Secretary, or such other officer of the Corporation designated by
the Committee or the Board of Directors, specifying the number of shares for
which the option is being exercised.
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<PAGE> 4
Each option granted hereunder shall expire not more than twenty (20)
years from the date of the granting thereof (ten (10) years for Incentive
Options); provided, that with respect to an Incentive Option grant to an
employee who at the time of the grant owns (after applying the attribution
rules of Section 424 of the Code) more than ten percent (10%) of the total
combined voting stock of all classes of stock of the Corporation or of any
parent or subsidiary, such option shall expire not more than five (5) years
after the date of granting thereof.
9. PAYMENT OF OPTION PRICE:
(a) At the time of the exercise in whole or in part of any
option granted hereunder, payment in full in cash or, with the consent of the
Committee or the Board of Directors, in Common Stock of the Corporation, shall
be made by the Participant for all shares so purchased. No Participant shall
have any of the rights of a shareholder of the Corporation under any such
option until the actual issuance thereunder of shares to said participant. The
Committee or the Board of Directors may, in its discretion, authorize the
Corporation to lend funds to a grantee in order to enable him to exercise his
options. The terms of the loan shall be in the discretion of the Committee.
(b) Whenever a Participant holding any option outstanding
under this Plan (including Reload Options previously granted under this Section
9) exercises the option and makes payment of exercise price pursuant to this
Section 9, in whole or in part, by tendering Common Stock previously held by
the Participant then the Corporation shall, in the sole discretion of the Board
of Directors or the Committee, grant to the Participant a Reload Option for the
number of shares of Common Stock that is equal to the number of shares tendered
by the Participant on payment of the exercise price of the option being
exercised.
(c) Subject to Section 7 above, the Reload Option exercise
price per share shall be an amount equal to the fair market value per share of
the Corporation's Common Stock, determined under Section 7 above, as of the
date of receipt by the Corporation of the notice by the Participant to exercise
the option.
(d) Subject to Section 7 above, the exercise period of the
Reload Option shall expire, and the Reload Option shall no longer be
exercisable, on the later to occur of (i) the expiration date of the originally
surrendered option or (ii) one (1) year from the date of grant of the Reload
Option.
(e) Any Reload Option granted under this Section 9 shall vest
immediately upon grant under Section 9 (b) above.
(f) All other terms of the Reload Options granted hereunder
shall be identical to the terms and conditions of the original option, the
exercise of which led to the grant of
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<PAGE> 5
the Reload Option.
10. NONTRANSFERABILITY OF OPTION: No option granted under the
Plan to a Participant shall be transferable by him otherwise than by will or
the laws of descent and distribution, and such option shall be exercisable
during the lifetime of the Participant only by the Participant or by his
guardian or legal representative in the event of disability. For purposes of
this Section 10, "disability" shall mean mental or physical inability to carry
out the option holder's duties as an employee or director of the Corporation,
as determined by the Committee or the Board of Directors its sole discretion.
The Board of Directors or the Committee may in its discretion waive the
provisions of this Section 10 to the extent permitted by the Code or the
regulations promulgated under Section 16(b) of the Exchange Act.
11. DEATH OF PARTICIPANT: With regard to Incentive Options, in
the event that the employment of the Participant by the Corporation, or a
subsidiary thereof, is terminated by the death of the Participant, or in the
event of the death of the Participant within three (3) months of the
termination of his employment, his option, to the extent that it is exercisable
by the Participant at the date of his death, may be exercised within twelve
(12) months after the date of his death, but in no event subsequent to the
expiration date of the option, by the legal representative of the Participant
or the person or persons to whom the rights of the Participant shall pass by
will or by the laws of descent and distribution.
12. RETIREMENT OF PARTICIPANT: With respect to Incentive Options,
unless the Committee or the Board of Directors shall otherwise decide at the
time of his termination or in the terms of the grant, or the Code shall
otherwise permit for Incentive Options, in the event that a Participant shall
cease to be employed by the Corporation without having fully exercised any
option, such Participant shall have the right for a period of three (3) months
following the date of such cessation of employment, but in no event subsequent
to the expiration date of the option, to exercise that portion of the option,
if any, which is exercisable by him at the date of the termination of his
employment. Any options not exercisable on such date of cessation of
employment shall be extinguished unless the Committee or the Board of Directors
shall otherwise decide at the time of such termination, or the grant of the
option shall have otherwise provided.
13. CONTINUANCE OF EMPLOYMENT: The Committee or the Board of
Directors may require that any Participant under the Plan to whom an option
shall be granted shall agree in writing as a condition of the granting of such
option to remain in the employ of the Corporation or a subsidiary for a minimum
period from the date of the granting of such option, or for such other period
as shall be fixed by the Committee or the Board of Directors.
Nothing contained in the Plan or in any option granted pursuant to the
plan, nor any action taken by the Committee hereunder shall confer upon any
Participant any right with
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<PAGE> 6
respect to continuation of employment by the Corporation or a subsidiary nor
interfere in any way with the right of the Corporation or a subsidiary to
terminate his employment at any time.
14. PURCHASE FOR INVESTMENT ONLY: Unless a registration statement
covering the stock offered pursuant to the Plan is in effect under the
Securities Act of 1933, as amended, all stock purchased upon the exercise of an
option granted hereunder shall be acquired for investment and not with a view
to or for sale in connection with any distribution thereof and each notice of
the exercise of such option shall be accompanied by a representation in writing
signed by the Participant or any other person exercising an option granted
hereunder to the effect in form satisfactory to the Committee. The Corporation
may place a legend upon any certificate representing shares purchased pursuant
to exercise of an option granted hereunder noting that the transfer of such
shares may be restricted under the Securities Act of 1933.
15. WITHHOLDING PAYMENTS:
(a) If upon the exercise of any option there shall be
payable by the Corporation any amount for income tax withholding, either the
Participant shall pay such amount to the Corporation in cash or the number of
shares of Common Stock delivered by the Corporation upon exercise of the
Nonqualified Option shall be appropriately reduced to reimburse the Corporation
payment. The Committee or the Board of Directors shall have the authority to
accept other payment arrangements in its sole discretion.
(b) Whenever shares of Common Stock instead of cash are used
to pay income tax withholding under Section 15(a), above, the Board of
Directors or the Committee in its sole discretion may grant Reload Options for
the number of withheld shares in accordance with the provisions of Sections
9(c) to 9(f), above, applicable as appropriate to this Section 15(b).
16. SHAREHOLDER APPROVAL: No Incentive Option granted under the
Plan shall be exercisable unless and until the Plan shall have been approved by
the shareholders of the Corporation as permitted under the laws of the State of
Florida.
17. INTERPRETATION:
(a) This Plan shall be administered and interpreted so
that all Incentive Stock Options granted under this Plan will qualify as
Incentive Stock Options under Section 422 of the Code. If any provision of
this Plan should be held invalid for the granting of Incentive Stock Options or
illegal for any reason, such determination shall not affect the remaining
provisions hereof, and this Plan shall be construed and enforced as if such
provision had never been included in this Plan.
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<PAGE> 7
(b) With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act.
To the extent any term or provision of this Plan or any act or action by the
Committee or the Board of Directors fails to so comply, it shall be deemed null
and void and of no force or effect, to the extent deemed advisable by the
Committee or the Board of Directors. Moreover, in the event this Plan does not
include a term or provision required by Rule 16b-3 to be stated herein, such
term or provision (other than one relating to eligibility requirements, or the
price and amount of awards) shall be deemed automatically to be incorporated by
reference into this Plan insofar as participants subject to Section 16 of the
Exchange Act are concerned.
(c) This Plan shall be governed by the laws of the State
of Florida.
(d) Headings contained in this Plan are for convenience
only and shall in no manner be construed as part of this Plan or affect the
meaning or interpretation of any part of this Plan.
(e) Any reference to the masculine, feminine, or neuter
gender shall be a reference to such other gender as is appropriate.
18. DURATION AND TERMINATION OF PLAN: No options may be granted
hereunder after April 19, 2006. The Plan may be abandoned or terminated at any
time by the Board of Directors of the Corporation except with respect to any
option outstanding under the Plan upon the effective date of such termination.
19. AMENDMENT: For the purpose of conforming to any changes in
applicable law or governmental regulations or for any other purpose which at
the time may be permitted by law, the Board of Directors of the Corporation,
may, from time to time, amend or revise the terms of this Plan, providing that
no such amendment or revision shall increase the maximum number of shares in
the aggregate which may be sold pursuant to Incentive Options granted under the
Plan, or change the minimum option prices set forth in Section 7, or without
the consent of the holder thereof alter or impair any option previously granted
under the Plan.
20. EFFECTIVE DATE: This Plan was approved and adopted by the
Board of Directors on April 19, 1996 and was approved and adopted by the
Shareholders of the Corporation on April 19, 1996. The effective date of this
Plan shall be April 19, 1996.
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<PAGE> 1
Exhibit 10.2
2Connect Express, Inc.
1996 DIRECTORS STOCK OPTION PLAN
As Adopted September 27, 1996
1. PURPOSE. This 1996 Directors Stock Option Plan (this
"Plan") is established to provide equity incentives for nonemployee members of
the Board of Directors of 2Connect Express, Inc. (the "Company"), who are
described in Section 6.1 below, by granting such persons options to purchase
shares of stock of the Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. After this Plan is
adopted by the Board of Directors of the Company (the "Board"), this Plan will
become effective on the time and date (the "Effective Date") on which it is
approved by the stockholders of the Company. So long as the Company is subject
to Section 16(b) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") the Company will comply with the requirements of Rule 16b-3
with respect to stockholder approval.
3. TYPES OF OPTIONS AND SHARES. Options ("Options")
granted under this Plan shall be non-qualified stock options ("NQSOs"). The
shares of stock that may be purchased upon exercise of Options granted under
this Plan (the "Shares") are shares of the Common Stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that
may be issued pursuant to Options granted under this Plan (the "Maximum
Number") is 100,000 Shares, subject to adjustment as provided in this Plan. If
any Option is terminated for any reason without being exercised in whole or in
part, the Shares thereby released from such Option shall be available for
purchase under other Options subsequently granted under this Plan. At all
times during the term of this Plan, the Company shall reserve and keep
available such number of Shares as shall be required to satisfy the
requirements of outstanding Options granted under this Plan; provided however
that if the aggregate number of Shares subject to outstanding Options granted
under this Plan plus the aggregate number of Shares previously issued by the
Company pursuant to the exercise of Options granted under this Plan equals or
exceeds the Maximum Number of Shares, then notwithstanding anything herein to
the contrary, no further Options may be granted under this Plan until the
Maximum Number is increased or the aggregate number of Shares subject to
outstanding Options granted under this Plan plus the aggregate number of Shares
previously issued by the Company pursuant to the exercise of Options granted
under this Plan is less than the Maximum Number.
5. ADMINISTRATION. This Plan shall be administered by a
committee of not less than two disinterested members of the Board appointed to
administer this Plan (the "Committee"). A disinterested director is any
director who is not, during the year prior to serving on the Committee, granted
or awarded equity securities pursuant to any plan of the Company except
pursuant to the award formula in Section 6 below. The Committee is authorized
to interpret the Plan, to promulgate, amend and rescind rules and regulations
relating to the Plan and to make all other determinations necessary or
advisable for its administration, subject to the provisions hereof.
Interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive.
<PAGE> 2
1996 DIRECTORS' STOCK OPTION PLAN
6. ELIGIBILITY AND AWARD FORMULA
6.1 Eligibility. Options shall be granted only to
directors of the Company who are not employees of the Company or any Parent,
Subsidiary or Affiliate of the Company, as those terms are defined in Section
17 below (each such person referred to as an "Optionee").
6.2 Initial Grant. Each Optionee who on or after
the Effective Date is or becomes a member of the Board will automatically be
granted an Option for that number of Shares that have a Fair Market Value (as
defined in Section 16.4) of $25,000 on the date the Option is granted;
provided, however, that no fractional shares shall be issued upon exercise of
any Option and any resulting fractions of a Share shall be rounded up to the
nearest whole Share (the "Initial Grant"). The Initial Grant shall occur on
the date such Optionee first becomes a member of the Board.
6.3 Succeeding Grants. On October 1, 1997, and on
October 1 of each year thereafter, each Optionee who is a member of the Board
and has served continuously as a member of the Board for the preceding six
months, will automatically be granted an Option for the number of Shares that
have a Fair Market Value of $25,000 on October 1, of the year of such grant (a
"Succeeding Grant"); provided, however, that no fractional shares shall be
issued upon exercise of any Option and any resulting fractions of a Share shall
be rounded up to the nearest whole Share.
7. TERMS AND CONDITIONS OF OPTIONS.
7.1 Form of Option Grant. Each Option granted
under this Plan shall be evidenced by a written Stock Option Grant ("Grant") in
such form (which need not be the same for each Optionee) as the Committee shall
from time to time approve, which Grant shall comply with and be subject to the
terms and conditions of this Plan.
7.2 Vesting. Each Initial Grant and each
Succeeding Grant will fully vest when granted.
7.3 Exercise Price. The exercise price of an
Option shall be set by the Committee, but shall not be lower than the lesser of
(i) the Fair Market Value of the Shares at the time that the Option is granted,
or (ii) what is then the last sales price at which the Company sold shares of
its Common Stock on or prior to the date the Option is granted.
7.4 Termination of Option. Each Option shall
expire ten (10) years after the date of the grant of such Option.
8. EXERCISE OF OPTIONS
8.1 Exercise Period. Subject to the provisions of
Section 8.5 of the Plan, each Option shall be exercisable immediately upon the
vesting thereof (subject to repurchase pursuant to Section 10 of the Plan).
8.2 Notice. Options may be exercised only by
delivery to the company of an exercise agreement in a form approved by the
Committee stating the number of Shares being purchased, the restrictions
imposed on the Shares and such representations and agreements regarding the
Optionee's investment intent and access to information as may be required by
the Company to comply with applicable securities laws, together with payment in
full of the exercise price for the number of Shares being purchased.
<PAGE> 3
1996 DIRECTORS' STOCK OPTION PLAN
8.3 Payment. Payment for the Shares purchased upon
exercise of an Option may be made (a) in cash or by check; (b) by surrender of
shares of Common Stock of the Company that have been owned by the Optionee for
more than six (6) months (and which have been paid for within the meaning of
SEC Rule 144 and, if such shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to such shares) or
were obtained by the Optionee in the open public market, having a Fair Market
Value equal to the exercise price of the Option; (c) by waiver of compensation
due or accrued to the Optionee for services rendered; (d) provided that a
public market for the Company's stock exists, through a "same day sale"
commitment from the Optionee and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD Dealer") whereby the
Optionee irrevocably elects to exercise the Option and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company, (e) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Optionee and an NASD
Dealer whereby the Optionee irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; or (f) by any combination
of the foregoing.
8.4 Withholding Taxes. Prior to issuance of the
shares upon exercise of an Option, the Optionee shall pay or make adequate
provision for any federal or state withholding obligations of the Company, if
applicable.
8.5 Limitations on Exercise. Notwithstanding the
exercise periods set forth in the Grant, exercise of an Option shall always be
subject to the following limitations:
(a) An Option shall not be exercisable until
such time as this Plan (or, in the case
of Options granted pursuant to an
amendment increasing the number of shares
that may be issued pursuant to this Plan,
such amendment) has been approved by the
stockholders of the Company in accordance
with Section 14 hereof.
(b) An Option shall not be exercisable unless
such exercise is in compliance with the
Securities Act of 1933, as amended, and
all applicable state securities laws, as
they are in effect on the date of
exercise.
(c) The Committee may specify a reasonable
minimum number of Shares that may be
purchased upon any exercise of an Option,
provided that such minimum number will not
prevent the Optionee from exercising the
full number of Shares as to which the
option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, an Option shall be exercisable only by the Optionee or by the
Optionee's guardian or legal representative in the event of Optionee's
disability, unless otherwise permitted by the Committee. No Option may be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution.
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<PAGE> 4
1996 DIRECTORS' STOCK OPTION PLAN
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have
any of the rights of a stockholder with respect to any Shares subject to an
Option until the Option has been validly exercised. No adjustment shall be
made for dividends or distributions or other rights for which the record date
is prior to the date of exercise, except as provided in this Plan.
11. ADJUSTMENT OF OPTION SHARE. In the event that the
number of outstanding shares of Common Stock of the Company is changed by a
stock dividend, stock split, reverse stock split, reclassification or similar
change in the capital structure of the Company without consideration, the
number of Shares available under this Plan and the number of Shares subject to
outstanding Options and the exercise price per share of such outstanding
Options shall be proportionately adjusted, subject to any required action by
the Board or stockholders of the Company and compliance with applicable
securities laws; provided however, that no fractional shares shall be issued
upon exercise of any Option and any resulting fractions of a Share shall be
rounded up to the nearest whole Share.
12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this
Plan or any Option granted under this Plan shall confer on any Optionee any
right to continue as a director of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the
issuance of Shares upon exercise of any Options shall be subject to and
conditioned upon compliance with all applicable requirements of law, including
without limitation compliance with the Securities Act, compliance with all
other applicable state securities laws and compliance with the requirements of
any stock exchange or national market system on which the Shares may be listed.
The Company shall be under no obligation to register the Shares with the SEC or
to effect compliance with the registration or qualification requirement of any
state securities laws, stock exchange or national market system.
14. AMENDMENT OR TERMINATION OF PLAN. The Committee may
at any time terminate or amend this Plan (but may not terminate or amend the
terms of any outstanding Option without the consent of the Optionee); provided,
however, that the Committee shall not, without the approval of the stockholders
of the Company, increase the total number of Shares available under this Plan
except by operation of the provisions of Section 4 and 11 above) or change the
class of persons eligible to receive Options. Further, the provisions in
Sections 6 and 7 of this Plan shall not be amended more than once every six (6)
months, other than to comport with changes in the Securities Rules or
Regulations, the Code, or the Employee Retirement Income Security Act or the
rules thereunder. In any case, an amendment of this Plan may not adversely
affect any then outstanding Options or any unexercised portions thereof without
the written consent of the Optionee.
15. TERM OF PLAN. Options may be granted pursuant to this
Plan from time to time within a period of ten (10) years from the date this
Plan is adopted by the Board.
16. CERTAIN DEFINITIONS. As used in this Plan, the
following terms shall have the following meanings:
16.1 "Parent" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the Option, each of such corporations other than
the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
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<PAGE> 5
1996 DIRECTORS' STOCK OPTION PLAN
16.2 "Subsidiary" means any corporation (other than
the Company) in an unbroken chain of corporations beginning with the Company
if, at the time of granting of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporation in such chain.
16.3 "Affiliate" means any corporation that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, another corporation, where
"control" (including the terms "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to cause the direction
of the management and policies of the corporation, whether through the
ownership of voting securities, by contract, or otherwise.
16.4 "Fair Market Value" means, as of any date,
the value of a share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on
the Nasdaq National Market, its closing
price on the Nasdaq National Market on
the date of determination as reported in
The Wall Street Journal;
(b) if such Common Stock is publicly traded
and is then listed on a national
securities exchange, its closing prices
on the date of determination on the
principal national securities exchange
on which the Common Stock is listed or
admitted to trading as reported in The
Wall Street Journal;
(c) if such Common Stock is publicly traded
but is not quoted on the Nasdaq
National Market nor listed or admitted
to trading on a national securities
exchange, the average of the closing bid
and asked prices on the date of
determination as reported in The Wall
Street Journal; or
(d) in the case of an Initial Grant made on
or after but prior to the date the
Company's Common Stock is being publicly
traded, or if the date for which the
Fair Market is being determined
(excluding specific days and weekends
when securities generally are not
publicly traded) is during a period when
the Company's Common Stock is not
subject to being publicly traded, or
otherwise if none of the foregoing (a),
(b) or (c) is applicable, by the
Committee in good faith.
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<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 17th day of June, 1996, by and
between MARC D. FISHMAN (the "Executive") and 2CONNECT EXPRESS, INC., a
Florida corporation ("Company").
WHEREAS, the Company is a specialty retailer offering
Internet, satellite and communication services; and,
WHEREAS, the Company desires to obtain the services of the
Executive, and Executive desires to be employed by the Company.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein, the parties agree as follows:
1. Employment. The Company shall employ the Executive as its
Chief Executive Officer and President. The Executive shall be responsible for
the general management of the affairs of the Company and shall report only to
the Board of Directors of the Company. The Executive shall diligently,
faithfully, and competently perform all duties of the office of Chief Executive
Officer and President and shall devote his full productive time and abilities
to the performance of such duties, and will not render his active business
services to any other person or entity without the prior consent of the Board
of Directors. The Executive shall also serve on the Board of Directors of the
Company.
2. Compensation.
(a) Salary. In consideration of and as compensation for
performance of the services under this Agreement, the Company will pay the
Executive a base salary of $150,000 per year, payable in equal bi-monthly
installments or such frequency as is consistent with Company practices.
Subsequent to the first year of this Agreement, the salary paid to the
Executive shall be reviewed to determine whether to increase Executive's base
annual salary.
(b) Stock Option. In addition to the above salary, the
Company has granted, and may additionally grant in its discretion, certain
options to purchase shares of the Company's common stock, pursuant to the terms
and conditions contained in the Option Agreement between the parties and the
Company's stock option plan.
3. Benefits. While this Agreement is in effect, the Executive
shall receive any and all health and medical benefits, insurance, pension and
profit sharing plans, paid vacation time, sick leave and other benefits, on a
no less favorable basis as is offered to other executive officers.
4. Expenses. The Company shall reimburse the Executive for all
necessary and reasonable expenses incurred and paid by the Executive in
connection with the performance of services hereunder upon presentation of
supporting documentation.
<PAGE> 2
5. Term. The term of the Executive's employment
with the Company shall commence on June 17, 1996, and shall continue thereafter
until June 16, 1999 (the "Term"), unless earlier terminated as provided in
Section 6 below. The term of the Executive's employment shall automatically
renew for successive one-year terms thereafter, unless the Executive provides
the Company with written notice of his intent not to continue his employment.
6. Termination For Cause. The Company may terminate this
Agreement, and the Executive's employment hereunder, for "cause", by written
notice to the Executive, upon the occurrence of any one of the following
events; provided, however, if an event is one that is specified in parts (a),
(b), or (c), termination shall not occur until after arbitrators, as
hereinafter described, shall have finally determined that the Executive shall
have committed the act of which he is accused:
(a) his proven dishonesty, fraud or embezzlement that
materially and adversely affects the Company;
(b) his conviction of a felony involving moral
turpitude that materially and adversely affects the
Company;
(c) his repeated willful failures to carry out the
terms of this Agreement or the lawful instructions of
the Board of Directors, which instructions relate to
matters material to the conduct of the Company's
business, which failures continue after not less than
two (2) written warnings to the Executive specifying
one or more specific failures in each such warning;
provided, however, the provisions contained in this
Section 6(c) shall not constitute a "cause" for
termination in the event that the actual Adjusted
Pre-tax Profits (as defined in accordance with
Generally Accepted Accounting Principles) of the
Company for fiscal year most recently ended shall
have equaled or exceeded the amount of Adjusted
Pre-Tax Profit for the previous year.
(d) his death; or
(e) his disability, which prevents the Executive from
performing his duties under the terms of this Agreement
for 180 days during any period of 360 consecutive days
(the last day of such 180 days being called the
"disability termination date").
In the event of termination of this Agreement for "cause" by reason of an event
defined in parts (a), (b), or (c) of this Section 6, then, except for sums
theretofore earned by, or otherwise payable to, him, no further sums shall be
payable by the Company to the Executive. In the event of termination of this
Agreement for "cause" by reason of an event defined in parts (d) or (e) of this
Section 6, the salary, otherwise payable through the end of the month during
which his death or the disability termination date occurs, shall be paid
immediately to the Executive or to his estate. Any disputes between the
parties hereto relating to the determination of the existence of "cause" shall
be subject to binding arbitration in Dade County, Florida, in accordance with
the rules of the American Arbitration Association then in effect. If the
Executive challenges the Company's right to discharge
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<PAGE> 3
him under this Section 6, the Company shall have the burden of proof. Unless
the parties agree on a single arbitrator, the arbitration shall take place
before three arbitrators, one to be selected by the Company, one to be selected
by the Executive, and the third to be selected by the first two arbitrators.
The decision of the arbitrators shall be deemed final for purposes of this
Agreement, and may be enforced in any court having jurisdiction.
In the event this Agreement is wrongfully terminated by the Company or is
terminated by the Company without cause, then, in addition to any other
remedies available to the Executive (a) he shall have no obligations to
mitigate damages and in the event he is employed elsewhere, the amount of his
compensation from such other employment shall not reduce the Company's
obligations hereunder; and (b) the Company shall accelerate and pay in full the
salary provided in Section 2(a) and shall cover the Executive for other
benefits herein provided, to the same extent and in the same amounts as he
would have been entitled if the Executive had not been terminated as described
above.
The parties acknowledge that if a situation arises in which the Executive seeks
to enforce the severance or other rights provided herein, the Company may
attempt to refuse to comply with its obligations under this Agreement, or may
institute or attempt to institute or attempt to institute litigation seeking to
have this Agreement declared unenforceable, or may take or attempt to take
other action to deny the Executive the benefits intended under this Agreement.
In these circumstances, the purpose of this Agreement could be frustrated. It
is the intent of the Company that the Executive not be required to incur the
expenses associated with the enforcement of any rights under this Agreement by
litigation or other legal action, nor be bound to negotiate any settlement of
any rights hereunder, because the cost and expense of such legal action or
settlement would substantially detract from the benefits intended to be
extended to the Executive hereunder.
Accordingly, if it should appear to Executive that the Company has failed to
comply with any of its obligations under this Agreement, and such failure
includes a failure to comply with its obligations under this Section 6, or in
the event that the Company or any other person takes any action to declare this
Agreement void or unenforceable, or institutes any litigation or other legal
action designed to deny, diminish or to recover from the Executive the benefits
entitled to be provided to the Executive hereunder, and Executive has complied
with his material obligations under this Agreement, the Company irrevocably
authorizes counsel to the Company to represent the Executive in connection with
the initiation or defense of any litigation or other legal action, whether such
action is by or against the Company or any Director, officer, shareholder, or
other person affiliated with the Company, in any jurisdiction. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Executive entering into an
attorney-client relationship with such counsel, and in that connection the
Company and Executive agree that a confidential relationship shall exist
between Executive and such counsel. The reasonable fees and expenses of
counsel selected from time to time by Executive as hereinabove provided shall
be paid or reimbursed to Executive by the Company on a regular, periodic basis
upon presentation by Executive of a statement or statements prepared by counsel
in accordance with its customary practice. Any legal expenses incurred by the
Company by reason of any dispute between the parties as to enforceability of
or the terms contained in this Agreement, notwithstanding the
3
<PAGE> 4
outcome of any such dispute, shall be the sole responsibility of the Company,
and the Company shall not take any action to seek reimbursement from the
Executive for such expenses.
7. Notices. All claims, notices, requests, demands and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given or made when delivered by hand or
mailed, first class certified mail, return receipt requested, with postage
paid:
(i) If to Executive: MARC D. FISHMAN
Miami, Florida 33133
or to such other person or address as Executive shall furnish to the Company in
writing.
(ii) If to the Company, to: 2CONNECT EXPRESS, INC. 2300
Glades Road, Suite 370
Boca Raton, Florida 33431
or to such other person or address as the Company shall furnish to Executive in
writing.
(iii) In either case, with a copy
to:
ARNOLD M. JAFFEE, Esq.
Adorno & Zeder, P.A.
2601 S. Bayshore Drive, Suite 1600
and to such other persons or addresses as either the Executive or the Company
shall furnish to the other in writing.
8. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of The Company.
9. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of Florida. Venue for any
proceedings shall be Dade County, Florida, and the parties agree to submit to
the jurisdiction thereof.
10. Entire Agreement. This Agreement contains the entire
agreement concerning the subject matter and supersedes all prior written and
oral understandings of the parties with respect thereto. This Agreement may
not be changed except by a writing signed by the party against whom the
enforcement of any waiver, change, extension, modification or discharge is
sought.
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<PAGE> 5
11. Severability. In the event any term, paragraph or
provision of this Agreement or its application to any circumstances shall to
any extent be deemed invalid or unenforceable, the remainder of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
12. Consultation of Attorneys. The Company and the
Executive acknowledge that they each have had the opportunity to consult its or
his attorney with respect to this Agreement and that they each understand its
contents.
13. Gender. References in this Agreement to any of the
masculine, feminine, or neuter genders shall refer to the other two genders as
the context may reasonably require, and references to the singular or plural
shall refer to the other as the context may reasonably require.
14. Paragraph Headings. This paragraph headings
contained herein are for reference only and shall not in any way affect the
meaning and interpretation of this Agreement.
15. Counterparts. This Agreement may be executed
in counterparts, each of which when so executed shall be an original, but both
of which shall together constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement is made and entered into on the date first
above written.
2CONNECT EXPRESS, INC.
By: /s/ Marc D. Fishman
--------------------------------
Marc D. Fishman
Title: CEO
EXECUTIVE
/s/ Marc D. Fishman
-----------------------------------
Marc D. Fishman
5
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 17th day of June, 1996, by and
between STEVE STEDMAN (the "EMPLOYEE") and 2CONNECT EXPRESS, INC., a
Florida corporation ("Company").
WHEREAS, the Company is a specialty retailer offering
Internet, satellite and communication services; and,
WHEREAS, the Company desires to obtain the services of the
Employee, and Employee desires to be employed by the Company.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein, the parties agree as follows:
1. Employment. The Company shall employ the Employee as its
Vice President-Finance and Controller. The Employee shall be responsible for
the management of the financial affairs of the Company and such other duties as
are customary for a Vice President-Finance and Controller, subject to the
direction of the Chief Executive Officer, President and the Board of Directors
of the Company. The Employee shall diligently, faithfully, and competently
perform all duties of the office of Vice President-Finance and Controller and
shall devote his full productive time and abilities to the performance of such
duties and will not render his services to any other person or entity without
the prior written consent of the Board of Directors.
2. Compensation.
(a) Salary. In consideration of and as compensation for
performance of the services under this Agreement, the Company will pay the
Employee a salary of $100,000 per year, payable in equal installments once
every two weeks or such frequency as is consistent with Company practices.
Subsequent to the first year of this Agreement, the salary paid to the
Employee shall be reviewed to determine whether it should be increased to an
amount that is greater than the amount paid to him during the immediately
preceding year.
(b) Stock Option. In addition to the above salary, the
Company has granted, and may additionally grant, in its discretion, certain
options to purchase shares of the Company's common stock, pursuant to the terms
and conditions contained in the Option Agreement between the parties and the
Company's stock option plan.
3. Benefits. While this Agreement is in effect, the
Employee shall receive any and all health and medical benefits, insurance,
pension and profit sharing plans, paid vacation time, sick leave and other
benefits on a similar basis as is offered to other similarly situated Company
employees.
4. Expenses. The Company shall reimburse the Employee
for all necessary and reasonable expenses incurred and paid by the Employee in
connection with the performance of services hereunder upon presentation of
supporting documentation.
<PAGE> 2
5. Term. The term of the Employee's employment with
the Company shall commence on June 17, 1996 and shall continue thereafter
until June 15, 1997 (the "Term"), unless earlier terminated as provided in
Section 6 below. The term of the Employee's employment shall automatically
renew for successive one-year terms thereafter, unless either the Employee or
the Company provides the other with written notice of his or its intent not to
continue the employment.
6. Termination For Cause. The Company may terminate
this Agreement, and the Employee's employment hereunder, for "cause". For
purposes of this Agreement, "cause" shall be defined as any act, which in the
opinion of the Board of Directors, in their sole discretion, constitutes:
(a) theft, dishonesty, fraud or embezzlement;
(b) failure or non-performance by the Employee to
carry out his duties or responsibilities pursuant to this Agreement or the
lawful instructions of the Board of Directors, the CEO or the President, which
such instructions relate to the conduct of the Company's business;
(c) willful refusal to continue his employment with
the Company, failure to comply with the Company's policies then in effect, or
any act that is otherwise a material breach or default of this Agreement.
Upon such acts of "cause", the Company may immediately terminate this
Agreement by written notice and shall have no further liability hereunder
except for compensation accrued to the date of such termination notice or the
first date of willful refusal by the Employee to continue his employment, as
the case may be.
7. Confidentiality and Non-Disclosure.
(a) The Employee acknowledges that the Company has
organized and created a new form of retail establishment to sell Internet,
satellite, cellular, paging, long-distance, local phone, and other
communication services and related hardware in a format aimed at mass market
consumers (as adjusted by the Company from time-to-time, referred to herein as
the "Company's Business"). The Company has invested substantial capital, time,
expertise, effort and other resources to develop this unique specialty retail
concept; these resources contain certain confidential and proprietary
information and analysis. For purposes of this Agreement, confidential and
proprietary information ("Confidential Information") shall be defined as any
information relating to the Company's confidential or proprietary business
affairs, whether communicated orally or in writing, including without
limitation, concepts, techniques, lists, designs, cost data, management
information, and other know-how, financial, marketing, and other business
information disclosed by the Company to the Employee or obtained by the
Employee through observation or examination of the Company's customers or
suppliers, including the identity of such customers and suppliers, and any
information the Company has received from others which the Company is obligated
to treat as confidential or proprietary.
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<PAGE> 3
(b) The Employee acknowledges that irreparable
injury and damage will result from the Employee's disclosure to third parties
or from any use of Confidential Information for purposes other than those
connected with Employee's employment hereunder.
(c) Employee agrees that he will not, during the
course of his employment, and at all times thereafter, without the Company's
prior written consent, disclose any Confidential Information to any third party
and shall not use any Confidential Information except pursuant to and in the
course of his association with the Company. The Employee shall have no
liability for reasonable disclosure of any Confidential Information that the
Employee can establish (i) has become publicly known without breach of this
Agreement, or (ii) had become known by or available prior to disclosure of such
information to the Employee or to such third party, without any breach of any
obligation of confidentiality by the Employee to the Company.
(d) Without limiting any other obligations
contained in this Agreement, the Employee agrees to take reasonable security
precautions, at least as great as the Employee uses to protect his own
confidential information, to protect from disclosure and to keep confidential
the Confidential Information, including without limitation, protection of
documents from discovery of contents, theft, unauthorized duplication, and
access by other persons to Confidential Information.
(e) Upon reasonable request by the Company and
immediately upon termination of the Employee's employment, the Employee will
return to the Company all materials, including but not limited to written
materials, photographs, equipment, art work, prototypes, advertising materials,
customer lists, service user lists, access lists, prospect lists, hardware,
computers, programs in whatever form, and all other documentation made
available or supplied by the Company, and all copies and reproductions thereof.
(f) The Employee will not make or use any copies
of, or summaries of, oral or written material, photographs or any other
documentation or information made available or supplied by the Company, except
such as are necessary to accomplish the purpose of his employment hereunder.
(g) The Company retains all rights and remedies
afforded it under the copyright, trademark and other laws of the United States
and the states thereof, including without limitation any laws designed to
protect proprietary or confidential information.
8. Non-Competition.
(a) In addition to, and separate from the
provisions regarding Confidential Information stated in Section 7 above, the
Employee agrees that for one (1) year after the termination of employment for
any reason (excluding termination of the Employee by the Company without cause)
the Employee will not, in any geographic area where the Company operates a
retail establishment, for its own account or as agent, servant or employee, nor
as a shareholder of
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any corporation or member of any firm: (a) accept employment from, or directly
or indirectly take any action for the benefit of, any individual or entity that
conducts a business that is in competition with the Company's Business, without
the consent of the Board of Directors of the Company; (b) contact or accept any
business with any of the Company's vendors or customers with the intention of
engaging in competition with the Company's Business; (c) engage, hire, employ
or solicit the employment of, for the purpose of engaging in competition with
the Company's Business, any of the Company's employees whose duties require
that employee to be familiar with the operation of the Company's business or
the employees or agents of any vendor or customer of the Company. For
purposes of this Section 8, the phrase "in competition with the Company's
Business" shall mean any company or division thereof that derives more than 50%
of its annual gross revenues from the sale of Internet, satellite, cellular,
paging, long-distance, local phone, and other communication services and
related hardware in a format aimed at mass market consumers.
(b) In the event of the Employee's actual or
threatened breach of any of the preceding paragraph of this Section 8, the
Company shall be entitled (without the need to post bond) to an injunction
restraining Employee from the prohibited conduct. If the court should hold
that the duration and/or scope (geographic or otherwise) of the covenants
contained in this Section 8 are unreasonable, then, to the extent permitted by
law, the court may prescribe a duration and/or scope (geographic or otherwise)
that is reasonable, and both the Company and Employee agree to accept such
determination, subject to rights of appeal. Nothing herein stated shall be
construed as prohibiting the Company or any third party from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages.
(c) The Employee agrees that if he is in violation
of any of the aforementioned restrictive covenants, then the time limitation
for the covenant shall be extended for a period of time equal to the period of
time during which the Employee was in breach of the covenant.
(d) The Employee agrees that the existence of any
claim or cause of action which he may have against the Company, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the Company's enforcement of the foregoing restrictive covenants, but shall be
litigated separately.
9. Notices. All claims, notices, requests,
demands and other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given or made when delivered by
hand or mailed, first class certified mail, return receipt requested, with
postage paid:
(i) If to Employee: STEVE STEDMAN
708 Belinda Drive
-------------------
Keller, Texas 76248
-------------------
-------------------
or to such other person or address as Employee shall furnish to the Company in
writing.
4
<PAGE> 5
(ii) If to the Company, to: 2CONNECT EXPRESS, INC.
2300 Glades Road, Suite 370
Boca Raton, Florida 33431
with a copy to: ARNOLD M. JAFFEE, ESQ.
Adorno & Zeder, P.A.
2601 S. Bayshore Drive, Suite 1600
Miami, Florida 33133
or to such other person or address as the Company shall furnish to Employee in
writing.
10. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of The Company.
11. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of Florida. Venue for
any proceedings shall be in Dade or Broward Counties, Florida, and the parties
agree to submit to the jurisdiction thereof.
12. Entire Agreement. This Agreement contains the
entire agreement concerning the subject matter and supersedes all prior
written and oral understandings of the parties with respect thereto. This
Agreement may not be changed except by a writing signed by the party against
whom the enforcement of any waiver, change, extension, modification or
discharge is sought.
13. Severability. In the event any term, paragraph or
provision of this Agreement or its application to any circumstances shall to
any extent be deemed invalid or unenforceable, the remainder of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
14. Consultation of Attorneys. The Company and the
Employee acknowledge that they each have had the opportunity to consult its
or his respective attorney with respect to this Agreement, and that they each
understand its contents.
15. Gender. References in this Agreement to any of the
masculine, feminine, or neuter genders shall refer to the others as the
context may reasonably require, and references to the singular or plural shall
refer to the other as the context may reasonably require.
16. Paragraph Headings. This paragraph headings
contained herein are for reference only and shall not in any way affect the
meaning and interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be an original, but both of
which shall together constitute one and the same instrument.
5
<PAGE> 6
IN WITNESS WHEREOF, this Agreement is made and entered into on the date first
above written.
2CONNECT EXPRESS, INC.
By: /s/ Marc D. Fishman
-------------------------
Marc D. Fishman
Title: President
----------------------
EMPLOYEE
/s/ Steve Stedman
----------------------------
Steve Stedman
6
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 17th day of June, 1996, by and
between MICHAEL WICHELNS (the "EMPLOYEE") and 2CONNECT EXPRESS, INC., a
Florida corporation ("Company").
WHEREAS, the Company is a specialty retailer offering
Internet, satellite and communication services; and,
WHEREAS, the Company desires to obtain the services of the
Employee, and Employee desires to be employed by the Company.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein, the parties agree as follows:
1. Employment The Company shall employ the Employee as its
Director of Operations. The Employee shall be responsible for such duties as
are customary for a Director of Operations, subject to the direction of the
Chief Executive Officer, President and the Board of Directors of the Company.
The Employee shall diligently, faithfully, and competently perform all duties
of the office of Director of Operations and shall devote his full productive
time and abilities to the performance of such duties and will not render his
services to any other person or entity without the prior written consent of the
Board of Directors.
2. Compensation.
(a) Salary. In consideration of and as compensation for
performance of the services under this Agreement, the Company will pay the
Employee a salary of $100,000 per year, payable in equal installments once
every two weeks or such frequency as is consistent with Company practices.
Subsequent to the first year of this Agreement, the salary paid to the Employee
shall be reviewed to determine whether it should be increased to an amount that
is greater than the amount paid to him during the immediately preceding year.
(b) Stock Option. In addition to the above salary, the
Company has granted, and may additionally grant, in its discretion, certain
options to purchase shares of the Company's common stock, pursuant to the terms
and conditions contained in the Option Agreement between the parties and the
Company's stock option plan.
3. Benefits. While this Agreement is in effect, the Employee
shall receive any and all health and medical benefits, insurance, pension and
profit sharing plans, paid vacation time, sick leave and other benefits on a
similar basis as is offered to other similarly situated Company employees.
4. Expenses. The Company shall reimburse the Employee for all
necessary and reasonable expenses incurred and paid by the Employee in
connection with the performance of services hereunder upon presentation of
supporting documentation.
<PAGE> 2
5. Term. The term of the Employee's employment with the Company
shall commence on June 17, 1996 and shall continue thereafter until June 15,
1997 (the "Term"), unless earlier terminated as provided in Section 6 below.
The term of the Employee's employment shall automatically renew for successive
one-year terms thereafter, unless either the Employee or the Company provides
the other with written notice of his or its intent not to continue the
employment.
6. Termination For Cause. The Company may terminate this
Agreement, and the Employee's employment hereunder, for "cause". For purposes
of this Agreement, "cause" shall be defined as any act, which in the opinion of
the Board of Directors, in their sole discretion, constitutes:
(a) theft, dishonesty, fraud or embezzlement;
(b) failure or non-performance by the Employee to carry
out his duties or responsibilities pursuant to this Agreement or the lawful
instructions of the Board of Directors, the CEO or the President, which such
instructions relate to the conduct of the Company's business;
(c) willful refusal to continue his employment with the
Company, failure to comply with the Company's policies then in effect, or any
act that is otherwise a material breach or default of this Agreement.
Upon such acts of "cause", the Company may immediately terminate this
Agreement by written notice and shall have no further liability hereunder
except for compensation accrued to the date of such termination notice or the
first date of willful refusal by the Employee to continue his employment, as
the case may be.
7. Confidentiality and Non-Disclosure.
(a) The Employee acknowledges that the Company has
organized and created a new form of retail establishment to sell Internet,
satellite, cellular, paging, long-distance, local phone, and other
communication services and related hardware in a format aimed at mass market
consumers (as adjusted by the Company from time-to-time, referred to herein as
the "Company's Business"). The Company has invested substantial capital, time,
expertise, effort and other resources to develop this unique specialty retail
concept; these resources contain certain confidential and proprietary
information and analysis. For purposes of this Agreement, confidential and
proprietary information ("Confidential Information") shall be defined as any
information relating to the Company's confidential or proprietary business
affairs, whether communicated orally or in writing, including without
limitation, concepts, techniques, lists, designs, cost data, management
information, and other know-how, financial, marketing, and other business
information disclosed by the Company to the Employee or obtained by the
Employee through observation or examination of the Company's customers or
suppliers, including the identity of such customers and suppliers, and any
information the Company has received from others which the Company is obligated
to treat as confidential or proprietary.
2
<PAGE> 3
(b) The Employee acknowledges that irreparable injury and
damage will result from the Employee's disclosure to third parties or from any
use of Confidential Information for purposes other than those connected with
Employee's employment hereunder.
(c) Employee agrees that he will not, during the course
of his employment, and at all times thereafter, without the Company's prior
written consent, disclose any Confidential Information to any third party and
shall not use any Confidential Information except pursuant to and in the course
of his association with the Company. The Employee shall have no liability for
reasonable disclosure of any Confidential Information that the Employee can
establish (i) has become publicly known without breach of this Agreement, or
(ii) had become known by or available prior to disclosure of such information
to the Employee or to such third party, without any breach of any obligation of
confidentiality by the Employee to the Company.
(d) Without limiting any other obligations contained in
this Agreement, the Employee agrees to take reasonable security precautions, at
least as great as the Employee uses to protect his own confidential
information, to protect from disclosure and to keep confidential the
Confidential Information, including without limitation, protection of documents
from discovery of contents, theft, unauthorized duplication, and access by
other persons to Confidential Information.
(e) Upon reasonable request by the Company and immediately
upon termination of the Employee's employment, the Employee will return to the
Company all materials, including but not limited to written materials,
photographs, equipment, art work, prototypes, advertising materials, customer
lists, service user lists, access lists, prospect lists, hardware, computers,
programs in whatever form, and all other documentation made available or
supplied by the Company, and all copies and reproductions thereof.
(f) The Employee will not make use any copies of, or
summaries of, oral or written material, photographs or any other documentation
or information made available or supplied by the Company, except such as are
necessary to accomplish the purpose of his employment hereunder.
(g) The Company retains all rights and remedies afforded
it under the copyright, trademark and other laws of the United States and the
states thereof, including without limitation any laws designed to protect
proprietary or confidential information.
8. Non-Competition.
(a) In addition to, and separate from the provisions
regarding Confidential Information stated in Section 7 above, the Employee
agrees that for one (1) year after the termination of employment for any reason
(excluding termination of the Employee by the Company without cause), the
Employee will not, in any geographic area where the Company operates a retail
establishment, for its own account or as agent, servant or employee, nor as a
shareholder of any
3
<PAGE> 4
corporation or member of any firm: (a) accept employment from, or directly or
indirectly take any action for the benefit of, any individual or entity that
conducts a business that is in competition with the Company's Business, without
the consent of the Board of Directors of the Company; (b) contact or accept any
business with any of the Company's vendors or customers with the intention of
engaging in competition with the Company's Business; (c) engage, hire, employ
or solicit the employment of, for the purpose of engaging in competition with
the Company's Business, any of the Company's employees whose duties require
that employee to be familiar with the operation of the Company's Business or
the employees or agents of any vendor or customer of the Company. For purposes
of this Section 8, an entity or individual is "in competition with the
Company's Business" if it or any division thereof derives more than 50% of its
annual gross revenues from the sale of Internet, satellite, cellular, paging,
long-distance, local phone, and/or other communication services and/or related
hardware in a format aimed at mass market consumers.
(b) In the event of the Employee's actual or threatened
breach of any of the preceding paragraph of this Section 8, the Company shall
be entitled (without the need to post bond) to an injunction restraining
Employee from the prohibited conduct. If the court should hold that the
duration and/or scope (geographic or otherwise) of the covenants contained in
this Section 8 are unreasonable, then, to the extent permitted by law, the
court may prescribe a duration and/or scope (geographic or otherwise) that is
reasonable, and both the Company and Employee agree to accept such
determination, subject to rights of appeal. Nothing herein stated shall be
construed as prohibiting the Company or any third party from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages.
(c) The Employee agrees that if he is in violation of any of
the aforementioned restrictive covenants, then the time limitation for the
covenant shall be extended for a period of time equal to the period of time
during which the Employee was in breach of the covenant.
(d) The Employee agrees that the existence of any claim or
cause of action which he may have against the Company, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the Company's
enforcement of the foregoing restrictive covenants, but shall be litigated
separately.
9. Notices. All claims, notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given or made when delivered by hand or mailed, first
class certified mail, return receipt requested, with postage paid:
(i) If to Employee: MICHAEL WICHELNS
709 N. BROUGHTON SQ.
BOYNTON BEACH, FL. 33436
or to such other person or address as Employee shall furnish to the Company in
writing.
4
<PAGE> 5
(ii) If to the Company, to: 2CONNECT EXPRESS, INC.
2300 Glades Road, Suite 370
Boca Raton, Florida 33431
with a copy to: ARNOLD M. JAFFEE, ESQ.
Adorno & Zeder, P.A.
2601 S. Bayshore Drive, Suite 1600
Miami, Florida 33133
or to such other person or address as the Company shall furnish to Employee in
writing.
10. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of The Company.
11. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of Florida. Venue for any
proceedings shall be in Dade or Broward Counties, Florida and the parties agree
to submit to the jurisdiction thereof.
12. Entire Agreement. This Agreement contains the entire
agreement concerning the subject matter and supersedes all prior written and
oral understandings of the parties with respect thereto. This Agreement may
not be changed except by a writing signed by the party against whom the
enforcement of any waiver, change, extension, modification or discharge is
sought.
13. Severability. In the event any term, paragraph or
provision of this Agreement or its application to any circumstances shall to
any extent be deemed invalid or unenforceable, the remainder of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
14. Consultation of Attorneys. The Company and the
Employee acknowledge that they each have had the opportunity to consult its or
his respective attorney with respect to this Agreement, and that they each
understand its contents.
15. Gender. References in this Agreement to any of the
masculine, feminine, or neuter genders shall refer to the others as the context
may reasonably require, and references to the singular or plural shall refer to
the other as the context may reasonably require.
16. Paragraph Headings. This paragraph headings
contained herein are for reference only and shall not in any way affect the
meaning and interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be an original, but both of
which shall together constitute one and the same instrument.
5
<PAGE> 6
IN WITNESS WHEREOF, this Agreement is made and entered into on the date first
above written.
2CONNECT EXPRESS, INC.
By: /s/ Marc D. Fishman
--------------------
Marc D. Fishman
Title: President
-----------------
EMPLOYEE
/s/ Michael Wichelns
-----------------------
MICHAEL WICHELNS
6
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 17th day of June, 1996, by and
between JEFF MANLY (the "EMPLOYEE") and 2CONNECT EXPRESS, INC., a Florida
corporation ("Company").
WHEREAS, the Company is a specialty retailer offering
Internet, satellite and communication services; and,
WHEREAS, the Company desires to obtain the services of the
Employee, and Employee desires to be employed by the Company.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein, the parties agree as follows:
1. Employment. The Company shall employ the Employee as
its Director of Merchandising. The Employee shall be responsible for such
duties as are customary for a Director of Merchandising, subject to the
direction of the Chief Executive Officer, President and the Board of Directors
of the Company. The Employee shall diligently, faithfully, and competently
perform all duties of the office of Director of Merchandising and shall devote
his full productive time and abilities to the performance of such duties and
will not render his services to any other person or entity without the prior
written consent of the Board of Directors.
2. Compensation.
(a) Salary. In consideration of and as compensation for
performance of the services under this Agreement, the Company will pay the
Employee a salary of $100,000 per year, payable in equal installments once
every two weeks or such frequency as is consistent with Company practices.
Subsequent to the first year of this Agreement, the salary paid to the
Employee shall be reviewed to determine whether it should be increased to an
amount that is greater than the amount paid to him during the immediately
preceding year.
(b) Stock Option. In addition to the above salary, the
Company has granted, and may additionally grant, in its discretion, certain
options to purchase shares of the Company's common stock, pursuant to the terms
and conditions contained in the Option Agreement between the parties and the
Company's stock option plan.
3. Benefits. While this Agreement is in effect, the
Employee shall receive any and all health and medical benefits, insurance,
pension and profit sharing plans, paid vacation time, sick leave and other
benefits on a similar basis as is offered to other similarly situated Company
employees.
4. Expenses. The Company shall reimburse the Employee
for all necessary and reasonable expenses incurred and paid by the Employee in
connection with the performance of services hereunder upon presentation of
supporting documentation.
<PAGE> 2
5. Term. The term of the Employee's employment with the
Company shall commence on June 17, 1996 and shall continue thereafter until
June 15, 1997 (the "Term"), unless earlier terminated as provided in Section 6
below. The term of the Employee's employment shall automatically renew for
successive one-year terms thereafter, unless either the Employee or the Company
provides the other with written notice of his or its intent not to continue the
employment.
6. Termination For Cause. The Company may terminate
this Agreement, and the Employee's employment hereunder, for "cause". For
purposes of this Agreement, "cause" shall be defined as any act, which in the
opinion of the Board of Directors, in their sole discretion, constitutes:
(a) theft, dishonesty, fraud or embezzlement;
(b) failure or non-performance by the Employee to
carry out his duties or responsibilities pursuant to this Agreement or the
lawful instructions of the Board of Directors, the CEO or the President, which
such instructions relate to the conduct of the Company's business;
(c) willful refusal to continue his employment with
the Company, failure to comply with the Company's policies then in effect, or
any act that is otherwise a material breach or default of this Agreement.
Upon such acts of "cause", the Company may immediately terminate this
Agreement by written notice and shall have no further liability hereunder
except for compensation accrued to the date of such termination notice or the
first date of willful refusal by the Employee to continue his employment, as
the case may be.
7. Confidentiality and Non-Disclosure.
(a) The Employee acknowledges that the Company has
organized and created a new form of retail establishment to sell Internet,
satellite, cellular, paging, long-distance, local phone, and other
communication services and related hardware in a format aimed at mass market
consumers (as adjusted by the Company from time-to time, referred to herein as
the "Company's Business"). The Company has invested substantial capital, time,
expertise, effort and other resources to develop this unique specialty retail
concept; these resources contain certain confidential and proprietary
information and analysis. For purposes of this Agreement, confidential and
proprietary information ("Confidential Information") shall be defined as any
information relating to the Company's confidential or proprietary business
affairs, whether communicated orally or in writing, including without
limitation, concepts, techniques, lists, designs, cost data, management
information, and other know-how, financial, marketing, and other business
information disclosed by the Company to the Employee or obtained by the
Employee through observation or examination of the Company's customers or
suppliers, including the identity of such customers and suppliers, and any
information the Company has received from others which the Company is obligated
to treat as confidential or proprietary.
2
<PAGE> 3
(b) The Employee acknowledges that irreparable
injury and damage will result from the Employee's disclosure to third parties
or from any use of Confidential Information for purposes other than those
connected with Employee's employment hereunder.
(c) Employee agrees that he will not, during the
course of his employment, and at all times thereafter, without the Company's
prior written consent, disclose any Confidential Information to any third party
and shall not use any Confidential Information except pursuant to and in the
course of his association with the Company. The Employee shall have no
liability for reasonable disclosure of any Confidential Information that the
Employee can establish (i) has become publicly known without breach of this
Agreement, or (ii) had become known by or available prior to disclosure of such
information to the Employee or to such third party, without any breach of any
obligation of confidentiality by the Employee to the Company.
(d) Without limiting any other obligations contained
in this Agreement, the Employee agrees to take reasonable security precautions,
at least as great as the Employee uses to protect his own confidential
information, to protect from disclosure and to keep confidential the
Confidential Information, including without limitation, protection of documents
from discovery of contents, theft, unauthorized duplication, and access by
other persons to Confidential Information.
(e) Upon reasonable request by the Company and
immediately upon termination of the Employee's employment, the Employee will
return to the Company all materials, including but not limited to written
materials, photographs, equipment, art work, prototypes, advertising materials,
customer lists, service user lists, access lists, prospect lists, hardware,
computers, programs in whatever form, and all other documentation made
available or supplied by the Company, and all copies and reproductions thereof.
(f) The Employee will not make or use any copies of,
or summaries of, oral or written material, photographs or any other
documentation or information made available or supplied by the Company, except
such as are necessary to accomplish the purpose of his employment hereunder.
(g) The Company retains all rights and remedies
afforded it under the copyright, trademark and other laws of the United States
and the states thereof, including without limitation any laws designed to
protect proprietary or confidential information.
8. Non-Competition.
(a) In addition to, and separate from the provisions
regarding Confidential Information stated in Section 7 above, the Employee
agrees that for one (1) year after the termination of employment for any reason
(excluding termination of the Employee by the Company without cause) the
Employee will not, in any geographic area where the Company operates a retail
establishment, for its own account or as agent, servant or employee, nor as a
shareholder of any
3
<PAGE> 4
corporation or member of any firm: (a) accept employment from, or directly
or indirectly take any action for the benefit of, any individual or entity that
conducts a business that is in competition with the Company's Business without
the consent of the Board of Directors of the Company; (b) contact or accept any
business with any of the Company's vendors or customers with the intention of
engaging in competition with the Company's Business; (c) engage, hire, employ
or solicit the employment of, for the purpose of engaging in competition with
the Company's Business, any of the Company's employees whose duties require
that employee to be familiar with the operation of the Company's Business or
the employees or agents of any vendor or customer of the Company. For purposes
of this Section 8, the phrase "in competition with the Company's Business"
shall mean any company or division thereof that derives more than 50% of its
annual gross revenues from the sale of Internet, satellite, cellular, paging,
long-distance, local phone, and other communication services and related
hardware in a format aimed at mass market consumers.
(b) In the event of the Employee's actual or
threatened breach of any of the preceding paragraph of this Section 8, the
Company shall be entitled (without the need to post bond) to an injunction
restraining Employee from the prohibited conduct. If the court should hold
that the duration and/or scope (geographic or otherwise) of the covenants
contained in this Section 8 are unreasonable, then, to the extent permitted by
law, the court may prescribe a duration and/or scope (geographic or otherwise)
that is reasonable, and both the Company and Employee agree to accept such
determination, subject to rights of appeal. Nothing herein stated shall be
construed as prohibiting the Company or any third party from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages.
(c) The Employee agrees that if he is in violation of
any of the aforementioned restrictive covenants, then the time limitation for
the covenant shall be extended for a period of time equal to the period of time
during which the Employee was in breach of the covenant.
(d) The Employee agrees that the existence of any
claim or cause of action which he may have against the Company, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the Company's enforcement of the foregoing restrictive covenants, but shall be
litigated separately.
9. Notices. All claims, notices, requests, demands and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given or made when delivered by hand or
mailed, first class certified mail, return receipt requested, with postage
paid:
(i) If to Employee: JEFF MANLY
----------------
/s/ Jeff Manly
----------------
----------------
or to such other person or address as Employee shall furnish to the Company in
writing.
4
<PAGE> 5
(ii) If to the Company, to: 2CONNECT EXPRESS, INC.
2300 Glades Road, Suite 370
Boca Raton, Florida 33431
with a copy to: ARNOLD M. JAFFEE, ESQ.
Adorno & Zeder, P.A.
2601 S. Bayshore Drive,
Suite 1600
Miami, Florida 33133
or to such other person or address as the Company shall furnish to Employee in
writing.
10. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of The Company.
11. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of Florida. Venue for any
proceedings shall be in Dade or Broward Counties, Florida, and the parties
agree to submit to the jurisdiction thereof.
12. Entire Agreement. This Agreement contains the entire
agreement concerning the subject matter and supersedes all prior written and
oral understandings of the parties with respect thereto. This Agreement may
not be changed except by a writing signed by the party against whom the
enforcement of any waiver, change, extension, modification or discharge is
sought.
13. Severability. In the event any term, paragraph or
provision of this Agreement or its application to any circumstances shall to
any extent be deemed invalid or unenforceable, the remainder of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
14. Consultation of Attorneys. The Company and the
Employee acknowledge that they each have had the opportunity to consult its or
his respective attorney with respect to this Agreement, and that they each
understand its contents.
15. Gender. References in this Agreement to any of the
masculine, feminine, or neuter genders shall refer to the others as the context
may reasonably require, and references to the singular or plural shall refer to
the other as the context may reasonably require.
16. Paragraph Headings. This paragraph headings contained
herein are for reference only and shall not in any way affect the meaning and
interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be an original, but both
of which shall together constitute one and the same instrument.
5
<PAGE> 6
IN WITNESS WHEREOF, this Agreement is made and entered into on the date first
above written.
2CONNECT EXPRESS, INC.
By: /s/ Marc D. Fishman
--------------------------------
Title: President
-----------------------------
EMPLOYEE
/s/ Jeff Manly
-----------------------------------
JEFF MANLY
6
<PAGE> 1
Exhibit 23.1
KPMG Peat Marwick LLP
One Biscayne Tower Telephone 305 358 2300 Telefax 305 577 0644
Suite 2900
2 South Biscayne Boulevard
Miami, Florida 33131
Consent of Independent Auditors
The Board of Directors
2 Connect Express, Inc.:
We consent to the use of our report included herein and to the references to
our firm under the headings "Selected Financial Information" and "Experts" in
the prospectus.
Miami, Florida
November 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1996 AND FOR THE
PERIOD FROM APRIL 19, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-19-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,854,124
<SECURITIES> 0
<RECEIVABLES> 4,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,858,124
<PP&E> 30,382
<DEPRECIATION> (890)
<TOTAL-ASSETS> 2,900,393
<CURRENT-LIABILITIES> 38,180
<BONDS> 0
0
0
<COMMON> 54,100
<OTHER-SE> 2,808,113
<TOTAL-LIABILITY-AND-EQUITY> 2,900,393
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (375,137)
<INCOME-TAX> 0
<INCOME-CONTINUING> (375,137)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (375,137)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0
</TABLE>
