AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
POWERTRADER, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 7372 98-0163116
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Industrial Identification Number)
Classification
Code Number)
Douglas J. Bates, Esq.
Suite 591 Gallop, Johnson & Neuman, L.C. Suite 591
885 Dunsmuir Street 101 South Hanley Road 885 Dunsmuir Street
Vancouver, B.C. St. Louis, MO 63105 Vancouver, B.C.
V6C 1N5 (314) 862-1200 V6C 1N5
(604) 685-1529 (Name, Address and (Address of Principal
(Address and Telephone Telephone Number Place of Business or
Number of Principal of Agent for Service) Intended Principal
Executive Offices) Place of Business)
Approximate Date of Proposed Sale to the Public: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_| |X|
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each class of Proposed maximum Amount of
securities to be registered aggregate offering price (b) registration fee
<S> <C> <C>
Units, consisting of one share of Common Stock,
$0.01 par value per share, and one warrant to
purchase one additional share of Common Stock $5,525,000 $1,674.24
Common Stock, $0.01 par value per share,
included as part of the Units --- --- (c)
Warrant to purchase one share of Common Stock,
included as part of the Units --- --- (c)
Common Stock, $0.01 par value per share,
issuable upon exercise of the Warrants --- --- (c)
Common Stock, $0.01 par value per share $1,785,000 $540.91
<FN>
(a) Pursuant to Rule 416, this registration statement also covers such
indeterminable additional shares of Common Stock as may become
issuable as a result of any future antidilution adjustments made in
accordance with the terms of the Warrants.
(b) Calculated pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
(c) No separate registration fee required pursuant to Rule 457(i) under
the Securities Act of 1933, as amended.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS [LOGO]
Information contained herein is subject to completion or amendment. A
registration statement relating to the 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 the securities in
any state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of such state.
THIS OFFERING IS MADE ONLY TO RESIDENTS OF THE STATES OF CALIFORNIA, COLORADO,
CONNECTICUT, NEW JERSEY, AND NEW YORK. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANYONE IN ANY OTHER JURISDICTION. THE SECURITIES OFFERED
HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED FOR SALE IN ANY STATE OTHER THAN
THOSE SET FORTH ABOVE; ACCORDINGLY, SECURITIES PURCHASED IN THIS OFFERING MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED TO THE RESIDENTS OF ANY OTHER STATE ABSENT
REGISTRATION UNDER SUCH STATES' LAW OR THE AVAILABILITY OF AN EXEMPTION
THEREFROM.
A minimum of 1,000,000 Units and a maximum of 1,700,000 Units
(Each Unit consisting of one share of Common Stock and
one Warrant to purchase one additional share of Common Stock)
595,000 Shares of Common Stock
POWERTRADER, INC.
--------------
PowerTrader, Inc. (the "Company") hereby offers a minimum of 1,000,000
and a maximum of 1,700,000 units (the "Units"), each consisting of one share of
the Company's common stock, $0.01 par value per share (the "Common Stock"), and
one warrant to purchase one additional share of Common Stock at an exercise
price of $3.50 per share at any time during the five-year period commencing on
the date of this Prospectus (each a "Warrant") at an initial offering price of
$3.25 per Unit. Although the Common Stock and the Warrants included in the Units
may not be separately purchased in this offering, such securities will be
separately transferable immediately after issuance. The Warrants are subject to
redemption by the Company, in whole but not in part, at a redemption price of
$0.01 per Warrant on 30 days prior written notice to the registered holder
thereof if the average closing bid price of the Common Stock as reported by the
principal market on which the Common Stock is traded equals or exceeds $4.50 per
share for any 20 trading days within a period of 30 consecutive trading days
ending on the fifth trading day prior to the notice of redemption. See
"DESCRIPTION OF SECURITIES."
Certain stockholders of the Company (the "Selling Stockholders") also
offer hereby 595,000 shares of Common Stock at an offering price of $3.00 per
share. Such shares will be offered for sale by the Selling Stockholders
concurrently with the offering of Units by the Company. The Company will not
receive any proceeds from the sale of Common Stock by the Selling Stockholders.
See "PRINCIPAL AND SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION."
<PAGE>
Prior to this offering, there has been no public market for the Units,
Common Stock or Warrants and there can be no assurance that any such market will
develop after the closing of the offering or that, if developed, it will be
sustained. The offering price of the Units and the Common Stock was arbitrarily
determined by the Company and the Selling Stockholder and does not necessarily
bear any direct relationship to the Company's assets, earnings, book value or
other generally accepted criteria of value. It is intended that the offering
price of the Units will be $3.25 per Unit and that the offering price of the
Common Stock will be $3.00 per share. See "PLAN OF DISTRIBUTION" for information
relating to the determination of the offering price. The Company intends to
submit an application to render the Common Stock and Warrants eligible for
quotation on the Nasdaq SmallCap Market under the symbols "PTSW" and "PTSWW."
The Company proposes to offer the Units to the public on a
minimum/maximum, best efforts basis directly through its directors and executive
officers; however, the Company may engage one or more registered brokers or
dealers to assist in the sale of the securities offered hereby. All of the
proceeds received in connection with the sale of Units by the Company will be
deposited and held in escrow until subscriptions for an aggregate of at least
1,000,000 Units have been received. If subscriptions for the purchase of at
least 1,000,000 Units have not been received on or before the first anniversary
of the effective date of this Prospectus, the offering of the Units will be
terminated and all subscription payments held in escrow will be promptly
returned to investors, together with interest at the prevailing market rate. See
"SUMMARY OF ESCROW AGREEMENT" and "PLAN OF DISTRIBUTION."
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. ONLY INVESTORS WHO CAN BEAR THE RISK OF LOSS
OF THEIR ENTIRE INVESTMENT SHOULD PURCHASE THESE SECURITIES. SEE "RISK FACTORS"
BEGINNING ON PAGE 6 HEREOF, AND DILUTION ON PAGE 12.
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.
<PAGE>
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to the Selling
Public Commissions(1) Company(2) Stockholder(3)
<S> <C> <C> <C> <C>
Per Unit $3.25 $--- $3.25 $---
Total Minimum $3,250,000 $--- $3,250,000 $---
Total Maximum $5,525,000 $--- $5,525,000 $---
Per Share $3.00 $--- $--- $3.00
Total $1,785,000 $--- $--- $1,785,000
<FN>
(1) Although the Company intends to offer the Units directly to the public
through its directors and executive officers, it may engage and pay
compensation at customary rates to registered brokers or dealers. See
"PLAN OF DISTRIBUTION."
(2) Before deducting estimated expenses of $200,000 payable by the
Company.
(3) The Company will not receive any of the proceeds from the sale of the
shares of Common Stock by the Selling Stockholders.
</FN>
</TABLE>
The date of this Prospectus is , 1997
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial data, including the notes related
thereto, appearing elsewhere in this Prospectus. Except as otherwise indicated,
all information in this Prospectus (other than the historical consolidated
financial statements contained herein) reflects the organization of The Company
as a Delaware corporation and subsequent acquisition of all of the outstanding
shares of PowerTrader Software Inc., a corporation organized under the laws of
the Canadian Province of British Columbia ("PSI"), as if such transactions had
occurred on July 1, 1996. See "THE COMPANY." Unless the context otherwise
requires, all references to the Company include PowerTrader, Inc. and
PowerTrader Software Inc. To assist prospective investors, a glossary of
technical terms has been included beginning on page 5 of this Prospectus.
The Company
PowerTrader, Inc. designs, develops, markets and supports informational
and analytical desktop decision support and risk management systems for both
securities professionals (including securities brokerage firms, investment
advisors and trust companies) and individual investors. The Company's products
enable its customers to capture an incoming stream of market data provided by
Market Data Vendors, store such market data for future reference, display
selected data in tabular and graphic form and analyze the data to discover
trading opportunities. The Company's systems are modular, scalable and allow
clients to leverage their investments in existing systems. Individual components
of the Company's systems can function independently, giving clients the ability
to build their system over time to integrate existing software which is meeting
their current needs. The Company's systems have been licensed to more than 200
investors. Marketed directly, as well as through distribution partners, in the
United States, Canada, Europe and the Asian/Pacific region, the Company's
products are believed to offer a unique combination of analytical capabilities
and trading information.
<PAGE>
Industry Background
To successfully compete in the securities industry which is
experiencing rapid demographic, instrumental and accounting changes, securities
professionals are expected to increasingly rely on information systems to lower
transaction costs, manage the exponentially increasing data flow and provide
value-added analysis services. Additionally, the Company believes that advances
in telecommunications and information technology, such as the Internet, will
prompt the individual investor to increasingly require analytical tools to
manage available data and uncover investment opportunities. Because existing
systems lack the sophistication necessary to handle such changes and advances,
they do not provide the tools which the Company believes are necessary for
securities professionals and individual investors to make effective investment
decisions.
The PowerTrader Solution
The Company seeks to provide solutions to the informational and
analytical challenges of both securities professionals and individual investors.
The Company's products provide an efficient application capable of supporting
rapid deployment of data and analytical functionality. The Company's products
run in a Windows environment for ease of use.
Business Strategy
The Company believes it can capitalize on the experience of its
management in the security industry to become a leading provider of analytical
and informational systems by employing a strategy that consists of the following
key elements:
o Implement Dual Market Strategy. By serving both the securities
professional and the individual investor portions of the
market, the Company believes it will enhance its product by
using knowledge, methodologies and concepts normally reserved
for securities professionals for the benefit of the individual
investor and vice versa, thereby realizing additional benefits
not generally enjoyed by competitors.
o Expand Product Portfolio. To meet the evolving needs of its
clients, the Company intends to continually expand its product
line by internally developing and licensing products that
respond to regular evaluations of such need.
o Pursue Distribution Alliances. To extend the Company's market
presence, the Company intends to build distribution alliances
similar to the two arrangements it currently has with
securities market participants to distribute the Company's
products.
o Expanded Services. The Company intends to expand the products
and services distributed through its Financial Wire Internet
website and its client technical consulting services.
o Leverage Existing Customer Base. The Company intends to
continuously introduce products that complement the core
functionality of existing systems owned by its large customer
and distribution partner base.
The Company's executive offices are located at Suite 591, 885 Dunsmuir
Street, Vancouver, British Columbia V6C 1N5, and its telephone number is (604)
685-1529.
<PAGE>
The Offering
Securities offered hereby:
by the Company a minimum of 1,000,000 and a maximum of 1,700,000
Units, each consisting of one share of Common
Stock and a warrant to purchase one additional
share of Common Stock. See "DESCRIPTION OF
SECURITIES."
by the Selling
Stockholders 595,000 shares of Common Stock.
Terms of the Warrants,
included as part of
Units Each Warrant included as part of the Units
entitles the holder thereof to purchase, at any
time during the five-year period commencing on the
date of this Prospectus, one share of Common Stock
at a price of $3.50 per share, subject to
adjustment. The Warrants are subject to redemption
by the Company, in whole but not in part, at $0.01
per Warrant on 30 days prior written notice
provided that the average closing bid price of the
Common Stock as reported by the principal market
on which the Common Stock is traded equals or
exceeds $4.50 per share, subject to adjustment,
for any 20 trading days within a period of 30
consecutive trading days ending on the fifth
trading day prior to the date of the notice of
redemption. See "DESCRIPTION OF SECURITIES."
Use of Proceeds To fund (1) expansion of the Company's marketing
and sales efforts, (2) new product development,
(3) acquisitions and (4) working capital and other
general corporate purposes.
Securities Outstanding
Prior to Offering (a) 7,378,115 shares of Common Stock.
Securities to be Outstanding
After this Offering (a) 9,078,115 shares of Common Stock, and 1,700,000
Warrants.
Risk Factors This offering involves a high degree of risk. See
"RISK FACTORS" beginning on page 6.
Proposed Trading Symbols:
Common Stock PTSW
Warrants PTSWW
- ----------
(a) Based on shares outstanding as of January 2, 1997 and assumes that the
maximum number of shares (1,700,000) are sold. Excludes shares
reserved for issuance under certain outstanding options and the
Company's 1996 Stock Option Plan. See "CAPITALIZATION."
--------------------
<PAGE>
This Prospectus contains trademarks and trade names of companies other
than the Company and PSI. These trademarks and trade names are the property of
their respective owners. PowerTrader(R) is a federally registered trademark of
the Company.
--------------------
Any forward looking statements set forth in this Prospectus are
necessarily subject to significant uncertainties and risks, including, but not
limited to those set forth in "RISK FACTORS." When used in this Prospectus, the
words "believes," "anticipates," "expects" and similar expressions are intended
to identify forward-looking statements. Actual results could be materially
different as a result of various possibilities, including the Company's ability
to continue as a going concern, the unavailability of needed additional capital,
difficulties or delays in the introduction of new products or enhancement to
existing products, rapid technological change, new product offerings by existing
competitors or new entrants into the Company's markets. Readers are cautioned
not to place undue reliance on forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
<PAGE>
SUMMARY FINANCIAL DATA
PowerTrader, Inc.
Period Commencing on
August 22, 1996 (date of
inception) through
September 30, 1996
Statement of ------------------
Operations Data:
Revenue $ -
Selling, General and Administrative Costs 7
----
Net Loss $ (7)
Net Loss per share $ (7)
September 30, 1996
------------------
Balance Sheet Data:
Working Capital deficit $ (6)
Total Assets 493
Long-term debt, less current maturities -
Stockholders' Deficit (6)
<TABLE>
PowerTrader Software Inc.
<CAPTION>
29 December
Fiscal Year Ended Three Months Ended 1988
June 30, 29 December 1988 September 30, (inception) to
-------- (inception) to ------------- 30 September
30 June 1996 1996
Statements of 1996 1995 (cumulative) 1996 1995 (cumulative)
---- ---- ------------ ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations Data:
Sales $ 50,971 $ 44,026 $ 94,997 $ 10,219 $ 34,795 $ 105,216
Cost of Sales 40,910 17,411 58,321 14,900 27,836 73,221
Selling, General and
Administrative costs 405,099 369,910 755,009 108,373 102,662 883,382
Development Costs 203,933 108,067 312,000 59,015 49,438 371,015
-------- -------- ---------- -------- -------- ----------
Net loss $(598,971) $(451,362) $(1,050,333) $(172,069) $(145,141) $(1,222,402)
-------- -------- ---------- -------- -------- ----------
Net loss per share $ (0.24) $(3,029.28) $ (0.04) $ (0.12)
-------- ---------- -------- --------
Weighted Average Number 2,475,258 149 4,174,597 1,238,579
of shares outstanding
</TABLE>
September 30,
1996
-----------
Balance Sheet Data:
Working Capital $ 39,130
Total Assets 159,566
Long-term debt, less current portion -
Stockholders' Deficit (576,071)
<PAGE>
GLOSSARY
API - Application Programming Interface. A standard way for third party
developers to create their own programs that will work with PowerTrader Analyst
and manipulate end-of-day market data.
BETA PRODUCT - An unfinished version of a computer program that is released to a
limited number of external users for testing and comment.
C + + - An object oriented computer programming language.
CLIENT/SERVER ARCHITECTURE - A computer system architecture in which two
independent processors communicate via an established protocol. The client is
typically a single user personal computer with a graphical user interface
operated by the end-user that makes requests to the server. The server typically
runs database software, maintains information and responds to one or more
clients.
CROSS PLATFORM APPLICATIONS - high level development tools that allow for the
development of applications that can be supported across a variety of operating
systems (for example, Windows NT and Unix).
CTA - Commodity Trading Advisor.
DATA BASE - collection of data organized especially for rapid search and
retrieval.
DATA FEED - A stream of market data coming from a Data Vendor. Usually delivered
by satellite, cable or data line.
DYNAMIC DATA EXCHANGE (DDE) - A method used to share data between application
programs in the Windows environment.
DECISION SUPPORT SYSTEM SOFTWARE (DSS) - Computer programs that analyze and
graphically display financial data.
DYNAMIC LINK LIBRARY (DLL) - A set of routines used by Windows software packages
as standard functions available for use by other software packages. These
functions are loaded when the programs are run.
FIREWALL - A system that controls the flow of data between an internal network
and the Internet or between internal network segments.
FRAME RELAY - A wide area communications interface.
GRAPHIC USER INTERFACE (GUI) - Interfacing with a computer by manipulating
graphical icons and windows (usually by pointing and clicking a mouse) rather
than using text commands.
<PAGE>
HYPERTEXT MARK-UP LANGUAGE (HTML) - A page description language used to convey
both content and formatting information about content to a Web browser.
IBS/DOS - IBS is a DOS product owned and marketed by North American Quotations
used to display quotation information from its data feed.
DOS - Disk Operating System. The operating system software used to run
IBM-compatible computers.
INTEROPERABILITY - The ability of software and hardware on multiple machines
from multiple vendors to communicate.
INTERNET - An open global network of interconnected commercial, educational and
governmental computer networks that utilize a common communications protocol.
INTERNET SERVICE PROVIDER - (ISP) A company which provides other companies or
individuals with access to, or presence on, the Internet. Most ISPs are also
Internet Access Providers; extra services include help with design, creation and
administration of world-wide Websites, training, and administration of
Intranets.
INTERNET PROTOCOL (IP) - IP is a connectionless, best-effort packet switching
protocol. It provides packet routing, fragmentation and re-assembly through the
data link layer.
INTRANET - An organization's private network of its local area networks that
utilizes Internet data formats and communications protocols and that may use the
Internet's facilities as the backbone for network communications.
LOCAL AREA NETWORK (LAN) - A group of one or more computers connected together
within a localized environment for the purpose of sharing data and networked
resources such as printers, modems or servers.
MARKET DATA VENDORS (MDVs) - Companies that collect and distribute data
associated with the trading of financial instruments.
MICROSOFT WINDOWS - Computer operating systems providing graphical user
interfaces and, in the case of Windows NT, that are optimized for use as a
network server.
MIS - Manager of Information Services for a business entity.
NETWORK ENABLED - A version of work station software that has been modified to
work as a node on a network.
NEURAL NETWORK - An adaptive computer program that is capable of limited
learning.
OPEN SYSTEM - A system based on standards that permits interoperability of
computer systems.
<PAGE>
RAPID APPLICATION DEVELOPMENT (RAD) - a technique for developing software
quickly that makes use of prototyping and reusable software components.
SERVER - A program that collects and stores financial market data and makes it
available to other programs.
SHRINK WRAP LICENSE - A printed agreement included in product packaging that
typically provides that opening the package indicates the user's acceptance of
its terms and conditions.
STRUCTURED QUERY LANGUAGE (SQL) - A standard way to retrieve data from a
relational database.
UNIVERSAL RESOURCE LOCATOR (URL) - A complete address to reach a site on the
World Wide Web specifying the protocol and fully qualified address.
VALUE-ADDED RESELLERS (VAR) - A third party service/marketing organization
offering products to its customers which include software developed by a
different Company.
VISUAL BASIC - A programming system that allows the user to create robust and
useful applications for Microsoft Windows operating systems by making full use
of the Graphical User Interface (GUI).
VIRUS - An executable file that replicates and attaches itself to other
executable programs in an unsolicited manner. Most viruses are designed to
damage data or other components within a computer system.
WEB BROWSER - Client programs that allow users to browse the Web.
WEB SERVER - A server process running at a website which sends out web pages in
response to requests from remote browsers. If one site runs more than one server
they must use different port numbers.
WEBSITE - Any computer on the Internet running a World Wide Web server process.
A particular website is identified by the host name part of a URL.
WIDE AREA NETWORK (WAN) - A communications network that uses commercial
transmission resources to connect geographically dispersed users or LANs.
WORLD WIDE WEB (Web or WWW) - A network of computer servers that uses a special
communications protocol to link different servers throughout the Internet,
allowing a user to move from document to related document, no matter where it is
stored on the Internet, and permits communication of graphics, video and sound.
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors,
in addition to the other information contained in this Prospectus, in evaluating
an investment in the Securities offered hereby. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth in the following risk factors and elsewhere in this Prospectus.
Ability to Continue as a Going Concern
The Company's limited capital resources have caused the Company's
independent accountants to issue a report which indicates that substantial doubt
exists as to the Company's ability to continue as a going concern. The Company
anticipates that absent completion of this offering it would likely exhaust its
capital resources in early 1997. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-- Liquidity and Capital Resources"
for a discussion of management's analysis and plans concerning the matters
addressed in its accountant's report.
Operating History; Expectation of Future Operating Losses; Accumulated Deficit
Although PSI, which conducts all of the Company's operations, was
incorporated in December, 1988, it did not engage in any material business
activity until June, 1994, at which time it began development of its PowerTrader
suite of software products. Accordingly, PSI has been a development stage
company, has had virtually no operating history or record of operations for
investors to consider in making an investment decision regarding the purchase of
the securities offered hereby and is vulnerable to a variety of business risks
generally associated with an early stage company. During the fiscal years ended
June 30, 1995 and 1996, and the three months ended September 30, 1996, PSI
incurred net losses of $451,362, $598,971, and $172,069, respectively. At June
30, 1996 and September 30, 1996, PSI had an accumulated deficit of $1,050,333
and $1,222,402. Because of additional research and development expenses and the
additional personnel expenses which the Company believes will be necessary to
establish its competitive and market position and build the organizational
infrastructure required to support implementation of the Company's growth
strategy, the Company expects to incur further losses in the future. Such losses
will likely have a negative impact on the Company's results of operation,
particularly if sales of the Company's current products fall below expectations.
There can be no assurance that the Company will achieve profitable operations in
any future period.
Possible Need for Additional Capital
The Company anticipates that its existing capital resources, including
the net proceeds of this offering and interest income earned thereon, will
enable the Company to maintain its current and planned operations for at least
the 12 month period following the date of this Prospectus, by which time the
Company expects to be generating revenues and income from product sales.
However, the Company anticipates negative cash flow from operations will
continue through at least the end of fiscal 1997, because the Company will
utilize substantial funds to continue research and development, to conduct Beta
Product testing, and to establish quality control, marketing, sales and
administrative capabilities. In the event that the Company does not achieve its
product objectives or if its expectations with respect to product sales are not
<PAGE>
fulfilled, the Company may need to seek additional funding through public or
private financing, including equity financing, and through collaborative
arrangements. Adequate funds for these purposes, whether obtained through
financial markets or from collaborative arrangements, may not be available when
needed or may not be available on terms favorable to the Company. If additional
funds are raised by issuing additional equity securities, dilution to existing
stockholders may result. If funding is insufficient, the Company may be required
to delay, scale back or eliminate some or all of its research and development
programs or license third parties to commercialize products or technologies that
the Company would otherwise seek to develop itself. The Company's future cash
requirements will be affected by the results of its research and development
program, Beta Product testing, acquisitions of products or technologies,
relationships with collaborators,competing technological and marketing
developments, the costs of commercialization activities and other factors.
Quarterly Fluctuations in Operating Results
The Company's quarterly results of operations are expected to vary in
the future. Any shortfall in revenues recognized in any given period could have
a material adverse effect on the Company's business, results of operations and
financial condition for such period. Because a significant percentage of the
Company's total expenses is relatively fixed, variations in the timing of
product sales and installations can cause significant variations in operating
results from quarter to quarter and may magnify the adverse effect of any
shortfalls in revenues on the Company's results of operations. The Company
believes that period to period comparisons of revenues and results of operations
are not necessarily meaningful and should not be relied upon as indicators of
future performance. At some point in the future the Company's quarterly results
will likely be below those projected by market analysts. Quarterly fluctuations
in operating results and variations from projections could have a significant
impact on the market price of the Common Stock.
Technological Change; Dependence on New Product Development
The software industry is characterized by rapid technological change.
The Company's future success will depend largely upon its ability to continually
develop decision support and risk management applications that incorporate new
technologies and to enhance and expand its current products. There can be no
assurance that the Company's financial and technological resources will permit
it to develop or market new products successfully, or respond effectively to
technological changes. The Company anticipates that significant amounts of
future revenue will be derived from products and product enhancements which
either do not exist today or have not been sold in large enough quantities to
ensure market acceptance. The development of new software applications is a
complex, expensive and uncertain process requiring technological innovation and
accurate anticipation of technological and market trends. The Company will need
to continue to attract and retain appropriately skilled employees to
successfully develop new products. There can be no assurance that the Company
will not experience difficulties that could delay or prevent the successful
development and introduction of product enhancements or new products, or that
such enhancements or new products will adequately meet the requirements of the
marketplace or achieve market acceptance. If the Company is unable to develop
and introduce product enhancements and new products in a timely and
cost-effective manner in response to changing market conditions or client
requirements, the Company's business, results of operations and financial
condition could be materially and adversely affected.
<PAGE>
The software products offered by the Company may contain undetected
errors or failures when first introduced or as new versions are released. Errors
or failures that are not detected until after commencement of commercial
shipment of a product could result in loss of or delay in market acceptance of
the product and claims against the Company, which could have a material adverse
impact on the Company's business, results of operations and financial
conditions.
Intense Competition
The software industry is intensely competitive and rapidly evolving.
Most of the Company's revenues are derived from competitive procurement
processes managed by sophisticated purchasers that extensively investigate and
compare the software applications offered by the Company and its competitors.
The Company believes that the principal competitive factors influencing the
market for its products include vendor and product reputation, product
architecture, functionality and features, ease of use, rapidity of
implementation, quality of client support, product performance and price. There
can be no assurance that the Company will be able to compete successfully with
respect to any of such factors.
The Company competes directly with a large number of software vendors.
The Company also faces competition from internal management information systems
departments many of which have developed or may develop risk management and
other decision support systems. Many of the Company's current and potential
competitors have significantly greater financial, managerial, development,
technical, marketing and sales resources than the Company and may be able to
devote those resources to develop and introduce products more rapidly than the
Company or systems with significantly greater functionality than and superior
overall performance to, those offered by the Company. These competitors may also
be able to initiate and withstand significant price decreases more effectively
than the Company. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase their ability to offer products that address the needs
<PAGE>
of current and potential customers. New competitors or new alliances among
competitors may emerge and quickly acquire market share. Competition may
therefore result in significant price reductions, decreased gross revenues, loss
of market share and reduced acceptance of the Company's products. Failure of the
Company to effectively compete could have a material adverse impact on the
Company's business, results of operations and financial condition.
Limited Marketing Capabilities; Dependence on Strategic Relationships
The Company's strategy for commercialization of its products
contemplates the allocation of substantial resources to the expansion and
training of its marketing staff and direct sales force. To date, the Company has
conducted only limited sales, marketing and distribution activities. There can
be no assurance that the Company will be able to continue to attract and retain
the qualified marketing and sales personnel necessary to sustain growth in
revenues derived from sales of the Company's products or that the expansion and
training of such a marketing staff and sales force will prove to be economically
feasible. The Company also expects to market and sell its products through
licensing or other distribution arrangements with third parties. Although the
Company will seek to create significant economic incentive to motivate its
distribution partners to commercialize the products that they license from or
distribute on behalf of the Company, the level of resources and attention
devoted by the partner to a product is not expected to be within the Company's
sole control. Accordingly, any revenues received by the Company will be
dependent in large part, on the efforts of third parties, and no assurance can
be given that such efforts will be successful.
Dependence on a Limited Number of Products
The Company expects to derive a significant portion of its revenues in
fiscal 1997 and in future years from a limited number of products and services.
Most of this revenue is expected to be derived from subscriptions to the
Company's Financial Wire products and services and a limited number of other
products and services related thereto. As a result, the reduction, delay or
cancellation of subscriptions for these products and services could have a
material adverse effect on the Company's business, financial condition and
results of operation.
<PAGE>
Dependence on Internet
The Company's Financial Wire products and services, and the marketing
strategy related thereto, have been designed to capitalize on the growing
acceptance and use of the Internet. Accordingly, achievement of the Company's
growth and profitability objectives will be dependent in large part upon the
capacity, reliability, integrity and security of the Internet, and the service
providers and telecommunications vendors associated therewith. In addition,
implementation of the Company's strategy for its Financial Wire products and
services will require the Company to devote substantial financial, operational
and managerial resources to the expansion and adaptation of the Company's
Internet infrastructure. The Internet and the Company's Internet infrastructure
is vulnerable to computer viruses and interruptions in service resulting from
the accidental or intentional actions of Internet users. If the Company is
unable to expand or adapt its Internet infrastructure to meet changing consumer
demands or if interruptions of service or other disruptive events affecting the
Internet cannot be minimized, the Company's business, results of operations and
financial condition could be materially and adversely affected.
Dependence on Proprietary Technology; Risk of Infringement
The Company's ability to compete effectively depends to a significant
extent on its ability to protect its proprietary information. The Company relies
primarily on copyright and trade secret laws, confidentiality procedures and
licensing arrangements to protect its intellectual property rights. The Company
generally enters into confidentiality agreements with its consultants and
employees and generally limits access to distribution of its technology,
software and other proprietary information. Although the Company intends to
defend its intellectual property, there can be no assurance that the steps taken
by the Company to protect its proprietary information will be adequate to
prevent misappropriation of its technology or that the Company's competitors
will not independently develop technologies that are substantially equivalent or
superior to the Company's technology. The Company is also subject to the risk of
alleged infringement by it of the intellectual property rights of others.
Although the Company is not currently aware of any pending or threatened
infringement claims with respect to the Company's current or future products,
there can be no assurance that third parties will not assert such claims. Any
such claims could require the Company to enter into license arrangements or
could result in protracted and costly litigation, regardless of the merits of
such claims. No assurance can be given that any necessary licenses will be
available or that if available such licenses can be obtained on commercially
<PAGE>
reasonable terms. Furthermore, litigation may be necessary to enforce the
Company's intellectual property rights, to protect the Company's trade secrets,
to determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement. Such litigation could result in
substantial costs and diversion of resources and could have material adverse
affect on the Company's business, financial condition and results of operation.
Dilution
The offering price per Unit will exceed the Company's net tangible book
value per share of Common Stock immediately following this offering. Based upon
the offering price of $3.25 per Unit and the proposed use of the net proceeds of
this offering, new investors will experience immediate dilution in per share net
tangible book value of approximately $2.92, or 90%. In addition, the exercise
price of the Warrants is substantially higher than the net tangible book value
per share of the Common Stock as of the date of this Prospectus. If the net
tangible book value per share has not substantially increased by the date of the
exercise of the Warrants, the holders of such Warrants, upon exercise thereof,
will incur substantial additional dilution from the exercised price.
Need to Maintain Registration of Common Stock Issuable Upon Exercise of the
Warrants
A holder of the Warrants will have the right to exercise the holder's
rights to purchase Common Stock, only if an effective registration statement
(including a current prospectus) relating to the shares of Common Stock issuable
upon the exercise of the Warrants is on file with the Securities and Exchange
Commission and the securities officials of the State in which the holder
resides. The Company intends to file post-effective amendments as required to
keep this Prospectus, and the Registration Statement of which it is a part,
current and effective. There can be no assurance that the Company will be able
to keep this Prospectus and the Registration Statement of which this Prospectus
is a part, or any other Prospectus or Registration Statement covering such
shares of Common Stock current and effective. The inability of the Company to do
so would prevent the exercise of the Warrants, which could deprive the Warrants
of market value.
<PAGE>
Listing on the Nasdaq SmallCap Market; Risk of Delisting; Loan Stock Prices
The Company intends to apply for quotation of the Common Stock and
Warrants on the Nasdaq SmallCap Market. Admission and trading of the Company's
securities on the Nasdaq SmallCap Market is conditioned upon the Company meeting
certain assets, capital and surplus, and stock price tests. In order to receive
initial approval for quotation of such securities on the Nasdaq SmallCap Market,
the Company must (i) hold total assets in excess of $4,000,000, (ii) have a
total stockholder's equity of at least $2,000,000, (iii) have at least 100,000
shares of Common Stock held by persons other than officers, directors or
significant stockholders of the Company, having a minimum market value of at
least $1,000,000, (iv) have at least 300 beneficial owners of the Common Stock,
(v) have at least two registered broker/dealers making a market in the Common
Stock, and (vi) the Common Stock must have a minimum bid price of at least $3.00
per share. To maintain eligibility on the Nasdaq SmallCap Market the Company
must maintain total assets in excess of $2,000,000, stockholder's equity in
excess of $1,000,000 and (subject to certain exceptions) a bid price of $1.00
per share. The Nasdaq Stock Market has recently announced its intention to
propose changes to these tests which could make approval of the Common Stock and
Warrants substantially more difficult. If the Company fails any of the current
or proposed tests, the Common Stock and Warrants may be prevented from trading
on the Nasdaq SmallCap Market. The effects of the failure to receive the
necessary approval include the limited release of the market prices of the
Company's securities and more limited news coverage of the Company. Such failure
may restrict investors interest in the Company's securities and materially
adversely effect the trading market and prices for such securities and the
Company's ability to issue additional securities or to secure additional
financing. Low price stocks are subject to additional risks of additional
federal and state regulatory requirements and the potential loss of effective
trading markets. In particular, if the Common Stock or Warrants were not
admitted for trading, or were delisted from trading on the Nasdaq SmallCap
Market and the trading price of the Common Stock was less than $5.00 per share,
the Common Stock and Warrants could be subject to Rule 15g-9 under the
Securities Exchange Act of 1934, as amended, which among other things, requires
that broker/dealers satisfy special sales practice requirements including making
individualized written suitability determinations and receiving a purchaser's
written consent prior to any transaction. If the Company's securities were not
admitted for trading and the trading price was less than $5.00 per share, the
Company's securities could also be deemed penny stocks under the Securities
Enforcement and Penny Stock Reform Act of 1990, which would require additional
disclosure in connection with trades in the Company's securities, including the
delivery of a disclosure schedule explaining the nature and risks of the penny
stock market. Such requirements could severely limit the liquidity of the
Company's securities and the ability of purchasers in this offering to sell the
securities in the secondary market.
Absence of Prior Market for Securities; Arbitrary Offering Price
Prior to this offering, there has been no public market for the
Company's securities. Although the Company intends to apply for approval for
quotation of the Common Stock and Warrants on the Nasdaq SmallCap Market, there
can be no assurance that such approval will be received, or if received that an
active or liquid trading market will develop on completion of this offering or,
if developed, that it will be sustained. The offering price of the Units and
Common Stock was determined arbitrarily by the Company and the Selling
Stockholders and does not necessarily bear any relationship to the Company's
book value, assets, past operating results, financial condition or other
established criteria of value. See "PLAN OF DISTRIBUTION."
<PAGE>
Shares Eligible for Future Sale; Registration Rights
None of the 7,378,115 shares of Common Stock outstanding on January 2,
1997 are currently eligible for sale to the public without restriction; however,
595,000 shares have been registered for sale pursuant to this Prospectus.
7,368,115 of such shares of Common Stock were issued in reliance on Regulation S
of the Securities Act of 1933, as amended, and may not be sold to a U.S. person
or in a U.S. securities market absent registration under the Act or the
applicability of an exemption therefrom. However, the period of restriction
applicable to such shares will expire and the shares will become eligible for
sale in early 1998. The remaining 10,000 shares were issued in reliance on
Section 4(2) of the Act and may not be sold absent registration under the Act or
the applicability of an exemption therefrom. Pursuant to authority granted by
its Certificate of Incorporation, the Company may issue additional shares of
Common Stock and shares of one or mores series of Preferred Stock. In addition,
the Company intends to file a Registration Statement under the Securities Act to
register an aggregate of approximately 1,200,000 shares of Common Stock issued
or reserved for issuance under the Company's 1996 Stock Option Plan and certain
outstanding options issued to consultants to the Company. No prediction can be
made as to the effect, if any, that future sales of Common Stock or the
availability of such shares for sale will have on the market price of the Common
Stock prevailing from time to time. Sales of substantial amounts of Common
Stock, or the perception that such sales might occur, could adversely effect the
prevailing market price of the Common Stock.
Attraction and Retention of Key Employees
The Company's success will depend on its ability to attract and retain
qualified managerial and technical personnel. Competition for such personnel is
intense and there can be no assurance that the Company will be able to attract
and retain the personnel necessary for the full development of this business.
The Company believes that the loss of no single executive or employee will have
a material adverse effect on the Company. Rather, the Company relies on a number
of key individuals for its continued success and the simultaneous loss of the
services of several such individuals could result in material adverse effect on
the Company's operations.
Adverse Affect of Possible Redemption of Warrants
The Warrants may be redeemed by the Company provided certain market
conditions are met. Redemption of the Warrants could force the holders to
exercise the Warrants at a time when it may be disadvantageous to the holders to
do so, to sell the Warrants at the then market price when they might otherwise
wish to hold the Warrants for possible additional appreciation, or to accept the
redemption price, which is likely to be substantially less than the market value
of the Warrants at the time of redemption.
No Dividends With Respect to Common Stock
The Company currently anticipates that it will retain all of its future
earnings, if any, for use in the expansion and operation of its business, and
does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. There can be no assurance that the Company will pay cash
dividends at any time with respect to the Common Stock, or that the failure to
pay dividends for a period of time will not adversely affect the market price
for the Company's Common Stock. See "DIVIDEND POLICY."
<PAGE>
Anti-Takeover Effects of Certificate of Incorporation and Bylaws
The Company's Board of Directors has authority to issue up to 2,000,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions thereof, including voting rights, without any
further vote or action by the Company's stockholders. The voting and the rights
of the holders of Common Stock will be subject to and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with obtaining necessary capital resources and other corporate
purposes, could have the affect of delaying, deferring or preventing a change in
control of the Company. The Company has no current arrangements to issue any
additional shares of preferred stock. See "DESCRIPTION OF SECURITIES." In
addition, the Company's Certificate of Incorporation and Bylaws include certain
provisions providing for the staggered election of directors and restrictions on
the ability of stockholders to call special meetings of stockholders. See
"CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS." The Company
is also subject to the Delaware Corporation Law, which under certain
circumstances may prohibit a business combination between the Company and a
stockholder owning 20% or more of the outstanding voting power of the Company.
Such provisions could have the affect of delaying, deferring or preventing a
change in control of the Company.
USE OF PROCEEDS
After deducting the estimated expenses of this offering, the net
proceeds for the sale by the Company of the Units offered hereby are estimated
to be approximately $3,050,000 if the minimum offering of 1,000,000 Units are
sold, $4,268,750 if 1,350,000 Units are sold, and $5,325,000 if the maximum
offering of 1,700,000 Units are sold.
The following table sets forth the Company's anticipated use of
proceeds at each level of Units sold. Each use of proceeds as a percentage of
gross proceeds is also shown.
<TABLE>
<CAPTION>
1,000,000 Units 1,375,000 Units 1,700,000 Units
Sold Sold Sold
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross Proceeds $3,250,000 (100%) $4,468,750 (100%) $5,525,000 (100%)
Less: Offering Expenses 200,000 (6.2) 200,000 (4.5) 200,000 (3,6)
--------- --------- ---------
Net Proceeds $3,050,000 (93.8%) $4,268,750 (95.5%) $5,325,000 (96.4%)
Use of Proceeds:
Marketing and Sales 1,525,000 (46.9) 2,134,375 (47.8) 2,662,500 (48.2)
New Product Development 565,000 (17.4) 930,625 (20.8) 1,247,500 (22.6)
Acquisitions 350,000 (10.8) 350,000 (7.8) 350,000 (6.3)
Working capital and other
general corporate purposes 610,000 (18.7) 853,750 (19.1) 1,065,000 (19.3)
--------- --------- ---------
Total Use of Proceeds $3,050,000 (93.8%) $4,268,750 (95.5%) $5,325,000 (96.4%)
</TABLE>
<PAGE>
Pending the use of the net proceeds from the sale of the Units as
described above, such funds will be invested in short-term, interest bearing
securities or deposited in short-term interest bearing bank accounts. The
Company will not receive any of the net proceeds from the sale of the Common
Stock offered by the Selling Stockholders.
The foregoing represents the Company's present intentions for the use
of the proceeds of this offering based on its currently contemplated operations,
business plan and the currently prevailing economic and industry conditions. The
Company's business plan contemplates that the Company may acquire businesses or
additional products and services. Although the Company has had and will continue
to have discussions with potential acquisition candidates it does not have any
present agreements or understandings with respect to any acquisitions. Changes
in the proposed expenditures may be made in response to, among other things,
changes in the Company's plans and its future revenues and expenditures, as well
as changes in general industry conditions and technology.
The Company believes that the net proceeds of this offering, cash flow
from operations, and trade credit will be sufficient to meet its immediate cash
needs and finance its plans for expansion for not less than twelve months from
the date of this Prospectus. This belief is based upon certain assumptions
regarding the Company's business and cash flow as well as prevailing industry
and economic conditions. The Company's capital requirements may vary
significantly, depending on how rapidly management seeks to expand the business
and the expansion strategies elected. Accordingly, the Company may, in the
future, require additional financing to continue to expand its business. There
is no assurance that the Company will be successful in obtaining additional
financing, if required, on favorable terms, or at all. If the Company were
unable to obtain additional financing, its ability to continue to implement its
growth strategy could be materially and adversely affected. See
"CAPITALIZATION", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and "BUSINESS--Business Strategy".
DIVIDEND POLICY
During the last two years, the Company has not declared or paid any
cash dividends on its Common Stock. The Board of Directors presently intends to
retain all of its earnings, if any, for the development of the Company's
business for the foreseeable future. The declaration and payment of cash
dividends in the future will be at the discretion of the Company's Board of
Directors and will depend upon a number of factors, including among others,
future earnings, operations, capital requirements, the general financial
condition of the Company and such other factors that the Board of Directors may
deem relevant.
<PAGE>
DILUTION
At September 30, 1996, after giving retroactive effect to (i) the
organization of the Company, (ii) the acquisition of the outstanding shares of
PSI and (iii) the issuance of 914,000 shares of Common Stock prior to January 2,
1997, which yielded $314,285 in proceeds, the net tangible book value
(deficiency) of the Company was $(261,792), or $(0.04) per share of Common
Stock. Assuming the sale by the Company of the minimum 1,000,000 Units offered
hereby and the receipt of the estimated net proceeds therefrom (based upon the
offering price of $3.25 per Unit) as described in "Use of Proceeds", the pro
forma net tangible book value of the Company as of September 30, 1996, would
have been $2,788,208, or $0.33 per share. This represents an immediate increase
in pro forma net tangible book value of $0.37 per share to the existing
stockholders and an immediate dilution in pro forma net tangible book value of
$2.92 per share to investors purchasing Units in this offering. The following
table illustrates this per share dilution:
Initial offering price per Unit(1). . . . . . . . . . . . . . . . . . . $3.25
Net tangible book value before this offering(2) . . . . . . . . . . .$(0.04)
Increase attributable to investors in this offering. . . . . . . . . $0.37
Adjusted pro forma net intangible book value after this offering. . . . $0.33
Dilution to investors in this offering. . . . . . . . . . . . . . . . . $2.92
The following table summarizes, as of January 2, 1997, the difference
between the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid by the existing
stockholders and the price per Unit paid by the investors in this offering (see
footnote(1)):
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price Per
Number Percent Amount Percent Share
<S> <C> <C> <C> <C> <C>
Existing security holders. . 7,378,115 88% $1,642,739 34% $0.22
New investors. . . . . . . . 1,000,000 12 3,250,000 66 $3.25
--------- ---- --------- ---- ----
Total. . . . . . . . . . . 8,378,115 100% $4,892,739 100%
========= ===== ========= =====
</TABLE>
The tables above exclude the effect of the exercise of (i) the
Warrants, and (ii) the options outstanding on the date hereof. Exercise of the
aforementioned Warrants and options may result in further dilution to investors
purchasing Units in this offering. See "MANAGEMENT--Incentive Compensation Plan"
and "DESCRIPTION OF SECURITIES."
- ------------------------
(1) Before deduction of offering expenses payable by the Company.
(2) Net tangible book value per share is equal to the book value of
tangible assets of the Company, less total liabilities, divided by the
number of shares of Common Stock outstanding.
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization
of the Company and PSI as of September 30, 1996. This table should be read in
conjunction with the consolidated financial statements of the Company,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and "DESCRIPTION OF SECURITIES" included elsewhere in this
Prospectus.
PowerTrader, Inc. September 30,
1996
Long-term debt................................................ $ -
Stockholders' deficiency:
Common Stock, par value $0.0001 per share
one share outstanding actual............................. 1
Deficit accumulated during
development stage ....................................... (7)
Total stockholders' deficit .................... (6)
Total capitalization ........................... (6)
PowerTrader Software Inc.
Long-term debt................................................ $ -
Stockholders' deficiency:
Class A Common Stock, no par value
4,174,513 shares outstanding actual...................... 646,270
Class B Common Stock, no par value
61 shares outstanding actual............................. 61
Deficit accumulated during
development stage ....................................... (1,222,402)
Total stockholders' deficit..................... (576,071)
Total capitalization ........................... (576,071)
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data as of and for the periods presented below have
been derived from the financial statements of the Company and PSI. The financial
statements of (1) the Company as of September 30, 1996 and for the period
commencing on August 22, 1996 (date of inception) through September 30, 1996,
and (2) PSI as of and for the fiscal years ended June 30, 1995 and 1996, have
been audited by BDO Dunwoody, Chartered Accountants, and its report thereon are
included elsewhere herein. The selected financial data presented below as of and
for the three months ended September 30, 1995 and 1996 are derived from PSI's
unaudited consolidated financial statements. In the opinion of the Company's
management, such unaudited financial statements include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of financial position and results of operations. The operating
results for the three months ended September 30, 1996 are not necessarily
indicative of the operating results for the full year. The selected consolidated
financial data should be read in conjunction with the consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus
and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION."
PowerTrader, Inc.
Period Commencing on
August 22, 1996 (date of
inception) through
Statement of September 30, 1996
Operations Data:
Revenue $ -
Selling, General and Administrative Costs 7
----
Net Loss $ (7)
Net Loss per share $ (7)
September 30,
Balance Sheet Data: 1996
Working Capital deficit $ (6)
Total Assets 493
Long-term debt, less current maturities -
Stockholders' Deficit (6)
<PAGE>
<TABLE>
PowerTrader Software Inc.
<CAPTION>
29 December
1988
Fiscal Year Ended 29 December 1988 Three Months Ended (inception) to
June 30, inception) to September 30, 30 September
30 June 1996 1996
Statements of 1996 1995 (cumulative) 1996 1995 (cumulative)
---- ---- ------------ ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Operations Data:
Sales $ 50,971 $ 44,026 $ 94,997 $ 10,219 $ 34,795 $ 105,216
Cost of Sales 40,910 17,411 58,321 14,900 27,836 73,221
Selling, General and
Administrative costs 405,099 369,910 755,009 108,373 102,662 883,382
Development Costs 203,933 108,067 312,000 59,015 49,438 371,015
-------- -------- ---------- ------- -------- ----------
Net loss $(598,971) $(451,362) $(1,050,333) $(172,069) $(145,141) $(1,222,402)
-------- -------- ---------- -------- -------- ----------
Net loss per share $ (0.24) $(3,029.28) $ (0.04) $ (0.12)
------- ---------- -------- --------
Weighted Average Number 2,475,258 149 4,174,597 1,238,579
of shares outstanding
<CAPTION>
June 30, September 30,
1996 1995 1996
---- ---- ----------------
<S> <C> <C> <C>
Balance Sheet Data:
Working Capital (deficiency) $( 44,996) $(486,977) $ 39,130
Total Assets 186,718 44,344 159,566
Long-term debt, less current
portion - - -
Stockholders' Deficit (404,002) (451,253) (576,071)
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. When used
in this Prospectus, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected, including, but not limited to, those
set forth in "RISK FACTORS". Readers are cautioned not to place undue reliance
on forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
PowerTrader, Inc. ("PowerTrader" or the "Company") was incorporated
under the laws of the State of Delaware on August 22, 1996 for the purpose of
acquiring the business of PowerTrader Software Inc. in a merger, exchange of
shares or other business combination.
In January, 1997, PowerTrader consummated a transaction with the
shareholders of PowerTrader Software Inc. ("PSI") pursuant to which PowerTrader
became the holder of all of the issued and outstanding shares of PSI's capital
stock. Prior to such transactions, the Company had not engaged in any business
activity, other than with respect to organizational matters, and had no
predecessors.
Through its wholly owned subsidiary, PSI, the Company designs,
develops, markets and supports informational and analytical desktop decision
support and risk management systems for both securities professionals (including
securities brokerage firms, investment advisors and trust companies) and
individual investors. Substantially all of PSI's sales have resulted from the
distribution of Beta Products and product development work continues;
accordingly, PSI remains a development stage company.
Because of the Company's limited operating history, the Company's
results of operations to date are not necessarily indicative of future operating
results. Moreover, the Company believes that its developmental operations to
date render traditional accounting presentations meaningless.
Results of Operations
Sales. Sales decreased 70.6% during the three months ended 30 September
1996 as compared to the similar period in 1995. Sales during fiscal 1996,
however, increased 15.8% from fiscal 1995. Sales during each of the periods
compared have been significantly impacted by the limited financial resources
available to PSI for allocation to advertising and Beta Product marketing. Sales
in the first quarter of fiscal 1997 decreased primarily due to management's
decision to modify its products in response to data obtained from its Beta
Product testing program.
Cost of Sales. Cost of sales decreased by $12,963 (or 46.6%) from
$27,836 (or 80.0% of sales) in the first quarter of fiscal 1995 to $14,900 (or
145.8% of sales) in the first quarter of fiscal 1996. However, cost of sales
increased by $23,499 from $17,411 (or 39.5% of sales) in fiscal 1995 to $40,910
(or 80.3% of sales) in fiscal 1996. The foregoing increases and decreases in
cost of sales resulted primarily from corresponding increases and decreases in
the level of sales.
<PAGE>
Selling, General and Administrative Costs. Selling, general and
administrative costs ("SGA") increased by $5,711 (or 5.6%) from $102,662 (or
295.0% of sales) in the first quarter of fiscal 1995 to $108,373 (or 1,060.5% of
sales) in the first quarter of fiscal 1996. SGA similarly increased $35,189 (or
9.5%) from $369,910 (or 8,402.1% of sales) in fiscal 1995 to $405,099 (or
7,947.6% of sales) in fiscal 1996. Such expenses were incurred to develop the
necessary organizational infrastructure to support the implementation of the
Company's business plan. SGA includes salaries and benefits for corporate
management, administrative and sales personnel, as well as rent expense for
PSI's offices. Because the level of SGA which is required to maintain adequate
corporate infrastructure is relatively fixed in nature, management anticipates
that such expenses as a percentage of sales will decline as total sales levels
increase.
Development Costs. Development costs increased by $9,577 (or 19.4%)
from $49,438 (or 142.1% of sales) during the first quarter of fiscal 1995 to
$59,015 (or 577.5% of sales) in the first quarter of fiscal 1996. Similarly,
development costs increased $95,866 (or 88.7%) from $108,067 (or 245.5% of
sales) in fiscal 1995 to $203,933 (or 400.1% of sales) in fiscal 1996. Such
increases in development expense were primarily attributable to costs incurred
to support modifications and error corrections discovered during Beta Product
testing of the PowerTrader suite of products.
Net Loss. As a result of the foregoing, PSI experienced net losses of
$172,069 (or 1,683.8% of sales) and $145,141 (or 4,171.3% of sales) for the
three months ended 30 September 1996 and 1995, respectively. For fiscal years
1996 and 1995, PSI experienced net losses of $598,971 (or 1,175.1% of sales) and
$451,362 (or 1,025.2% of sales), respectively. Such losses may be offset in part
by the use of net loss tax carryforwards in future years. Because of additional
research and development expenses and the additional personnel expenses which
the Company believes will be necessary to establish its competitive and market
position and build the organizational infrastructure required to support
implementation of the Company's growth strategy, the Company expects to incur
further losses in the future. Such losses will likely have a negative impact on
the Company's results of operation, particularly if sales of PSI's current
products fall below expectation.
Liquidity and Capital Resources
The principal source of funds to the Company and PSI since their
respective formation has been derived from the net proceeds of certain private
offerings of securities which, together with the proceeds of sales, have been
used to fund continued research and development expenses as well as necessary
SGA costs. Although the Company believes that the proceeds of this offering and,
to a lesser extent, cash generated from operations, will be sufficient to fund
its operations and planned capital expenditures for at least the next twelve
months, there can be no assurance that the Company will not require additional
financing during that time or thereafter. The Company has no plans to secure any
such additional financing. The inability of the Company to obtain additional
financing, if necessary, on acceptable terms, could have a material adverse
effect on the Company's business, financial condition and results of operations.
If additional funds were raised by the issuance of equity securities, further
dilution to existing stockholders could result.
The Company's limited capital resources have caused the Company's
independent accountants to issue a report which indicates that substantial doubt
exists as to the Company's ability to continue as a going concern. The Company
believes that the net proceeds of this offering will significantly improve the
capital resources of the Company and thereby address certain of the going
concern conditions. Accordingly, the Company considers the conditions which
resulted in questions about the Company's ability to continue as a going concern
will be substantially alleviated through this offering.
Income Taxes
PSI did not have any material current or deferred income tax
liabilities at June 30, 1996 and June 30, 1995. However, PSI did have available
tax benefits of loss carry-forwards for 1996 and 1995 totalling $1,052,800 and
<PAGE>
tax benefits related to depreciation for 1996 and 1995 totalling $41,900. The
Company did not record these tax benefits in the Financial Statements because
the Company believes that it is more likely than not that the tax benefits would
not be realized. Accordingly, the tax benefits have been reduced by a valuation
allowance of $281,900 in 1996 and $210,300 in 1995.
New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Statement
of Financial Accounting Standards No. 121, "accounting for the impairment of
long-lived assets and for long-lived assets to be disposed of" (SFAS No. 121)
which is effective for financial statements for fiscal years beginning after 15
December 1995. The new standard establishes new guidelines regarding when
impairment losses on long-lived assets, which include plant and equipment,
certain identifiable intangible assets and goodwill, should be recognized and
how impairment losses should be measured. The Company does not expect the
application of SFAS No. 121 to have a material effect on its financial position
or results of operations.
The FASB has also issued Statement of Financial Accounting Standards
No. 123, "Accounting for stock based compensation" (SFAS No. 123). SFAS No. 123
encourages entities to adopt the fair value method in place of the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for stock issued to
employees" (APB No. 25) for all arrangements under which employees receive
shares of stock or other equity instruments of the employer or the employer
incurs liabilities to employees in amounts based on the price of its stock. The
Company has not determined whether it will adopt the Fair Value Method
encouraged by SFAS No. 123 or to account for such transactions in accordance
with APB No. 25 for US GAAP purposes. However, the Company will provide
additional disclosures beginning in 1997 providing pro- forma effects as if the
Company had elected to adopt SFAS No. 123 should the Company elect not to adopt
APB No. 25.
THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
August 22, 1996, and acquired all of the issued and outstanding shares of the
common stock of PowerTrader Software Inc. on January 2, 1997 in a series of
transactions with the holders of such shares conducted in reliance upon
Regulation S and Section 4(2) of the Securities Act of 1933, as amended.
PowerTrader Software Inc., which conducts all of the Company's operations, was
incorporated under the laws of the Canadian Province of British Columbia on
December 29, 1988, under the original corporate name "Corporate Media Solutions,
Inc."
BUSINESS
PowerTrader, Inc., through its wholly-owned subsidiary PowerTrader
Software Inc., designs, develops, markets and supports informational and
analytical desktop decision support and risk management systems for both
securities professionals (including securities brokerage firms, investment
advisors and trust companies) and individual investors. The Company's products
enable its clients to capture an incoming stream of market data provided by
Market Data Vendors, store such market data for future reference, display
selected data in tabular and graphic form and analyze the data to discover
trading opportunities. The Company's systems are modular, scalable and allow
clients to leverage their investments in existing systems. Individual components
of the Company's systems can function independently, giving clients the ability
to build their system over time to integrate existing software which is meeting
their current needs. The Company's systems have been licensed to more than 200
investors. Marketed directly, as well as through distribution partners, in the
United States, Canada, Europe and the Asian/Pacific region, the Company's
products are believed to offer a unique combination of analytical capabilities
and trading information.
<PAGE>
Industry Background
The worldwide securities industry is undergoing rapid change.
Significant increases in trading volumes, driven by demand for financial
investment services from an increasing number of persons in the 40-65 year old
age group, widespread use of complex derivative and other financial instruments,
and increased use of "marked-to-market" accounting and "value at risk"
methodologies, have imposed heavy demands on the system infrastructures of many
securities firms and institutional investors. Concurrently, the growth of global
financial markets has attracted new providers of financial services, including
discount brokerages, insurance companies, banks and trust companies, and changed
the manner in which financial services are provided, such as the adoption of
online trading systems. To successfully compete in this evolving environment,
securities professionals are expected to increasingly rely on information
systems to lower transaction costs, manage the exponentially increasing data
flow and provide value-added analysis services.
As demographic, instrumental and accounting changes have changed the
means by which securities professionals compete, advances in telecommunications
and information technology have fundamentally altered the way individuals
invest. The emergence of the Internet as a tool for accessing detailed, current
information has given individual investors the capability to take charge of
their investments and raised their level of sophistication. As a result, the
Company believes that individual investors will increasingly require analytical
tools to manage available data and uncover investment opportunities.
The existing information systems installed by most investors were
typically designed to function within the limits of the then available
telecommunication and information technology. Accordingly, existing systems are
limited in their ability to collect and rapidly process incoming data flow. In
addition, such systems are generally inflexible and lack the ability to display
proprietary trading indicators or other analytic methodologies. Because existing
systems lack such sophistication, they do not provide the tools which the
Company believes are required for securities professionals and individual
investors to make effective investment decisions.
<PAGE>
The PowerTrader Solution
The Company seeks to provide solutions to the informational and
analytical challenges of both securities professionals and individual investors.
The Company's products provide an efficient application capable of supporting
rapid deployment of data and analytical functionality. The Company's products
run in a Windows environment for ease of use.
Business Strategy
The Company's objective is to capitalize on the experience of its
management in the securities industry to become a leading provider of analytical
and informational systems to both securities professionals and individual
investors. The Company's strategy for achieving this objective includes the
following elements:
Implement Dual Market Strategy. The Company intends to aggressively
pursue both the securities professional and individual investor portions of the
market for decision support and risk management systems. The Company believes
that its service to both portions of the market results in additional benefits
not generally enjoyed by competitors serving one portion of the market or the
other. Because the Company deals with more technically oriented securities
professionals, the Company's personnel are required to have a sophisticated
knowledge of analytical and risk management methodologies. The Company has found
that such knowledge enhances the Company's ability to tailor products and
services to meet the needs of individual investors. Further, the Company has
found that the more progressive marketing concepts utilized by it in the
individual investor portion of its business can be applied to enhance demand
from securities professionals for the Company's products and services.
Expand Product Portfolio. The Company intends to expand its product
line to meet the evolving needs of its clients. The Company continually
evaluates its offerings to determine what additional products or enhancements
are required by the securities industry and the Company develops and enhances
products internally to meet clients' needs. If the Company has the opportunity
to purchase or license proven products at a reasonable cost, it will do so in
order to avoid the time and expense involved in developing new products.
Pursue Distribution Alliances. The Company has entered into two
arrangements with securities market participants to distribute the Company's
products to their respective clients under private labels. The Company intends
to focus on building similar distribution alliances that will extend the
Company's market presence.
Expanded Services. The Company intends to expand the products and
services distributed through its Financial Wire Internet website to include
additional news, end-ofday trading data, charting applications, investment
newsletters, articles of general or educational interest, and advertising. In
addition, the Company intends to expand its consulting services to design and
configure the architecture of a clients' systems including networking, systems
integration and data conversion.
<PAGE>
Leverage Existing Customer Base. With a licensed customer base of more
than 200 users and two distribution partners, the Company believes significant
opportunities exist to license additional products to its existing customer
base. The Company's strategic plan envisions continuing introduction of new
products that will complement the core functionality of existing systems,
thereby allowing PowerTrader to leverage its existing customer base by offering
new modules and products, platform conversions and value added consulting
services.
Products
The Company has developed a comprehensive suite of products to manage
and analyze information available to securities professionals and private
investors. A client can purchase a comprehensive system or can buy modules
separately to match its individual needs. The Company's systems facilitate
effective decision making and delivery of high quality services.
Number of
Product Licenses Issued Product Description
- ------- --------------- -------------------
Server 135 Decodes data feeds and
arranges the resulting data
into an accessible data base.
PowerTrader Pro-Vision 135 Displays a continually
refreshed data base created by
PowerTrader in a customizable
and searchable tabular format.
PowerTrader Analyst 225 Displays data base created by
Server in a charting package
facilitating technical
securities analysis and
custom/proprietary indicators
using Microsoft Excel and
Visual Basic.
Data Manager 225 A data retrieval helper
application for use with
Netscape Navigator and
Microsoft Explorer to replace
data which may have been lost
in the creation of the
customer's data base. Data
Manager permits the customer
to retrieve data from the
Company's Internet website.
Formula One 225 A series of dynamic data
exchange links to four custom
spreadsheet templates.
<PAGE>
In addition to the foregoing products, which have been designed
primarily for the securities professional, the Company has developed and markets
on a subscription basis its Financial Wire products and services. Through its
Financial Wire Internet website, the Company offers the individual investor the
opportunity to use PowerTrader Analyst and Data Manager in conjunction with an
end-of-day data file retrieved through the Company's Internet server.
Services and Support
Client service is an important component of the Company's operations.
The Company's client/service team generally provides implementation, application
and support, education and consulting services to the Company's clients.
Additional client services are provided through computer-based training or
formal instructor-led, Company sponsored educational courses and seminars.
Through its Registered Associate Members Plan ("RAMP"), the Company offers a
pre-paid maintenance program covering software upgrades and toll-free telephone
technical support service.
The Company intends to expand the range of strategic client support
services it provides in order to strengthen relationships with its clients.
Product Development
The Company is dedicated to providing state-of-the-art, integrated
systems for the securities industry. The cornerstone of the Company's
development efforts is its commitment to open client/server architecture and
Internet technology.
The Company's current project development efforts use object orientated
program methodologies. This allows the Company to develop applications based on
reusable libraries of code that the Company believes results in more cost
effective and rapid product development cycles. The Company extensively employs
Microsoft tool sets and standards in its product development efforts. The
Company believes that use of these standards and tools facilitates interfacing
with other systems and products.
The Company plans to expand its product line to meet the evolving needs
of its clients. The Company currently evaluates its offerings to determine what
additional products or enhancements are required by the securities industry and
develops or enhances products internally to meet clients' needs. However, if the
Company can purchase or license proven products at reasonable costs, it will do
so in order to avoid the time and expense involved in developing products.
Currently, the Company's product development team is focused on the following
projects:
Data Mill. An open client/server architecture system which permits
securities professionals to consolidate two or more data feeds for distribution
to terminals on a local area network or the Internet.
I-Deal. A fully-integrated cross-platform system facilitating third
party institutional customers to place brokerage orders, access their accounts
and other on-line resources through Internet technology. I-Deal will be fully
integratable with the leading "back office" brokerage operations software
support systems.
For the fiscal years ended June 30, 1995 and 1996, the Company invested
$108,067 and $203,933, respectively on research and development. For the three
month period ended September 30, 1996, the Company invested $59,015 on research
and development. The Company expects to continue to make significant investments
in research and development, however, there can be no assurance that the
Company's financial and technological resources will permit it to develop or
market new products successfully or respond effectively to technological
changes.
<PAGE>
Sales and Marketing
The Company's existing customers include a broad range of securities
professionals and institutional investors in the United States and around the
world. The Company's products are licensed for use at more than 200 customer
terminals. The Company's installed customer base includes:
Canaccord Capital Corporation, Ltd. Yorkton Securities, Inc.
Mohawk Oil Marleau Lamier Securities
Bank of Montreal RAS Securities
Merrill-Lynch Robert Thomas Securities
North American Quotations Hong Kong Bank Discount
Fidelity Investments, Inc. Trading Corp.
The Company markets its products in the United States, Canada, Europe,
the United Kingdom and the Far East directly through its sales force and
indirectly through its distribution partners. The Company's current direct sales
force is located in the Company's Vancouver, British Columbia headquarters, from
which the Company's products are marketed primarily through telemarketing and
electronic means. In addition, the Company uses direct-mail, press releases,
customer referrals and tradeshow participation to generate sales leads. The
Company plans to expand its direct sales force by adding field sales personnel
in the future to increase market exposure and penetration.
The Company's sales and marketing efforts are significantly augmented
by its strategic relationships with distribution partners which generally offer
related products and services. To date, the Company has entered into two joint
marketing arrangements with Market Data Vendors under which the MDVs will
provide product information and demonstration versions of the Company's products
to their customers. In addition, the Company has entered into a distribution
alliance with a discount brokerage firm under which the Company's PowerTrader
Analyst product will be distributed to each of such brokerage's 2000 customers
under the name PowerCharts. The Company believes that such arrangements will
significantly increase the Company's market presence and permit its distribution
partners to offer a complete data feed, information storage and analysis system.
Products are generally shipped as orders are received, and,
accordingly, the Company has historically operated with virtually no backlog.
Because of the generally short cycle between order and shipment, the Company
does not believe that its backlog as of any particular date is meaningful.
Competition
The market for informational and analytical systems applicable to the
securities industry is intensely competitive and rapidly evolving. Most of the
Company's revenues are derived from lengthy, competition procurement processes
managed by sophisticated purchasers that extensively investigate and compare the
products offered by the Company and its competitors. The Company competes
directly with other vendors of similar systems and faces further competition
from internal management information systems departments of large securities
brokerages, many of which have developed functionally competitive proprietary
systems. The Company believes that the principal competitive factors influencing
the market for its products include vendor and product reputation, product
architecture, functionality and features, ease of use, rapidity of
implementation, quality of client support, product performance and price. There
can be no assurance that the Company will be able to compete successfully with
respect to any of such factors.
<PAGE>
Many of the Company's current and potential competitors have
significantly greater financial, managerial, developmental, technical, marketing
and sales resources than the Company and may be able to devote those resources
to develop and introduce systems more rapidly than the Company, or systems with
significantly greater functionality than and superior overall performance to
those offered by the Company. These competitors may also be able to initiate and
withstand significant price decreases more effectively than the Company. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to offer products that address the needs of current and potential
customers. New competitors or new alliances among competitors may emerge and
quickly acquire market share. Competition may, therefore, result in significant
price reductions, decreased gross revenues, loss of market share and reduced
acceptance of the Company's products.
The Company competes with a large number of system vendors, some of
which sell comprehensive systems and some of which sell products which compete
with only one or more modules of the Company's products. The Company's believes
that it is, and will be, competitive in the market place as a result of its
current and future products' functional compatibility, sophistication, open
client/server architecture and price; the ability of each of its users to
customize the systems to meet their unique needs; and the high level of service
the Company provides to all clients.
Intellectual Property
The Company's ability to compete effectively depends to a significant
extent on its ability to protect its proprietary information. The Company relies
primarily on trade secret laws, confidentiality procedures and licensing
arrangements to protect its intellectual property rights.
The Company generally enters into confidentiality agreements with its
consultants, key employees and sales representatives and generally controls
access to and distribution of its software and other proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use the Company's products or technology without
authorization or to develop similar technology independently. Although the
Company intends to defend its intellectual property rights, there can be no
assurance that the steps taken by the Company to protect its proprietary
information will be adequate to prevent misappropriation of its intellectual
property or that the Company's competitors will not independently develop
software that is substantially equivalent or superior to the Company's software.
The Company is subject to the risk of alleged infringement by it of the
intellectual property rights of others. Although the Company is not currently
aware of any pending or threatened infringement claims with respect to the
Company's current or future products, there can be no assurance that third
parties will not assert such claims or that any such claims will not require the
Company to enter into licensing agreements or result in protracted and costly
litigation, regardless of the merits of such claims. No assurance can be given
that any necessary licenses will be available or that, if available, such
licenses can be obtained on commercially reasonable terms. Furthermore,
litigation may be necessary to enforce the Company's intellectual property
rights, to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others or to defend against claims of
infringement. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse affect on the Company's business,
financial condition and results of operations.
<PAGE>
Employees
As of September 30, 1996, the Company employed twelve persons, all of
whom serve on a full-time basis. The Company's employees are not represented by
a labor union and the Company's management believes that its relationships with
its employees are good.
The Company believes its future success will depend in large part, upon
the continued service of its key technical and senior management personnel and
upon the Company's continued ability to attract and retain highly qualified
technical and managerial personnel. Competition for highly qualified personnel
is intense and there can be no assurance that the Company will be able to retain
its key managerial and technical employees or that it will be able to attract
and retain additional highly qualified technical and managerial personnel in the
future.
Facilities
The Company's principal offices occupy approximately 3068 square feet
in Vancouver, British Columbia under a lease expiring in 1999. The Company
believes that its existing facilities will be adequate to meet its current
anticipated requirements and that, if additional space is needed, such space
will be available on acceptable terms.
Legal Proceedings
As of the date of this Prospectus, the Company is not a party to any
material legal proceedings.
MANAGEMENT
The following table sets forth certain information concerning the
directors and executive officers of the Company:
Name Age Position
Michael C. Withrow 34 Director, Chairman, President and Chief
Executive Officer
David C. Furlonger 35 Director, Secretary and Chief Financial
Officer
The services of each of the foregoing persons is provided under an
agreement with corporations wholly owned by such persons. Set forth below are
descriptions of the backgrounds of the executive officers and directors of the
Company:
Michael C. Withrow has been a director, Chairman and President of the Company
since its inception in August 1996. Also, Mr. Withrow has served as a director
of PSI, since its inception in 1988 and in August, 1994, became President. In
September 1996, he was named Chairman of the Board of PSI. From 1990 to 1992,
Mr. Withrow was engaged as an account executive with Merisel, Canada, a
multinational distributor of computer equipment, from 1992 to 1993 as a private
professional securities trader, and from 1993 to 1994 as an institutional
securities trader with Canaccord Capital Corporation, Ltd., Vancouver, British
Columbia.
<PAGE>
David C. Furlonger has been a director, Secretary and Chief Financial Officer of
the Company since its inception in August 1996. In September 1996, Mr. Furlonger
was named a director of PSI. From April, 1995 to March, 1996, Mr. Furlonger
served as Senior Proprietary Trader for Commerzbank AG, London, United Kingdom.
For more than five years prior thereto, he was employed by Baring Brothers & Co.
serving most recently as manager within the treasury and trading operations.
The Board of Directors of the Company consists of two members. The
Company's Certificate and Bylaws provide that the Board of Directors will
consist of three classes serving staggered three year terms, so that
approximately one-third of the directors will be elected at each annual meeting.
The number of directors comprising the Board of Directors may be increased or
decreased by resolution adopted by the affirmative vote of a majority of the
Board of Directors.
Executive Compensation
The following table summarizes information concerning cash and non-cash
compensation paid to or accrued for the benefit of the chief executive officer
of the Company for all services rendered in all capacities to the Company and
its predecessors. No other officers of the Company earned compensation of more
than $100,000 during the fiscal year ended June 30, 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<CAPTION>
Name of Principal Other Annual
Position Year Salary Bonus Compensation
-------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Michael C. Withrow 1996 $62,963 - -
Chairman, President
and CEO of the Company
Don Farrell 1996 $ - - -
CEO of PSI
</TABLE>
PSI has entered into an employment agreement with 458468 BC Ltd., a
British Columbia corporation wholly owned by Michael C. Withrow ("458468"), the
Company's Chairman and President. Pursuant to that agreement, 458468 will
provide the services of Mr. Withrow to manage PSI's operations. The agreement
with 458468 will expire in September, 1999, subject to renewal, at the option of
PSI, for an additional three year term. The agreement with 458468 contains
non-competition clauses that provide, in pertinent part, that during the term of
the agreements, as they may be extended, and for a period of one year
thereafter, 458468 will not engage in any activity competitive with the business
of PSI, will not solicit or attempt to solicit customers or employees of PSI,
and will not otherwise interfere with PSI's business relationships.
<PAGE>
Director Compensation
Under the Company's present policy, no director of the Company is
entitled to receive compensation for services rendered to the Company as a
director. Directors are entitled to be reimbursed for expenses incurred by them
in attending meetings of the Board of Directors and its committees.
Incentive Compensation Plan
In December, 1996, the Company's Board of Directors adopted the
PowerTrader, Inc., 1996 Stock Option Plan (the "Plan"), pursuant to which
officers, key employees, advisers and consultants, of the Company may receive
stock options to purchase up to an aggregate of 750,000 shares of the Company's
Common Stock. Under the Plan, stock options awarded under the Plan may not have
a term of more than 10 years or provide for an exercise price of less than the
fair market value of the Common Stock on the date of grant. As of December 31,
1996, no awards had been made under the Plan.
Certain Relationships and Related Transactions.
From time to time, the Company and its wholly owned subsidiary, PSI,
have engaged in various transactions with its directors, executive officers and
other affiliated parties. The following paragraphs summarize certain information
concerning such transactions and relationships which have occurred during the
past two fiscal years or which are presently proposed.
On August 1, 1995, Michael C. Withrow converted a debt owed to him by
PSI of approximately $58,736 into equity of 1,857,645 shares of PSI's common
stock and transferred those shares to 458468.
PSI entered into a consultant arrangement, effective as of September
1, 1996, with No. 410 Taurus Ventures, Ltd., a British Columbia corporation
wholly owned by Holly Withrow ("Taurus"). Pursuant to such agreement, Taurus
provides the service of Mrs. Withrow to act as a consultant to PSI in exchange
for an annual fee of approximately $31,111.
On October 24, 1996, PSI entered into a similar agreement, effective
as of October 24, 1996, with Peridot International Enterprises, Ltd., a British
Columbia corporation of which Mr. Furlonger is the controlling shareholder
("Peridot"). Pursuant to such agreement, Peridot provides the services of
Furlonger to act as a consultant to PSI in exchange for an annual fee of
approximately $51,852, the right to receive certain options to purchase a
portion of the Company's common stock, and 350,000 restricted shares of the
Company's common stock.
On October 31, 1996, the Company acquired all of the issued and
outstanding shares of PSI, in which David C. Furlonger and Mr. Withrow are
directors and Mr. Withrow held a substantial equity interest. As a result of the
transaction, Mr. Withrow became the beneficial owner of 1,857,696 shares of the
Company's Common Stock.
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information as of January 31,
1997, concerning the beneficial ownership of the Company's Common Stock by: (i)
each person known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock, (ii) each director and each executive
officer named in the Summary Compensation Table contained in this Prospectus,
and (iii) all directors and executive officers of the Company as a group. Each
person named has sole voting and investment power with respect to the shares
indicated, except as otherwise stated in the notes to the table:
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering After the Offering
----------------- ------------------
Number
Name and Address of Shares
of Beneficial Owner Amount Percent Offered Amount Percent
- ------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Michael C. Withrow 1,467,697(1) 19.9% - 1,467,697 16.2%
12-1850 Argue Street
Port Coquitlam,
British Columbia
Chartwell International, Inc. 370,000 5.0 100,000 270,000 3.0
No. 2 Commercial Center Sq.
P. O. Box 71
Alofi, Nille
David C. Furlonger 350,000(2) 4.7 - 350,000 3.8
11837 190th Street
Pitt Meadows,
British Columbia
Rozel International Holdings, Ltd. 350,000 4.7 75,000 275,000 3.0
P. O. Box 3151
Road Town Tortola
BVI
Lotus Development Corp. 350,000 4.7 50,000 300,000 3.3
P.O. Box N-8424
Nassau, Bahamas
Bryn Investments Ltd. 300,000 4.1 100,000 200,000 2.2
c/o Lines Overseas Mgmt. Ltd.
73 Front Street
P.O. Box HM 2908
Hamilton HMLX, Bermuda
Gino Punzo 278,333(3) 3.8 33,333 245,000 2.7
1398 Preston Court
Burnaby, British Columbia
<PAGE>
Bradshaw Holdings, Ltd. 246,666 3.3 86,667 159,999 1.8
P. O. Box North 7521
Nassau, Bahamas
533202 BC Ltd. 221,000 3.0 25,000 196,000 2.2
Suite 200
853 Richards St.
Vancouver, British Columbia
Don Farrell 200,000 2.7 100,000 100,000 1.1
#2201-1275 Pacific St.
Vancouver,
British Columbia
Ricardo Reqena 100,000 1.4 25,000 75,000 *
25 DeMayo 444, Piso
MonteVideo, Uruguay
All directors and 1,817,697 24.6 - 1,817,697 20.0
executive officers
as a group (2 persons)
- -------------------------------
<FN>
* Less than 1%.
(1) The stated number of shares are held of record by 458468 BC Ltd. of
which Mr. Withrow is the sole shareholder.
(2) The stated number of shares are held of record by Peridot
International Enterprises, Ltd. of which Mr. Furlonger is the
controlling shareholder.
(3) The stated number of shares includes 133,333 shares held of record by
Punzo Partnership of which Mr. Punzo is the controlling partner.
</FN>
</TABLE>
DESCRIPTION OF SECURITIES
Authorized and Outstanding Capital Stock
The Company's Certificate of Incorporation (the "Certificate") provides
for an authorized capital of 25,000,000 shares, $0.01 par value per share,
23,000,000 of which are designated as shares of Common Stock, and the remaining
2,000,000 of which are designated as preferred stock. Prior to consummation of
this offering, 7,378,115 shares of Common Stock were outstanding. The following
summary description of the capital stock of the Company is qualified in its
entirety by reference to the Certificate.
Units
Each Unit consists of one share of Common Stock and one warrant to
purchase an additional share of Common Stock. The Common Stock and the Warrant
included in the Units will be separately transferable immediately after
issuance.
<PAGE>
Common Stock
The holders of Common Stock are entitled to cast one vote for each
share of record on all matters to be voted on by stockholders, including the
election of directors except to the extent voting rights are established for
holders of preferred stock by the Board of Directors. The holders of Common
Stock are entitled to receive dividends when and if declared by the Board of
Directors out of legally available funds. In the event of liquidation,
dissolution or winding up of the affairs of the Company, the holders of the
Common Stock are entitled to share ratably in all remaining assets available for
distribution to them after the payment of liabilities. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
All of the outstanding shares of Common Stock are validly issued, fully
paid and non-assessable.
Warrants
General. Each of the Units offered hereby will include a warrant to
purchase one share of Common Stock at an exercise price equal to $3.50 per
share, subject to adjustment. All Warrants not exercised will expire at 5:00
p.m., New York time, on the fifth anniversary of the date of this Prospectus.
After issuance, the Warrants shall be transferable separately from the Common
Stock. Holders of the Warrants as such will not have any of the rights or
privileges of stockholders of the Company prior to the exercise of the Warrants.
Exercise. The holder of a Warrant may exercise the Warrant at any time
after issuance by surrender of the Warrant certificate to the American Stock
Transfer and Trust Company (the "Warrant Agent"), with the form of "Election to
Purchase" appearing on the reverse side of the Warrant certificate duly
completed and executed, accompanied by payment by certified or official bank
check of the full exercise price for the number of shares being purchased.
In order for warrant holders to exercise the Warrants, the Company must
have an effective registration statement (including a current prospectus)
relating to the shares of Common Stock issuable upon the exercise of the
Warrants on file with the Commission and the securities officials of the states
in which the holders reside. The Company has agreed to file post-effective
amendments, as required, to keep this Prospectus and the Registration Statement
of which it is a part, current and effective. See, however, "RISK FACTORS--Need
to Maintain Registration of Common Stock Issuable Upon Exercise of the
Warrants."
<PAGE>
Dilution. The number, price and kind of securities or other property
for which the Warrants are exercisable are subject to adjustment in certain
events, such as mergers, stock splits, stock dividends and recapitalizations.
Preferred Stock
The Certificate authorizes the Board of Directors of the Company to
establish one or more series of Preferred Stock and to determine, with respect
to any series of Preferred Stock, the terms, rights and preferences of each such
series, including voting, dividend, liquidation, conversion and other rights.
The authorized shares of Preferred Stock will be available for issuance without
further action by the Company's stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded. Although the Company
has no present intent of so doing, it could issue a series of Preferred Stock
that could discourage, impede, delay or prevent a transaction which would result
in a change in control of the Company, regardless of whether some of the
Company's stockholders might believe such a transaction to be in their best
interests. See "RISK FACTORS--Anti-Takeover Effects of Certificate of
Incorporation and Bylaws."
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock and Warrants is
the American Stock Transfer and Trust Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the federal income tax consequences
of the purchase of Units is based on the Internal Revenue Code of 1986, as
amended (the "Code"), applicable Treasury Regulations, judicial authority and
current administrative rulings and practices as in effect on the date of this
Prospectus. The discussion herein is for general information only and does not
discuss the tax consequences which may apply to special classes of taxpayers
(e.g., nonresident aliens, broker-dealers or insurance companies). Investors are
urged to consult their own tax advisors to determine the particular tax
consequences to them.
An investor must allocate the cost of each Unit between each of its
elements (one share of Common Stock and one Warrant) in accordance with their
relative fair market values for the purpose of determining the adjusted basis of
each such element for federal income tax purposes. For this purpose, if the
elements of the Units become separately tradeable after purchase, the cost basis
of the previously purchased Units will, in general, be allocated to the shares
of Common Stock and the Warrants in the same proportion as the fair market value
of these securities bears to the sum of such values on the first date the shares
of Common Stock and the Warrants are separately tradeable.
The sale of shares of Common Stock or the sale of a Warrant will result
in the recognition of gain or loss to the holder in an amount equal to the
difference, if any, between the amount realized and his adjusted basis therein.
Such a sale of shares of Common Stock will result in capital gain or loss,
provided the shares are a capital asset in the hands of the holder. The sale of
Warrants (other than a sale to the Company) will likewise result in capital gain
or loss, provided that the Warrants are a capital asset in the hands of the
holder and the shares of Common Stock issuable upon exercise of the Warrants
would be a capital asset to the holder if acquired by him.
<PAGE>
Under Section 305 of the Code, certain actual or constructive
distributions of stock (including warrants to purchase stock) may be taxable to
a stockholder of the Company. Adjustments in the exercise price of the Warrants,
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, in each case made pursuant to the anti-dilution provisions of the
Warrants, may result in a distribution which is taxable as a dividend under the
Code to the holders of the Warrants.
No gain or loss will be recognized to the holder of Warrants on his
purchase of shares of Common Stock for cash upon exercise of the Warrants. The
adjusted basis of the shares of Common Stock so acquired would be equal to the
adjusted basis of the Warrants plus the exercise price. For tax purposes, the
holding period of the shares of Common Stock acquired upon the exercise of the
Warrants will not include the holding period of the Warrants exercised.
If the Warrants are not exercised and are allowed to expire, the
Warrants will be deemed to have been sold or exchanged on the expiration date.
Any loss to the Warrant holder will be a capital loss if the Warrants were held
as a capital asset and whether such capital loss will be classified as
short-term or long-term will depend upon the date the Warrants were acquired and
the length of time the Warrants were held.
No gain or loss will be recognized by the Company upon the exercise or
expiration of the Warrants.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Certificate of Incorporation and Bylaws of the Company contain
certain provisions regarding the rights and privileges of stockholders, some of
which may have the effect of discouraging certain types of transactions that
involve an actual or threatened change of control of the Company, diminishing
the opportunities for a stockholder to participate in tender offers, including
tender offers at a price above the then current market value of the Common Stock
or over a stockholder's cost basis in the Common Stock, and inhibiting
fluctuations in the market price of the Common Stock that could result from
takeover attempts. These provisions of the Certificate and Bylaws are summarized
below.
Size of Board and Election of Directors
The Certificate provides that the number of Directors shall be fixed
from time to time as provided in the Bylaws. The Bylaws provide for a minimum of
three and a maximum of nine persons to serve on the Board, with an initial board
of three directors. The number of Directors may be increased or decreased by a
resolution adopted by the affirmative vote of a majority of the Board. The
Certificate further provides that the Board may amend the Bylaws by action taken
in accordance with such Bylaws, except to the extent that any matters under the
Certificate or applicable law are specifically reserved to the stockholders.
<PAGE>
The Bylaws provide that the Board will be divided into three classes of
Directors, with the classes to be as nearly equal in number as possible, and one
of each such classes shall be elected each year to serve for a three-year term.
At any meeting called for such purpose, Directors may be removed only for cause
upon the affirmative vote of the holders of eighty percent (80%) of the
Company's outstanding shares of Common Stock.
Stockholder Nominations and Proposals
The Company's Bylaws provide for advance notice requirements for
stockholder nominations and proposals at annual meetings of the Company.
Stockholders may nominate Directors or submit other proposals only upon written
notice to the Company not less than 120 days nor more than 150 days prior to the
date of the notice to stockholders of the previous year's annual meeting. A
stockholder's notice also must contain certain additional information, as
specified in the Bylaws. The Board may reject any proposals that are not made in
accordance with the procedures set forth in the Bylaws or that are not proper
subjects of stockholder action in accordance with the provisions of applicable
law.
Calling Stockholder Meetings; Action by Stockholders Without a Meeting
Matters to be acted upon by the stockholders at special meetings are
limited to those which are specified in the notice thereof. A special meeting of
stockholders may be called by the Board of Directors or the President of the
Company. As required by Delaware law, the Bylaws provide that any action by
written consent of stockholders in lieu of a meeting must be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to be voted were present and voted.
The foregoing provisions contained in the Certificate and Bylaws are
designed, in part, to make it more difficult and time consuming to obtain
majority control of the Board of Directors or otherwise to bring a matter before
stockholders without the Board's consent, and therefore to reduce the
vulnerability of the Company to an unsolicited takeover proposal. These
provisions are designed to enable the Company to develop its business in a
manner which will foster its long-term growth without the threat of a takeover
not deemed by the Board to be in the best interests of the Company and its
stockholders and to reduce, to the extent practicable, the potential disruption
entailed by such a threat. However, these provisions may have an adverse effect
on the ability of stockholders to influence the Governance of the Company and
the possibility of stockholders receiving a premium above the market price for
their securities from a potential acquirer who is unfriendly to management. See
"RISK FACTORS--Anti-Takeover Effects of Certificate of Incorporation and
Bylaws."
<PAGE>
Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
permits indemnification by a corporation of certain officers, directors,
employees and agents. Consistent therewith, Article VIII of the Company's Bylaws
requires that the Company indemnify all persons whom it may indemnify pursuant
thereto to the fullest extent permitted by Section 145. Article VIII also
provides that expenses incurred by an officer or director of the Company or any
of its direct or indirect wholly-owned subsidiaries, in defending a civil or
criminal action, suit or proceeding, will be paid by the Company in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such officer, director, employee or agent to
repay such amount, if it shall ultimately be determined that he is not entitled
to be indemnified by the Company as authorized. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
In addition, Article 6 of the Certificate provides that directors of
the Company shall not be personally liable for monetary damages to the Company
or its stockholders for a breach of fiduciary duty as a director, except for
liability as a result of (i) a breach of the director's duty of loyalty to the
Company or its stockholders; (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) an act
related to the unlawful stock repurchase or payment of a dividend under Section
174 of Delaware General Corporation Law; and (iv) transactions from which the
director derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
General
Upon completion of this Offering, the Company will have outstanding
9,078,115 shares of Common Stock. All of such shares of Common Stock, other than
those sold pursuant to this Prospectus, are "restricted" shares within the
meaning of the Securities Act and may not be sold in the absence of registration
under the Securities Act or an exemption therefrom.
In general, a person acquiring securities issued in reliance on
Regulation S from a company which does not have a class of securities registered
under Section 12 of the Securities Exchange Act of 1934, as amended, is
prohibited from reselling such securities to a "U.S. Person" for a period of one
year after purchase. For these purposes, a "U.S. Person" is defined to generally
include all residents of the United States and all business organizations
incorporated under the laws of the United States or any state or a majority of
which is owned by a U.S. Person or group of U.S. Persons.
Prior to this offering, there has been no market for the Units, the
Common Stock or the Warrants. Trading of the Common Stock and the Warrants is
expected to commence following completion of this offering. No predictions can
be made of the effect, if any, that future market sales of shares of Common
Stock or the availability of such shares for sale will have on the market price
prevailing from time to time. Sales of substantial amounts of Common Stock, or
the perception that such sales might occur, could adversely affect prevailing
market prices. See "RISK FACTORS--Shares Eligible for Future Sale; Registration
Rights."
<PAGE>
PLAN OF DISTRIBUTION
Subject to the provisions of applicable federal and state security law,
the Company proposes to offer the Units to the public on a minimum/maximum, best
efforts basis through its directors and executive officers. Such persons will
not receive any underwriting discount, commission or other form of remuneration
in connection with this offering.
Although the Company has made no arrangements with any brokerage or
dealers concerning the distribution of the securities offered hereby, it may do
so in the future and pay a selling commission or allow a discount in customary
amounts.
All securities offered hereby will be sold only for cash. The Company
intends to solicit potential purchasers of Units primarily through announcements
designed to comply with Rule 134, each of which will contain a hyperlink
connection to a readable and downloadable electronic version of this Prospectus.
Prior to actually receiving access to this Prospectus, each potential investor
must confirm his status as a non-U.S. Person or as a resident of a state in
which the offering is being made. If the investor desires to purchase the
securities offered hereby. The potential investor may electronically submit
non-binding indication of interest. At such time as the registration statement
of which this Prospectus is a part is declared effective, the Company will
physically mail a written confirmation, together with a copy of this Prospectus,
to each person who previously submitted an indication of interest, directing
such person to complete, date, sign and return two copies of the subscription
agreement (together with the applicable subscription payment) to the Escrow
Agent.
Within five days of its receipt of a subscription agreement and
subscription payment, the Company will send by either E-Mail or by first class
mail a written confirmation to notify the subscriber of the extent, if any, to
which, such subscription has been accepted by the Company. Not more than thirty
days after the minimum offering of 1,000,000 Units has been sold a subscriber's
Common Stock certificate and Warrant certificate will be mailed by first class
mail. The Company shall not use the proceeds paid by any investor until the
Common Stock certificate evidencing such investment has been mailed.
SUMMARY OF ESCROW AGREEMENT
The Company intends to enter into an Escrow Agreement with American
Stock Transfer and Trust Company. The following is a summary of certain
provisions of the Escrow Agreement and is not necessarily complete. References
are made to the copy of the Escrow Agreement filed as an exhibit to the
Registration Statement and the following summary is qualified in all respects by
such reference.
<PAGE>
The Escrow Agreement will be entered into for the express purpose of
complying with the provisions of Rule 10b-9 of the Exchange Act. Promptly
following its receipt thereof, the Company will deposit with the Escrow Agent
all of the proceeds received by the Company with respect to the Offering until
the minimum offering is sold. Until the minimum offering is sold, all offering
proceeds will be deposited by the Escrow Agent into a separate bank account
established and maintained by the Escrow Agent for the sole and exclusive
benefit of the purchasers of the Units offered hereby.
All Units held under the Escrow Agreement will be treated as authorized
but unissued shares of the Common Stock and Warrants of the Company. Purchasers
will not have any rights as stockholders of the Company until the conditions of
the escrow are fulfilled. While held under the Escrow Agreement, no transfer or
other disposition of the Units or any interest relating thereto, is permitted
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986, as amended, or Title I of the Employee Retirement Income Security act, or
the rules thereunder.
All offering proceeds held in the Escrow Account will be released by
the Escrow Agent to the Company and certificates representing the shares of
Common Stock and Warrants will be issued and delivered to the persons entitled
thereto immediately upon the receipt by the Escrow Agent of a signed
representation from the Company together with such other evidence acceptable to
the Escrow Agent that the minimum offering has completed.
LEGAL MATTERS
The validity of the Securities offered hereby and certain other legal
matters in connection with the sale of the Units offered hereby will be passed
upon for the Company by Gallop, Johnson & Neuman, L.C., St. Louis, Missouri.
EXPERTS
The financial statements of the Company as of September 30, 1996, and
the financial statements of PSI for the fiscal years ending June 30, 1996 and
1995, included in the Prospectus and the Registration Statement have been so
included in reliance on the reports, which contain an explanatory paragraph
regarding a going concern uncertainty, of BDO Dunwoody, Chartered Accountants,
independent public accountants given on the authority of said Firm as experts in
accounting and auditing.
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act
with respect to the Units offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules filed therewith. For further information with respect to the Company
and the Units offered hereby, reference is hereby made to such Registration
Statement and to the financial statements, 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 the document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. The Registration Statement, including the
exhibits thereto, may be inspected without charge at the principal office of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
regional offices of the Commission at Room 1400, 7 World Trade Center, New York,
New York 10048, and Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661-2511. Copies of such material may be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its public reference facilities in New York, New
York, and Chicago, Illinois, upon the payment of the prescribed fees.
The Company will furnish its stockholders with annual reports
containing audited financial statements and an opinion thereon expressed by the
Company's independent accountants and such other periodic reports as the Company
may determine to be appropriate or as may be required by law.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PowerTrader, Inc.
Independent Auditors' report
Balance sheet
Statement of loss
Statement of cash flow
Statement of shareholder's deficit
Summary of accounting policies
Notes to financial statements
PowerTrader Software Inc.
As of and for the three months ending 30 September, 1996 and 30 September, 1995
(unaudited)
Balance sheet
Statement of loss
Statement of cash flow
Statement of shareholders' deficit
As of and for the fiscal years ending 30 June 1996 and 30 June, 1995
Independent Auditors' report
Balance sheets
Statements of loss
Statements of cash flow
Statements of shareholders' deficit
Summary of accounting policies
Notes to financial statements
Pro Forma Financial Statements
Introduction
Pro forma consolidated balance sheet
F-1
<PAGE>
Independent Auditors' Report
To the Directors
PowerTrader, Inc.
We have audited the Balance Sheet of PowerTrader, Inc. (a development stage
company) as of 30 September 1996 and the Statements of Loss, Cash Flow, and
Changes in Shareholder's Deficit for the period from 22 August 1996 (inception)
to 30 September 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
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 PowerTrader, Inc. as of 30
September 1996 and the results of its operations and its cash flows for the
period from 22 August 1996 (inception) to 30 September 1996 in accordance with
generally accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company has incurred recurring losses, has an
accumulated deficit and is a development stage Company which raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
17 January 1997 BDO Dunwoody
Vancouver, British Columbia CHARTERED ACOUNTANTS
(Internationally BDO Binder)
F-2
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Balance Sheet
(Expressed in U.S. Dollars)
30 September
1996
----
Assets
Cash $ 493
-----
Liabilities
Due to shareholder, note 3 $ 499
-----
Shareholder's deficit
Share capital, note 4
Authorized
The Company is authorized to issue 100,000,000
common shares with a $.0001 par value per share
Issued and outstanding
one common share 1
Deficit accumulated during development stage (7)
-----
(6)
-----
$ 493
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-3
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Statement of Loss
For the Period From 22 August 1996
(inception) to 30 September 1996
(Expressed in U.S. Dollars)
30 September 1996
Revenue $ -
Selling, general and administrative expenses
Bank charges 7
-----
Net loss for the period $ (7)
-----
Net loss per share $ (7)
-----
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-4
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Statement of Cash Flow
For the Period From 22 August 1996
(inception) to 30 September 1996
(Expressed in U.S. Dollars)
30 September 1996
Operating activity
Net loss for the period $ (7)
------
Financing activities
Advance from shareholder 499
Share issuance 1
------
500
------
Increase in cash and cash, end of period $ 493
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-5
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Statement of Changes in Shareholder's Deficit
For the Period From 22 August 1996
(inception) to 30 September 1996
(Expressed in U.S. Dollars)
Deficit Accumulated
During the
Shares Amount Development Stage
------ ------ -----------------
Balance, beginning of period - $ - $ -
Issuance of shares 1 1 -
Net loss for the period - - (7)
------- ------ -------
Balance, end of period 1 $ 1 $ (7)
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-6
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies
(Expressed in U.S. Dollars)
30 September 1996
Revenue Recognition The Company will record revenue from the sale
of computer software upon shipment of
products.
Research and Development Research and development costs will be
charged to expense as incurred.
Capitalized Software Costs Software development and production costs
will be capitalized upon a product's reaching
technological feasibility. The capitalization
of these costs will stop when a product is
ready for sale. Technological feasibility is
considered to be attained when the Company
has completed all planning, designing, coding
and testing activities that are necessary to
establish that the product can be produced to
meet its design specifications including
functions, features and technical performance
requirements.
Estimates and Assumptions The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities
and disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from
those estimates.
Fair Value of Financial
Instruments The respective carrying value of certain on
balance-sheet financial instruments
approximated their fair values. These
financial instruments include cash and
amounts due to shareholder. Fair values were
assumed to approximate carrying values for
these financial instruments since they are
short term in nature and their carrying
amounts approximate fair values.
Loss Per Share Loss Per Share is calculated based on the
weighted average number of shares
outstanding.
<PAGE>
New Accounting Statement of Financial Accounting Standards
Pronouncements No. 121, "accounting for the impairment of
long-lived assets and for long-lived assets
to be disposed of" (SFAS No. 121) issued by
the Financial Accounting Standards Board
(FASB) is effective for financial statements
for fiscal years beginning after 15 December
1995. The new standard establishes new
guidelines regarding when impairment losses
on long-lived assets, which include plant and
equipment, certain identifiable intangible
assets and goodwill, should be recognized and
how impairment losses should be measured. The
Company does not expect adoption to have a
material effect on its financial position or
results of operations.
Statement of Financial Accounting Standards
No. 123, "Accounting for stock based
compensation" (SFAS No. 123). SFAS No. 123
encourages entities to adopt the fair value
method in place of the provisions of
Accounting Principles Board Opinion No. 25,
"Accounting for stock issued to employees"
(APB No. 25) for all arrangements under which
employees receive shares of stock or other
equity instruments of the employer or the
employer incurs liabilities to employees in
amounts based on the price of its stock. The
Company has not determined whether it will
adopt the Fair Value Method encouraged by
SFAS No. 123 or to account for such
transactions in accordance with APB No. 25
for US GAAP purposes. However, the Company
will provide additional disclosures beginning
in 1997 providing pro- forma effects as if
the Company had elected to adopt SFAS No. 123
should the Company elect not to adopt APB No.
25.
F-7
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
30 September 1996
1. Nature of Business and Continued Operations
PowerTrader, Inc., through its wholly-owned subsidiary PowerTrader
Software Inc., designs, develops, markets and supports informational
and analytical desktop decision support and risk management systems.
The Company was incorporated under the laws of the State of Delaware on
22 August 1996 and is a development stage company.
These financial statements are stated in U.S. dollars and have been
prepared in accordance with United States generally accepted accounting
principles, on a going concern basis. The Company was recently
incorporated and has not yet been sufficiently capitalized to carry out
its business plans. These factors among others, raise substantial doubt
about the Company's ability to be able to continue as a going concern.
The ability of the company to continue as a going concern is dependent
on the Company obtaining additional financing through private or
public share offerings. The financial statements do not include any
adjustments related to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities
that may be necessary should the Company be unable to continue as a
going concern.
Management's plans in this regard are to obtain financing from private
or public share offerings until such time that sufficient revenue can
be generated to sustain continuing operations.
2. Acquisition of PowerTrader Software Inc.
On 2 January 1997, the Company entered into an agreement with the
shareholders of PowerTrader Software Inc. ("Software") whereby it
acquired all of the outstanding shares of Software in exchange for
4,174,597 common shares. The transaction will be accounted for as a
reverse acquisition, utilizing historical costs. Software is in the
same business as the Company. The financial position of Software as of
30 June 1996, its fiscal year end is summarized as follows:
Tangible assets $ 186,718
Liabilities (590,720)
----------
Shareholders' deficiency $(404,002)
----------
The following is a summary of pro-forma sales, pro-forma net loss and
pro-forma loss per share for the Company under the assumption that the
Software acquisition was completed on 1 July 1996.
1 July 1996 (Unaudited)
Pro-forma sales $ 10,219
----------
Pro-forma net loss $(172,076)
----------
Pro-forma loss per share $ (.04)
----------
F-8
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
30 September 1996
3. Due to Shareholder
Amounts advanced from shareholder are unsecured, non-interest bearing,
have no specific terms of repayment and are disclosed as a financing
activity in the statement of cash flow.
4. Share Capital
All of the outstanding common shares are restricted shares and may not
be sold in the absence of registration under the Securities Act of 1933
(United States) or an exemption therefrom.
Subsequent to 30 September 1996, the Company
(i) issued 314,000 shares for $314,000;
(ii) issued 350,000 shares to a director of the Company for $35.
The shares are subject to an agreement which contains certain
restrictions on transfer over a three year period and
provisions for forfeiture upon the occurrence of certain
events;
(iii) issued 2,289,517 shares to subscribers of shares of Software
to settle $715,138 in Software's liabilities;
(iv) amended its certificate of incorporation to change the
Company's authorized capital to 25,000,000 shares, $0.01 par
value per share, 23,000,000 of which has been classified as
Common Stock and 2,000,000 of which has been classified as
preferred stock. All shares outstanding on the date of
amendment were converted into a like number of the newly
authorized shares; and
(v) plans to file a prospectus with the Securities and Exchange
Commission for the issuance of a minimum of 1,000,000 Units
and a maximum of 1,700,000 Units, with each Unit consisting of
one share of the Company's Common Stock, $0.01 par value per
share, and one Warrant to purchase one additional share of
common stock at an exercise price of $3.50 per share for a
five year period. The Warrants are subject to redemption by
the Company, at a redemption price of $0.01 per Warrant on 30
days prior written notice to the registered holder thereof if
the average closing bid price of the Common Stock as reported
by the principal market on which the Common Stock is traded
equals or exceeds $4.50 per share for any 20 trading days
within a period of 30 consecutive trading days ending on the
fifth trading day prior to the notice of redemption.
F-9
<PAGE>
5. Share Options
As of 30 September 1996, 250,000 share options issued to a third party
at $0.001 were outstanding and exercised subsequent to 30 September
1996.
Subsequent to 30 September 1996, the Company issued the following share
options to consultants and a Software officer:
Amount Exercise Price Expiry Date
149,999 $0.37 Dec. 98
100,000 $1.00 Feb. 99
100,000 $3.00 Feb. 99
In December, 1996, the Company's Board of Directors adopted the
PowerTrader, Inc., 1996 Stock Option Plan (the "Plan"), pursuant to
which officers, key employees, advisers and consultants, of the Company
may receive stock options to purchase up to an aggregate of 750,000
shares of the Company's Common Stock. Under the Plan, stock options
awarded under the Plan may not have a term of more than 10 years or
provide for an exercise price of less than the fair market value of the
Common Stock on the date of grant. As of December 31, 1996, no awards
had been made under the Plan. However, the Company is committed to
issue 100,000 stock options under the Plan.
F-10
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Interim Balance Sheet
(Expressed in U.S. Dollars)
30 September 30 June
1996 1996
(unaudited)
- --------------------------------------------------------------------------------
Assets
$ 77,026 $127,077
Deposits and prepaids 8,969 2,392
-------- --------
85,995 129,469
Fixed assets 73,571 57,249
-------- -------
$159,566 $186,718
- --------------------------------------------------------------------------------
Liabilities
Current
Account payable and accrued
liabilities $ 40,739 $ 168,655
Current portion of capital lease
obligations 6,126 5,810
--------- ---------
46,865 174,465
Share subscriptions 682,123 408,089
Capital lease obligations 6,649 8,166
--------- ---------
735,637 590,720
--------- ---------
Shareholders' deficit
Share capital
Authorized
The Company is authorized to issue
100,000,000 (1995 - 5,000) Class
"A" Common shares without par value and
5,000 Class "B" common shares without
par value
Issued and outstanding
4,174,513 Class "A" common 646,270 646,270
84 Class "B" common 61 61
------- -------
646,331 646,331
Deficit accumulated during
development stage (1,222,402) (1,050,333)
----------- -----------
(576,071) 404,002
--------- ----------
$ 159,566 $ 186,718
The accompanying notes form an integral part of these financial statements.
F-11
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Interim Statement of Loss and Deficit
(Expressed in U.S. Dollars)
29 December
Three Three 1988
Months Months (inception) to
Ended Ended 30 September
30 September 30 September 1996
1996 1995 (cumulative)
(unaudited) (unaudited) (unaudited)
Revenue $ 10,219 $ 34,795 $ 105,216
Cost of sales 14,900 27,836 73,221
---------- --------- ----------
(4,681) 6,959 31,995
---------- --------- ----------
Selling, general and
administrative costs 108,373 102,662 883,382
Development costs 59,015 49,438 371,015
---------- --------- ----------
Net loss (172,069) (145,141) (1,222,402)
Deficit, beginning of period (1,050,333) (451,362) -
----------- ---------- ----------
Deficit, end of period $(1,122,402) $(596,503) $(1,222,402)
Loss per share $ (0.04) $ (0.12)
------- -------
The accompanying notes form an integral part of these financial statements.
F-12
<PAGE>
<TABLE>
PowerTrader Software Inc.
(A Development Stage Company)
Interim Statement of Cash Flow
(Expressed in U.S. Dollars)
<CAPTION>
29 December
Three Three 1988
Months Months (inception) to
Ended Ended 30 September
30 September 30 September 1996
1996 1995 (cumulative)
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities
Operations
Net loss for the period $(172,069) $(145,141) $(1,222,402)
Item not involving cash
Amortization 5,740 6,647 47,586
Increase (decrease) in:
Deposits and prepaids (6,577) (1,200) (8,969)
Accounts payable and accrued
liabilities (127,916) 92,810 40,739
---------- --------- -----------
(300,822) (46,884) (1,143,046)
---------- --------- -----------
Financing activities
Share subscriptions 274,034 - 682,123
Lease financing received - - 18,790
Repayment of obligations under
capital lease (1,201) - (6,014)
Shareholders' advances - 44,581 646,222
Issuance of share capital - - 109
---------- -------- ----------
272,833 44,581 1,341,230
---------- -------- ----------
Investing activity
Investment in fixed assets (22,062) - (121,157)
---------- --------- ----------
Increase (decrease) in cash (50,051) 2,303 77,026
Cash, beginning of year 127,077 2,424 -
---------- --------- ----------
Cash, end of year $ 77,026 $ 121 $ 77,026
</TABLE>
The accompanying notes form an integral part of these financial statements.
F-13
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Interim Financial Statements
(Expressed in U.S. Dollars)
30 September 1996
1. Nature of Operations
PowerTrader Software Inc. ("the Company") designs, develops, markets
and supports informational and analytical desktop decision support and
risk management systems.
2. Revenue Recognition and Interim Accounting Adjustments
The Company records revenue from the sale of computer software upon
shipment.
The interim financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim periods presented. All adjustments recorded in
the interim financial statements are of a normal recurring nature.
The results of operations for interim periods are not necessarily
indicative of results of operations for a full year.
3. Exchange Rates
Exchange rates between the United States dollar and the Canadian
dollar for the periods reported in these financial statements are as
follows:
1996 1995
---- ----
Average 1.3701 1.3555
As of 30 September 1.3622 1.3438
F-14
<PAGE>
Independent Auditors' Report
To The Directors
PowerTrader Software Inc.
We have audited the Balance Sheets of PowerTrader Software Inc. (a development
stage company) as of 30 June 1996 and 1995 and the Statements of Loss, Cash
Flow, and Changes in Shareholders' Deficit for the years then ended. We have
also audited the Statements of Loss and Deficit, Cash Flow and Changes in
Shareholders' Deficit for the period from 29 December 1988 (inception) to 30
June 1996 (cumulative). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PowerTrader Software Inc. as of
30 June 1996 and 1995 and the results of its operations and its cash flows for
the years then ended and the period from 29 December 1988 (inception) to 30 June
1996 (cumulative) in accordance with generally accepted accounting principles in
the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company has incurred recurring losses, has an
accumulated deficit and is a development stage Company which raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
17 January 1997 BDO Dunwoody
Vancouver, British Columbia Chartered Accountants
(Internationally BDO Binder)
F-15
<PAGE>
<TABLE>
PowerTrader Software Inc.
(A Development Stage Company)
Balance Sheets
(Expressed in U.S. Dollars)
<CAPTION>
30 June 1996 1995
Assets
<S> <C> <C>
Current
Cash $127,077 $ 2,424
Deposits and prepaids 2,392 1,772
------------------------------
Fixed Assets, note 2 129,469 4,196
57,249 40,148
------------------------------
$186,718 $44,344
Liabilities
Current
Accounts payable and accrued liabilities $168,655 $96,657
Due to shareholder, note 3 - 392,305
Current portion of capital lease obligations 5,810 2,211
------------------------------
174,465 491,173
Share subscriptions, note 4 408,089 -
Capital lease obligations, note 5 8,166 4,424
------------------------------
590,720 495,597
------------------------------
Shareholders' deficit
Share capital, note 6
Authorization
The company is authorized to issue
100,000,000 (1995 - 5,000)
Class "A" common shares without par value
and 5,000 Class "B" common shares
without par value
Issued and outstanding
4,174,513 Class "A" common (1995 - 65) 646,270 48
84 Class "B" common (1995 - 84) 61 61
------- ------
646,331 109
Deficit accumulated during
development stage (1,050,333) (451,362)
-------------------------------
(404,002) (451,253)
-------------------------------
$ 186,718 $ 44,344
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-16
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Statements of Loss
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
29 December 1988
Year Ended Year Ended (inception) to
30 June 30 June 30 June 1996
1996 1995 (cumulative)
---- ---- ------------
<S> <C> <C> <C>
Revenue $ 50,971 $ 44,026 $ 94,997
Cost of sales 40,910 17,411 58,321
------------------------------------------------------
10,061 26,615 36,676
------------------------------------------------------
Selling, general and
administrative costs 405,099 369,910 755,009
Development costs 203,933 108,067 312,000
------------------------------------------------------
Net loss $(598,971) $ (451,362) $(1,050,333)
Loss per share $ (0.24) $(3,029.28)
------------ ------------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-17
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Statements of Cash Flow
(in U.S. Dollars)
<TABLE>
<CAPTION>
29 December 1988
Year Ended Year Ended (inception) to
30 June 30 June 30 June 1996
1996 1995 (cumulative)
---- ---- ------------
<S> <C> <C> <C>
Operating activities
Operations
Net loss $ (598,971) $ (451,362) $(1,050,333)
Items not involving cash
Amortization 26,589 15,257 41,846
Increase (decrease) from changes in
Deposits and prepaids (620) (1,772) (2,392)
Accounts payable and
accrued liabilities 71,997 96,657 168,654
-------------------------------------------------------
(501,005) (341,220) (842,225)
-------------------------------------------------------
Financing activities
Share subscriptions 408,089 - 408,089
Lease financing received 11,074 7,716 18,790
Repayment of obligations
under capital lease (3,732) (1,081) (4,813)
Shareholders' advances 253,917 392,305 646,222
Issuance of share capital - - 109
-------------------------------------------------------
669,348 398,940 1,068,397
-------------------------------------------------------
Investing activities
Investment in fixed assets (43,690) (55,405) (99,095)
-------------------------------------------------------
Increase in cash 124,653 2,315 127,077
Cash, beginning of period 2,424 109 -
-------------------------------------------------------
Cash, end of period $ 127,077 $ 2,424 $127,077
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-18
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Statements of Changes in Shareholders' Deficit
For the Years Ended 30 June 1996 and 1995
and the Period From 29 December 1988
(inception) to 30 June 1996 (cumulative)
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated
Class "A" Class "B" During the
Common Common Share Development
Shares Amount Shares Amount Total Stage
------ ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Shares issued for cash
29 December 1988 100* 70 - - - -
Shares redeemed
and cancelled
12 September 1989 (100) (70) - - - -
Shares issued
12 September 1989 100 72 100 73 - -
Shares redeemed
and cancelled
12 July 1990 35 (24) 16 (12) - -
---- ---- ---- ---- ---- --------
Balance at
1 July 1994 65 48 84 61 109 -
Net loss - - - - - (451,362)
---- ---- ---- ---- ---- --------
Balance at
30 June 1995 65 48 84 61 109 (451,362)
Shares issued
for debt 4,174,448 646,222 - - 646,222 -
Net loss - - - - - (598,971)
------- ------ ------ ------ ------ --------
Balance at
30 June 1996 4,174,513 $646,270 84 $61 $646,331 $(1,050,333)
*Stated shares were common shares not class "A" common shares.
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-19
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies
30 June 1996
Foreign Currency Foreign monetary assets and liabilities are
Translation translated into U.S. dollars at the rates of
exchange in effect at the balance sheet
dates. Monetary assets are translated at
historical rates. Revenue and expense items
are translated at average exchange rates
prevailing during the period, except for
amortization which is translated at the same
rate as the assets to which it applies.
Foreign currency translation adjustments are
included in income.
Exchange ratios between the Canadian and U.S.
dollar as of 30 June 1996 and 1995, with
bracketed figures reflecting the average rate
for the period are:
30 June 1996 US$1.00: CDN$1.3836 (1.3600)
30 June 1995 US$1.00: CDN$1.3725 (1.3793)
Fixed Assets Fixed assets are recorded at cost.
Amortization is provided at the following
annual rates:
Computer equipment 30% declining balance
Computer software 100% declining balance
Revenue Recognition The Company records revenue from the sale of
computer software upon shipment of products.
Research and Development Research and development costs are charged to
Costs expense as incurred.
Capitalized Software Certain software development and production
Costs costs are capitalized upon a product's
reaching technological feasibility. The
capitalization of these costs will stop when
a product is ready for sale. Technological
feasibility is considered to be attained when
the Company has completed all planning,
designing, coding and testing activities that
are necessary to establish that the product
can be produced to meet its design
specifications including functions, features
and technical performance requirements. The
Company has attained technological
feasibility on one product; however, it has
not incurred any capitalizable costs with
respect to this product.
F-20
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies
Estimates and Assumptions The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities
and disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from
those estimates.
Fair Value of Financial The respective carrying value of certain
Instruments on-balance-sheet financial instruments
approximated their fair values. These
financial instruments include cash, accounts
receivable, accounts payable and accrued
liabilities. Fair values were assumed to
approximate carrying values for these
financial instruments since they are short
term in nature and their carrying amounts
approximate fair values or they are
receivable or payable on demand.
Earnings Per Share Earnings Per Share is calculated
based on the weighted average number of
shares outstanding.
New Accounting Statement of Financial Accounting Standards
Pronouncements No. 121, "accounting for the impairment of
long-lived assets and for long-lived assets
to be disposed of" (SFAS No. 121) issued by
the Financial Accounting Standards Board
(FASB) is effective for financial statements
for fiscal years beginning after 15 December
1995. The new standard establishes new
guidelines regarding when impairment losses
on long-lived assets, which include plant and
equipment, certain identifiable intangible
assets and goodwill, should be recognized and
how impairment losses should be measured. The
Company does not expect adoption to have a
material effect on its financial position or
results of operations.
Statement of Financial Accounting Standards
No. 123, "Accounting for stock based
compensation" (SFAS No. 123). SFAS No. 123
encourages entities to adopt the fair value
method in place of the provisions of
Accounting Principles Board Opinion No. 25,
"Accounting for stock issued to employees"
(APB No. 25) for all arrangements under which
employees receive shares of stock or other
equity instruments of the employer or the
employer incurs liabilities to employees in
amounts based on the price of its stock. The
Company has not determined whether it will
adopt the Fair Value Method encouraged by
SFAS No. 123 or to account for such
transactions in accordance with APB No. 25
for US GAAP purposes. However, the Company
will provide additional disclosures beginning
in 1997 providing pro-forma effects as if the
Company had elected to adopt SFAS No. 123
should the Company elect not to adopt APB No.
25.
F-21
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Financial Statements
(In U.S. Dollars)
30 June 1996
1. Nature of Business and Continued Operations
PowerTrader Software Inc. designs, develops, markets and supports
informational and analytical desktop decision support and risk
management systems. The Company was originally incorporated on 29
December 1988 under the name Corporate Media Solutions, Inc. On 6
November 1989, the Company changed its name to Precision Investment
Services, Inc. On 16 April 1996 the Company changed its name from
Precision Investment Services, Inc. to PowerTrader Software Inc. The
Company was inactive until July 1994 when it commenced development of
its current suite of software products.
To date, since the Company has only sold Beta product and support
services, major product development work continues and the Company has
not yet recorded significant sales, accordingly, the Company is still a
development stage company with its principal business and assets in
Canada and its revenue earned in Canada.
These financial statements are stated in U.S. dollars and have been
prepared in accordance with generally accepted accounting principles,
on a going concern basis. As reflected in these financial statements,
the Company has at 30 June 1996 a deficit of $1,050,333 and a working
capital deficiency of $44,996. In addition, the Company has incurred
operating losses in each of the last two years. These factors among
others, raise substantial doubt about the Company's ability to be able
to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Company obtaining additional
financing through private or public share offerings or debt. The
financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that may be necessary should
the Company be unable to continue as a going concern. However, it is
reasonably possible, based on existing knowledge, that changes in
future conditions in the near term could require a material change in
the recognized amounts for the assets and liabilities.
Management's plans in this regard are to obtain financing from private
or public share offerings or debt until such time that sufficient
revenue can be generated to sustain continuing operations.
2. Fixed Assets
<TABLE>
<CAPTION>
Accumulated 1996 1995
Cost Amortization Net Net
<S> <C> <C> <C> <C>
Computer equipment $73,726 $19,120 $54,606 $30,224
Computer software 25,370 22,727 2,643 9,924
-------------------------------------------------------------------------
$99,096 $41,847 $57,249 $40,148
</TABLE>
The estimated useful life of the fixed assets varies between 1 and 5
years.
F-22
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Financial Statements
(in U.S. Dollars)
3. Due to Shareholders
Amounts advanced from shareholders are unsecured, non-interest bearing
and have no specific terms of repayment.
4. Share Subscriptions
As at 30 June 1996, the Company has received a total of $408,089 with
respect to subscriptions for 1,599,880 Class "A" common shares of the
Company. The Company received a further $307,049 with respect to
subscriptions for 689,637 Class "A" common shares subsequent to 30 June
1996. Shares have not been issued for these share subscriptions,
accordingly the amounts are recorded as a liability at 30 June 1996.
Subsequent to 30 June 1996, these liabilities were settled through the
issuance of 2,289,517 shares in a company which subsequent to year-end
acquired control of the Company.
5. Capital Lease Obligations
The Company has two capital leases for computer equipment. Future
minimum lease payments are as follows:
1997 $ 5,810
1998 6,633
1999 2,290
--------
14,733
Interest component (757)
--------
$13,976
========
6. Share Capital
<TABLE>
<CAPTION>
Class "A" Class "B"
Common Common
Shares Amount Shares Amount Total
<S> <C> <C> <C> <C> <C>
Balance, 1 July 1994 and
30 June 1995 65 $ 48 84 $ 61 $ 109
Issued, shares for debt 4,174,448 646,222 - - 646,222
--------- ------- --- --- -------
Balance, end of year 4,174,513 $646,270 84 $61 $646,331
</TABLE>
During the year, shareholders entered into share for debt agreements for
repayment of $646,222 in debts owed.
The number of shares issued in connection with the Share for Debt Agreements was
determined based on management's estimate of the value of the Company at the
date the Agreements were entered into.
F-23
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
7. Share Options
The number of shares under option and the exercise price thereof is
summarized as follows:
1996 1995
Outstanding, beginning of year - -
Granted (per share) $0.37 149,999 -
------- -----
Outstanding, end of year 149,999 -
At the date of issuance of the share options, the exercisable price of
the options was equal to the price share subscriptions were being
offered to third parties. Accordingly, no compensation was recorded in
connection with the issuance of these options. Subsequent to year end,
the options were cancelled.
8. Related Party Transactions
During 1996, the Company paid consulting and leasing fees totalling
approximately $11,800 (1995 nil) to a director and a company controlled
by a director of the Company. As of 30 June 1996, included in accounts
payable were $3,491 (1995 - $530) in amounts owing to directors.
9. Income Taxes
The Company has income tax loss carry-forwards of approximately
$1,094,000 available to reduce future taxable income, the tax effect of
which has not been recorded in these financial statements. These losses
will expire during 2002 and 2003.
A summary of deferred tax assets at 30 June 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
Deferred
Tax Valuation Tax
Rate Amount Allowance Asset
<S> <C> <C> <C> <C> <C>
1996 tax benefit
of loss carry
forward $599,700 .45 $269,900
Tax benefit related
to depreciation $ 26,600 .45 $ 12,000 -
--------
$281,900 (281,900)
1995 tax benefit
of loss carry
forward $452,100 .45 $203,400
Tax benefit related
to depreciation $ 15,300 .45 $ 6,900
--------
$210,300 (210,300) -
</TABLE>
Since in management's opinion, it is more likely than not that the tax
benefits would not be realized, they have been reduced by a valuation
allowance of $281,900 (1995 - $210,300).
Deferred tax liabilities were not material at 30 June 1996 and 1995.
F-24
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
30 June 1996
10. Commitments
The Company has entered compensation contracts requiring minimum
payments as follows:
1997 $166,664
1998 203,996
1999 121,165
2000 24,694
--------
$516,519
Subsequent to 30 September 1996, the Company entered into a Lease
Agreement for its premises requiring minimum lease payments of $31,786,
with required lease payments as follows:
1997 $ 8,476
1998 12,715
1999 10,595
--------
$ 31,786
During 1996 and 1995, the Company had rent expenses for its premises of
$8,770 and $23,795, respectively.
11. Subsequent events
On 2 January 1997, the Company acquired from a shareholder various
office equipment for $7,100.
F-25
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Pro-Forma Consolidated Balance Sheet
30 September 1996 (unaudited)
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
PowerTrader
Software PowerTrader, Pro-Forma Pro-Forma
Inc. Inc. Adjustments Consolidated
<S> <C> <C> <C> <C>
Assets
Current
Cash $77,026 $493 $ - $ 77,519
Deposits and prepaids 8,969 - - 8,969
-------- ---- ----------- ----------
85,995 493 - 86,488
Fixed assets 73,571 - - 73,571
-------- ---- ----------- ----------
$159,566 $493 $ - $ 160,059
Liabilities
Current
Account payable and
accrued liabilities $ 40,739 $ 499 - $ 41,238
Current portion of
capital lease
obligations 6,126 - - 6,126
------- ---- --------- -------
46,865 499 - 47,364
Share subscriptions 682,123 - (682,123) -
Capital lease obligations 6,649 - - 6,649
-------- ---- --------- -------
735,637 499 (682,123) 54,013
-------- ---- --------- -------
Shareholders' equity (deficit)
Share capital 646,331 1 682,116 1,328,448
Deficit (1,222,402) (7) 7 (1,222,402)
----------- ---- ---------- -----------
(576,031) (6) - 106,046
----------- ----- ---------- -----------
$159,566 $493 $ - $ 160,059
</TABLE>
The accompanying notes form an integral part of these financial statements.
F-26
<PAGE>
PowerTrader, Inc.
Notes and Assumptions to
Pro-Forma Consolidated Statements
1. Basis of Presentation
The Pro-Forma Consolidated Balance Sheet and Statement of Loss have
been prepared to give effect as of 30 September 1996 to the
acquisition of PowerTrader Software Inc. ("Software") by PowerTrader,
Inc. ("Inc."). The above noted transaction was completed in January
1997.
Separate Pro-Forma Statements of Loss have not been prepared for
PowerTrader, Inc. for the period ended 30 September 1996 and the year
ended 30 June 1996 as they would effectively be the same as the
Statements of Loss for PowerTrader Software Inc. for those periods.
Sales, net loss and loss per share under the assumptions that the
share exchange was completed on 1 July 1996 and 1 July 1995 are
summarized as follows:
3 Months Year
Ended Ended
30 September 1996 30 June 1996
----------------- ------------
Sales $ 10,219 $ 50,961
Net loss $(172,076) $(598,971)
Loss per share $ (0.04) $ (0.14)
The Pro-Forma Consolidated Statements have been prepared from the
interim financial statements of Software for the three month period
ended 30 September 1996 and the interim financial statements of Inc.
for the period from 22 August 1996 (date of inception) to 30 September
1996.
2. Pro-Forma Assumption
The Pro-Forma Consolidated Statements have been prepared based upon
the assumptions that the exchange of all the outstanding shares of
Software by its shareholders to Inc. was complete as of 1 July 1996.
3. Acquisition of PowerTrader Software Inc.
The Company has entered into agreements with the shareholders of
PowerTrader Software Inc. ("Software") whereby it acquired all of the
outstanding shares of Software in exchange for 4,174,597 common
shares. The acquisition has been accounted for in these pro-forma
financial statements as a reverse acquisition.
F-27
<PAGE>
4. Pro-Forma Adjustments
The following pro-forma adjustments have been recorded:
Share Subscriptions $682,123
Share Capital 682,123
To record the assumption that the Software share subscription
liability, which was settled in January 1997 through the issuance of
PowerTrader, Inc. shares, was settled on 1 July 1996.
Share Capital $ 7
Deficit $ 7
To properly consolidate the Shareholders' equity of PowerTrader, Inc.
F-28
<PAGE>
No underwriter, dealer, salesperson or
other person has been authorized to give
any information or to make any POWERTRADER, INC.
representations other than those
contained in this prospectus and, if
given or made, such other 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 such offer
or solicitation is not qualified to do
so or to anyone to whom it is unlawful
to make such offer or solicitation.
-------------
TABLE OF CONTENTS -----------------
Page PROSPECTUS
-----------------
Prospectus Summary......................
Risk Factors............................
Use of Proceeds.........................
Dividend Policy.........................
Dilution................................
Capitalization..........................
Selected Financial Data.................
Management's Discussion and Analysis
of Financial Conditions and Results
of Operations.........................
The Company.............................
Business................................
Management..............................
Principal and Selling StockholderS......
Description of Securities...............
Certain Federal Income Tax Consequences , 1997
Certain Provisions of the Certificate
of Incorporation and Bylaws...........
Shares Eligible for Future Sale.........
Plan of Distribution....................
Summary of Escrow Agreement.............
Legal Matters...........................
Experts.................................
Available Information...................
Index to Financial Statements...........
----------------------
Until , 1997, all dealers effecting
transactions in the registered
securities, whether or not participating
in this distribution, may be required to
deliver a Prospectus. This is in
addition to the obligation of dealers to
deliver a Prospectus when acting as
Underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
permits indemnification by a corporation of certain officers, directors,
employees and agents. Consistent therewith, Article VIII of the Company's Bylaws
requires that the Company indemnify all persons whom it may indemnify pursuant
thereto to the fullest extent permitted by Section 145. Article VIII also
provides that expenses incurred by an officer or director of the Company or any
of its direct or indirect wholly-owned subsidiaries, in defending a civil or
criminal action, suit or proceeding, will be paid by the Company in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such officer, director, employee or agent or
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Company as authorized. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
In addition, Article 6 of the Company's Certificate of Incorporation
provides that directors of the Company shall not be personally liable for
monetary damages to the Company or its stockholders for a breach of fiduciary
duty as a director, except for liability as a result of (i) a breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) an act related to the unlawful stock repurchase or
payment of a dividend under Section 174 of Delaware General Corporation Law; and
(iv) transactions from which the director derived an improper personal benefit.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities offered hereby, all of which
will be paid by the Company:
SEC Registration fee .................................. $2,200
State securities law compliance........................ $12,000
Transfer agent fees and expenses....................... $15,000
Printing and engraving................................. $18,000
Legal fees and expenses................................ $75,000
Accounting fees and expenses........................... $50,000
Miscellaneous.......................................... $27,800
--------
Total.............................................. $200,000
Item 26. Recent Sales of Unregistered Securities
In connection with the organization of the registrant, Michael C.
Withrow, Chairman, President and a director of the Company, purchased one share
of Common Stock for a purchase price of $0.10.
In October, 1996, the Company issued to David C. Furlonger, vice
president, chief financial officer and a director of the Company, an aggregate
of 350,000 shares of Common Stock for an aggregate purchase price of $35.00.
Such shares are subject to an agreement which contains certain restrictions on
transfer and provisions for forfeiture upon the occurrence of certain events.
In November and December, 1996, the Company sold an aggregate of
314,000 shares of its Common Stock to certain individuals for an aggregate
purchase price of $314,000.
In December, 1996, a consultant to the Company exercised a previously
granted option to purchase an aggregate of 250,000 shares of Common Stock for an
aggregate purchase price equivalent to $250.
In January, 1997, the Company consummated an acquisition of PSI, and in
connection therewith, issued 4,174,597 shares of its Common Stock to the former
shareholders of PSI, issued 2,289,517 share of its Common Stock to certain
persons who had previously subscribed for PSI Common Stock and granted options
to purchase 149,999 shares of its Common Stock to certain optionees of PSI.
II-1
<PAGE>
As part of the acquisition of PSI, the Company issued 10,000 shares to
one individual in reliance on Section 4(2) of the Securities Act of 1933, as
amended ("Act").
All of the other foregoing transactions were conducted in reliance on
the exemptive provisions of Regulation S of the Act.
Item 27. Exhibits
2.1 Stock Acquisition Agreement
3.1 Restated Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Form of Subscription Agreement
4.2 Escrow Agreement with American Stock Transfer and
Trust Company
5.1 Opinion of Gallop, Johnson & Neuman, L.C.
10.1 Consultant Agreement with 458468 B.C. Ltd.
10.2 Consultant Agreement with Peridot International Enterprises, Ltd.
10.3 Restricted Stock Agreement with Peridot International
Enterprises, Ltd.
10.4 Consultant Agreement with No. 410 Taurus Ventures, Ltd.
10.5 License Agreement with North American Quotations, Inc.
10.6 License Agreement with Hong Kong Bank Discount Trading Corp.
10.7 PowerTrader, Inc. 1996 Stock Option Plan
21.1 Subsidiaries of the Registrant
23.1 Consent of BDO Dunwoody, Chartered Accountants
23.2 Consent of Gallop, Johnson & Neuman, L.C. (included in Exhibit 5.1)
24.1 Power of Attorney (set forth on signature page)
27.1 Financial Data Schedule
Item 28. Undertakings
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned will:
(1) For determining any liability under the Securities Act, 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 undersigned 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.
(2) For determining any liability under the Securities Act, 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 the time as the initial bona fide
offering of those securities.
II-2
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Vancouver, Province of British Columbia, Canada on the 17th day of January,
1997.
POWERTRADER, INC.
By: /s/ Michael C. Withrow
----------------------------
Michael C. Withrow
Chairman and President
Each of the undersigned hereby appoints Michael C. Withrow and Douglas
J. Bates, and each of them (with full power to act alone), as attorneys and
agents for the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned, to sign and file with the Securities
and Exchange Commission under the Securities Act of 1933 any and all amendments
and exhibits to the Registration Statement and any and all applications,
instruments and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby, with
full power to do and perform any and all acts and things whatsoever requisite or
desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Michael W. Withrow Director, Chairman January 17, 1997
- ---------------------- and President
Michael W. Withrow (principal executive
officer)
/s/ David C. Furlonger Director, Secretary January 17, 1997
- ---------------------- and Vice-President
David C. Furlonger (principal financial
and accounting officer)
II-3
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
2.1 Stock Acquisition Agreement.....................................
3.1 Restated Certificate of Incorporation of the Registrant.........
3.2 Bylaws of the Registrant........................................
4.1 Form of Subscription Agreement..................................
4.2 Escrow Agreement with American Stock Transfer and
Trust Company...................................................
5.1* Opinion of Gallop, Johnson & Neuman, L.C........................
10.1 Consultant Agreement with 458468 B.C. Ltd.......................
10.2 Consultant Agreement with Peridot International
Enterprises, Ltd................................................
10.3 Restricted Stock Agreement with Peridot International
Enterprises, Ltd................................................
10.4 Consultant Agreement with No. 410 Taurus Ventures, Ltd..........
10.5 License Agreement with North American Quotations, Inc...........
10.6* License Agreement with Hong Kong Bank Discount Trading Corp.....
10.7 PowerTrader, Inc. 1996 Stock Option Plan........................
21.1 Subsidiaries of the Registrant..................................
23.1 Consent of BDO Dunwoody, Chartered Accountants..................
23.2 Consent of Gallop, Johnson & Neuman, L.C.,
(included in Exhibit 5.1).......................................
24.1 Power of Attorney (set forth on signature page).................
27.1 Financial Data Schedule.........................................
* To be filed by amendment
E-1
STOCK ACQUISITION AGREEMENT
THIS STOCK ACQUISITION AGREEMENT is entered into as of January 2, 1997,
among POWERTRADER SOFTWARE INC., a corporation incorporated pursuant to the
laws of the Province of British Columbia ("PSI"), POWERTRADER, INC., a Delaware
corporation ("PowerTrader"), and those persons listed on Exhibit A hereto
(collectively, the "Shareholders").
WHEREAS, the Shareholders are the record and beneficial owners of all
of the outstanding shares of Class A common stock and Class B common stock of
PSI (the "PSI Shares"); and
WHEREAS, PSI has a current liability to certain subscribers of its
shares (the "Subscribers") to issue shares of Class A common stock (the
"Subscription Liability"); and
WHEREAS, PSI has another liability to certain of its agents (the
"Agents") to grant options to purchase certain amounts of shares of Class A
common stock of PSI (the "Option Liability"); and
WHEREAS, the parties desire that the Shareholders exchange with
PowerTrader, the PSI Shares for an equal number of shares of the common stock of
Powertrader, par value $0.01 per share ("PowerTrader Common Stock"), PSI assign
its Subscription Liability and Option Liability to PowerTrader and PowerTrader
accept the foregoing assignment and assume and agree to discharge the
Subscription Liability and Option Liability.
THEREFORE, in consideration of the mutual covenants and undertakings
contained, and on the terms and subject to the conditions set forth herein, the
parties agree:
ARTICLE I: EXCHANGE OF SHARES; CLOSING
1.1. Exchange of Shares. On the terms and subject to the conditions set
forth in this Agreement and at the consummation of the transactions contemplated
therein ("Closing"), PowerTrader shall acquire from the Shareholders the PSI
Shares, and in exchange, PowerTrader shall issue to each Shareholder one share
of PowerTrader Common Stock for each share of Class A or Class B common stock of
PSI owned of record by such Shareholder.
1.2. Issue of Certificates. At the Closing, each Shareholder will
deliver stock certificates representing all of the PSI Shares owned by each
Shareholder, endorsed in blank or accompanied by a duly executed assignment
document. Simultaneously, PowerTrader shall issue and deliver to each
Shareholder, certificates representing the number of shares of PowerTrader
Common Stock to which each Shareholder is entitled pursuant to Section 1.1.
1.3. Fractional Shares. No fractional shares of PowerTrader Common
Stock shall be issued in the Exchange. In the event that the number of shares to
be issued to each Shareholder in accordance with Section 1.1 hereof does not
represent a whole number of shares of PowerTrader Common Stock, such number of
shares of PowerTrader Common Stock shall be rounded up or down to the nearest
whole number of shares.
<PAGE>
1.4. Closing.
(a) Closing Date. The Closing shall take place at the offices of PSI,
#591, 885 Dunsmuir Street, Vancouver, B.C. Canada V6C 1N5, on January
2nd, 1997, or such other date as may be mutually agreed upon by the
parties. ("Closing Date").
(b) Delivery. On the Closing Date, PowerTrader and the Shareholders
shall each deliver to the other such documents as are required under
Section 1.1 and Article IV.
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders, severally and not jointly, represent and warrant to
PowerTrader:
2.1. Authorization of Transaction. Each Shareholder has full legal
capacity, power and authority to execute and deliver this Agreement and to
perform his obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of each Shareholder, enforceable in accordance with
its terms and conditions.
2.2. Shares. Each Shareholder has not granted any options with respect
to the PSI Shares and is the sole beneficial and record owner of the PSI Shares
represented by those certificates to be delivered at Closing, free and clear of
any and all adverse claims or liens.
2.3. No Conflict. The execution, delivery and performance of this
Agreement by the Shareholders will not result in a violation or breach of any
term or provision of, or constitute a default or accelerate the performance
required under, any indenture, mortgage, deed of trust, contract or agreement to
which either Shareholder is a party or by which each Shareholder or each
Shareholder's assets are bound, or violate any order, writ injunction or decree
of any court, administrative agency or governmental body.
2.4. Tax Considerations. Each Shareholder has sought legal advice
concerning the tax considerations of the transactions contemplated herein.
ARTICLE III: REPRESENTATION AND WARRANTY OF PSI
PSI represents and warrants to PowerTrader and the Shareholders:
3.1 Organization. PSI is a corporation duly organized, validly existing
and in good standing under the laws of the Province of British Columbia, Canada.
ARTICLE IV: REPRESENTATION AND WARRANTY OF POWERTRADER
PowerTrader represents and warrants to PSI and the Shareholders:
4.1 Organization. PowerTrader is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2
<PAGE>
ARTICLE V: POST-CLOSING COVENANTS AND AGREEMENTS
5.1. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, the
parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other party to this Agreement
reasonably may request, all at the sole cost and expense of the requesting
party.
5.2. PowerTrader's Actions. PowerTrader covenants and agrees that
PowerTrader:
(a) accepts the assignment of the Subscription Liability and Option
Liability from PSI and hereby assumes and agrees to discharge all of
the obligations, liabilities, covenants, conditions and restrictions to
be done, kept or performed by or imposed upon PSI with respect to the
Subscription Liability and the Option Liability.
(b) in connection with the Subscription Liability, shall issue to the
Subscribers that number of shares of PowerTrader Common Stock having a
value equal to the number PSI Shares each Subscriber had agreed to
purchase pursuant to a certain subscription agreement between PSI and
each Subscriber.
(c) in connection with the Option Liability, shall enter into an option
agreement with each Agent whereby PowerTrader shall issue an option for
a number of shares of PowerTrader Common Stock equal to the number of
shares of PSI common stock originally contemplated by the parties and
for an exercise price expressed in dollars of the United States but of
equal value to the exercise price originally contemplated by the
parties.
ARTICLE VI: CONDITIONS TO THE EXCHANGE
6.1. Conditions to Obligation of PowerTrader to Complete the Closing.
The obligation of PowerTrader to consummate the Closing shall be subject to the
satisfaction of or waiver by PowerTrader at or prior to the completion of the
Closing of each of the following conditions:
(a) Each of the representations and warranties of the Shareholders
shall be true, and each of the covenants and agreements of the
Shareholders shall have been duly performed.
(b) The Shareholders shall have delivered the stock certificates
representing the PSI Shares, duly endorsed for transfer to PowerTrader
and shall have taken any other actions necessary or required in
connection with consummation of the transactions contemplated hereby
and any documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance to
PowerTrader.
3
<PAGE>
(c) The transfer of the PSI Shares by the Shareholders shall have been
duly authorized and approved by all requisite action including
corporate resolutions by the Directors of PSI.
(d) Upon surrender of the certificates which represent the PSI Shares,
PSI shall transfer such shares on its stock ledger into the name of
PowerTrader and shall issue new certificates in the name of PowerTrader
representing the PSI Shares.
(e) There shall not have been issued and be in effect any order, decree
or judgment of any court or tribunal which makes the consummation of
the Closing illegal.
ARTICLE VII: MISCELLANEOUS
7.1. Entire Agreement. Except as otherwise expressly contemplated
herein, this Agreement: (a) constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, between the parties,
with respect to the subject matter hereof, and (b) is not intended to confer
upon any other persons any rights or remedies hereunder.
7.2. Counterparts. This Agreement and any amendments hereto may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which shall be considered one and the same instrument.
7.3. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware.
7.4. Illegality. In case any provision in this Agreement shall be
invalid illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.5. Third-Party Beneficiaries. Nothing in this Agreement shall be
construed as giving any person, firm, corporation or other entity, other than
the parties hereto and their successors, any right, remedy or claim under or in
respect of this Agreement or any provision hereof.
4
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of
the parties hereto as of the date first above written.
POWER TRADER, INC. MONTROSE LTD.
/s/ Mike Withrow /s/ Francis Perez
By: Mike Withrow By: Francis Perez
POWER TRADER SOFTWARE INC. LOTUS DEVELOPMENT CORP.
/s/ Mike Withrow /s/ Martin Christen
By: Mike Withrow By: Martin Christen
ROZEL INTERNATIONAL HLDS LTD. TAYLOR JACKSON
/s/ Howard Chaffe /s/ Taylor Jackson
By: Howard Chaffe By: Taylor Jackson
ZALUCCI ENTERPRISES LTD. 458468 BC LTD.
/s/ Xenius Xenopoulos /s/ Mike Withrow
By: Xenius Xenopoulos By: Mike Withrow
BRYN INVESTMENTS LTD. CHARTWELL INTERNATIONAL INC.
/s/ J. Brott /s/ Juan Mashburn
By: J. Bross By: Juan Mashburn
STRATEGIC LINES ASSET MANAGEMENT DON FARRELL
/s/ Brian Lines /s/ Don Farrell
By: Brian Lines By: Don Farrell
BRADSHAW HOLDINGS LTD. MR. RICARDO REQUNA
/s/ Issac Collie /s/ Ricardo Requna
By: Issac Collie By: Ricardo Requna
PUNZO PARTNERSHIP VELMASIC ENTERPRISES LTD.
/s/ Gino Punzo /s/ W. Kussof
By: Gino Punzo By: W. Kussof
533202 BC LTD.
/s/ Carol Williams
By: Carol Williams
5
<PAGE>
EXHIBIT A
SHAREHOLDERS OF POWERTRADER SOFTWARE INC.
458468 B.C. Ltd.
533202 B.C. Ltd.
Bradshaw Holdings Ltd.
Bryn Investments Ltd.
Chartwell International Ltd.
Don Farrell
Taylor Jackson
Lotus Development Corp.
Montrose Ltd.
Punzo Partnership
Ricardo Requna
Rozel International Holdings
Strategic Lines Asset Management
Velmasic Enterprises Ltd.
Zalucci Enterprises Limited
6
RESTATED
CERTIFICATE OF INCORPORATION
OF
POWERTRADER, INC.
PowerTrader, Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies as follows:
A. The Corporation was originally incorporated under the name
PowerTrader, Inc., and the original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of Delaware on August 22,
1996.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of the Corporation.
C. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
FIRST: The name of the corporation is POWERTRADER, INC.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH: (a) The aggregate number of shares of capital stock which the
corporation shall have authority to issue is Twenty-five Million (25,000,000),
each having a par value of One Cent ($0.01) per share. Of such authorized
shares, Twenty-three Million (23,000,000) shares are hereby classified and
designated as common stock and Two Million (2,000,000) shares are hereby
classified and designated as preferred stock.
(b) The voting power of the corporation shall be vested in the holders
of the common stock, who shall be entitled to one vote per share of common stock
on all matters to be voted on by the stockholders (including the election of
directors), except to the extent voting rights are established for holders of
preferred stock by the Board of Directors in accordance with part (c) of this
Article 4.
<PAGE>
(c) The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article 4, to provide for the
issuance of the shares of preferred stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
(d) The authority of the Board of Directors with respect to the
establishment of each series of preferred stock shall include, but not be
limited to, determination of the following:
(i) the number of shares constituting that series and the distinctive
designation of that series;
(ii) the dividend rate on the shares of that series, whether dividends
shall be cumulative and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(iii) whether that series shall have voting rights, in addition to the
voting rights provided by law, and if so, the terms of such voting rights;
(iv) whether that series shall have conversion privileges and, if so,
the terms and conditions of such conversion privileges, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
(v) whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(vi) whether that series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and amount of such
sinking fund;
(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(viii) any other relative rights, preferences and limitations of that
series.
2
<PAGE>
(e) No holder of any share of stock or other security of the
corporation, either now or hereafter authorized or issued, shall have any
preferential or preemptive right to acquire additional shares of stock or any
other security of the corporation other than such, if any, as the Board of
Directors may in its discretion from time to time determine pursuant to the
authority conferred by this Certificate of Incorporation of the corporation.
(f) There shall be no right to cumulative voting in the election of
directors.
(g) Except as otherwise required by the General Corporation Law of the
State of Delaware, whenever the holders of shares of stock of the corporation
shall be entitled to vote as a class at a meeting at which a quorum of the class
is present with respect to any matter, the affirmative vote of a majority of the
shares of such class voted in person or by proxy at the meeting shall be
required to constitute the act of such class.
FIFTH: In furtherance and not in limitation of the powers granted by
statute, the board of directors is authorized to adopt, alter or repeal the
bylaws of the corporation.
SIXTH: No director of the corporation shall be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article 6
shall not eliminate or limit the liability of a director to the extent provided
by applicable law: (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the General Corporation Law of the State of Delaware; or (iii)
for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Article 6 shall apply to or have any
effect on the liability or allege liability of any director of the corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of ss.291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of ss.279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the stockholders
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or class of stockholders of this corporation, as the case may be, to be summoned
in such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors of class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has
been signed by Michael C. Withrow, its authorized officer this 17th day of
December , 1996.
/s/ Michael C. Withrow
Michael C. Withrow, Chairman,
President and Chief Executive
Officer
Date: December 17, 1996
4
BY-LAWS Exhibit 3.2
OF
POWERTRADER, INC.
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places,
both within and without the State of Delaware, as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held on the second Tuesday of May if not a legal holiday, and if
a legal holiday, then on the next business day following, at 10:00 a.m., 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 which the stockholders
shall elect one or more directors and transact such other business as may
properly be brought before the meeting.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting by
a stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a stockholder's notice must be
<PAGE>
received at the principal executive offices of the Corporation not less than 120
days nor more than 150 days prior to the date of the notice to stockholders of
the previous year's annual meeting. A stockholder's notice to the secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting: (a) a brief description of the proposal or business desired to
be brought before the annual meeting and the reasons for presenting the proposal
or conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such proposal or business. Notwithstanding anything in these
ByLaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this Section 2. The
chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 2, and if he should so
determine and declare to the meeting, any such business not properly brought
before the meeting shall not be transacted.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders entitled to vote, for
any purpose or purposes, may be called only by the president or the Board of
Directors.
Section 6. Written notice of a special meeting of the stockholders
entitled to vote, stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at the meeting.
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Section 7. Business transacted at a special meeting of the stockholders
entitled to vote shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the issued and outstanding
stock which is entitled to vote, whether present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such a quorum shall not be present or
represented at a meeting, except as otherwise provided in Article VI, Section 5,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting in accordance with the original notice thereof. If the adjournment
is for more than thirty (30) days, or 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 stockholder of record entitled to vote at the meeting in
accordance with Section 3 and/or Section 6 of this Article II.
Section 9. When a quorum is present at any meeting, the affirmative
vote of a majority of the votes cast shall decide any question brought before
the meeting, unless the question is one upon which, by the express provision of
statute, the Certificate of Incorporation of the Corporation or these By-Laws, a
different vote is required in which case such express provision shall govern and
control the decision of such question.
Section 10. When determining the presence of a quorum at any meeting,
all shares held by (a) any stockholder, or represented by a holder of a proxy
therefor, who is present but voluntarily decides not to vote, or (b) a broker or
nominee who lacks authority to vote such shares, shall be deemed present.
However, such shares shall not be deemed cast on any matter unless properly
voted and, therefore, shall have no effect on the outcome of the matter in
question.
Section 11. Unless otherwise provided in the Certificate of
Incorporation of the Corporation, each stockholder shall at every meeting of the
stockholders be entitled to cast one vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after eleven (11) months from its date, unless the proxy
provides for a longer period.
Section 12. Any action required or permitted to be taken at any annual
or special meeting of stockholders of the Corporation, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken,
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is signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to be voted were present and voted, and is
delivered to the Corporation to its registered office in this State, its
principal place of business, or to an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a Corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested.
ARTICLE III
DIRECTORS
Section 1. (a) The number of directors constituting the entire Board
shall be not less than three (3) nor more than nine (9) as fixed from time to
time by vote of a majority of the entire Board, provided, however, that the
number of directors shall not be reduced so as to shorten the term of any
director then in office, and provided further, that the number of directors
constituting the entire Board shall be three (3) until otherwise fixed by a
majority of the entire Board.
(b) The Board of Directors shall be divided into three
classes. Directors shall be elected and/or appointed to one of the
following classes:
CLASS EXPIRATION OF TERM
I Annual meeting date of the
stockholders in 1997 and every
3 years thereafter
II Annual meeting date of the
stockholders in 1998 and every
3 years thereafter
III Annual meeting date of the
stockholders in 1999 and every
3 years thereafter
Directors shall be elected and/or appointed to classes so that the total number
of directors shall be divided as equally as possible between the three classes
of directors. Any vacancies in the Board of Directors for any reason, and any
created directorships resulting from any increase in the directors, may be
filled by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successors
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<PAGE>
shall be elected and qualified. No decrease in the number of directors shall
shorten the term of any incumbent director. Notwithstanding the foregoing, and
except as otherwise required by law, whenever the holders of any one or more
series of Preferred Stock shall have the right, voting separately as a class, to
elect one or more directors of the Corporation, the terms of the director or
directors elected by such holders shall expire at the next succeeding annual
meeting of stockholders. Subject to the foregoing, at each annual meeting of
stockholders the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting.
(c) Notwithstanding any other provisions of the Certificate of
Incorporation of the Corporation or these By-Laws (and notwithstanding the fact
that some lesser percentage may be specified or permitted by law, the
Certificate of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed only for cause
by the affirmative vote of the holders of eighty percent (80%) or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors cast at a meeting of the stockholders
called for that purpose. Notwithstanding the foregoing, and except as otherwise
required by law, whenever the holders of any one or more series of Preferred
Stock shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the provisions of this subsection (c) shall not
apply with respect to the director or directors elected by such holders of
Preferred Stock.
Section 2. The business 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 Certificate of Incorporation of the Corporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 4. The annual meeting of the Board of Directors shall be held
immediately following the annual meeting of stockholders at the place at which
the meeting of the stockholders is held, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum of the Board of Directors is present.
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Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board of Directors.
Section 6. Special meetings of the Board of Directors may be called by
the president on three (3) days' notice to each director, either personally or
by mail or by facsimile; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two or
more directors unless the Board of Directors consists of only one director.
Section 7. At all meetings of the Board of Directors, a majority of
directors shall constitute a quorum for the transaction of business and the vote
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
Section 8. 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, without prior notice and without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
Section 9. Members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors, or any 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 such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
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appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in resolutions of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority to amend the Certificate of Incorporation of the Corporation (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation, or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the Corporation), to adopt an agreement of merger or consolidation, to
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, to recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or to amend the By-Laws of the Corporation; and, unless the resolution of the
Board of Directors or the Certificate of Incorporation of the Corporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or to adopt a
certificate of ownership and merger. 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.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors.
COMPENSATION OF DIRECTORS
Section 12. The Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors or committee thereof and
may be paid, either in cash or in securities of the Corporation, a fixed sum for
attendance at each meeting of the Board of Directors or committee thereof or a
stated salary as director or committee member. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
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ARTICLE IV
NOTICES
Section 1. Whenever notice is required or permitted to be given to any
director or stockholder, it shall not be construed to require personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his or her address as it appears on the records of the
Corporation, with first class postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given personally, by facsimile or
by next business day courier delivery and shall be deemed to be given when
personally given or so sent.
Section 2. Whenever any notice is required to be given, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE 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 stockholders and
shall be a chairman of the Board of Directors, president, one or more
vice-presidents (who may have further descriptive designations thereof, such as
executive vice-president, senior vice-president, vice-president, finance, etc.),
a secretary and a treasurer. The Board of Directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors may 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 of Directors.
Section 3. The salaries of all executive officers of the Corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the Corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
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THE CHAIRMAN OF THE BOARD OF DIRECTORS
Section 5. The chairman of the Board of Directors shall be the chief
executive officer of the Corporation and shall have general supervision over the
policies, affairs and finances of the Corporation. He shall keep the Board of
Directors fully informed and shall freely consult with the Board of Directors
concerning the business of the Corporation and shall perform such other duties
as are incident to his office and are properly required of him by the Board of
Directors. The chairman of the Board of Directors shall preside at all meetings
of the stockholders and the Board of Directors. Except where by law the
signature of the president is required and except as otherwise provided by the
Board of Directors, the chairman may sign all certificates, contracts, documents
and other instruments on behalf of the Corporation. Unless otherwise provided by
resolution of the Board of Directors, the chairman of the Board of Directors
also shall be entitled to vote all stock and other interests having voting
rights which are owned by the Corporation; in the absence of a contrary
resolution adopted by the Board of Directors, the chairman of the Board of
Directors shall vote such stock and other interests in a manner which he deems
appropriate.
THE PRESIDENT
Section 6. The president shall be the chief operating and
administrative officer of the Corporation and shall have general supervision
over the day-to-day operating affairs of the Corporation. The president shall
keep the Board of Directors fully informed, shall freely consult with the Board
of Directors concerning the business of the Corporation and shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe. In the absence of the chairman of the Board of Directors or
in the event of the chairman's inability or refusal to act, the president shall
perform all the duties of the chairman of the Board of Directors, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the chairman. The president may sign all certificates, deeds, mortgages, bonds,
contracts, documents and other instruments on behalf of the Corporation, except
where by law the signature of another officer or agent of the Corporation is
required, and except as otherwise provided by the Board of Directors.
THE VICE-PRESIDENTS
Section 7. In the absence of the president or in the event of the
president's inability or refusal to act, the vice-president (or in the event
there is more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
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acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 8. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
such meetings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. The secretary shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or chairman of the Board of Directors.
The secretary shall have custody of the corporate seal of the Corporation and
shall have authority to affix the same to any instrument requiring it and, when
so affixed, it may be attested by the secretary's signature. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by the secretary's signature.
Section 9. The assistant secretary, if any, or if there be more than
one, the assistant secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 10. The treasurer shall be the chief financial officer of the
Corporation and shall have the custody of the corporate funds and securities and
shall keep or cause to be kept 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.
Section 11. The treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and upon request shall render to the chairman of the Board of
Directors and the Board of Directors, an account of all transactions as
treasurer and of the financial condition of the Corporation.
Section 12. If required by the Board of Directors, the treasurer shall
give the Corporation and maintain in effect a bond in such sum and with such
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surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of the office of treasurer and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the possession or under the control of the treasurer belonging
to the Corporation.
Section 13. The assistant treasurer, if any, or if there shall be more
than one, the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of the
inability or refusal to act of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by one or
more certificates. Certificates shall be signed, in the name of the Corporation,
by the chairman of the Board of Directors, the president or a vice-president and
the treasurer or an assistant treasurer or the secretary or an assistant
secretary of the Corporation.
Upon the face or back of each stock certificate issued to represent any
partly paid shares shall be set forth the total amount of the consideration to
be paid therefor and the amount paid thereon.
If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized or referenced
on the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, provided that, if summarized or
referenced, there shall also be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
thereof who so requests a copy of the powers, designations, preferences and
relative, participating, optional or other special rights of the class of stock
or series and the qualifications, limitations or restrictions of such
preferences and/or rights.
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Section 2. Any of or all the signatures on a certificate may be
facsimile. If any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require and/or 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, stolen or destroyed.
TRANSFER OF STOCK
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, assignation 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 books,
subject, however to restrictions imposed either by applicable federal or state
securities laws or by agreements by or among the stockholders.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders, or to express
consent to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. A determination of stockholders of record
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entitled to notice of or to vote at a meeting ofstockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, to vote as such owner, and to hold liable for calls and assessments,
and shall not be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, whether or not the Corporation
shall have express or other notice thereof.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock of the Corporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
CHECKS
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
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SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the Corporation and the words "Corporate Seal, Delaware". The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 1. (a) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another Corporation, partnership, joint venture, trust,
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by such
person in connection with such action, suit, or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such conduct
was unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation, as a director or officer of another Corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
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<PAGE>
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
(c) To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subparagraphs (a) and (b), or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred in
connection therewith.
(d) Any indemnification under subparagraphs (a) and (b)
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director
or officer is proper in the circumstances because such person has met the
applicable standard of conduct set forth in subparagraphs (a) and (b). Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending a civil, criminal, administrative or
investigative action, suit, or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit, or proceeding upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation as authorized herein.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, other subsections of this section shall not be
deemed exclusive of any other rights to which officers or directors seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office.
(g) The Corporation also shall have the authority to indemnify
employees and agents of the Corporation, but only to the extent provided by a
majority vote of disinterested directors on a case-by-case basis, after full
disclosure to the directors of all relevant facts and circumstances.
(h) The Corporation shall have the power to purchase and
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<PAGE>
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of his or her status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this section.
(i) For the purposes of this section, references to "the
Corporation" include all constituent corporations (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had the power and authority to indemnify its
directors, officers, employees or agents, as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this section with
respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
(j) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this section.
(k) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent, including, but not limited to, a person who ceases
to be a director, officer, employee or agent due to the resignation of such
person prior to the initiation of any action, suit or proceeding referred to in
subparagraphs (a) and (b), and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 2. The Corporation shall, to the fullest extent permitted by
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Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented from time to time, indemnify all officers and
directors whom it shall have the power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, or any successor section thereto.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors (when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation), at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
17
INVESTOR SUBSCRIPTION AGREEMENT for
POWERTRADER, INC.
The undersigned, intending to be legally bound, hereby irrevocably subscribes to
purchase from PowerTrader, Inc., a Delaware corporation (the "Company"), the
number of units set forth below, each unit consisting of one share of the
Company's common stock, $0.01 par value ("Share") and one warrant to purchase
one additional Share ("Warrant")(Warrant and Share are collectively referred to
herein as "Unit") for a purchase price of $3.25 per Unit, and/or to purchase
from certain stockholders of the Company, the number of Shares set forth below
(the "Stockholder Shares") for a purchase price of $3.00 per Share. This
Subscription Agreement along with payment payable to the order of "American
Stock Transfer and Trust Company, Escrow Agent" should be returned to:
PowerTrader, Inc.
885 Dunsmuir Street, Suite 591
Vancouver, B.C. Canada V6C 1N5
If this subscription is accepted by the Company, in whole or in part, the
Company shall deliver to American Stock Transfer and Trust Company (the "Escrow
Agent") the subscription payment to be held for the benefit of the undersigned
in accordance with the terms and conditions of a certain Escrow Agreement.
The undersigned hereby represents and warrants to, and agrees with, the Company
as follows:
a. The undersigned, if a natural person, is a bona fide resident of the
State of __________________.
b. The undersigned, if an entity, is duly authorized to execute this
Agreement which constitutes a binding obligation of the undersigned
enforceable against the undersigned.
c. The undersigned has received, read carefully and is familiar with this
Agreement and the Prospectus, dated ______________, 1996 (the
"Prospectus"), as it may be supplemented and amended, and has had
access to all information necessary to verify the information in this
Agreement and the Prospectus.
d. It has never been represented by any agent of the Company that the
undersigned's investment will be profitable or in any way predictable
based on past performance or experience.
e. The representations, warranties, consents and agreements made by the
undersigned herein shall survive the execution and delivery of this
Agreement and the purchase of Units and/or Stockholder Shares.
f. The undersigned shall indemnify and hold harmless the Company and its
agents, from and against any and all loss, damage or liability due to
or arising out of a breach of any representation or warranty contained
herein.
g. The undersigned hereby consents to delivery of prospectuses required
to be delivered in connection with offerings under the Securities Act
of 1933 and annual reports to security holders and proxy or
information statements required to be furnished pursuant to Section 14
of the Securities and Exchange Act of 1934 by e-mail or, if preceded
by e-mail notice, Internet delivery.
<PAGE>
Number of Units being purchased:_________
Number of Stockholder Shares being purchased: _________
o Name as it should appear on the certificate:
o As (check one):
|_| Individual |_| Tenants-in-Common |_| Existing Partnership
|_| Joint Tenants |_| Corporation |_| Trust
|_| Minor with adult cust dian under the Uniform Gift to Minors Act
o For the person(s) who will be registered stockholder(s):
- ------------------------------------- ------------------ ----------------------
Name Telephone E-Mail Address
- ------------------------------------- ----------------------------------------
Street address Social Security or Taxpayer ID number
- ------------------------------------- ----------------------------------------
City State Zip Date of Birth
- -------------------------------------- ----------------------------------------
Signature Date
ACCEPTED BY POWERTRADER, INC.
By:----------------------------------- Date:-----------------------------------
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into and effective as of
_______________________, 1997, by and between PowerTrader, Inc. (the "Company")
and American Stock Transfer and Trust Company. (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company is conducting an offering of a minimum of
1,000,000 and a maximum of 1,700,000 units, each consisting of one share of the
Company's common stock, $0.01 par value per share (the "Common Stock"), and one
warrant to purchase one additional share of Common Stock at an exercise price of
$3.50 per share (individually a "Unit" and collectively, the "Units") at an
offering price of $3.25 per Unit (the "Offering") on a best efforts basis; and
WHEREAS, the Offering is being made in reliance upon the exemptions
from registration contained in Section 4(2) of the Securities Act of 1933, as
amended (the "Act") and Regulation D promulgated thereunder, as well as
analogous exemptive provisions of the securities laws of the states in which the
Offering is being made; and
WHEREAS, the Company proposes to establish an Escrow Account with the
Escrow Agent for the benefit of those persons subscribing for the Units in the
Offering (the "Subscribers") to be designated as the "PowerTrader, Inc. -
Special Account".
NOW, THEREFORE, in consideration of the mutual obligations hereunder,
the parties hereto agree as follows:
1.0 Appointment of Escrow Agent; Establishment of Account. The Company
hereby appoints the Escrow Agent to act as escrow agent in accordance with and
subject to the terms and conditions of this Agreement for the sole and exclusive
benefit of the Subscribers, and the Escrow Agent hereby accepts such appointment
and agrees to act in accordance with and subject to the terms and conditions
hereof. Escrow Agent further agrees to establish an escrow account designated as
the "PowerTrader, Inc. - Special Account" (the "Escrow Account").
2.0 Deposit of Proceeds. Upon its receipt of an acceptable subscription
for the Units in the form of a duly completed subscription agreement accompanied
by payment in full of the applicable purchase price in the form of a certified
or official bank check payable to the order of "PowerTrader, Inc. - Special
Account", the Company will promptly deliver to the Escrow Agent the subscription
amount received and the name and address of the Subscriber. Upon receipt of any
subscription amount represented by a check, the Escrow Agent shall enter the
check for collection and hold the proceeds thereof in escrow subject to the
<PAGE>
terms and conditions of this Agreement. Subscription amounts may also be sent by
wire transfer directly to the Escrow Account, which payments the Escrow Agent
shall hold subject to the terms and conditions of this Agreement.
3.0 Investment of Subscription Amounts. The Escrow Agent shall hold all
subscription amounts in the Escrow Account, which shall be a separate bank
account constituting a "deposit" (as that term is defined in Section 3(1) of the
Federal Deposit Insurance Act) established and maintained by the Escrow Agent in
accordance with the terms and conditions of this Agreement. The Escrow Agent
shall establish and maintain books and records indicating the name, address and
interest in the account of each Subscriber. All interest earned on the
subscription amounts, if any, shall be held in the Escrow Account until the
subscription amounts are released in accordance with the provisions of Section
4.
4.0 Release of Subscription Amounts and Securities.
4.1 If, on or before ______________________, 1997 (the
"Termination Date"), the Company has received, pursuant to the Offering,
acceptable subscriptions for an aggregate of not less than 1,000,000 Units
($3,250,000 in cash), then the Company will deliver to the Escrow Agent a
certificate to that effect in substantially the form of Exhibit A hereto. Upon
receipt of the aforementioned certificate, the Escrow Agent will release from
escrow and deliver to the Company all of the subscription amounts, and any
income earned thereon, in the form of a check payable to the order of the
Company or by other transfer to or for the account of the Company, as the
Company may designate.
4.2 If, within five (5) business days after the Termination
Date, the Escrow Agent has not received the certificate set forth in Exhibit A
hereto, then all subscription amounts, and any income earned thereon, then held
in escrow hereunder shall be disbursed by the Escrow Agent to each Subscriber in
the form of a check for such subscription amount, plus the pro rata share of any
income earned thereon, minus expenses, but in no event less than the original
subscription amount for each such Subscribers.
4.3 If after the release of funds, the Company has received,
pursuant to the Offering, additional acceptable subscriptions for Units, the
Company will deliver to the Escrow Agent a certificate to that effect in
substantially the form of Exhibit A hereto. Upon receipt of the aforementioned
certificate, the Escrow Agent will release from escrow and deliver to the
Company at such time as determined by the Board of Directors of the Company, all
of the additional subscription amounts, and any income earned thereon, in the
form of a check payable to the order of the Company or by other transfer to or
for the account of the Company, as the Company may designate.
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<PAGE>
5.0 Limitations of Escrow Agent's Capacity.
5.1 This Agreement expressly and exclusively sets forth the
duties of the Escrow Agent with respect to any and all matters pertinent hereto
and no implied duties or obligations or any fiduciary relationship shall be read
into this Agreement against the Escrow Agent.
5.2 The Escrow Agent shall act hereunder as a depository only,
and is not responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of the subject matter of this Agreement or
any part thereof, whether in form or substance, or for the form of execution
thereof, or for any endorsement or lack of endorsement thereon or for any
description therein. It shall be sufficient if a writing purporting to be such
instrument, document, certificate, statement or notice is delivered to the
Escrow Agent and purports on its face to be correct in form and signed or
otherwise executed by the party or parties required to sign or execute the same
under this Agreement. The Escrow Agent shall not be required in any way to
determine the identity or authority of any person executing the same or the
genuineness of such signature.
5.3 This Agreement as it presently exists or may hereafter be
amended constitutes the entire agreement between the Escrow Agent and any other
parties hereto in connection with the subject matter hereof, and no other
agreement entered into between the parties or any of them, shall be considered
as adopted or binding, in whole or in part, upon the Escrow Agent
notwithstanding that any other agreement may be deposited with the Escrow Agent
or the Escrow Agent may have knowledge thereof.
5.4 The Escrow Agent shall have no liability or obligation to
notify any party hereto or any other party interested in this Agreement of any
payment required or maturity occurring under this Agreement or under the terms
of any instrument deposited herewith unless such notice is explicitly provided
for in this Agreement.
5.5 The Escrow Agent shall not be charged with notice or
knowledge of any fact or information not herein set forth.
6.0 Authority of Escrow Agent.
6.1 The Escrow Agent is hereby authorized and directed by the
undersigned to deliver the subject matter of this Agreement only in accordance
with the provisions of Section 4 above.
6.2 The Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, certificate, receipt, authorization,
power of attorney or other paper or document which the Escrow Agent in good
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<PAGE>
faith believes to be genuine and what it purports to be, including but not
limited to items directing investment or non-investment of funds, items
requesting or authorizing release, disbursement or retainage of the subject
matter of this Agreement and the items amending the terms of this Agreement.
6.3 The Escrow Agent may consult with legal counsel in the
event of any dispute or question as to the construction of any of the provisions
hereof or its duties hereunder, and shall incur no liability and shall be fully
protected in act and in accordance with the advise of such counsel.
6.4 In the event of any disagreement between any of the
parties to this Agreement, or between any of them and any other person,
resulting in adverse claims or demands being made in connection with the matters
covered by this Agreement, or in the event that the Escrow Agent, in good faith,
shall be in doubt as to what action it should take, the Escrow Agent may, at its
option, refuse to comply with any claims or demands on it, or refuse to take any
other action hereunder, so long as such disagreement continues or such doubt
exists and in any such event the Escrow Agent shall not be or become liable in
any way or to any person for its failure or refusal to act, and the Escrow Agent
shall be entitled to continue to refrain from acting until (i) the rights of all
interested parties shall have been fully and finally adjudicated by a court of
competent jurisdiction, or (ii) all differences shall have been adjudged and all
doubt resolved by agreement among all the interested persons, and the Escrow
Agent shall have been notified thereof in writing signed by all such persons.
Notwithstanding the preceding, the Escrow Agent may in its discretion obey the
order or judgment, decree or levy of any court, whether with or without
jurisdiction, and the Escrow Agent is hereby authorized in its sole discretion,
to comply with and obey (and shall have no liability to any person or party so
doing) any such orders, judgments, decrees or levies which the Escrow Agent is
advised by legal counsel of its own choosing is binding upon it. The rights of
the Escrow Agent under this subsection are cumulative with all other rights
which it may have by law or otherwise.
6.5 The Escrow Agent shall have no liability for any loss
arising from any cause beyond its control, including but not limited to the
following (i) the act, failure or negligence of any agent or correspondent
selected by the Escrow Agent for the remittance of funds (ii) any delay, error
omission or default of any mail, telegraph, cable or wireless agency or operator
(iii) the acts or edicts of any government or governmental agency or other group
or entity exercising governmental powers.
6.6 Without in any way limiting any other provision of this
Agreement as expressly understood and agreed that the Escrow Agent shall be
4
<PAGE>
under no duty or obligation to give any notice or todo or to omit the doing of
any action or anything with respect to the subject matter hereof except to
receive, hold and deliver the same in accordance with the terms hereof. The
Escrow Agent shall not be liable for any error in judgment, or act or omission,
or any mistake of law or fact or for doing anything it may do or refrain from
doing in connection herewith, except for its own willful misconduct or gross
negligence.
6.7 The Escrow Agent shall be indemnified and held harmless
from anything which it may do or refrain from doing in connection herewith or
for any claims, demands or losses or for any damages made or suffered by any
party to this Agreement except such as may arise through or be caused by the
Escrow Agent's willful misconduct or gross negligence.
6.8 In the event that any controversy should arise among the
parties with respect to this Agreement, or should the Escrow Agent resign and
the parties fail to select another escrow agent to act in its stead, the Escrow
Agent shall have the right to institute a bill of interpleader in any court of
competent jurisdiction to determine the rights of the parties.
7.0 Compensation. The Escrow Agent shall be entitled to reasonable
compensation as well as reimbursement for its reasonable costs and expenses
incurred in connection with the performance by it of services under this
Agreement (including reasonable fees and expenses of Escrow Agent's counsel).
Each of the undersigned parties, with the exception of the Escrow Agent hereby
jointly and severally bind and obligate themselves to pay to the Escrow Agent on
demand compensation to which it is entitled. The Escrow Agent's fee for services
hereunder during the term of this Escrow Agreement shall be not more than Escrow
Agent's normal fee for similar services.
8.0 Resignation. The Escrow Agent may resign at any time by giving
written notice to the parties hereto whereupon the parties hereto will appoint a
successor Escrow Agent within thirty (30) days thereafter. Until a successor
Escrow Agent has been named and accepted its appointment or until another
disposition of the subject matter of this Agreement has been agreed upon by all
the parties hereto, the Escrow Agent shall be discharged of all of its duties
hereunder save to keep the subject matter whole.
9.0 General Provisions.
9.1 Unless this Agreement is terminated earlier by the
complete disbursement of the subject matter of this Agreement, the duties of
Escrow Agent shall terminate December 31, 1998 (unless any party has sent notice
to all other parties that a dispute exists regarding any part of the subject
matter hereof) and upon such termination, the Escrow Agent is hereby directed to
deliver any subscription amounts then held in escrow to the Company.
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<PAGE>
9.2 The Escrow Agent upon the first to occur of the fixed
termination date set out in subsection 9.1 above, or the release of all of the
subject matter pursuant to the terms of this Agreement, shall be discharged from
any further obligation hereunder.
9.3 Where directions or instructions from more than one of the
undersigned are required, such directions or instructions may be given by
separate instruments of similar tenor. Any of the undersigned may act hereunder
through an agent or attorney-in-fact, provided satisfactory written evidence of
authority is first furnished to any party relying on such authority.
9.4 Any payment, notice, request for consent, report, or any
other communication required or permitted in this Agreement shall be in writing
and shall be deemed to have been given when personally delivered to the party
hereunder specified against receipt therefor or when placed in the United States
Postal Service, registered or certified, with return receipt requested, postage
prepaid or by facsimile transmission (provided a copy is mailed by certified or
registered mail, return receipt requested) and addressed as follows:
If to the Escrow Agent:
American Stock Transfer and Trust Co.
------------------------------------
------------------------------------
Fax:
If to the Company:
PowerTrader, Inc.
Suite 591, 885 Dunsmuir Street
Vancouver, British Columbia
V6C 1N5
Attn: Michael C. Withrow, President
Fax: (604) 685-1513
With copy to:
Gallop, Johnson & Neuman, L.C.
101 South Hanley
St. Louis, Missouri 63105
Attn: Douglas J. Bates, Esq.
Fax: (314) 862-1219
Any party may unilaterally designate a different address by giving
notice of each such change in the manner specified above to the other party.
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<PAGE>
9.5 This Agreement is being made in and is intended to be
construed according to the internal substantive laws of the State of Delaware
applicable to contracts executed, delivered and performed wholly within the
State of Delaware. It shall inure to and be binding upon the parties hereto and
their respective successors, receivers, personal representatives, trustees and
assigns.
9.6 Words used in the singular number may include the plural
and the plural may include the singular. The section headings appearing in this
instrument have been inserted for convenience only and shall be given no
substantive meaning or significance whatsoever in construing the terms and
conditions of this Agreement.
9.7 The terms of this Agreement may be altered, amended,
modified or revoked only by an instrument in writing signed by all the parties
hereto and each of the Purchasers.
9.8 If one or more of the provisions hereof shall for any
reason be held to be invalid, illegal or unenforceable in any respect under
applicable law, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
The parties below execute this Agreement on this ____ day of
_________________, 199__.
POWERTRADER, INC.
By:
Michael C. Withrow, President,
Chairman and Chief Executive
Officer
AMERICAN STOCK TRANSFER AND TRUST CO.
By: _______________________________
Printed
Name:_______________________________
Title:______________________________
7
<PAGE>
EXHIBIT A
American Stock Transfer and Trust Company
- -----------------------------------------
- -----------------------------------------
Re: PowerTrader, Inc.
Ladies and Gentlemen:
We hereby refer to the Escrow Agreement between PowerTrader, Inc. (the
"Company") and American Stock Transfer and Trust Company, dated as of
______________, 199__ (the "Agreement"). In accordance with Section 4 of the
Agreement, we hereby certify to you that the Company has received acceptable
subscriptions for an aggregate of not less than 1,000,000 Units and you have
received cash related thereto of not less than $3,250,000. Accordingly, you are
instructed to deliver the entire amount held by you under the Agreement to
___________ _________________, attention __________________, for deposit to such
accounts as the Company instructs _______________.
Very truly yours,
POWERTRADER, INC.,
a Delaware corporation
By:__________________________________
Michael C. Withrow, President,
Chairman and Chief Executive
Officer
Date:________________________________
CONSULTANT AGREEMENT
THIS MADE THE 27 DAY OF December , 1996,
BETWEEN
PowerTrader Software Inc., incorporated pursuant to the laws of the Province of
British Columbia, with a head office at #591-885 Dunsmuir St., Vancouver, BC V6C
1N5 ("PSI")
Of The First Part
AND:
458468 B.C. Ltd.
("458468")
Of The Second Part
WHEREAS:
R.1 PSI entered into an oral agreement with 458468 as of July 1, 1996, wherein
458468 agreed to make available to PSI the services of Michael C. Withrow
("Withrow") to serve as a consultant to PSI; and
R.2 PSI and 458468 now desire to memorialize their arrangement through a written
agreement that will supersede any previous discussions or arrangements including
any which may have been made directly with Withrow.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto mutually agree as follows:
APPOINTMENTS AND DUTIES
Section 1.1. PSI, by this Agreement, appoints 458468 to serve as a
consultant to PSI subject to the terms and conditions and for the term set forth
in this Agreement. 458468 accepts and agrees to such appointment with PSI,
subject to the terms and conditions and for the term set forth in this
Agreement. 458468 agrees that it will faithfully, industriously and to the best
of its ability, experience and talents, perform all of the duties described in
this Agreement.
Section 1.2. 458468 shall make available to PSI the services of
Withrow, who shall devote eighty (80%) percent of his time to managing the
affairs of PSI. Specifically, Withrow shall assist in the overall long term
direction of PSI, the technical revision and further development of PSI's suite
of products, and the initial marketing of PSI until such time as PSI is
adequately financed to fund a significant marketing plan.
EFFECTIVE DATE; TERM OF THE AGREEMENT; TERMINATION
Section 2.1. The Agreement shall be effective as of the 1st day of
July, 1996.
Section 2.2. Subject to earlier termination as provided in Section 2.3
of this Agreement, this Agreement shall be for a period commencing effective the
1st day of July, 1996 and ending on July 1st, 1999 (the "Contract Term"). This
Agreement shall be automatically extended for an additional three (3) year term
after the Contract Term unless either party shall give to the other party
written notice at least six (6) months prior to the expiration of the Contract
Term, or any extension thereof, of its determination not to so renew.
<PAGE>
At the expiration of the Contract Term, or any extension thereof, the obligation
of PSI to pay further compensation to 458468 shall cease, provided, however,
that all other obligations hereunder of either party to the other party at the
time of such termination shall not be affected by such termination.
Section 2.3. This Agreement may be terminated by either party at any
time prior to the expiration of the Contract Term, or any extension thereof,
upon one (1) month notice to the other party. In the event of termination of
this Agreement except termination pursuant to Section 2.4, PSI shall:
(a) Pay to 458468 any fees to which 458468 is entitled as provided
in this Agreement which accrue through the date of
termination;
(b) Immediately reimburse 458468 for any money that 458468 has
paid with its own funds on behalf of PSI, its parent or any
subsidiary plus interest at the rate of prime plus 1.5 % per
month (or part thereof);
(c) If this Agreement is terminated during the first year of the
Contract Term, pay to 458468 an amount equal to two (2)
months' fees; and
(d) If this Agreement is terminated subsequent to the first year
of the Contract Term, pay to 458468 two (2) months' fees for
each full year of service of the Contract Term, or any
extension thereof.
Section 2.4. This Agreement may be terminated by PSI without prior
notice if, at any time, 458468, while in the performance of its duties:
(a) commits a material breach of a provision of this Agreement;
(b) is unable or unwilling to perform its duties under this
Agreement;
(c) commits fraud or serious neglect or misconduct in the
discharge of its duties hereunder; or
(d) becomes bankrupt or makes any arrangement or compromise with
its creditors.
In the event of termination of this Agreement pursuant to this Section
2.4, 458468 shall only be entitled to receive any fees to which 458468 is
entitled as provided in this Agreement which accrue through the date of
termination.
FEES AND EXPENSES
Section 3.1. As a fee for 458468's services under the Agreement, PSI
shall pay 458468, commencing on the effective date of this Agreement and
continuing throughout 458468's engagement by PSI, an annual base fee (the "Base
Fee") in an amount as provided below:
(a) Eighty-five Thousand Canadian Dollars (CDN $85,000) per annum
for the first year of the Contract Term payable in monthly
installments of CDN $7,083.33;
(b) Ninety-two Thousand Canadian Dollars (CDN $92,000) per annum
for the second year of the Contract Term payable in monthly
installments of CDN $7,666.66; and
(c) For subsequent years, an amount mutually determined by the
Board of Directors of PSI and 458468, payable in monthly
installments.
2
<PAGE>
Section 3.2. In addition to 458468's Based Fee, 458468 shall be
entitled to receive bonuses from time to time determined by the Board of
Directors of PSI in such amount and/or on such basis as the Board shall
determine to be reasonable and appropriate based on such criteria as the Board
shall have established. 458468 shall have no vested rights to receive any
bonuses and 458468 agrees that the amount, if any, of any bonus shall be in the
sole discretion of the Board.
Section 3.3. PSI agrees to reimburse 458468 for all actual expenses
properly incurred by 458468 on behalf of PSI or PowerTrader in carrying out its
duties and performing its functions under this Agreement and for all such
expenses 458468 shall furnish a statement to PSI prior to reimbursement.
Section 3.4. In addition to providing the services set forth herein,
458468 may provide office equipment, services and space to PSI for which PSI
shall pay 458468 a fee per month at such rates and minimums as the parties
hereto shall from time to time establish by mutual agreement.
Section 3.5. All payments hereunder shall be made to 458468 at the head
office of PSI and PSI shall remit such payments to 458468 on a regular monthly
basis commencing the 1st day of July, 1996.
CONFIDENTIALITY AND TRADE SECRETS
Section 4.1. 458468 shall not reveal or divulge and shall cause each of
its officers and agents (including Withrow) to refrain from revealing or
divulging, except as authorized or required by its duties, to any person or
companies any of the trade secrets, secrets or confidential operations,
processes or dealings or any information concerning the organization, business,
finances, transactions or other affairs of PSI, PowerTrader, or any subsidiary
which may come to its knowledge during the term of this Agreement and shall keep
in complete secrecy all confidential information entrusted to it and shall not
use or attempt to use any such information in any manner which may incur or
cause loss either directly or indirectly to the business of PSI, PowerTrader, or
any subsidiary or may be likely so to do. This restriction shall continue to
apply after the termination of this agreement for a term of six (6) months.
Section 4.2. 458468 agrees that all the information, records and files
458468 shall obtain or to which 458468 shall have access during the term of this
Agreement shall be and remain the sole property of PSI or its customers, as the
case may be. On the cessation of 458468's association with PSI as a consultant,
all documents, records, papers, books, programs, bulletins, notices, plans,
strategies, customers, leads, customer lists, financial information, prices,
pricing policies, and processes related to the business of PSI, 458468's own
business notes, all equipment and supplies, instruments, prototypes, models,
products, notebooks, invoices, statements, correspondence and similar
depositories, including computer tapes, discs, magnetic or digital storage of
information containing trade secrets, or confidential information, as
hereinabove set forth, including all copies, abstracts or summaries thereof,
then in 458468's possession or control, whether prepared by PSI or others,
excepting therefrom those materials which 458468 received or would have been
entitled to receive as a stockholder, shall be returned to and left with PSI,
upon PSI's request and at its sole cost. The obligations of 458468 under this
Section 4.2 shall not be applicable to any materials or information which are
publicly available and/or known.
As a prior condition to 458468 receiving any final fees (if any) due
458468 which are accrued but unpaid at the cessation of 458468's employment,
458468 shall execute an affidavit to the effect that 458468 has complied with
the provisions of this section.
FURTHER ASSURANCES
Section 5.1. The parties hereto agree from time to time after the
execution hereof to make, to execute or cause or permit to be made, done or
executed all such further and other lawful acts, deeds, things, devices and
assurances in law whatsoever as may be required to carry out the true intention
and to give full force and effect to this agreement.
3
<PAGE>
INDEMNIFICATION
Section 6.1. PSI shall indemnify and save harmless 458468 from and
against any and all actions, claims, suits, demands, loss and damages whatsoever
which arise or result from or are caused by 458468 or PSI or anyone associated
with or employed by 458468 or PSI in the ordinary scope of this engagement.
NOTICE
Section 7.1. Any notice, direction or other instrument required or
permitted to be given under this Agreement shall be in writing and shall be
given by the delivery of same or by mailing same by prepaid registered or
certified mail or by sending same by telecopier (fax) in each case addressed to
the intended recipient at the address of the respective party set out on the
first page hereof with telecopier numbers as follows:
If to PSI:
PowerTrader Software Inc.
#591 - 885 Dunsmuir Street
Vancouver, B.C. V6C 1N5
Telecopier No. 685-1513
If to 458468:
458468 B.C. Ltd.
#12 - 1850 Argue Street
Port Coquitlam, B.C.
V3C 5K4
Telecopier No. 685-1513
Section 7.2. Any notice, direction or other instrument aforesaid will,
if delivered, be deemed to have been given and received on the day it was
delivered, and if mailed, be deemed to have been given and received on the fifth
business day following the date of mailing, except in the event of disruption of
the postal service in which event notice will be deemed to be received only when
actually received and if sent by telecopier on the day it was sent provided the
sender telephones to confirm receipt of the fax by the party to whom it was
sent.
Section 7.3. Any party may, at any time, give notice in writing to the
others of any change of address, and from and after the giving of such notice,
the address therein specified will be deemed to be the address of such party for
the purposes of giving notice hereunder.
WAIVER
Section 8.1. No waiver of any breach of this Agreement shall be binding
unless evidenced in writing executed by the party against whom waiver is
claimed. Any waiver shall extend only to the particular breach so waived and
shall not limit any rights with respect to any future breach.
AMENDMENTS
Section 9.1. This Agreement constitutes the entire Agreement between
4
<PAGE>
the parties hereto with respect to the subject matter hereof. An amendment or
variation of this Agreement shall only be binding upon a party if evidenced in
writing executed by that party.
SEVERABILITY
Section 10.1. If any one or more of the provisions contained herein
should be invalid, illegal or unenforceable in any respect in any jurisdiction,
the validity, legality and enforceability of such provision shall not in any way
be affected or impaired thereby in any other jurisdiction and the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
NUMBER AND GENDER
Section 11.1. Words used herein importing the singular number only
shall include the plural, and vice versa, and words importing the masculine
gender shall include the feminine and neuter genders, and vice versa, and words
importing persons shall include firms and corporations.
TIME OF ESSENCE
Section 12.1. Time is of the essence of this Agreement.
SUCCESSORS AND ASSIGNS
Section 13.1. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and permitted assigns.
GOVERNING LAW AND ARBITRATION
Section 14.1. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of British Columbia and the parties
hereby irrevocably attorn to the jurisdiction of the courts of the Province of
British Columbia.
Section 14.2. All disputes arising in connection with this Agreement
and which are not resolved by agreement between the parties shall be finally
settled by arbitration in accordance with the Commercial Arbitration act of
British Columbia.
5
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto on the
date and year first above written.
The common seal of PowerTrader Software Inc.
was hereunto affixed in the presence of:
/s/ David C. Furlonger
- ----------------------------
The authorized signature of
458468 B.C. LTD.
was hereunder affixed in the presence of:
/s/ Michael C. Withrow
- ----------------------------
/s/ David C. Furlonger
--------------------------
PowerTrader Software Inc.
6
CONSULTANT AGREEMENT
THIS MADE THE 24th DAY OF October, 1996,
BETWEEN
PowerTrader Software Inc., incorporated pursuant to the laws of the Province of
British Columbia, with a head office at #591-885 Dunsmuir St., Vancouver, BC V6C
1N5 ("PSI")
Of The First Part
AND:
Peridot International Enterprises Ltd.
("Peridot")
Of The Second Part
WHEREAS:
R.1 PSI entered into an oral agreement with Peridot as of October 24, 1996,
wherein Peridot agreed to make available to PSI the services of David C.
Furlonger ("Furlonger") to serve as the President of PSI; and
R.2 PSI and Peridot now desire to memorialize their arrangement through a
written agreement that will supersede any previous discussions or arrangements
including any which may have been made directly with Furlonger.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto mutually agree as follows:
APPOINTMENTS AND DUTIES
Section 1.1. PSI, by this Agreement, appoints Peridot to serve as an
administrative and financial consultant to PSI subject to the terms and
conditions and for the term set forth in this Agreement. Peridot accepts and
agrees to such appointment with PSI, subject to the terms and conditions and for
the term set forth in this Agreement. Peridot agrees that it will faithfully,
industriously and to the best of its ability, experience and talents, perform
all of the duties described in this Agreement.
Section 1.2. Peridot shall make available to PSI the services of
Furlonger, who shall devote eighty (80%) percent of his time to managing the
affairs of PSI. Specifically, Peridot shall assist in the overall long term
direction of PSI, the technical revision and further development of PSI's suite
of products, and the initial marketing of PSI until such time as PSI is
adequately financed to fund a significant marketing plan.
EFFECTIVE DATE; TERM OF THE AGREEMENT; TERMINATION
Section 2.1. The Agreement shall be effective as of the 24th day of
October, 1996.
Section 2.2. Subject to earlier termination as provided in Section 2.3
of this Agreement, this Agreement shall be for a period commencing effective the
24th day of October 1996 and ending on October 24th 1999 (the "Contract Term").
This Agreement shall be automatically extended for an additional three (3) year
term after the Contract Term unless either party shall give to the other party
written notice at least six (6) months prior to the expiration of the Contract
Term, or any extension thereof, of its determination not
<PAGE>
to so renew. At the expiration of the Contract Term, or any extension thereof,
the obligation of PSI to pay further compensation to Peridot shall cease,
provided, however, that all other obligations hereunder of either party to the
other party at the time of such termination shall not be affected by such
termination.
Section 2.3. This Agreement may be terminated by either party at any
time prior to the expiration of the Contract Term, or any extension thereof,
upon one (1) month notice to the other party. In the event of termination of
this Agreement except termination pursuant to Section 2.4, PSI shall:
(a) Pay to Peridot any fees to which Peridot is entitled as
provided in this Agreement which accrue through the date of
termination;
(b) Immediately reimburse Peridot for any money that Peridot has
paid with its own funds on behalf of PSI, its parent or any
subsidiary plus interest at the rate of prime plus 1.5 % per
month (or part thereof);
(c) If this Agreement is terminated during the first year of the
Contract Term, pay to Peridot an amount equal to two (2)
months' fees; and
(d) If this Agreement is terminated subsequent to the first year
of the Contract Term, pay to Peridot two (2) months' fees for
each full year of service of the Contract Term, or any
extension thereof.
Section 2.4. This Agreement may be terminated by PSI without prior
notice if, at any time, Peridot, while in the performance of its duties:
(a) commits a material breach of a provision of this Agreement;
(b) is unable or unwilling to perform its duties under this
Agreement;
(c) commits fraud or serious neglect or misconduct in the
discharge of its duties hereunder; or
(d) becomes bankrupt or makes any arrangement or compromise with
its creditors.
In the event of termination of this Agreement pursuant to this Section
2.4, Peridot shall only be entitled to receive any fees to which Peridot is
entitled as provided in this Agreement which accrue through the date of
termination.
FEES AND EXPENSES
Section 3.1. As a fee for Peridot's services under the Agreement, PSI
shall pay Peridot, commencing on the effective date of this Agreement and
continuing throughout Peridot's engagement by PSI, an annual base fee (the "Base
Fee") in an amount as provided below:
(a) Seventy Thousand Dollars ($70,000) per annum for the first two
years of the Contract Term payable in monthly installments of
$5,833.00;
(b) Eighty Thousand Dollars ($80,000) per annum for the third year
of the Contract Term payable in monthly installments of
$6,666.66; and
(c) For subsequent years, an amount mutually determined by the
Board of Directors of PSI and Peridot, payable in monthly
installments.
2
<PAGE>
Section 3.2. PSI will cause PowerTrader, Inc., a Delaware corporation
and parent company of PSI ("PowerTrader"), to grant to Peridot Three Hundred and
Fifty Thousand (350,000) shares of common stock of PowerTrader subject to
certain restrictions and forfeiture provisions set forth in an agreement of
customary form. Such restrictions and forfeiture provisions shall lapse in
accordance with the following schedule:
(a) One Hundred Thousand (100,000) shares after the first year of
service;
(b) One Hundred and Fifty Thousand (150,000) shares after the
second year of service;
(c) One Hundred Thousand (100,000) shares after the third year of
service;
Section 3.3. In addition to Peridot's Base Fee, Peridot will receive a
stock option to purchase up to 100,000 shares of Common Stock of PowerTrader in
accordance with the PowerTrader, Inc. 1996 Stock Option Plan.
Section 3.4. In addition to Peridot's Based Fee, Peridot shall be
entitled to receive bonuses from time to time determined by the Board of
Directors of PSI in such amount and/or on such basis as the Board shall
determine to be reasonable and appropriate based on such criteria as the Board
shall have established. Peridot shall have no vested rights to receive any
bonuses and Peridot agrees that the amount, if any, of any bonus shall be in the
sole discretion of the Board.
Section 3.5. PSI agrees to reimburse Peridot for all actual expenses
properly incurred by Peridot on behalf of PSI or PowerTrader in carrying out its
duties and performing its functions under this Agreement and for all such
expenses Peridot shall furnish a statement to PSI prior to reimbursement.
Section 3.6. In addition to providing the services set forth herein,
Peridot may provide office equipment, services and space to PSI for which PSI
shall pay Peridot a fee per month at such rates and minimums as the parties
hereto shall from time to time establish by mutual agreement.
Section 3.7. All payments hereunder shall be made to Peridot at the
head office of PSI and PSI shall remit such payments to Peridot on a regular
monthly basis commencing the 24th day of October, 1996.
Section 3.8. During each fiscal year of PSI, Peridot will be excused
from its obligation to provide the services of Furlonger for three weeks at a
time convenient to PSI and without deduction in Base Fees payable.
CONFIDENTIALITY AND TRADE SECRETS
Section 4.1. Peridot shall not reveal or divulge and shall cause each
of its officers and agents (including Furlonger) to refrain from revealing or
divulging, except as authorized or required by its duties, to any person or
companies any of the trade secrets, secrets or confidential operations,
processes or dealings or any information concerning the organization, business,
finances, transactions or other affairs of PSI, PowerTrader, or any subsidiary
which may come to its knowledge during the term of this Agreement and shall keep
in complete secrecy all confidential information entrusted to it and shall not
use or attempt to use any such information in any manner which may incur or
cause loss either directly or indirectly to the business of PSI, PowerTrader, or
any subsidiary or may be likely so to do. This restriction shall continue to
apply after the termination of this agreement for a term of six (6) months.
Section 4.2. Peridot agrees that all the information, records and files
Peridot shall obtain or to which Peridot shall have access during the term of
this Agreement shall be and remain the sole property of PSI or its customers, as
the case may be. On the cessation of Peridot's association with PSI as a
consultant, all documents, records, papers, books, programs, bulletins, notices,
plans, strategies, customers, leads, customer lists, financial information,
prices, pricing policies, and processes related to the business of PSI,
3
<PAGE>
Peridot's own business notes, all equipment and supplies, instruments,
prototypes, models, products, notebooks, invoices, statements, correspondence
and similar depositories, including computer tapes, discs, magnetic or digital
storage of information containing trade secrets, or confidential information, as
hereinabove set forth, including all copies, abstracts or summaries thereof,
then in Peridot's possession or control, whether prepared by PSI or others,
excepting therefrom those materials which Peridot received or would have been
entitled to receive as a stockholder, shall be returned to and left with PSI,
upon PSI's request and at its sole cost. The obligations of Peridot under this
Section 4.2 shall not be applicable to any materials or information which are
publicly available and/or known.
As a prior condition to Peridot receiving any final fees (if any) due
Peridot which are accrued but unpaid at the cessation of Peridot's employment,
Peridot shall execute an affidavit to the effect that Peridot has complied with
the provisions of this section.
FURTHER ASSURANCES
Section 5.1. The parties hereto agree from time to time after the
execution hereof to make, to execute or cause or permit to be made, done or
executed all such further and other lawful acts, deeds, things, devices and
assurances in law whatsoever as may be required to carry out the true intention
and to give full force and effect to this agreement.
INDEMNIFICATION
Section 6.1. PSI shall indemnify and save harmless Peridot from and
against any and all actions, claims, suits, demands, loss and damages whatsoever
which arise or result from or are caused by Peridot or PSI or anyone associated
with or employed by Peridot or PSI in the ordinary scope of this engagement.
NOTICE
Section 7.1. Any notice, direction or other instrument required or
permitted to be given under this Agreement shall be in writing and shall be
given by the delivery of same or by mailing same by prepaid registered or
certified mail or by sending same by telecopier (fax) in each case addressed to
the intended recipient at the address of the respective party set out on the
first page hereof with telecopier numbers as follows:
If to PSI:
PowerTrader Software Inc.
#591 - 885 Dunsmuir Street
Vancouver, B.C. V6C 1N5
Telecopier No. 685-1513
If to Peridot:
Peridot International Enterprises Ltd
#11837 -190 Street
Pitt Meadows, B.C.
V3Y 2L2
Telecopier No. 685-1513
4
<PAGE>
Section 7.2. Any notice, direction or other instrument aforesaid will,
if delivered, be deemed to have been given and received on the day it was
delivered, and if mailed, be deemed to have been given and received on the fifth
business day following the date of mailing, except in the event of disruption of
the postal service in which event notice will be deemed to be received only when
actually received and if sent by telecopier on the day it was sent provided the
sender telephones to confirm receipt of the fax by the party to whom it was
sent.
Section 7.3. Any party may, at any time, give notice in writing to the
others of any change of address, and from and after the giving of such notice,
the address therein specified will be deemed to be the address of such party for
the purposes of giving notice hereunder.
WAIVER
Section 8.1. No waiver of any breach of this Agreement shall be binding
unless evidenced in writing executed by the party against whom waiver is
claimed. Any waiver shall extend only to the particular breach so waived and
shall not limit any rights with respect to any future breach.
AMENDMENTS
Section 9.1. This Agreement constitutes the entire Agreement between
the parties hereto with respect to the subject matter hereof. An amendment or
variation of this Agreement shall only be binding upon a party if evidenced in
writing executed by that party.
SEVERABILITY
Section 10.1. If any one or more of the provisions contained herein
should be invalid, illegal or unenforceable in any respect in any jurisdiction,
the validity, legality and enforceability of such provision shall not in any way
be affected or impaired thereby in any other jurisdiction and the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
NUMBER AND GENDER
Section 11.1. Words used herein importing the singular number only
shall include the plural, and vice versa, and words importing the masculine
gender shall include the feminine and neuter genders, and vice versa, and words
importing persons shall include firms and corporations.
TIME OF ESSENCE
Section 12.1. Time is of the essence of this Agreement.
SUCCESSORS AND ASSIGNS
Section 13.1. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and permitted assigns.
GOVERNING LAW AND ARBITRATION
Section 14.1. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of British Columbia and the parties
hereby irrevocably attorn to the jurisdiction of the courts of the Province of
British Columbia.
5
<PAGE>
Section 14.2. All disputes arising in connection with this Agreement
and which are not resolved by agreement between the parties shall be finally
settled by arbitration in accordance with the Commercial Arbitration act of
British Columbia.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto on the
date and year first above written.
The common seal of PowerTrader Software Inc.
was hereunto affixed in the presence of:
/s/ Michael C. Withrow
- --------------------------
The authorized signature of PERIDOT
INTERNATIONAL ENTERPRISES LTD
was hereunder affixed in the presence of:
/s/ David C. Furlonger
- --------------------------
/s/ Michael C. Withrow
---------------------------
PowerTrader Software Inc.
6
POWERTRADER, INC.
RESTRICTED STOCK AGREEMENT
Date of Grant: October 24, 1996 Number of Shares: 350,000
AGREEMENT, effective as of the Date of Grant set forth above, between
POWERTRADER, INC., a Delaware corporation (the "Company"), and Peridot
International Enterprises Ltd. ("Grantee").
WHEREAS, Grantee is a valued and trusted key consultant of PowerTrader
Software, Inc. a subsidiary of the Company ("PSI"); and
WHEREAS, the Company intends to issue shares of its common stock to
Grantee in fulfillment of its obligations under a certain Consultant Agreement
effective as of October 24, 1996, in order that Grantee thereby may be induced
to acquire and maintain an ownership interest in the Common Stock and to work
for the success of the Company and PSI;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants contained herein, the parties hereto agree as follows:
1. Restricted Stock Award. The Company hereby issues to Grantee,
subject to the conditions and restrictions set forth in this Agreement, that
number of shares of the Common Stock of the Company, par value $.0001 per share,
identified above opposite the heading "Number of Shares" (the "Shares"). The
Shares will be delivered to Grantee as of the Grant Date, provided, however,
that a certificate or certificates representing the Shares will not be issued to
Grantee until such later date as is identified in Section 4 hereof.
2. Vesting/Restrictions on Transfer. Subject to the exceptions and
limitations set forth elsewhere herein, the Shares and rights relating thereto
may not be sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of, and Grantee agrees not to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of such Shares or rights, prior to the vesting
of such Shares and simultaneous lapse of such restrictions on transfer, which
vesting shall occur, with respect to the Shares, in three annual installments in
accordance with the following schedule:
(i) One Hundred Thousand (100,000) shares on October 24, 1997;
(ii) One Hundred and Fifty Thousand (150,000) shares on October 24,
1998; and
(iii) One Hundred Thousand (100,000) shares on October 24, 1999.
Notwithstanding the foregoing, the Board of Directors of the Company may, in its
sole discretion, at any time or from time to time and with respect to any or all
of the Shares, accelerate the vesting of such Shares and removal of such
1
<PAGE>
restrictions on transfer with respect thereto, if in its judgment the
performance of Grantee has warranted such action or such action is in the best
interests of the Company.
3. Possible Forfeiture Prior to Vesting. If Grantee's consulting
relationship with PSI shall cease for any reason prior to the vesting of some or
all of the Shares and the simultaneous lapsing of all restrictions on transfer
thereof, Grantee shall thereafter immediately forfeit any and all such unvested
Shares and rights to such Shares, and the full ownership of the unvested Shares
shall thereafter revert to the Company. Upon such forfeiture, Grantee shall not
be entitled to receive from the Company reimbursement of any portion of the
purchase price paid by Grantee for the Shares.
4. Certificates. Certificates representing the Shares will be held by
the Company or by its transfer agent, together with a stock power to be executed
by Grantee in favor of the Company, until such time as the restrictions on
transfer of the Shares set forth in Section 2 of this Agreement lapse or are
removed, at which time a certificate or certificates for those Shares as to
which such restrictions have then lapsed or been removed will be issued to
Grantee.
5. Dividends and Voting. From and after the Date of Grant with respect
to any particular Shares and prior to any subsequent forfeiture of such Shares
by Grantee, Grantee shall be treated as the sole beneficial owner of such
Shares, having all rights of a common stockholder of the Company with respect
thereto, except as may otherwise be set forth in this Agreement. In particular,
Grantee shall be entitled to receive all dividends, whether in stock or in cash,
declared on or with respect to any Shares and to exercise all voting rights with
respect thereto, if the record date for such dividends or for the exercise of
such voting rights occurs on or after the Date of Grant of such Shares and prior
to any subsequent transfer or forfeiture of such Shares by Grantee. In the event
of subsequent forfeiture of any of the Shares by Grantee, Grantee shall not be
required to return to the Company any such dividends or distributions previously
paid to Grantee with respect to such Shares.
6. Adjustments. In the event of any change in the outstanding shares of
Common Stock of the Company by reason of any stock dividend or stock split,
recapitalization, merger, sale, consolidation, spinoff, reorganization,
combination, delivery of stock rights or warrants, exchange of shares, or other
similar corporate change, an appropriate adjustment will be made by the Board of
Directors of the Company to the number of Shares, consistent with equitable
considerations; provided, however, that if the Company shall deliver additional
shares of Common Stock for consideration, no such adjustment shall be made. No
such adjustment may materially change the value of benefits available to Grantee
as a result of the prior award of the Shares.
7. Investment Intent. Grantee agrees that Grantee is acquiring the
Shares for investment and not with a view to the sale or distribution thereof
and that the Shares may not be sold, pledged, assigned or transferred in whole
or in part except in compliance with all applicable federal and state securities
laws.
2
<PAGE>
8. Effect on Employment. The grant of the Shares and rights thereto
provided for herein shall in and of itself not confer upon Grantee any right to
continue its relationship with the Company or its subsidiaries or to continue to
perform services for the Company or its subsidiaries or shall not in any way
interfere with the right of PSI to terminate the services of Grantee as a
consultant at any time. Grantee and the Company agree that Grantee's
relationship with PSI will be governed by the Consultant Agreement.
9. Withholding. To the extent that the vesting of Shares granted
hereunder may obligate the Company to pay withholding taxes on behalf of
Grantee, the Company will pay the minimum amount of such withholding taxes then
due, and will (i) apply to such payment such amounts withheld by PSI from
Grantee's fees and delivered by PSI to the Company for such purpose or (ii)
apply to such payment funds then delivered by Grantee to the Company for such
purpose.
10. Applicable Law. This Agreement will be governed by and construed
in accordance with the substantive laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have, by a duly authorized
representative, executed this Agreement as of the 27th day of December, 1996.
POWERTRADER, INC.
By:/s/ Michael C. Withrow
Michael C. Withrow, President, Chairman
and Chief Executive Officer
PERIDOT INTERNATIONAL ENTERPRISES, LTD
By:/s/ David C. Furlonger
David C. Furlonger, President
3
CONSULTANT AGREEMENT
THIS MADE THE 27 DAY OF December, 1996,
BETWEEN
PowerTrader Software Inc., incorporated pursuant to the laws of the Province of
British Columbia, with a head office at #591-885 Dunsmuir St., Vancouver, BC V6C
1N5 ("PSI")
Of The First Part
AND:
No. 410 Taurus Ventures, Ltd.
("Taurus")
Of The Second Part
WHEREAS:
R.1 PSI entered into an oral agreement with Taurus as of September 1, 1996,
wherein Taurus agreed to make available to PSI the services of Holly Withrow
("Withrow") to serve as a consultant to PSI; and
R.2 PSI and Taurus now desire to memorialize their arrangement through a written
agreement that will supersede any previous discussions or arrangements including
any which may have been made directly with Withrow.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto mutually agree as follows:
APPOINTMENTS AND DUTIES
Section 1.1. PSI, by this Agreement, appoints Taurus to serve as a
sales and marketing consultant to PSI subject to the terms and conditions and
for the term set forth in this Agreement. Taurus accepts and agrees to such
appointment with PSI, subject to the terms and conditions and for the term set
forth in this Agreement. Taurus agrees that it will faithfully, industriously
and to the best of its ability, experience and talents, perform all of the
duties described in this Agreement.
Section 1.2. Taurus shall make available to PSI the services of
Withrow, who shall devote eighty (80%) percent of her time to managing the
affairs of PSI. Specifically, Withrow shall assist in the overall long term
direction of PSI, the technical revision and further development of PSI's suite
of products, and the initial marketing of PSI until such time as PSI is
adequately financed to fund a significant marketing plan.
EFFECTIVE DATE; TERM OF THE AGREEMENT; TERMINATION
Section 2.1. The Agreement shall be effective as of the 1st day of
September, 1996.
Section 2.2. Subject to earlier termination as provided in Section 2.3
of this Agreement, this Agreement shall be for a period commencing effective the
1st day of September, 1996 and ending on September 1st, 1999 (the "Contract
Term"). This Agreement shall be automatically extended for an additional three
(3) year term after the Contract Term unless either party shall give to the
other party written notice at least six (6) months prior to the expiration of
the Contract Term, or any extension thereof, of its
<PAGE>
determination not to so renew. At the expiration of the Contract Term, or any
extension thereof, the obligation of PSI to pay further compensation to Taurus
shall cease, provided, however, that all other obligations hereunder of either
party to the other party at the time of such termination shall not be affected
by such termination.
Section 2.3. This Agreement may be terminated by either party at any
time prior to the expiration of the Contract Term, or any extension thereof,
upon one (1) month notice to the other party. In the event of termination of
this Agreement except termination pursuant to Section 2.4, PSI shall:
(a) Pay to Taurus any fees to which Taurus is entitled as provided
in this Agreement which accrue through the date of
termination;
(b) Immediately reimburse Taurus for any money that Taurus has
paid with its own funds on behalf of PSI, its parent or any
subsidiary plus interest at the rate of prime plus 1.5 % per
month (or part thereof);
(c) If this Agreement is terminated during the first year of the
Contract Term, pay to Taurus an amount equal to two (2)
months' fees; and
(d) If this Agreement is terminated subsequent to the first year
of the Contract Term, pay to Taurus two (2) months' fees for
each full year of service of the Contract Term, or any
extension thereof.
Section 2.4. This Agreement may be terminated by PSI without prior
notice if, at any time, Taurus, while in the performance of its duties:
(a) commits a material breach of a provision of this Agreement;
(b) is unable or unwilling to perform its duties under this
Agreement;
(c) commits fraud or serious neglect or misconduct in the
discharge of its duties hereunder; or
(d) becomes bankrupt or makes any arrangement or compromise with
its creditors.
In the event of termination of this Agreement pursuant to this Section
2.4, Taurus shall only be entitled to receive any fees to which Taurus is
entitled as provided in this Agreement which accrue through the date of
termination.
FEES AND EXPENSES
Section 3.1. As a fee for Taurus's services under the Agreement, PSI
shall pay Taurus, commencing on the effective date of this Agreement and
continuing throughout Taurus's engagement by PSI, an annual base fee (the "Base
Fee") in an amount as provided below:
(a) Forty-two Thousand Canadian Dollars (CDN $42,000) per annum
for the first two years of the Contract Term payable in
monthly installments of CDN $3,500.00; and
(a) Forty-five Thousand Canadian Dollars (CDN $45,000) per annum
for the third year of the Contract Term payable in monthly
installments of CDN $3,750.00; and
(c) For subsequent years, an amount mutually determined by the
Board of Directors of PSI and Taurus, payable in monthly
installments.
2
<PAGE>
Section 3.2. In addition to Taurus's Based Fee, Taurus shall be
entitled to receive bonuses from time to time determined by the Board of
Directors of PSI in such amount and/or on such basis as the Board shall
determine to be reasonable and appropriate based on such criteria as the Board
shall have established. Taurus shall have no vested rights to receive any
bonuses and Taurus agrees that the amount, if any, of any bonus shall be in the
sole discretion of the Board.
Section 3.3. PSI agrees to reimburse Taurus for all actual expenses
properly incurred by Taurus on behalf of PSI or PowerTrader in carrying out its
duties and performing its functions under this Agreement and for all such
expenses Taurus shall furnish a statement to PSI prior to reimbursement.
Section 3.4. In addition to providing the services set forth herein,
Taurus may provide office equipment, services and space to PSI for which PSI
shall pay Taurus a fee per month at such rates and minimums as the parties
hereto shall from time to time establish by mutual agreement.
Section 3.5. All payments hereunder shall be made to Taurus at the head
office of PSI and PSI shall remit such payments to Taurus on a regular monthly
basis commencing the 1st day of September, 1996.
CONFIDENTIALITY AND TRADE SECRETS
Section 4.1. Taurus shall not reveal or divulge and shall cause each of
its officers and agents (including Withrow) to refrain from revealing or
divulging, except as authorized or required by its duties, to any person or
companies any of the trade secrets, secrets or confidential operations,
processes or dealings or any information concerning the organization, business,
finances, transactions or other affairs of PSI, PowerTrader, or any subsidiary
which may come to its knowledge during the term of this Agreement and shall keep
in complete secrecy all confidential information entrusted to it and shall not
use or attempt to use any such information in any manner which may incur or
cause loss either directly or indirectly to the business of PSI, PowerTrader, or
any subsidiary or may be likely so to do. This restriction shall continue to
apply after the termination of this agreement for a term of six (6) months.
Section 4.2. Taurus agrees that all the information, records and files
Taurus shall obtain or to which Taurus shall have access during the term of this
Agreement shall be and remain the sole property of PSI or its customers, as the
case may be. On the cessation of Taurus's association with PSI as a consultant,
all documents, records, papers, books, programs, bulletins, notices, plans,
strategies, customers, leads, customer lists, financial information, prices,
pricing policies, and processes related to the business of PSI, Taurus's own
business notes, all equipment and supplies, instruments, prototypes, models,
products, notebooks, invoices, statements, correspondence and similar
depositories, including computer tapes, discs, magnetic or digital storage of
information containing trade secrets, or confidential information, as
hereinabove set forth, including all copies, abstracts or summaries thereof,
then in Taurus's possession or control, whether prepared by PSI or others,
excepting therefrom those materials which Taurus received or would have been
entitled to receive as a stockholder, shall be returned to and left with PSI,
upon PSI's request and at its sole cost. The obligations of Taurus under this
Section 4.2 shall not be applicable to any materials or information which are
publicly available and/or known.
As a prior condition to Taurus receiving any final fees (if any) due
Taurus which are accrued but unpaid at the cessation of Taurus's employment,
Taurus shall execute an affidavit to the effect that Taurus has complied with
the provisions of this section.
FURTHER ASSURANCES
Section 5.1. The parties hereto agree from time to time after the
execution hereof to make, to execute or cause or permit to be made, done or
executed all such further and other lawful acts, deeds, things, devices
3
<PAGE>
and assurances in law whatsoever as may be required to carry out the true
intention and to give full force and effect to this agreement.
INDEMNIFICATION
Section 6.1. PSI shall indemnify and save harmless Taurus from and
against any and all actions, claims, suits, demands, loss and damages whatsoever
which arise or result from or are caused by Taurus or PSI or anyone associated
with or employed by Taurus or PSI in the ordinary scope of this engagement.
NOTICE
Section 7.1. Any notice, direction or other instrument required or
permitted to be given under this Agreement shall be in writing and shall be
given by the delivery of same or by mailing same by prepaid registered or
certified mail or by sending same by telecopier (fax) in each case addressed to
the intended recipient at the address of the respective party set out on the
first page hereof with telecopier numbers as follows:
If to PSI:
PowerTrader Software Inc.
#591 - 885 Dunsmuir Street
Vancouver, B.C. V6C 1N5
Telecopier No. 685-1513
If to Taurus:
No. 410 Taurus Ventures, Ltd.
#12 - 1850 Argue Street
Port Coquitlam, B.C.
V3C 5K4
Telecopier No. 685-1513
Section 7.2. Any notice, direction or other instrument aforesaid will,
if delivered, be deemed to have been given and received on the day it was
delivered, and if mailed, be deemed to have been given and received on the fifth
business day following the date of mailing, except in the event of disruption of
the postal service in which event notice will be deemed to be received only when
actually received and if sent by telecopier on the day it was sent provided the
sender telephones to confirm receipt of the fax by the party to whom it was
sent.
Section 7.3. Any party may, at any time, give notice in writing to the
others of any change of address, and from and after the giving of such notice,
the address therein specified will be deemed to be the address of such party for
the purposes of giving notice hereunder.
WAIVER
Section 8.1. No waiver of any breach of this Agreement shall be binding
unless evidenced in writing executed by the party against whom waiver is
claimed. Any waiver shall extend only to the particular breach so waived and
shall not limit any rights with respect to any future breach.
4
<PAGE>
AMENDMENTS
Section 9.1. This Agreement constitutes the entire Agreement between
the parties hereto with respect to the subject matter hereof. An amendment or
variation of this Agreement shall only be binding upon a party if evidenced in
writing executed by that party.
SEVERABILITY
Section 10.1. If any one or more of the provisions contained herein
should be invalid, illegal or unenforceable in any respect in any jurisdiction,
the validity, legality and enforceability of such provision shall not in any way
be affected or impaired thereby in any other jurisdiction and the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
NUMBER AND GENDER
Section 11.1. Words used herein importing the singular number only
shall include the plural, and vice versa, and words importing the masculine
gender shall include the feminine and neuter genders, and vice versa, and words
importing persons shall include firms and corporations.
TIME OF ESSENCE
Section 12.1. Time is of the essence of this Agreement.
SUCCESSORS AND ASSIGNS
Section 13.1. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and permitted assigns.
GOVERNING LAW AND ARBITRATION
Section 14.1. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of British Columbia and the parties
hereby irrevocably attorn to the jurisdiction of the courts of the Province of
British Columbia.
Section 14.2. All disputes arising in connection with this Agreement
and which are not resolved by agreement between the parties shall be finally
settled by arbitration in accordance with the Commercial Arbitration act of
British Columbia.
5
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto on the
date and year first above written.
The common seal of PowerTrader Software Inc.
was hereunto affixed in the presence of:
/s/ David C. Furlonger
- -----------------------------
The authorized signature of
was hereunder affixed in the presence of:
/s/ Holly Withrow
- -------------------------------
/s/ David C. Furlonger
--------------------------
PowerTrader Software Inc.
6
NAQ/PRECISION SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT ("Agreement"), made and entered into this 9th day
of February 1996,
Between:
PRECISION INVESTMENT SERVICES INC
a company incorporated pursuant to the laws of British Columbia,
incorporation number 357165, with a head office at
208- 700 W. Pender Street,
Vancouver, B.C. V6C 1G8 and a registered office at
900 - 525 Seymour Street,
Vancouver, B.C. V6J 4S6
(Hereinafter referred to as PI)
(Of the First Part)
And:
NORTH AMERICAN QUOTATIONS, INC
a company incorporated pursuant to the laws of the province of Ontario,
incorporation number 848077 , with a head office at 1112 Hyde Park Road, London,
Ontario NOM 1Z0 and a registered office at
(Hereinafter referred to as NAQ)
(Of the Second Part)
WHEREAS:
R.1, NAQ carries on the business of providing a data feed including continuous
real time stock, stock options, commodity futures and commodity futures options
price quotations from a number of exchanges that trade stock, stock options,
commodity futures and commodity futures options and provide related information,
including but not limited to technical facilities and software that facilitate
the interpretation of such data feed:
R.2 NAQ is in possession of electronic data processing equipment and software
that make possible their reception, processing and display of information
relating to stock, stock options, commodity futures and commodity futures
options prices with personal computer equipment: and
R.3 PI is in possession of software programs called Power Trader Source. When
compiled this source produces executables for the following products:
PowerTrader Pro Server, PowerTrader Pro Quotes, PowerTrader Pro Analyst,
PowerTrader Pro Portfolio, PowerTrader Pro Server for Excel and PowerTrader Pro
<PAGE>
Options Evaluator (hereinafter collectively referred to as PowerTrader Pro")
that makes possible the reception, processing and display of information
relating to stock and commodity prices with personal computers; all of which is
more particularly described in the features.* file contained in PowerTrader Pro.
and
R.4 NAQ desires that PI provide it with an exact current copy of PowerTrader Pro
which it will provide to its own Customers under its own product name "Integrity
2000" and
R.5 PI is in possession of the technical expertise to develop and provide to
NAQ, software program(s) required to allow PowerTrader Pro and Integrity 2000 to
receive, process and display information transmitted via NAQ's ticker feed and
R.6 PI desires that NAQ provide it with information relating to stock, stock
options, commodity futures and commodity futures options prices so that PI may
display such information for PI's customers in usable form on the terms
contained herein.
NOW THEREFORE WITNESSETH THAT in consideration of $10.00 and other good and
valuable consideration and the mutual promises and covenants herein made the
parties hereto hereby agree as follows:
Article I DEFINITIONS
1. As used in this Agreement, the following terms shall have
the following meanings:
1.1 "Agreement" means this Agreement.
1.2 "Client/Server Installation" means multiple installations of Integrity
2000 software at NAQ's customer location operating over a Local Area
Network (LAN).
1.3 "Customers" means subscribers in the Licensed Territory to the service
provided by NAQ and a "Customer" means one subscriber:
1.4 Dollars shall refer to currency of the Dominion of Canada for
installations in Canada and for installations in countries other than
Canada dollars shall refer to currency of the United States of
America.
1.5 "Enhancement(s)" means the difference between the then current release
version and the subsequent released version to the current released
version.
1.6 The words "Licensed Territory" shall mean all countries and
territories.
1.7 "Operating Systems" means personal computer programs provided by other
companies that determine how personal computers operate, such as
<PAGE>
Microsoft Corporation's Windows 3.1, Windows 3.11, Windows 95 and
Windows NT and International Business Machines' O/S2.
1.8 "Parties" means the signatories to this Agreement and a "Party" means
one of the signatories.
1.9 "Private Label" means the name designated by NAQ in place of
PowerTrader Pro which NAQ shall rename to "Integrity 2000".
1.10 "Release" means version that has been distributed to NAQ for
distribution to NAQ customers
1.11 "Source Code" means all uncompiled PowerTrader Pro programs developed
by PI including all uncompiled programs developed for NAQ by PI.
1.12 "Standalone installations" means a single installation of Integrity
2000 software at NAQ's customer location.
1.13 "Ticker Feed" means all information consolidated into NAQ's broadcast
transmission.
1.14 "Testing" means beta site testing.
1.15 "Ticker Interface" means programs developed by PI to process and
display information from NAQ's broadcast transmission.
Article II LICENSE GRANT TO NAQ
2.1 In consideration of the initial payment of $5,000.00 specified in Article VI
(6.2.1) hereof, PI agrees to license to NAQ, for distribution to its Customers
in the Licensed Territory, the current release version of PowerTrader Pro which
shall be marketed by NAQ as Integrity 2000. PI will provide NAQ with all
versions of PowerTrader Pro (Integrity 2000) that operate under the Microsoft
Windows Operating Systems.
2.2 PI further grants NAQ the license to make whatever copies of PowerTrader Pro
(Integrity 2000) it requires to distribute to its Customers. NAQ Customers shall
obtain a validation code directly from PI. To obtain the validation NAQ shall
disclose to PI the Customers ID number which is to be agreed by both parties.
Article III SOFTWARE SUPPORT
3.1 PI agrees to provide NAQ with documentation to assist in the installation
and maintenance of the product. The documentation will be supplied in a format
that enables NAQ to duplicate an exact copy of the supplied documentation (the
manual). NAQ may choose one of the following mediums.
<PAGE>
a) Laser printed camera-ready laser printed pages (600dpi resolution),
suitable for duplication by photocopy or printers.
b) Electronic postscript format, suitable for printing to a
high-resolution Xerox Docutec 135 duplication machine. The necessary
files can be supplied on CD-ROM, DAT tape or in compressed form on
3-1/2" floppy disks.
c) Microsoft Word format. This is an electronic document that contains
all necessary graphics and editable text. The technical content is
copyright by PI. Edits made by NAQ must be approved by PI. NAQ is free
to reformat the document as required, but NAQ is responsible for
reproduction. This documentation can be supplied on CD-ROM. DAT tape
or in compressed form on 3-1/2" floppy disks.
3.1.1 It is the responsibility of NAQ to acquire the necessary
software required to edit this document. Changes to fonts and
design of this electronic document are allowed. Customer is
responsible for generating their own table of contents, index
and maintaining document numbering and references.
Content on each medium will be reformatted to reflect
the NAQ private label
3.2 PI will provide initial training in the installation and
maintenance of PowerTrader Pro to qualified NAQ personnel at the
following rates;
a) $250 per day in the PI offices in Vancouver, BC
b) $400 per day at any other location designated by
NAQ plus expenses and a fee for traveling time of $200
per day or part day spent in travel.
3.3 Subsequent support
Telephone support will be provided at the rate of $350 per month for six months.
Thereafter, NAQ trained personnel will receive five hours of telephone support
per month at no charge to NAQ. Any time over and above the allotted five hours
will be billed to NAQ at a rate of $50.00 per hour. There will be no charge for
support arising from problems relating to software bugs.
Article IV Software Enhancement
4.1 PI will ship two complete sets of master updated software disks (3.5"
diskettes and CD-ROM) which NAQ shall duplicate as required to provide to its
Customers.
<PAGE>
4.2 PI shall provide to NAQ a released version (with enhancements) at no
additional cost, other than those specified in Article VI within 30 days.
4.3 Enhancement of PowerTrader Pro may be done from time to time
at the sole discretion of PI.
4.4 Enhancements and new features and upgrades requested by NAQ shall be paid
for by NAQ. The costing of the said requests shall be determined by PI using the
then industry standard rates and using personnel approved by PI. The timetable
for the said requests shall be determined according to the scheduling capacity
of PI.
Article V OWNERSHIP
5.1 PI shall retain ownership and control of all software, trademarks,
copyrights and confidential information provided to NAQ or its Customers
pursuant to this Agreement, including all software, trademarks, copyrights and
confidential information that may be embodied or contained in the software.
5.1a PI shall disclose development credits in (2) two places in the Integrity
2000 version of PowerTrader Pro stating the following: Integrity 2000 Developed
for NAQ by Precision Investment Services Inc. of Vancouver, British Columbia,
Canada.
5.2 NAQ shall retain ownership and control of all software, trademarks,
copyright and confidential information provided to PI pursuant to this
Agreement, including all software, trademarks, copyrights and confidential
information that may be embodied or contained in the software.
5.3.1 PI shall place in escrow a complete copy of all Source Code to the Private
Label version of PowerTrader Pro, including all software developed specifically
for NAQ PI will further maintain a complete, current copy of all Source Code
with revisions and updates that may be made periodically time to time. The
escrowholder shall be a third party agreed to by both parties and the escrow
holder's fees shall be paid by NAQ.
5.3.2 The escrow agreement shall provide, inter alia that the escrow documents
shall only be released to NAQ in the event of:
a) a winding up of PI according to bankruptcy laws or
no bona fide sale of the source code.
<PAGE>
ARTICLE VI DEVELOPMENT COSTS AND LICENSE FEES
Software Development.
6.1 NAQ has requested PI to decode the Ticker interface for NAQ's datafeed to
enable interoperability (herein called the Ticker Interface Project) and PI has
agreed to the Ticker Interface Project. The costs shall be paid by NAQ and cost
is based on an hourly fee charged by PI of approximately $50.00 plus applicable
taxes with an anticipated completion time of 4-6 weeks (anticipated development
cost to be approximately $10,000.00 to $15,000.00). A deposit of $5,000. shall
be paid by NAQ at the time of signing of this agreement. The balance of fees due
shall be paid upon completion of the Ticker Interface Project. For further
clarity, the first sale/contract shall constitute the completion of the Ticker
Interface project.
Reimbursement of Costs
6.2.1 $5,000 shall be paid upon execution of this agreement to partially
reimburse cost of manual production, master CD creation, satellite connections
and other hard costs.
6.2.2 Two further payments of $5,000 each shall be paid as
follows:
a) Upon NAQ attaining a base of 500 customers using
Power Trader Pro (Integrity 2000)
b) Upon NAQ attaining a base of 1000 customers using
Power Trader Pro (Integrity 2000)
License Fees.
NAQ shall pay license fees each calendar month to PI as follows:
6.3.1 $25.00 for each Integrity 2000 Standalone system installed at Customer
location.
6.3.2 $15.00 for each Integrity 2000 LAN Server installed at a Customer
location.
6.3.3 $20.00 for each Integrity 2000 LAN Client system installed at a Customer
location. Each of the monthly fees per terminal shall increase by $2.50 per
installed screen in the second year of this agreement and shall increase again
by a further $2.50 per installed screen in the third year of the agreement with
an additional $1.50 per installed screen in the fourth year and $1.50 per
installed screen in the fifth year.
6.4 NAQ shall be allowed to install demonstration systems at its prospective
customer's locations for a maximum period of 30 days at each such location
<PAGE>
without payment. These systems shall be used for demonstration purposes as a
marketing tool and as monitoring and support tools as part of marketing support
and supervision_ (normal) activities. NAQ may install as many systems as it
deems necessary at its own locations or at its agents' for demonstration
purposes and as monitoring and support tools as part normal activities without
payment.
6.5 NAQ shall pay to PI all amounts due and owing on the 20th day of each
calendar month for the previous months installed systems provided that if the
20th day does not fall on a business day the payment shall be received by the
next business day immediately following the 20th of such day.
Customer Status.
6.6.1 By the 20th day of each calendar month, NAQ shall provide a statement
listing the account number of all Customer locations of Integrity 2000 as of the
last day of the previous month. This statement will also include NAQ Site
Numbers, type of systems and quantity of each type installed.
Article VII AUDIT
7.1 NAQ agrees to allow representatives of PI full access to all records
relating to the operation relating to this Agreement. PI shall give 72 hours
notice to NAQ of its intent to audit these records and NAQ agrees to provide
promptly any and all information requested by PI's representatives during this
audit.
Article VIII SERVICE TERM
8.1 This Agreement shall take effect on date first above written and shall as
hereinafter provided continue in force for a term of five (5) years from that
date. Subsequent terms may be granted by PI on terms.
Article IX NAQ License Grant to PI
9.1 In consideration of $1.00 and other good and valuable consideration the
receipt of which is hereby acknowledged NAQ hereby appoints PI as an authorized
non exclusive agent for NAQ for North America to market NAQ's product. For each
new customer(s) acquired by NAQ through the assistance of PI, a commission shall
be paid by NAQ to PI equal to the sum of the first and last months fees charged
to the new customer(s) for the software portion only of the service provided by
NAQ. Software service portion is basic service offered for the Integrity Server,
Standalone or Client Workstation. Basic service excludes any additional monthly
charges such as communication facilities, Exchange fees, administration fees and
any other fees not relating to the software service portion. The commission
shall be paid in the month immediately following the acquisition of the new
<PAGE>
customer according to the schedule in 6.5 of this agreement. A lead generation
sheet signed by a new customer will be satisfactory evidence to NAQ requiring
payment of the commission after sign up by the client with NAQ.
Article X TERMINATION
10.1 If either party, commits a material breach of any of its obligations
hereunder the aggrieved party may serve notice in writing upon the party in
breach requiring the said party to remedy the breach within 30 days of the date
of the notice, failing which the aggrieved party may forthwith terminate this
Agreement by giving notice of termination in writing to the party in breach. For
further clarity and without limiting the generality of the foregoing a failure
by NAQ to make any of the payments specified herein within the required times
shall constitute a material breach. PI may at its option refuse to provide
validation for new customers until said outstanding fees are paid in full in
addition to any other remedies at law that are available to PI.
10.2 If either party ceases doing business as a going concern, is insolvent,
makes an assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they become due, files a voluntary petition in
bankruptcy, is adjudicated bankrupt or insolvent, files or has filed against it
a petition seeking any reorganization arrangement or composition under any
present or future bankruptcy statute, law or regulation, then in any such event
the other party may by notice in writing terminate this Agreement forthwith or
from such date as its shall designate.
10.3 Arbitration
In the event that any disagreement arises between the parties, then such
disagreement shall be referred to an arbitrator who shall be chosen by both
parties, acting in good faith, who is not associated with either party to this
Agreement. Except as herein provided, all terms and conditions with respect to
the conduct of such arbitration shall be set by such arbitrator in accordance
with the Commercial Arbitration Act of British Columbia. A decision by the
arbitrator shall be final and biding upon all parties hereto. The cost of the
arbitration and payment and allocation shall be determined by the arbitrator.
Article XI ADDITIONAL RIGHTS AND OBLIGATIONS ON TERMINATION
11.0 In the event of termination of this Agreement howsoever
occasioned:
11.1 Each party shall return promptly to the other all copies of any material
relating to the supply by such other of data hereunder which are in its
<PAGE>
possession or under its control, except as set forth below. The provisions of
article of 13 or 14 of this Agreement shall continue in full force after
termination of this Agreement.
11.2 Neither party shall be relieved or discharged from any obligations which
accrued prior to such termination, and termination hereof shall neither destroy
nor diminish the binding force and effect of any of the provisions of this
Agreement that expressly or by implication come into or continue in effect on or
following termination hereof.
11.3 If this Agreement terminates upon expiration of a five year term, PI shall
not, nor shall it cause any related or associated corporation of PI, nor any
person who has an interest in any of the aforesaid corporations to use in any
way the information provided by NAQ to PI under the agreement.
11.4 If this Agreement terminates upon expiration of a five year term, NAQ shall
not, nor shall it cause any related or associated corporation of NAQ, nor any
person who has an interest in any of the aforesaid corporations to use in any
way the information provided by PI to NAQ under the agreement.
11.5 It is a condition of a grant of a further term that an intent to renew this
agreement including proposed terms shall be delivered by NAQ to PI not less than
six months prior to the termination of this agreement.
11.6 If the parties agree to extend this contract at the end of the term, but
are unable to agree on terms, the contract shall be in force for an additional 6
months at the same terms and conditions.
Article XII FORCE MAJEURE
12.1 If the performance by either party of its material obligations is delayed
or becomes impossible or impractical because of any equipment failure,
transmission difficulty, failure of the Exchanges to generate or transmit data,
act or failure to act by a common carrier, Act of God, fire, tempest, earthquake
or other event, strike, civil commotion, acts of government, war, civil unrest,
or any other order, regulation, ruling, decision, or action of any labor union
or association affecting the business with which this Agreement is concerned or
any matter beyond the control or a party then such party shall not be liable to
the other for any breach of its obligations hereunder by virtue of any such
event and such party may upon notice to the other party suspend the performance
of its obligation for the duration of any such delay, impossibility or
impracticality.
<PAGE>
Article XIII MUTUAL RELEASES
13.1 Neither party shall be liable to the other or to any person or organization
claiming by or through the other for any errors, omissions, or delays relating
to the sequence, accuracy, or completeness in the information carried,
furnished, or displayed by or through NAQ's equipment or for any damages arising
therefrom or occasioned thereby nor shall either party have any liability or
obligation for the accuracy or display of its stored computer data or for any
damages arising therefrom or occasioned thereby, whether or not resulting from
the negligence of either party, its employees, or agents. Furthermore, either
party shall not be liable for any damages, either directly or indirectly
attributable to either party, any other software, Communications Cards, Disks or
any Information provided under the Agreement. This includes loss of business,
anticipatory profits and consequential damages of either party and their
Customers.
Article XIV RESTRICTIONS ON DISSEMINATION AND USE
14.1 NAQ and PI Mutually Acknowledge and Agree to Maintain Confidentiality. -
NAQ and Pi mutually acknowledge that each Party's Confidential Information is
the property and trade secrets of the other Party and that any publication or
disclosure to third parties of the other Party's confidential Information may
cause immediate and irreparable harm to the other Party. Each Party will take
all reasonable steps to maintain the confidentiality of the other Party's
Confidential Information.
14.2 Prohibition on Making PI and NAQ Confidential Information Available to
Others. - Each Party shall not, without the other Party's prior written consent
or as expressly provided in this Agreement, disclose, provide, or make available
any of the other Party's Confidential Information in any form to any person,
except to employees or consultants of the Party whose access is necessary to
enable that Party to exercise its rights under this Agreement.
14.3 Restriction on Both Parties' Employees and Customers. - Each Party shall
require any employee or Customer having such access to agree, in writing to
maintain the confidentiality of the other Party's Confidential Information.
14.4 Restriction on Both Parties' Employees and Customers. - Each Party shall
require any employee or Customer having such access to agree, in writing to
maintain the confidentiality of the other Party's Confidential Information.
Article XV COPYRIGHT, COPYING AND TRADEMARKS
15.1 Prohibition on Copying Printed Material. - Each Party shall not copy or
<PAGE>
cause to be copied all or any part of the other Party's Confidential Information
which is in human-readable form, except if authorized in advance by the other
Party or expressly provided in this Agreement.
15.2 Disclosure of Machine-Readable Material. - Each Party shall not copy or
cause to be copied all or any part of the other Party's Confidential information
which is in machine-readable form, except if authorized in advance by the other
Party or expressly provided in this Agreement.
15.3 Legend Required on Copies. - On all authorized copies made by each Party,
each Party shall include proprietary, copyright, trademark and trade secret
legends, in the same form and location as any legend appearing on the original
from which the copies are made, or in any other form and location specified by
the other Party from time-to-time in writing.
15.4 Prohibition on Removal of Legend. - Each Party shall not remove any
proprietary, copyright, or trade secret legend from any of the other Party's
Confidential Information.
15.5 Log Required of All Copies. - Each Party shall maintain a log of the number
and location of all originals and copies of the other Party's Confidential
Information, and shall notify the other Party in writing if any of the copies
are kept in any location other than the designated site.
15.6 Reference to Copyright. - The inclusion of copyright notice on any of the
other Party's Confidential Information shall not cause, or be construed to
cause, it to be a published work.
15.7 Reference to Copyright and Trademark. - Each Party shall identify and refer
to the various copyright and trademarks of the other Party or its related or
associated companies as such whenever used, such as, but not limited to
marketing, advertising and providing services to Customers. Each Party shall not
make any use or take any action inconsistent with the other Party's or its
related or associated companies' copyright and trademarks.
Article XVI MISCELLANEOUS
16.1 Entire Agreement-This Agreement sets forth the entire agreement between the
parties with respect to the subject matter hereof and no modification,
amendment, waiver, termination or discharge of this Agreement or of any
provisions hereof shall be binding upon either party hereto unless confirmed by
a written instrument signed by the duly authorized representative of what party.
16.2 Notices - All notices from either party to the other may be delivered
personally or sent by registered or certified mail or by fax followed by a
confirmation letter to the addresses indicated herein or an those addresses may
be changed from time to time by notice.
<PAGE>
Precision Investment Services Inc,
#208 - 700 West Pender Street
Vancouver British Columbia
V6C 1 G8
Attention: Mike Withrow
Fax: 604-685-1513
North American Quotations, Inc.
PO Box 130
1112 Hyde Park Road
London, Ontario
NOM 1ZO
Attention Walter J. Medwid
Fax: 519-657-3331
Any such notice shall be deemed to have been received:
A) In the case of a letter, on the day on which the letter is actually received
or five (5) business days after posting by air mail, air mail. whichever is the
earlier: or
B) In the case of a fax, at the time and on the day that the whole of the said
notice or communication has been transmitted from the sending Fax machine, with
transmission verified as complete.
16.3 Illegal Transactions - Both parties agree that they will not engage in and
acknowledge that they are not presently engaged in the operation of any illegal
transactions or business and will not use or permit anyone to use information
received from one another for any illegal purpose.
16.4 Heading - The headings appearing at the beginning of several articles
contained herein have been inserted for identification and reference purposes
and shall not be themselves determine the construction or interpretation of this
Agreement.
16.5 Assignment - Neither party to this Agreement shall assign or purport to
assign any of its rights and responsibilities under this Agreement without the
prior consent in writing of the other party except that an assignment may be
made to an organization that is under the same beneficial interest which shall
mean that regardless of how the title is vested, the resources, responsibility
and benefit of profit resides in substantially the same hands as the assigning
organization.
16.6 Inurement - Subject to the provisions hereof, this Agreement shall be
binding upon the inure to the benefit of the parties and their respective
successors and assigns. In the event of a merger or consolidation involving
either party, this Agreement shall be binding on the surviving entity to such
merger or consolidation. In the event either party shall sell substantially all
of its assets, this Agreement shall be binding on the party acquiring such
assets.
<PAGE>
16.7 Further Assurance - The parties shall execute and deliver all such
documents and take all such action and do all such things as shall be necessary
for the complete performance of their respective obligations under this
Agreement.
16.8 Counterparts - This Agreement may be executed in any number of counterparts
and by the parties hereto on separate counterparts, each of which when executed
and delivered shall constitute an original, but all the counterparts shall
together constitute one and the same agreement.
16.9 Severance - If any term or provision of this Agreement shall be determined
or found to be invalid or unenforceable by any court of competent jurisdiction,
then such term or provision shall be deemed severed from the balance of this
Agreement which shall continue in full force and effect as if any such term or
provision had not been contained herein.
ARTICLE XVII GOVERNING LAW
17.0 This agreement is governed by the laws of the Province of British Columbia
and the parties hereto shall attorn to the courts of British Columbia.
IN WITNESS WHERE OF THE PARTIES HAVE HERETO AFFIXED THEIR
SIGNATURES BY THEIR AUTHORIZED SIGNATORIES
Precision Investment Services, North American Quotations
Inc. Inc.
By: /s/ Michael C. Withrow By: /s/ Walter J. Medwid
Name: Mike Withrow Name: Walter J. Medwid
Title: President Title: Director, Operations
Dated: 03-05-96 Dated: 03-06-96
Witness: /s/ Holly Pangman Witness: /s/ Blair Doman
<PAGE>
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 dated as of June 27, 1996 is to NAQ/PRECISION SOFTWARE
LICENSE AGREEMENT effective February 9, 1996 (the "Agreement") between PRECISION
INVESTMENT SERVICES, INC. ("PI") and NORTH AMERICAN QUOTATIONS, INC. (the
"NAQ").
For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. Except as amended hereby, the Agreement shall remain in full
force and effect.
2. Section 6.1 of the Agreement is deleted and replaced with
the following:
6.1 NAQ has requested PI to decode the Ticker Interface for
NAQ's datafeed to enable interoperability (herein called the
Ticker Interface Project) and PI has agreed to the Ticker
Interface Project. The cost to develop the Ticker Interface
Project shall be paid by NAQ and is based on an hourly fee
charged by PI of approximately $50.00, but not to exceed a
total cost of $20,000.00 (the "Ceiling") to NAQ, excluding
taxes. A deposit of $5,000 shall be paid by NAQ at the time of
signing of this agreement. The balance of the fees due shall
be paid upon the completion of the Ticker Interface Project,
with the exception of one interim payment in the amount of
$14,189.27 which will be paid within 30 days of issue date and
is to be applied against the Ceiling. For further clarity the
first sales/contract shall constitute the completion of the
Ticker Interface Project.
Agreed to:
Precision Investment Services North American Quotations,
Inc. Inc.
By: /s/ Michael C. Withrow By: /s/ Walter J. Medwid
Name: Mike Withrow Name: Walter J. Medwid
Title: President Title: Director, Operations
Dated: 07-04-96 Dated: 7-17-96
Witness: Witness: /s/ Carole Olkowski
POWERTRADER, INC.
1996 STOCK OPTION PLAN
ARTICLE I
Purpose, Scope and Administration of the Plan
1.1 Purpose. The purpose of this 1996 Stock Option Plan is to promote
the long-term success of PowerTrader, Inc. ("PowerTrader"), and its subsidiaries
and to encourage growth in stockholder value by providing financial incentives
to selected officers, employees, consultants and advisers who are in positions
to make significant contributions toward that success.
1.2 Definitions. Unless the context clearly indicates
otherwise, for purposes of this Plan:
(a) "Board of Directors" means the Board of Directors of
PowerTrader.
(b) "Cause" as such term relates to the termination of any
person means the occurrence of one or more of the following: (i) such person is
convicted of, pleads guilty to, or confesses to any felony or any act of fraud,
misappropriation or embezzlement which has an immediate and adverse effect on
the Company, as determined by the Board of Directors in good faith in its sole
discretion, (ii) such person engages in a fraudulent act to the damage or
prejudice of the Company or in conduct or activities damaging to the property,
business or reputation of the Company, all as determined by the Board of
Directors in good faith in its sole discretion, (iii) any act or omission by
such person involving malfeasance or negligence in the performance of such
person's duties to the Company to the detriment of the Company, as determined by
the Board of Directors in good faith in its sole discretion, which has not been
corrected by such person to the satisfaction of the Board of Directors within
thirty (30) days after written notice from the Company of any such act or
omission; (iv) failure by such person to comply in any material respect with the
terms of such person's employment, consulting or other similar agreement, if
any, or any written policies or directives of the Board of Directors as
determined by the Board of Directors in good faith in its sole discretion, which
has not been corrected by such person to the satisfaction of the Board of
Directors within thirty (30) days after written notice from the Company of such
failure, or (v) breach by such person of such person's noncompetition agreement
with the Company, if any, as determined by the Board of Directors in good faith
in its sole discretion.
(c) "Common Stock" means the Common Stock of PowerTrader,
$0.01 par value per share, or such other class of shares or other securities to
which the provisions of the Plan may be applicable by reason of the operation of
Section 3.1 hereof.
<PAGE>
(d) "Company" means PowerTrader and any subsidiary of
PowerTrader, including subsidiaries of PowerTrader which become such after
adoption of this Plan.
(e) "Fair Market Value" of a share of Common Stock on a
specified date means: the average of the daily closing prices for the ten
consecutive trading days immediately preceding such specified date. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such date, the closing bid price
regular way, in either case on the principal national securities exchange
(including, for purposes hereof, the Nasdaq National Market and the Nasdaq
SmallCap Market (on which the Common Stock is listed or admitted to trading) or,
if the Common Stock is not listed or admitted to trading on any national
securities exchange the highest reported bid price for the Common Stock as
reported by the National Association of Securities Dealers, Inc. through the OTC
Bulletin Board. If on any specified date, the Common Stock is not listed or
admitted to trading on any national securities exchange and is not quoted on the
Nasdaq OTC Bulletin Board, the Fair Market Value of a share of Common Stock on
such date shall be determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive absent manifest error.
(f) "Grant Date," as used with respect to a particular
Option, means the date as of which the Option is granted by the Board of
Directors pursuant to the Plan.
(g) "Grantee" means the person to whom an Option is granted
by the Board of Directors pursuant to the Plan.
(h) "Option" means an Option granted by the Board of
Directors pursuant to Article II to purchase shares of Common Stock.
(i) "Option Agreement" means the agreement between
PowerTrader and a Grantee under which the Grantee is granted an Option pursuant
to the Plan.
(j) "Option Period" means, with respect to any Option
granted hereunder, the period beginning on the Grant Date and ending at such
time not later than the tenth anniversary of the Grant Date as the Board of
Directors in its sole discretion shall determine and during which the Option may
be exercised.
(k) "Plan" means the PowerTrader, Inc., 1996 Stock Option
Plan as set forth herein and as amended from time to time.
1.3 Aggregate Limitation.
(a) The maximum number of shares of Common Stock with
respect to which Options may be granted shall not exceed a total of 750,000
shares in the aggregate, subject to possible adjustment in accordance with
Section 3.1.
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<PAGE>
(b) Any shares of Common Stock to be delivered by PowerTrader
upon the exercise of an Option shall, at the discretion of the Board of
Directors, be issued from PowerTrader's authorized but unissued shares of Common
Stock or transferred from any available Common Stock held in treasury.
(c) The Board of Directors may grant new Options hereunder
with respect to any shares for which an Option expires or otherwise terminates
prior to being exercised.
1.4 Administration of the Plan.
(a) The Plan shall be administered by the Board of
Directors, which shall have the authority:
(i) To determine the officers, employees, consultants
and advisers of the Company to whom, and the times at which,
Options shall be granted, and the number of shares of Common
Stock to be subject to each such Option, taking into
consideration the nature of the services rendered by the
particular Grantee, the Grantee's potential contribution to
the long-term success of the Company and such other factors as
the Board of Directors in its discretion may deem relevant;
(ii) To interpret and construe the provisions of
the Plan and to establish rules and regulations relating
to it;
(iii) To prescribe the terms and conditions of the
Option Agreements for the grant of Options (which need not be
identical for all Grantees) in accordance and consistent with
the requirements of the Plan; and
(iv) To make all other determinations necessary or
advisable to administer the Plan in a proper and effective
manner.
(b) All decisions and determinations of the Board of Directors
in the administration of the Plan and on other matters concerning the Plan or
any Option shall be final, conclusive and binding on all persons, including (but
not by way of limitation) the Company, the stockholders and directors of
PowerTrader, and any persons having any interest in any Options. The Board of
Directors shall be entitled to rely in reaching its decisions on the advice of
counsel (who may be counsel to the Company).
1.5 Eligibility for Awards. The Board of Directors shall in accordance
with Articles II and III designate from time to time the officers, employees,
consultants and advisers of the Company who are to be granted Options.
1.6 Effective Date and Duration of Plan. The Plan shall become
3
<PAGE>
effective January 1, 1997. Unless previously terminated by the Board of
Directors, the Plan (but not any Options then outstanding) shall terminate on
the tenth anniversary of its adoption by the Board of Directors.
ARTICLE II
Stock Options
2.1 Grant of Options. The Board of Directors may from time to time,
subject to the provisions of the Plan, grant Options to officers, employees,
consultants and advisers of the Company under appropriate Option Agreements to
purchase shares of Common Stock up to the aggregate number of shares of Common
Stock set forth in Section 1.3(a).
2.2 Option Requirements.
(a) An Option shall be evidenced by an Option Agreement
specifying the number of shares of Common Stock that may be purchased upon its
exercise and containing such other terms and conditions consistent with the Plan
as the Board of Directors may determine to be applicable to that Option.
(b) No Option shall be granted under the Plan on or
after the tenth anniversary of the effective date of the Plan.
(c) An Option shall expire by its terms at the
expiration of the Option Period and shall not be exercisable
thereafter.
(d) The Board of Directors may provide in the Option Agreement
for the expiration or termination of the Option prior to the expiration of the
Option Period, upon the occurrence of any event specified by the Board of
Directors.
(e) The option price per share of Common Stock shall not be
less than the Fair Market Value of a share of Common Stock on the Grant Date.
(f) An option shall not be transferable other than by will or
the laws of descent and distribution. During the Grantee's lifetime an option
shall be exercisable only by the Grantee or, if the Grantee is disabled and the
option remains exercisable, by his or her duly appointed guardian or other legal
representative. Upon the Grantee's death, but only to the extent that the option
is exercisable hereunder, an option may be exercised by the Grantee's legal
representative or by a person who received the right to exercise the option
under the Grantee's will or by the applicable laws of descent and distribution.
Notwithstanding the foregoing, the Board of Directors may provide in an option
agreement that the Grantee may transfer, without consideration for the transfer,
such option to members of his immediate family, to trusts for the benefit of
such family members, to corporations, partnerships or other entities in which
4
<PAGE>
such family partners are the only beneficial owners, or to charitable
organizations, provided that the transferee agrees in writing with the Company
to be bound by all of the terms and conditions of the Plan and the applicable
Option Agreement.
(g) An Option and all unexercised rights thereunder shall
expire and terminate automatically upon the earliest of: (i) the date which is
one year following the date on which the Optionee's employment by (or other
business relationship with) the Company ceases due to death or disability; (ii)
the date on which the Optionee's employment by (or business relationship with)
the Company is terminated for Cause; (iii) the date which is three months
following the date on which the Optionee's service with the Company ceases for
any reason other than death, disability or Cause; and (iv) the date of
expiration of the Option determined by the Board at the time the Option is
granted and specified in such Option.
2.3 Vesting; Election to Exercise.
(a) Unless otherwise determined by the Board of Directors, the
shares of Common Stock subject to an Option shall vest, in equal yearly
installments of twenty-five percent (25%) of the total number of represented
shares, beginning on the first anniversary date of the Grant Date of the Option.
Upon the shares vesting, the portion of the Option that represents the vested
shares shall become immediately exercisable and remain exercisable until the
expiration of the Option Period, unless otherwise determined by Section 2.2(g).
(b) A person electing to exercise an Option or any portion
thereof shall give written notice of election to PowerTrader in such form as the
Board of Directors may require, accompanied by payment of the full purchase
price of the shares of Common Stock for which the election is made. Payment of
the purchase price shall be made in cash or in such other form as the Board of
Directors may specify, which may include shares of Common Stock valued at their
Fair Market Value on the date of exercise of the option.
ARTICLE III
General Provisions
3.1 Adjustment Provisions.
(a) In the event of:
(i) any stock dividend payable in respect of Common
Stock; or
(ii) any recapitalization, reclassification,
split-up or consolidation of or other change in the
Common Stock; or
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<PAGE>
(iii) any exchange of the outstanding shares of
Common Stock in connection with a merger, consolidation or
other reorganization of or involving PowerTrader or a sale by
PowerTrader of all or a portion of its assets, for a different
number or class of shares of stock or other securities of
PowerTrader or for shares of the stock or other securities of
any other corporation;
then the Board of Directors shall, in such manner as it may determine in its
sole discretion, appropriately adjust the number of shares or other securities
which shall be subject to Options and the purchase price per share which must be
paid thereafter upon exercise of any Option. Any such adjustments made by the
Board of Directors shall be final, conclusive and binding upon all persons,
including (but not by way of limitation) the Company, the stockholders and
directors of PowerTrader, and any persons having any interest in any Options
which may be granted under the Plan.
(b) Except as provided above in subparagraph (a) of this
paragraph 3.1, issuance by PowerTrader of shares of stock of any class or
securities convertible into shares of stock of any class shall not affect the
Options.
3.2 Additional Conditions. Any shares of Common Stock issued or
transferred under any provision of the Plan may be issued or transferred subject
to such conditions, in addition to those specifically provided in the Plan, as
the Board of Directors or PowerTrader may impose.
3.3 No Rights as Stockholder or to Employment. No Grantee or any other
person authorized to purchase Common Stock upon exercise of an Option shall have
any interest in or stockholder rights with respect to any shares of the Common
Stock which are subject to any Option until certificates evidencing the shares
have been issued and delivered to the Grantee or any such person upon the
exercise of the Option. Furthermore, an Option shall not confer upon any Grantee
any rights to employment or any other relationship with the Company, including
without limitation any right to continue in the employ of the Company, nor
affect the right of the Company to terminate the employment or other
relationship of the Grantee with the Company at any time with or without cause.
3.4 Legal Restrictions. If in the opinion of legal counsel for
PowerTrader the issuance or sale of any shares of Common Stock pursuant to the
exercise of an Option would not be lawful for any reason, including (but not by
way of limitation) the inability or failure of PowerTrader to obtain from any
governmental authority or regulatory body the authority deemed necessary by such
counsel for such issuance or sale, PowerTrader shall not be obligated to issue
or sell any Common Stock pursuant to the exercise of an Option to a Grantee or
any other authorized person unless a registration statement that complies with
the provisions of the Securities Act of 1933, as amended (the "Act") in respect
of such shares is in effect at the time thereof, or other appropriate action has
6
<PAGE>
been taken under and pursuant to the terms and provisions of the Act, or
PowerTrader receives evidence satisfactory to its legal counsel that the
issuance and sale of the shares, in the absence of an effective registration
statement or other appropriate action, would not constitute a violation of the
Act or any applicable state securities law. PowerTrader shall in no event be
obligated to register any such shares, to comply with any exemption from
registration requirements or to take any other action which may be required in
order to permit, or to remedy or remove any prohibition or limitation on, the
issuance or sale of such shares to any Grantee or other authorized person.
3.5 Rights Unaffected. The existence of the Options shall not affect:
the right or power of PowerTrader and its stockholders to make adjustments,
recapitalizations, reorganizations or other changes in the PowerTrader's capital
structure or its business; any issuance of bonds, debentures, preferred or prior
preference stocks affecting the Common Stock or the rights thereof; the
dissolution or liquidation of PowerTrader, or sale or transfer of any part of
its assets or business; or any other corporate act, whether of a similar
character or otherwise.
3.6 Withholding Taxes. As a condition to exercise of an Option,
PowerTrader may in its sole discretion withhold or require the Grantee to pay or
reimburse PowerTrader for any taxes which PowerTrader determines are required to
be withheld in connection with the grant or any exercise of an Option.
3.7 Choice of Law. The validity, interpretation and administration of
the Plan and of any rules, regulations, determinations or decisions made
thereunder, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with the laws of the State of Delaware. Without limiting the generality of the
foregoing, the period within which any action in connection with the Plan must
be commenced shall be governed by the laws of the State of Delaware, without
regard to the place where the act or omission complained of took place, the
residence of any party to such action or the place where the action may be
brought or maintained.
3.8 Amendment, Suspension and Termination of Plan. The Plan may from
time to time be terminated, suspended or amended by the Board of Directors in
such respects as it may deem advisable, including any such amendment effected to
conform to any change in any law or regulation governing the Plan, or the
Options granted hereunder, including (but not by way of limitation) amendments
to comply with the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934.
3.9 Headings. The headings in this Plan are for convenience only and
are not to be used in interpreting the meaning or effect of any provisions
hereof.
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<PAGE>
AS APPROVED BY THE BOARD OF DIRECTORS OF POWERTRADER, INC. ON
DECEMBER 10, 1996.
POWERTRADER, INC.
By:/s/ David C. Furlonger
Secretary
8
SUBSIDIARIES OF THE REGISTRANT
PowerTrader Software Inc.
Province of British Columbia
Accountants' Consent
We consent to the use in the registration statement on Form SB-2 of PowerTrader,
Inc. of our report dated 17 January 1997 which contains an explanatory paragraph
regarding a going concern uncertainty, relating to the balance sheet of
PowerTrader, Inc. as of 30 September 1996 and the related Statements of Loss,
Cash Flow and Changes in Shareholders' Deficit for the period from 22 August
1996 (inception) to 30 September 1996, and to the reference to our firm under
the heading "Experts" in the registration statement.
17 January 1997 BDO Dunwoody
Vancouver, British Columbia CHARTERED ACCOUNTANTS
(Internationally BDO Binder)
<PAGE>
Accountants' Consent
We consent to the use in the registration statement on Form SB-2 of PowerTrader,
Inc. of our report dated 17 January 1997 which contains an explanatory paragraph
regarding a going concern uncertainty, relating to the balance sheets of
PowerTrader Software, Inc. as of 30 September 1996 and 1995 and the related
Statements of Loss, Cash Flow and Changes in Shareholders' Deficit for the years
then ended and the Statements of Loss, Cash Flow and Changes in Shareholders'
Deficit for the period from 29 December 1988 (inception) to 30 June 1996
(cumulative).
17 January 1997 BDO Dunwoody
Vancouver, British Columbia CHARTERED ACCOUNTANTS
(Internationally BDO Binder)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> AUG-22-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 493
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 493
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 493
<CURRENT-LIABILITIES> 499
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (7)
<TOTAL-LIABILITY-AND-EQUITY> 493
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (7)
<EPS-DILUTED> (7)
</TABLE>
