<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1997
REGISTRATION NO. 333-23023
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NEI WEBWORLD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 2752 75-2524630
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
4647 BRONZE WAY
DALLAS, TEXAS 75236
(214) 330-7273
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MR. BARRY B. CONRAD
CHAIRMAN OF THE BOARD
NEI WEBWORLD, INC.
4647 BRONZE WAY
DALLAS, TEXAS 75236
(214) 330-7273
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
CROUCH & HALLETT, L.L.P. JACKSON & WALKER, L.L.P.
717 NORTH HARWOOD, SUITE 1400 901 MAIN STREET, SUITE 6000
DALLAS, TEXAS 75201 DALLAS, TEXAS 75202
ATTN: BRUCE H. HALLETT ATTN: RICHARD F. DAHLSON
(214) 953-0053 (214) 953-5896
---------------
APPROXIMATE DATE OF COMMENCEMENT 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, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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- -----------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value.................. 1,150,000(2) $ 7.50 $ 8,625,000 $2,614
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Common Stock Purchase
Warrant................ 1,150,000(3) $ .125 (8) (8)
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Common Stock, issuable
under Warrants(4)...... 1,150,000 $ 9.38 $10,787,000 $3,269
- -----------------------------------------------------------------------------------------------
Representative's Common
Stock(5)............... 100,000 $ 9.00 $ 900,000 $ 273
- -----------------------------------------------------------------------------------------------
Representative's Common
Stock Purchase
Warrants(6)............ 100,000 $ .150 (8) (8)
- -----------------------------------------------------------------------------------------------
Representative's Common
Stock issuable under
Representative's Common
Stock Purchase
Warrant(7)............. 100,000 $ 9.38 $ 938,000 $ 285
- -----------------------------------------------------------------------------------------------
TOTAL................... $6,441
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</TABLE>
(1) Estimated solely for purposes of calculating the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933, as
amended.
(2) Includes 150,000 Shares of Common Stock issuable pursuant to the
Representatives'over-allotment option.
(3) Includes 150,000 Warrants issuable pursuant to the Representatives' over-
allotment option.
(4) Represents shares of Common Stock issuable upon exercise of the Warrants
registered hereby together with such additional indeterminate number of
shares as may be issued upon exercise of such Warrants by reason of the
anti-dilution provisions contained therein.
(5) Represents shares of Common Stock issuable upon exercise of the
Representatives' Warrant, together with such additional indeterminate
number of shares of Common Stock as may be issued upon exercise of such
Representatives' Warrant by reason of the anti-dilution provisions
contained therein.
(6) Represents Common Stock Purchase Warrants issuable upon exercise of the
Representative's Warrant, together with such additional indeterminate
number of Warrants as may be issued upon exercise of such Representatives'
Warrant.
(7) Represents shares of Common Stock issuable upon exercise of the Common
Stock Purchase Warrants included within the Representative's Warrant,
together with such additional indeterminate number of shares of Common
Stock as may be issued upon exercise of such Warrants by reason of the
anti-dilution provisions contained therein.
(8) Pursuant to Rule 416 of the Securities Act of 1933, no separate
registration fee is required because the Common Stock underlying the
Common Stock Purchase Warrants is being registered in the same
registration statement.
---------------
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 23, 1997
[NEI WEBWORLD INC. LOGO APPEARS HERE]
1,000,000 SHARES OF COMMON STOCK
1,000,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
-----------
NEI WebWorld, Inc. (the "Company") is offering 1,000,000 shares of Common
Stock, $.01 par value per share (the "Common Stock"), and 1,000,000 Redeemable
Common Stock Purchase Warrants (the "Warrants"). The Common Stock and the
Warrants (collectively, the "Securities") are being offered separately and not
as units, and each are separately transferable. Prior to this Offering, there
has been no public market for the Common Stock and the Warrants. It is
estimated that the initial public offering price will be between $5.50 and
$7.50 per share for the Common Stock (the "Share Offering Price") and $.125 per
Warrant.
Each Warrant entitles the holder to purchase one share of Common Stock at a
price of $ per share (125% of the Share Offering Price) during the five-year
period commencing on the date of this Prospectus. The Warrants are redeemable
by the Company for $.05 per Warrant on not less than 30 nor more than 60 days
written notice if the closing price for the Common Stock for seven trading days
during a 10 consecutive trading day period ending not more than 15 days prior
to the date that the notice of redemption is mailed equals or exceeds $ per
share (200% of the Share Offering Price), subject to adjustment under certain
circumstances and provided there is then a current effective registration
statement under the Securities Act of 1933, as amended (the "Act"), with
respect to the issuance and sale of Common Stock upon the exercise of the
Warrants. Any redemption of the Warrants during the one-year period commencing
on the date of this Prospectus shall require the written consent of First
London Securities Corporation and RAS Securities Corp., the representatives of
the Underwriters (the "Representatives"). See "Description of Securities."
Prior to this Offering, there has been no public market for the Common Stock
or the Warrants. The initial public offering prices of the Common Stock and
Warrants and the exercise price and other terms of the Warrants have been
determined through negotiations between the Company and the Representatives and
are not related to the Company's assets, book value, financial condition or
other recognized criteria of value. Although the Company has applied for the
inclusion of the Common Stock and the Warrants on the Pacific Stock Exchange
under the proposed symbols "NEI" and "NEIW," respectively, and on the Nasdaq
SmallCap Market under the symbols "NEIP" and "NEIPW", respectively, there can
be no assurance that an active trading market in the Company's securities will
develop or be sustained.
-----------
THESE ARE SPECULATIVE SECURITIES, AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION
FROM THE PUBLIC OFFERING PRICE OF THE COMMON STOCK AND SHOULD BE
CONSIDERED ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" ON PAGES 8-13 AND "DILUTION."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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<CAPTION>
UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) COMPANY (2)(3)
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<S> <C> <C> <C>
Per Share................. $ $ $
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Per Warrant............... $ $ $
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Total(3).................. $ $ $
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</TABLE>
*See Footnotes on following Page
The shares of Common Stock and the Warrants are offered by the Underwriters
on a firm commitment basis, subject to prior sale, when, as and if delivered to
and accepted by the Underwriters, and subject to their right to reject orders
in whole or in part. It is expected that delivery of the certificates for the
shares of Common Stock will be made on or about , 1997.
FIRST LONDON SECURITIES CORPORATION RAS SECURITIES CORP.
The date of this Prospectus is , 1997
<PAGE>
- --------
(1) Does not include additional underwriting compensation to be received by
the Representatives in the form of (i) a non-accountable expense allowance
equal to 2% of the gross proceeds of this Offering, of which $50,000 has
been paid to date, and (ii) warrants issued to the Representatives (the
"Representatives' Warrants") to purchase up to 100,000 shares of Common
Stock and up to 100,000 Warrants, which Representatives' Warrants are
exercisable for a four-year period commencing one year from the effective
date of this Offering at an exercise price of 120% of the initial offering
price of the Shares and Warrants (in each case subject to adjustment). In
addition, the Company has granted to the Representatives certain
registration rights with respect to registration of the shares of Common
Stock and the Warrants underlying the Representative's Warrants (the
"Underlying Warrants") and the shares of Common Stock issuable upon
exercise of the Underlying Warrants. The Company has agreed to pay the
Representatives upon the exercise or redemption of the Warrants a fee
equal to 5% of the gross proceeds received by the Company from the
exercise of the Warrants and 5% of the aggregate redemption price for
Warrants redeemed. Such fee will be paid to the Representatives or their
designees no sooner than 12 months after the effective date of this
Offering. Additionally, the Representative or their designees must be
designated in writing by the Warrant holder as having solicited the
Warrant in order to receive the fee. The Company has agreed to indemnify
the Underwriters against certain liabilities arising under the Act. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $525,000,
including the Representatives' non-accountable expense allowance.
(3) The Company has granted the Representative an option (the
"Representatives' Over-Allotment Option"), exercisable within 30 days from
the date of this Prospectus, to purchase on the same terms as the
Securities offered hereby up to 150,000 additional shares of Common Stock
and up to 150,000 additional Warrants solely to cover over-allotments, if
any. If the Representatives' Over-Allotment Option is exercised in full,
the total Price to Public, Underwriting Commissions, and Proceeds to
Company will be $ , $ and $ , respectively. See "Underwriting."
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement"), pursuant to the Act with respect to the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. THE STATEMENTS
CONTAINED IN THIS PROSPECTUS AS TO THE CONTENTS OF ANY CONTRACT OR OTHER
DOCUMENT IDENTIFIED AS EXHIBITS IN THIS PROSPECTUS ARE NOT NECESSARILY
COMPLETE, AND IN EACH INSTANCE, REFERENCE IS MADE TO A COPY OF SUCH CONTRACT
OR DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT, EACH STATEMENT
BEING QUALIFIED IN ANY AND ALL RESPECTS BY SUCH REFERENCE. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement and exhibits which may be
inspected without charge at the Commission's principal office at Judiciary
Plaza, 450 Fifth Street, NW, Washington, DC 20549.
Upon consummation of this Offering, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and in accordance therewith will file reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at its New York Regional Office, Room 1300, 7 World Trade
Center, New York, New York 10048; and at its Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may also be obtained from the
Public Reference Section of the Commission at prescribed rates. The Company's
Registration Statement on Form SB-2 as well as any reports to be filed under
the Exchange Act can also be obtained electronically after the Company has
filed such documents with the Commission through a variety of databases,
including among others, the Commission's Electronic Data Gathering, Analysis
And Retrieval ("EDGAR") program, Knight-Ridder Information, Inc., Federal
Filings/Dow Jones and Lexis/Nexis. Additionally, the Commission maintains a
Website (at http://www.sec.gov) that contains such information regarding the
Company.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and such other reports as the Company
deems appropriate or as may be required by law.
Such requests may be directed to Barry B. Conrad, Chairman of the Board, c/o
NEI WebWorld, Inc., 4647 Bronze Way, Dallas, Texas 75236, telephone number
(214) 330-7273.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OR THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and must be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, (i) all information in this Prospectus assumes no exercise
of the Warrants, the Representative's Over-Allotment Option and the
Representative's Warrant; (ii) all share and per share data have been adjusted
to give effect to a 3.33 for one stock split in March 1997; (iii) all
information in this Prospectus has been adjusted to reflect the conversion of
the outstanding shares of the Company's preferred stock into Common Stock upon
the effective date of this Offering; and (iv) all information in this
Prospectus assumes a public offering price of $6.50 per share of Common Stock
and $.125 per Warrant. All references to the "Company" or "WebWorld" refer to
NEI WebWorld, Inc.
THE COMPANY
WebWorld owns and operates a commercial printing facility and offers pre-
press, printing and post-press services to mid- and large-sized customers in
the Southwestern United States. Through its high production web presses, the
Company offers a broad range of services, including printing magazines,
catalogs, tabloids, inserts and mail wraps on a range of paper stocks. Through
pre-press and post-press production services, the Company provides customers
with services such as converting supplied data and information into printing
plates and stapling, binding, sorting and folding printed materials for mass
mailings. The Company primarily uses high production presses to print materials
which are often mass produced and distributed; for example, the Company prints
the weekly edition of The Dallas Morning News TV Magazine.
WebWorld believes a large part of its success to date has resulted from its
ability to make three strategic acquisitions which increased its printing
capabilities, provided greater purchasing efficiencies and increased operating
efficiencies through overhead reductions as a percentage of sales while
expanding the scope of printing related services offered to its customers. In
1994, the Company acquired the business of Newspaper Enterprises, Inc., which
primarily printed The Dallas Morning News TV Magazine. In 1994 the Company also
acquired certain assets of Computer Language Research, Inc., including three
half-web presses and certain post-production equipment. In September 1996, the
Company purchased two full web presses from The Webworks Inc. ("Webworks"), a
subsidiary of Morris Newspaper Corporation, which has enabled the Company to
increase operating efficiencies by assigning presses to generally run specific
types of paper stock. The three-month period ending December 31, 1996 was the
first quarter to reflect the results of the increased customer growth including
certain customers who previously did business with Webworks. During that
quarter, revenues were $5.5 million compared to $3.8 million in the quarter
ended September 30, 1996 for an increase of 45%.
The Company plans to grow its business through the following expansion
strategy:
. Implement Integrated Commercial Web Press Facility. WebWorld believes
that developing a series of high capacity, integrated web press
facilities capable of servicing the needs of most mid-to-large size
users of commercial printed materials will provide a sustainable,
competitive advantage.
. Strategic Acquisitions. The Company plans to target acquisitions of web
printers which will diversify its customer base, business mix and
geographical coverage. Acquisition targets would generally be required
to have characteristics which would enable rapid consolidation and
integration to existing operations and produce cost savings and overhead
reductions.
. Single-Source Service Provider. WebWorld intends to expand its pre-press
and post-press capabilities to provide a one-stop service for many of
its customers. The Company intends to purchase additional equipment to
expand the Company's post-press production services such as high speed
binding and stitching, ink jetting, in-line finishing and mailing. These
value-added services often produce higher margins than printing alone
and are in demand by high-volume users.
4
<PAGE>
. Develop Direct Marketing. In order to develop long-term relationships
with a broad and diverse customer base, the Company is expanding its in-
house marketing staff. The objective of this program is to produce a
base of recurring printing jobs on a regularly scheduled basis and then
seek higher margin value-added opportunities to utilize additional
capacity. By expanding the in-house marketing efforts, the Company plans
to decrease its historical pattern of using print brokers to fill excess
capacity.
The Company was incorporated in 1993 as a Texas corporation and currently has
over 140 employees. The Company's offices are located at 4647 Bronze Way,
Dallas, Texas 75236, and its telephone number is (214) 330-7273.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered.... 1,000,000 Shares
Warrants Offered........ 1,000,000 Warrants
Common Stock
Outstanding:
Before the Offering... 2,719,778 Shares
After the Offering.... 3,719,778 Shares
Warrants Outstanding:
Before the Offering... None
After the Offering.... 1,000,000
Estimated Net Proceeds.. $5.4 million(1)
Use of Proceeds......... Repay outstanding indebtedness, fund equipment
installation costs
and capital expenditures, and provide additional working
capital. See "Use of Proceeds."
Proposed Trading
Symbols(2):
Pacific Stock
Exchange:
Common Stock........ NEI
Warrants............ NEIW
Nasdaq SmallCap
Market:
Common Stock........ NEIP
Warrants............ NEIPW
Risk Factors............ The Common Stock and the Warrants offered hereby are
speculative and involve a high degree of risk. Investors
should carefully consider the risk factors enumerated
hereafter before investing in the Common Stock and the
Warrants. See "Risk Factors" and "Dilution."
</TABLE>
- --------
(1) After subtracting the underwriting discounts and commissions and estimated
offering expenses payable by the Company, including a 2% non-accountable
expense allowance to the Representatives.
(2) Pacific Stock Exchange and the Nasdaq SmallCap Market symbols do not imply
that an established public trading market will develop for any of these
securities, or if developed, that any such market will be sustained. See
"Risk Factors--Possible Applicability of Rules Relating to Low-Priced
Stock; Possible Failure to Qualify for Pacific Stock Exchange or Nasdaq
SmallCap Market Listing."
6
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED MARCH NINE MONTHS ENDED
31, DECEMBER 31,
------------------ --------------------
1995 1996 1995 1996
------- --------- --------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $12,006 $ 14,286 $ 11,039 $ 12,820
Cost of sales....................... 9,776 12,240 9,416 10,611
------- --------- --------- ---------
Gross profit........................ 2,230 2,046 1,623 2,209
Operating expenses.................. 1,663 1,966 1,557 1,859
------- --------- --------- ---------
Operating income.................... 567 80 66 350
Other income (expense).............. (417) (419) (311) (84)
------- --------- --------- ---------
Income (loss) before income tax
expense and extraordinary item..... 150 (339) (245) 266
Income tax (benefit) expense........ 48 (29) (22) 90
------- --------- --------- ---------
Income (loss) before extraordinary
item............................... 102 (310) (223) 176
Extraordinary item.................. -- -- -- (72)
------- --------- --------- ---------
Net income (loss)................... $ 102 $ (310) $ (223) $ 104
======= ========= ========= =========
Pro forma earnings per share:
Income (loss) before extraordinary
item.............................. -- (0.11) (0.08) 0.06
Net income (loss).................. -- (0.11) (0.08) 0.04
Pro forma common shares
outstanding....................... -- 2,719,778 2,719,778 2,719,778
OTHER DATA:
EBITDA(1)........................... $ 1,177 $ 723 $ 546 $ 903
Net cash provided by (used for)
operating activities............... (73) 31 (150) 431
Net cash used for investing
activities......................... (151) (245) (198) (158)
Net cash provided by (used for)
financing activities............... (154) 213 390 (273)
Depreciation and amortization....... 611 643 480 553
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................... $(1,010) $ 3,175
Total assets............................................ 8,805 10,741
Long-term debt, less current portion.................... 3,396 2,143
Shareholders' equity.................................... 745 6,183
</TABLE>
- --------
(1) EBITDA represents operating income excluding interest, taxes, depreciation,
amortization of goodwill and other intangible assets (as presented on the
face of the income statement). EBITDA is not a substitute for net cash
provided by operating activities or operating income in accordance with
generally accepted accounting principles. EBITDA is presented because
management believes that it is a widely accepted financial indicator of a
company's ability to service and/or incur indebtedness, maintain current
operating levels of fixed assets and acquire additional operations and
businesses. Accordingly, significant uses of EBITDA include, but are not
limited to, interest and principal payments on long-term debt, including
indebtedness under the Company's revolving credit agreement. Items excluded
from EBITDA, such as interest, taxes, depreciation and amortization, are
significant components of the Company's operations and should be considered
in evaluating the Company's financial performance.
(2) The as adjusted summary balance sheet data has been prepared as if the
Offering had occurred as of December 31, 1996 and reflects the issuance of
the Securities offered by the Company hereby and the application by the
Company of the net proceeds therefrom. See "Use of Proceeds."
7
<PAGE>
RISK FACTORS
Prospective investors should carefully review the following risk factors
together with the other information in this Prospectus in evaluating the
Company and its business prior to purchasing the Common Stock and the Warrants
offered by this Prospectus. This Prospectus contains forward-looking
statements that involve risks and uncertainties. Actual results could differ
from those discussed in the forward-looking statements as a result of factors,
including those set forth below and elsewhere in the Prospectus.
NATURE OF COMMERCIAL PRINTING BUSINESS
The Company's quarterly operating results have fluctuated as a result of a
number of factors, including overall trends in the economy, acquisitions of
new businesses and customer buying patterns. In addition, a fire at the
Company's facility in March 1996 had a significant adverse impact on the
Company's operations during the last quarter of fiscal 1996 and the first two
quarters of fiscal 1997.
High production commercial printing facilities require significant capital
expenditures. Although the Company has to date been able to acquire printing
presses at prices less than their replacement costs, there is no assurance
that it will continue to be able to do so. New presses offering comparable
characteristics to those operated by the Company generally range in price from
$6 to $12 million.
The Company competes in the general commercial printing sector, which is
characterized by individual orders from customers for specific printing
projects rather than long-term contracts, with continued engagement for
successive jobs dependent upon the customer's satisfaction with the services
provided. As such, WebWorld is unable to predict the number, size and
profitability of printing jobs in a given period. Consequently the timing of
projects in any quarter could have a significant impact on financial results
in that quarter. In addition, WebWorld has experienced some seasonality in its
sales with the calendar fourth quarter being the highest sales period and with
January and July being the lowest sales months. Quarterly results in the
future may be influenced by these or other factors and, accordingly, there may
be significant variations in the Company's quarterly operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RELIANCE ON KEY CUSTOMERS
WebWorld has an existing contract with The Dallas Morning News to print its
TV Magazine. The contract was originally entered into by the Company's
predecessor in 1978 and has been renewed for successive terms ranging from one
to three years in duration. The current contract expires in January 1998. The
Dallas Morning News represented approximately 55% of the Company's business in
fiscal 1996; however, because of increased sales volume The Dallas Morning
News accounted for approximately 36% of the Company's sales in the first nine
months of fiscal 1997. Although the Company believes that its relations with
its customers are good, the termination of The Dallas Morning News TV Magazine
contract or loss of any other significant customer could have a material
adverse effect on the results of operations, financial condition and cash
flows of the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Business--Customers."
COMPETITION
The commercial printing industry is extremely competitive and fragmented.
The Company competes with numerous large and small printing companies, some of
which have greater financial resources. The Company competes on the basis of
ongoing customer service, quality of finished products and price. No assurance
can be given that the Company will be able to compete effectively in the
future. See "Business--Competition."
ASSET RELOCATION
The Company's assets acquired from Webworks are located in a leased
facility, and the related lease expires in September 1997. The Company has
entered into a five-year lease for a facility adjacent (but not attached) to
8
<PAGE>
the Company's existing operations. Additionally, the Company has entered into
a contract to purchase the facility by December 31, 1997. The Company is
relocating the former Webworks assets to its facilities prior to September
1997 and shifting certain of its administrative offices and pre-press and
post-press services to the new leased facility. In connection with relocating
the assets acquired from Webworks, the two printing presses acquired from
Webworks will be dismantled in the former Webworks facility and reassembled in
the Company's facilities. The Company estimates that each press will be out of
operation for two to six months in connection with the relocation, and the
Company plans to stagger the relocation of the presses so that one of the
presses will be operating at all times. Although the Company does not
anticipate the relocation of these presses to adversely impact its ability to
service existing business, the reduction in the Company's operating capacity
during the relocation may adversely impact the Company's ability to attract or
service new business. In addition, there can be no assurance that the
relocation will be timely completed, that the costs will not be in excess of
the Company's estimates or that the operation of printing presses to be
relocated will not be materially impaired as a result of the relocation. If
unexpected problems occur with the printing presses or the relocation in
general, the Company's operations and financial performance could be
materially and adversely impacted.
INTEGRATION OF ACQUISITIONS
A material element of WebWorld's growth strategy is to expand its existing
business in the Dallas-Fort Worth metropolitan area and, in the future, in
other geographic markets. This expansion may be made through internal growth
or through strategic acquisitions. While the Company continuously evaluates
opportunities to make strategic acquisitions, it has no present commitments or
agreements with respect to any material acquisitions. There can be no
assurance that the Company will be able to identify and acquire such companies
or that it will be able to successfully integrate the operations of any
companies it acquires. Further, any acquisition may initially have an adverse
effect upon the Company's operating results while the acquired businesses are
adopting the Company's management and operating practices. In addition, there
can be no assurance that the Company will be able to establish, maintain or
increase profitability of an entity once it has been acquired. Also, if
WebWorld does not have sufficient cash resources for any acquisition, its
growth could be limited. There can be no assurance that WebWorld will be able
to obtain adequate financing for any acquisition, or that, if available, such
financing will be on terms acceptable to WebWorld. The consent of the
Company's primary lender will be required to be obtained in order to
consummate such acquisitions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Business--Business Strategy."
DEPENDENCE ON KEY PERSONNEL
The Company's success is largely dependent on the skills, experience and
performance of certain key members of its management, including particularly
Richard J. Wiencek, the Company's Chief Executive Officer. The loss of the
services of any of these key employees could have a material adverse effect on
the Company's business, financial condition, results of operations and cash
flows. WebWorld has not obtained key man life insurance on the lives of these
individuals. The Company has entered into a three year employment contract
with Mr. Wiencek. The Company's future success and plans for growth also
depend on its ability to attract, train and retain skilled personnel in all
areas of its business. See "Management."
GEOGRAPHIC CONCENTRATION AND ECONOMIC CONDITIONS
The Company's operations are located in the Dallas-Fort Worth metroplex, and
the majority of its customers are located in the Southwestern United States.
The Company and its profitability may be susceptible to the effects of
unfavorable or adverse local economic factors and conditions affecting these
geographic regions.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
WebWorld is subject to the environmental laws and regulations of the United
States and Texas concerning emissions into the air, discharges into waterways
and the generation, handling and disposal of waste materials. While the
Company believes it is currently in substantial compliance with these laws and
regulations, there can
9
<PAGE>
be no assurance that future changes in such laws and regulations will not have
a material effect on the Company's operations. See "Business--Government
Regulation and Environmental Matters."
TECHNOLOGICAL CHANGES
Production technology in the printing industry has evolved and continues to
evolve. The Company does not consider itself a technology leader and does not
attempt to be a leader in this area. WebWorld invests in technology
improvements after such improvements have been proven to be cost-effective.
The Company is currently evaluating digital imaging technology, along with new
finishing technology for inclusion in its service facility. WebWorld will
continue to add technology as the needs occur.
The printing industry has experienced significant changes due to
technological changes. Because of advances in computer and related
communication technologies, certain products that were once printed by
commercial printers are now generated on computers through word processing or
desktop publishing software. In addition, some information is now disseminated
in a digital or electronic format rather than disseminated in a paper format
and this trend could continue in the future.
VOLATILITY OF PAPER PRICES
A material component of the Company's operating costs is the price of paper,
a commodity that has experienced significant price volatility in recent years.
WebWorld anticipates that fluctuations in the price of paper will continue in
the future. Although increased paper prices potentially affect operating
margins, such increases are typically an expense of the Company's customers.
Nevertheless, increased paper prices could decrease orders for printing
services or the size of such orders.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
3,719,778 shares of Common Stock (3,869,778 shares if the Underwriter's over-
allotment option is exercised in full). In addition, substantially all of the
2,719,778 shares previously issued by the Company would be eligible for resale
90 days after the Offering subject to the provisions of Rule 144 under the
Act; however, shareholders owning 2,633,197 shares and the Company have agreed
not to offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities exercisable for or convertible into Common
Stock for a period of one year after the date of this Prospectus without the
prior written consent of the Representative.
No predictions can be made as to the effect, if any, that market sales of
such shares will have on the market price of shares of Common Stock prevailing
from time to time. However, sales of substantial amounts of Common Stock in
the open market or the availability of such shares for sale following this
Offering could adversely affect the market price for the Common Stock. See
"Shares Eligible for Future Sale," "Description of Capital Stock" and
"Principal Shareholders."
ARBITRARY OFFERING PRICE AND EXERCISE PRICE OF WARRANTS
The public offering price of the Common Stock and the Warrants and the
exercise price of the Warrants, as well as the exercise price of the
Representatives' Warrants, have been determined solely by negotiations between
the Company and the Representatives. Among the factors considered in
determining these prices were the Company's current financial condition and
prospects, market prices of similar securities of comparable publicly traded
companies, and the general condition of the securities market. However, the
public offering price of the Common Stock and the Warrants and the exercise
price of the Warrants and the Representatives' Warrants do not necessarily
bear any relationship to the Company's assets, book value, earnings or any
other established criterion of value. See"Underwriting."
NECESSITY TO MAINTAIN CURRENT PROSPECTUS AND REGISTRATION STATEMENT
The Company must maintain an effective registration statement on file with
the Commission before any Warrant may be redeemed or exercised. It is possible
that the Company may be unable to cause a registration statement covering the
Common Stock underlying the Warrants to be effective. It is also possible that
the
10
<PAGE>
Warrants could be acquired by persons residing in states where the Company is
unable to qualify the Common Stock underlying the Warrants for sale. In either
event, the Warrants may expire, unexercised, which would result in the holders
losing all the value of the Warrants.
STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE WARRANTS
Holders of the Warrants have the right to exercise the Warrants only if the
underlying shares of Common Stock are qualified, registered or exempt from
registration under applicable securities laws of the states in which the
various holders of the Warrants reside. The Company cannot issue shares of
Common Stock to holders of the Warrants in states where such shares are not
qualified, registered or exempt. The Company has undertaken, however, to
qualify the Warrants for listing on the Pacific Stock Exchange which provides
for blue sky registration in over 20 states. See "Description of Securities--
Warrants."
REDEEMABLE WARRANTS AND IMPACT ON INVESTORS
The Warrants are subject to redemption by the Company in certain
circumstances. The Company's exercise of this right would force a holder of
the Warrants to exercise the Warrants and pay the exercise price at a time
when it may be disadvantageous for the holder to do so, to sell the Warrants
at the then current market price when the holder 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 in the event of a call for redemption. Holders who do not exercise
their Warrants prior to redemption by the Company will forfeit their right to
purchase the shares of Common Stock underlying the Warrants. The foregoing
notwithstanding, the Company may not redeem the Warrants at any time that a
current registration statement under the Act is not then in effect. See
"Description of Securities--Warrants."
REPRESENTATIVE'S POTENTIAL INFLUENCE ON THE MARKET
It is anticipated that a significant amount of the Common Stock and the
Warrants will be sold to customers of the Representatives. Although the
Representatives have advised the Company that they intend to make a market in
the Common Stock and the Warrants, they will have no legal obligation to do
so. The prices and the liquidity of the Common Stock and the Warrants may be
significantly affected by the degree, if any, of the Representatives'
participation in the market. No assurance can be given that any market making
activities of the Representatives, if commenced, will be continued. See
"Underwriting."
POSSIBLE APPLICABILITY OF RULES RELATING TO LOW-PRICED STOCKS; POSSIBLE
FAILURE TO QUALIFY FOR PACIFIC STOCK EXCHANGE OR NASDAQ SMALLCAP MARKET
LISTING
The Commission has adopted regulations which generally define a "penny
stock" to be any equity security that has a market price (as defined) of less
than $5.00 per share, subject to certain exceptions. While the price at which
the shares of Common Stock offered to the public pursuant to this Offering
will be in excess of $5.00, the Warrants offered hereby will initially be
"penny stocks" and become subject to rules that impose additional sales
practice requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors, unless the Common
Stock and the Warrants are listed on the Pacific Stock Exchange. There can be
no assurance that the Company will be able to satisfy the listing criteria of
the Pacific Stock Exchange or that the Common Stock or the Warrants will trade
for $5.00 or more per security after the Offering. Consequently, the "penny
stock" rules may restrict the ability of broker/dealers to sell the Company's
securities and may affect the ability of purchasers in this Offering to sell
the Company's securities in a secondary market.
Although the Company has applied for listing of the Common Stock and the
Warrants on the Pacific Stock Exchange and the Nasdaq SmallCap Market, there
can be no assurance that such application will be approved or that a trading
market for the Common Stock and the Warrants will develop or, if developed,
will be sustained. Furthermore, there can be no assurance that the securities
purchased by the public hereunder may be resold at their original offering
price or at any other price. If the Common Stock and the Warrants are not
approved for
11
<PAGE>
listing on the Pacific Stock Exchange or the Nasdaq SmallCap Market, the
Company intends to apply for listing of the Common Stock and the Warrants on
the Boston Stock Exchange; however, there can be no assurance that such
application would be accepted.
In order to qualify for initial listing on the Pacific Stock Exchange, a
company must, among other things, have at least $2,000,000 in total assets,
$100,000 of after-tax income, $1.5 million "public float," and a minimum bid
price for its securities of $3.00 per share. For continued listing on the
Pacific Stock Exchange, a company must maintain a $1.0 million market value of
the public float and $2.0 million in total capital and surplus. In addition,
continued inclusion requires two market-makers and a minimum bid of $3.00 per
share. The failure to meet these maintenance criteria in the future may result
in the discontinuance of the listing of the Common Stock and Warrants on the
Pacific Stock Exchange.
In order to qualify for initial listing on the Nasdaq SmallCap Market, a
company must, among other things, have at least $4,000,000 in total assets,
$2.0 million of total capital and surplus, $1.0 million "public float," and a
minimum bid price for its securities of $3.00 per share. For continued listing
on the Nasdaq SmallCap Market, a company must maintain a $200,000 market value
of the public float, $2.0 million in total assets and $1.0 million in total
capital and surplus. In addition, continued inclusion requires two market-
makers and a minimum bid of $1.00 per share. The failure to meet these
maintenance criteria in the future may result in the discontinuance of the
listing of the Common Stock and Warrants on the Nasdaq SmallCap Market.
If the Company is or becomes unable to meet the listing criteria (either
initially or on a continued basis) of the Pacific Stock Exchange or the Nasdaq
SmallCap Market and is never traded or becomes delisted therefrom, trading, if
any, in the Common Stock and the Warrants would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
"Electronic Bulletin Board" administered by the National Association of
Securities Dealers, Inc. (the "NASD"). In such an event, the market price of
the Common Stock and the Warrants may be adversely impacted. As a result, an
investor may find it difficult to dispose of or to obtain accurate quotations
as to the market value of the Common Stock and the Warrants.
EXERCISE OF REPRESENTATIVE'S PURCHASE WARRANTS
In connection with this Offering, the Company will sell to the
Representatives or their designees, for nominal consideration, the
Representatives' Warrants to purchase up to 100,000 shares of Common Stock and
up to 100,000 Underlying Warrants from the Company. The Representatives'
Warrants will be exercisable for a four-year period commencing one year from
the effective date of this Offering at an exercise price of 120% of the price
at which the Common Stock and Warrants are sold to the public, subject to
adjustment. The Representatives' Warrants may have certain dilutive effects
because the holders thereof will be given the opportunity to profit from a
rise in the market price of the underlying shares with a resulting dilution in
the interest of the Company's other shareholders. The terms on which the
Company could obtain additional capital during the life of the
Representatives' Warrants may be adversely affected because the holders of the
Representatives' Warrants might be expected to exercise them at a time when
the Company would otherwise be able to obtain comparable additional capital in
a new offering of securities at a price per share greater than the exercise
price of the Representatives' Warrants.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF SECURITIES PRICES
Prior to this Offering, there has been no public market for the Common Stock
or the Warrants. Although the Company has applied to list the Common Stock and
the Warrants on the Pacific Stock Exchange and the Nasdaq SmallCap Market,
there can be no assurance that a regular trading market will develop (or be
sustained, if developed) for the Common Stock or the Warrants upon completion
of this Offering, or that purchasers will be able to resell their Common Stock
or Warrants or otherwise liquidate their investment without considerable
delay, if at all. Recent history relating to the market prices of newly public
companies indicates that, from time to time, there may be significant
volatility in their market price. There can be no assurance that the market
price of the Common Stock or the Warrants will not be volatile as a result of
a number of factors, including the Company's financial results or various
matters affecting the stock market generally.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward looking statements" within the meaning of
Section 27A of the Act, and Section 21E of the Exchange Act. The actual
results of the Company may differ significantly from the results discussed in
such forward-looking statements. Certain factors that might cause such
differences include, but are not limited to, the factors discussed in this
"Risk Factors" section. The safe harbors contained in Section 27A of the Act
and Section 21E of the Act, which apply to certain forward-looking statements,
are not applicable to this Offering.
NO DIVIDENDS
The Company has not declared or paid any cash dividends on its Common Stock
since its inception. The Company currently intends to retain all earnings for
the operation and expansion of its business and does not anticipate paying any
dividends in the foreseeable future. In addition, the Company's credit
agreement prohibits the payment of dividends. See "Dividend Policy" and Note 7
of "Notes to Financial Statements."
CONTROL BY PRINCIPAL SHAREHOLDERS
Upon completion of this Offering, the directors and executive officers will
own approximately 71% of the outstanding Common Stock of the Company. As a
result, these shareholders will be able to control the management and policies
of the Company through the ability to determine the outcome of elections for
the Company's Board of Directors and other matters requiring the vote or
consent of shareholders of the Company. See "Principal Shareholders."
PREFERRED STOCK AUTHORIZED
The Company's Articles of Incorporation authorizes the issuance of 2,000,000
shares of preferred stock, the rights, preferences and privileges of which are
to be determined by the Company's Board of Directors. Although the Company has
no intention at the present to issue any preferred stock, the Company may in
the future issue and sell preferred stock, which will likely have dividend,
distribution and liquidation preferences senior to common shareholders and
voting rights which may dilute the common shareholder voting rights. See
"Description of Capital Stock--Preferred Stock."
DILUTION
Purchasers of shares of Common Stock will suffer an immediate, substantial
dilution of approximately 77% in the net tangible book value of their shares
of Common Stock since the purchase price of the shares of Common Stock
substantially exceeds the current tangible book value per share of Common
Stock. See "Dilution."
13
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of 1,000,000
shares of Common Stock and 1,000,000 Warrants offered hereby are estimated to
be approximately $5.4 million ($6.3 million if the Representatives' Over-
Allotment Option is exercised in full) assuming an initial public offering
price of $6.50 per share for the Common Stock and $.125 per Warrant and after
deducting the estimated underwriting discounts and offering expenses and a
non-accountable expense allowance payable to the Representative equal to 2% of
such gross proceeds.
The following reflects the application of the estimated net proceeds by the
Company:
<TABLE>
<CAPTION>
PERCENT OF
USE DOLLAR AMOUNT NET PROCEEDS
--- ------------- ------------
<S> <C> <C>
Reduce outstanding balance on revolving credit
line with Congress Financial Corporation
(Southwest)..................................... $1,462,000 26.9%
Repay mortgage term note to Congress Financial
Corporation (Southwest)......................... 750,000 13.8
Repay term note to The Webworks, Inc............. 510,000 9.4
Repay term note to Robert L. Jensen.............. 200,000 3.7
Equipment installation and restoration costs..... 750,000 13.8
Working capital and capital expenditures......... 1,766,000 32.4
---------- -----
$5,438,000 100.0%
</TABLE>
At December 31, 1996, the Company's outstanding balance under the revolving
credit note issued to Congress Financial Corporation (Southwest) ("Congress")
was $1.46 million. The advances under this note have been used by the Company
to provide working capital. The outstanding indebtedness under this note bears
interest at a rate equal to Core States Bank prime rate plus 1.25% and is
repayable on December 31, 1998. The Company's outstanding indebtedness under
the Congress mortgage term loan bears interest at prime rate plus 1.5% per
annum and matures on December 31, 1998.
On December 31, 1996, the Company had outstanding indebtedness to The
Webworks, Inc. of $510,000. This indebtedness bears interest at 12% per annum
and is repayable in installments of $100,000 on September 12, 1997 and
September 12, 1998 and $310,000 on September 12, 1999.
The Company's note to Robert L. Jensen (seller of Newspaper Enterprises,
Inc.) bears interest at a rate of 8% per annum and matures on February 28,
1999. This note is not secured and is subordinated to all of the Company's
indebtedness to senior lenders.
The Company will utilize an estimated $580,000 of the net proceeds for the
relocation and installation of the assets acquired from Webworks to the
Company's facilities and an additional $170,000 for related capital
improvements. See "Business--Facilities and Capabilities."
The balance of the net proceeds will be used for general working capital
purposes and capital expenditures, including possible acquisitions of
additional printing operations. The Company does not have any present
agreements or understandings regarding any such acquisitions. The Company
plans to make capital purchases of approximately $2.0 million after completion
of the relocation of certain of its assets to its facilities to increase its
pre-press and post-press capabilities, including $300,000 to increase the
capacity and performance of an existing press. A portion of the net proceeds
will be used for such purposes.
Pending the use of proceeds for the foregoing purposes, the net proceeds
will be invested in short-term, interest bearing obligations.
The Company expects that the net proceeds of the Offering, together with
internally generated funds and funds available under its revolving credit
facility, will be sufficient to meet its cash requirements through fiscal year
1998.
14
<PAGE>
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common Stock
since its inception. The Company currently intends to retain all earnings for
the operation and expansion of its business and does not anticipate paying any
dividends in the foreseeable future. In addition, the Company's credit
agreement with Congress prohibits the payment of dividends. See Note 7 to
"Notes to Consolidated Financial Statements."
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
December 31, 1996, and (ii) as adjusted to reflect the sale by the Company of
1,000,000 shares of Common Stock and 1,000,000 Warrants offered hereby at an
assumed initial public offering price of $6.50 per share of Common Stock and
$.125 per Warrant (after deduction of the underwriting discount and estimated
offering expenses) and the application of the net proceeds therefrom as
described under "Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED(1)
------ --------------
<S> <C> <C>
Current portion of long-term debt....................... $ 664 $ 457
====== ======
Long-term debt, less current portion.................... $3,396 $2,143
Shareholders' equity:
Preferred stock: 2,000,000 shares of $1 par value
authorized, no shares issued and outstanding......... -0- -0-
Common stock: 20,000,000 shares of $.01 par value
authorized, 2,719,778 shares issued and outstanding
(actual) and 3,719,778 shares issued and outstanding
(as adjusted)........................................ 27 37
Common stock purchase warrants........................ -0- 125
Additional paid-in capital............................ 1,034 6,337
Accumulated deficit................................... (191) (191)
Notes receivable--shareholders........................ (125) (125)
------ ------
Total shareholders' equity.............................. 745 6,183
------ ------
Total capitalization.................................. $4,141 $8,326
====== ======
</TABLE>
- --------
(1) Excludes the issuance of (i) 1,000,000 shares of Common Stock upon
exercise of the Warrants; (ii) up to 300,000 shares of Common Stock
issuable pursuant to the Representative's Over-Allotment Option and that
underlie the Warrants contained therein; (iii) up to 200,000 shares
issuable pursuant to the Representatives' Warrants and the Underlying
Warrants contained therein; and (iv) 350,000 shares of Common Stock
reserved for issuance under the Company's Stock Option Plan, of which no
shares of Common Stock are currently subject to outstanding options. See
"Underwriting," "Management--Stock Option Plan," and "Description of
Securities."
15
<PAGE>
DILUTION
The net tangible book value of the Common Stock at December 31, 1996 was
$205,000 or $.08 per share. "Net tangible book value per share" represents the
amount of total tangible assets less total liabilities, divided by the number
of total shares of Common Stock outstanding. After giving effect to the sale
of the 1,000,000 shares of Common Stock at an assumed initial public offering
price of $6.50 per share and $.125 per Warrant, and the initial application of
the estimated net proceeds therefrom, pro forma net tangible book value of the
Company at December 31, 1996, would have been $5,642,000 or $1.52 per share,
representing an immediate increase in net tangible book value of $1.44 per
share to existing shareholders and an immediate dilution of $4.98 per share
(or approximately 77% dilution) to purchasers of shares of Common Stock in
this Offering as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $6.50
Net tangible book value per share before this Offering....... $ .08
Increase in value per share attributable to new investors.... 1.44
-----
Pro forma net tangible book value per share after this
Offering...................................................... 1.52
-----
Dilution per share to new investors............................ $4.98
=====
Percent of dilution to new investors........................... 77%
</TABLE>
The following table sets forth as of December 31, 1996, (i) the number of
shares of Common Stock purchased from the Company by the existing
shareholders, the total consideration paid and the average price per share
paid for such shares by the existing shareholders and (ii) the number of
shares of Common Stock to be sold by the Company in this Offering, the total
consideration to be paid and the average price per share.
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED(1) CONSIDERATION
----------------- ------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders........ 2,719,778 73.1% $1,148,500 15.0% $ .42
New investors................ 1,000,000 26.9% 6,500,000 85.0% $6.50
--------- ----- ---------- -----
Total...................... 3,719,778 100.0% $7,648,500 100.0%
========= ===== ========== =====
</TABLE>
- --------
(1) Excludes the issuance of (i) 1,000,000 shares of Common Stock upon
exercise of the Warrants; (ii) up to 300,000 shares of Common Stock
issuable pursuant to the Representatives' Over-Allotment Option and that
underlie the Warrants contained therein; (iii) up to 200,000 shares
issuable pursuant to the Representatives' Warrants and the Underlying
Warrants contained therein; and (iv) 350,000 shares of Common Stock
reserved for issuance under the Company's Stock Option Plan, of which no
shares of Common Stock are currently subject to outstanding options. See
"Underwriting," "Management--Stock Option Plan," and "Description of
Securities."
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
financial statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this Prospectus. The data for the years ended March 31, 1995 and 1996, and
for the nine months ended December 31, 1996, are derived from the audited
financial statements included elsewhere in this Prospectus. The data for the
nine months ended December 31, 1995 are derived from unaudited financial
statements that are included elsewhere in this Prospectus and that include, in
the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information
set forth therein. The results of operations for the nine months ended
December 31, 1996 are not necessarily indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED MARCH NINE MONTHS ENDED
31, DECEMBER 31,
------------------ --------------------
1995 1996 1995 1996
------- --------- --------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $12,006 $ 14,286 $ 11,039 $ 12,820
Cost of sales....................... 9,776 12,240 9,416 10,611
------- --------- --------- ---------
Gross profit........................ 2,230 2,046 1,623 2,209
Operating expenses.................. 1,663 1,966 1,557 1,859
------- --------- --------- ---------
Operating income.................... 567 80 66 350
Other income (expense).............. (417) (419) (311) ( 84)
------- --------- --------- ---------
Income (loss) before income tax
expense and extraordinary item..... 150 (339) (245) 266
Income tax (benefit) expense........ 48 (29) (22) 90
------- --------- --------- ---------
Income (loss) before extraordinary
item............................... 102 (310) (223) 176
Extraordinary item.................. -- -- -- (72)
------- --------- --------- ---------
Net income (loss)................... $ 102 $ (310) $ (223) $ 104
======= ========= ========= =========
Pro forma earnings per share:
Income (loss) before extraordinary
item.............................. -- (0.11) (0.08) 0.06
Net income (loss).................. -- (0.11) (0.08) 0.04
Pro forma common shares
outstanding....................... -- 2,719,778 2,719,778 2,719,778
OTHER DATA:
EBITDA(1)........................... $ 1,177 $ 723 $ 546 $ 903
Net cash provided by (used for)
operating activities............... (73) 31 (150) 431
Net cash used for investing
activities......................... (151) (245) (198) (158)
Net cash provided by (used for)
financing activities............... (154) 213 390 (273)
Depreciation and amortization....... 611 643 480 553
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................... $(1,010) $ 3,175
Total assets............................................ 8,805 10,741
Long-term debt, less current portion.................... 3,396 2,143
Shareholders' equity.................................... 745 6,183
</TABLE>
- --------
(1) EBITDA represents operating income excluding interest, taxes,
depreciation, amortization of goodwill and other intangible assets (as
presented on the face of the income statement). EBITDA is not a substitute
for net cash provided by operating activities or operating income in
accordance with generally accepted accounting principles. EBITDA is
presented because management believes that it is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness, maintain current operating levels of fixed assets and
acquire additional operations and businesses. Accordingly, significant
uses of EBITDA include, but are not limited to, interest and principal
payments on long-term debt, including indebtedness under the Company's
credit agreement and capital expenditures. Items excluded from EBITDA,
such as interest, taxes, depreciation and amortization, are significant
components of the Company's operations and should be considered in
evaluating the Company's financial performance.
(2) The as adjusted summary balance sheet data has been prepared as if the
Offering had occurred as of December 31, 1996 and reflects the issuance of
the Securities offered by the Company hereby and the application by the
Company of the net proceeds therefrom. See "Use of Proceeds."
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information
contained in the financial statements, including the notes thereto, and the
other financial information appearing elsewhere in this Prospectus.
GENERAL
WebWorld is a high-volume commercial printer specializing in the printing of
multi-color freestanding magazines, catalogs, tabloids, inserts and mail
wraps. Historically, the Company has concentrated on the newsprint magazine
sector of the printing industry. Contracts with local newspapers for the
printing of weekly television guides accounted for 72% and 61% of the gross
sales for the fiscal years ended March 31, 1995 and 1996, respectively, and
37% of gross sales for the nine months ended December 31, 1996.
In March 1996, the Company experienced a fire that adversely affected its
operations for approximately six months. In September 1996, the Company
purchased certain assets of Webworks, which will allow it to expand more
rapidly into the coated paper segment of the commercial printing market. The
Company expects to realize significant economies of scale through combined
plant operations, information systems and accounting functions and through
increased operation of under-utilized equipment. The asset acquisition will
also expand the Company's post-press production services such as stapling,
binding, sorting and folding printed materials for mass mailings.
The existing contract for production and sale of the weekly The Dallas
Morning News TV Magazine expires January 1998. Other than this annual
contract, the Company has no significant long-term printing contracts. Most
sales come from individual orders for specific printing projects. Customer
satisfaction with the quality, pricing and delivery of each job is required
for continued engagement.
Paper is the largest cost component of the Company's sales. The price of
paper is volatile and may cause significant fluctuations in sales and cost of
sales. Paper prices, specifically newsprint prices, increased consistently
through the Company's fiscal year ended March 31, 1995 to a peak in July and
August 1995. Prices since that time have fallen as paper mill production has
increased. The Company generally is able to pass paper cost increases to its
customers and conversely paper cost decreases. There can be no assurance that
future price increases can be passed through to customers.
Results of Operations
The following table sets forth certain percentage relationships based on the
Company's statements of operations for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
MARCH 31 DECEMBER 31
PERCENT OF PERCENT OF
NET SALES NET SALES
------------ ------------
1995 1996 1995 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales............................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales..................................... 81.4 85.7 85.3 82.8
----- ----- ----- -----
Gross profit...................................... 18.6 14.3 14.7 17.2
Selling, general and administrative expenses...... 7.6 8.1 8.4 9.1
Depreciation and amortization..................... 5.1 4.5 4.3 4.3
Management and consulting fees.................... 1.2 1.1 1.4 1.1
----- ----- ----- -----
Operating income.................................. 4.7 0.6 0.6 2.7
Interest expense (net)............................ 3.5 3.1 3.0 2.9
Other income...................................... 0.0 0.1 0.2 2.3
----- ----- ----- -----
Income (loss) before income taxes and
extraordinary item............................... 1.2 (2.4) (2.2) 2.1
Income taxes...................................... 0.4 (0.2) (0.2) 0.7
----- ----- ----- -----
Income (loss) before extraordinary item........... 0.8 (2.2) (2.0) 1.4
===== ===== ===== =====
</TABLE>
18
<PAGE>
Nine Months Ended December 31, 1996 Compared to Nine Months ended December
31, 1995:
Sales increased 16.1% from $11 million for the nine months ended December
31, 1995 to $12.8 million for the nine months ended December 31, 1996. Sales
increased primarily due to increases in sales of coated paper product services
primarily in the last three months of the current period. Sales of newsprint
items increased marginally despite a material increase in total units produced
due primarily to sales price reductions resulting from a decrease in newsprint
prices of 25% beginning in August 1995 and continuing through December 1996.
Paper costs as a percent of gross sales at the Company went from a high of 62%
in July 1995 to 41% for the month of December 1996. Newsprint paper costs are
generally passed through at cost to the Company's major customers.
Gross profit increased 36% or $585,000, from $1.6 million and 15% of sales
for the nine months ended December 31, 1995 to $2.2 million and 17% of sales
for the nine months ended December 31, 1996. The gross profit as a percent of
sales increase is due to the higher margins associated with coated paper
products and due to lower newsprint paper prices in the current year. Material
costs decreased 8% as a percent of sales during the nine months ended December
31,1996 as compared to the nine months ended December 31, 1995. The cost
decrease was due to the net reduction in newsprint prices during the period
and a $440,000 job completed during the third quarter in which the customer
supplied the paper, which at an average paper cost of 42% had a 1.5% effect on
the gross profit margin. The decrease in material costs as a percent of sales
was partially mitigated by an increase of 4% in labor costs as a percent of
sales during the same period. The labor cost increase was due to the newsprint
paper cost reductions and the resultant gross sales decrease applied to a
constant labor cost on a units-produced basis and increased overtime during
the last three months of 1996 resulting primarily from a large, non-recurring
job.
Selling, general and administrative expenses increased as a percent of sales
from 8.4% for the nine months ended December 31, 1995 to 9.1% for the nine
months ended December 31, 1996 due primarily to the temporary maintenance of
separate plant and administrative facilities in conjunction with the purchase
of the Webworks' assets and the short-term lease of its facility.
Operating income totaled $66,000, or $350,000, for the nine months ended
December 31, 1995 and 1996, respectively. The operating income increase is due
to the increased sales and gross profit resulting from increased sales in
higher margin coated paper and decreased newsprint paper prices mitigated by
the temporary increase in selling, general and administrative expenses.
Interest expense increased 12% from $335,000 for the nine months ended
December 31, 1995 to $375,000 for the nine months ended December 31, 1996, due
to an increase in the average debt balance in the revolving line of credit and
an increase in the average interest rate paid on term debt caused by
additional subordinated debt incurred in conjunction with the acquisition of
the Webworks assets.
Operations for the nine months ended December 31, 1996 included a gain of
$271,265 relating to the insurance settlement for the Company's claim arising
from the March 1996 fire at its facilities and an extraordinary loss, net of
income tax benefit, of $72,500 relating to the early retirement of debt.
Fiscal Year Ended March 31, 1996 Compared to Fiscal Year ended March 31,
1995:
Sales increased 19% from $12.0 million for fiscal year 1995 to $14.3 million
for fiscal year 1996 due to increased sales levels. Sales to The Dallas
Morning News increased 18% from $6.7 million to $7.9 million for fiscal year
1995 and fiscal year 1996, respectively. Sales to other customers increased
21% and $1.1 million during the same period. The increase was due to an
increase in sales and marketing efforts and to higher pass-through paper
prices.
Gross profit decreased 8% from $2.2 million for fiscal year 1995 to $2.05
million for the year ended March 31, 1996. Gross profit decreased as a percent
of sales from 18.6% for fiscal year 1995 to 14.3% for fiscal 1996 due to
increases in paper prices and labor. Material costs, including paper, ink,
plates and supplies increased
19
<PAGE>
as a percent of sales from 60.1% for fiscal year 1995 to 63.7% for fiscal year
1996 due to an increase in the average cost of paper, primarily newsprint, in
fiscal year 1996 as compared to fiscal year 1995. Labor costs as a percent of
sales increased from 14.7% for fiscal year 1995 to 15.2% for fiscal year 1996
due to increased overtime hours worked.
Selling, general and administrative costs increased as a percent of sales
from 7.6% for fiscal year 1995 to 8.1% for fiscal year 1996 due primarily to
an increase in the sales and marketing and executive staff.
Based on the above factors, operating income decreased 86% from $567,000 for
fiscal year 1995 to $80,000 for fiscal year 1996.
Interest expense increased 6% from $421,000 for fiscal year 1995 to $445,000
for fiscal year 1996, primarily due to a higher average loan balance
outstanding for fiscal year 1996 as compared to the average loan balance
outstanding for fiscal year 1995. Principal payments made on term debt during
fiscal year 1996 of $637,000 were mitigated by a net increase of $850,000 on
the revolving line of credit and equipment-backed term debt.
Recent Results of Operations
In January and February of 1997, the Company experienced a significant loss
from operations caused by a shortfall in sales as compared to expectations and
an inability to reduce direct labor in a commensurate amount due to the timing
of jobs produced. March sales improved to expected levels; however, management
estimates that the loss for the fourth quarter ended March 31, 1997 will equal
or exceed the amount of income before tax and extraordinary item as reported
for the nine months ended December 31, 1996. Management believes that
operations for the fourth quarter of fiscal 1997 are not indicative of future
performance; however, no assurance can be given that the net loss incurred
during this quarter will not continue.
Liquidity and Capital Resources
The Company has historically met its liquidity and capital investment
requirements through internally generated funds and external financing. Cash
flow provided by (used in) operations was ($73,311) and $31,445 for the fiscal
years 1995 and 1996, respectively, and $431,195 for the nine months ended
December 31, 1996. Working capital was $142,000 on March 31, 1996 and
($1,010,000) at December 31, 1996. The negative working capital balance at
December 31, 1996 is due primarily to the refinancing of the Company's debt on
December 31, 1996 and the recognition of an accrual for equipment installation
costs. The Company had net accounts receivable of $1.72 million and $2.72
million at March 31, 1996 and December 31, 1996, respectively. The increase in
these receivables reduced the net cash provided by operating activities during
the nine months ended December 31, 1996. The average collection period for the
Company's accounts receivable for the year ended March 31, 1996 and nine
months ended December 31, 1996 was 44 and 58 days, respectively.
Congress has provided the Company revolving credit, equipment, real estate
and future capital expenditure financing facilities totaling $9.0 million, of
which $4.7 million was drawn at December 31, 1996. An additional $2.3 million
was available on such date under such revolving credit facility, and an
additional $2.0 million was available through the capital expenditure
facility. See "Use of Proceeds" with respect to the terms of the revolving
credit facility. The capital expenditure facility's term runs concurrently
with the term of the revolving credit facility and provides financing for up
to 85% of the value of the equipment purchased. These borrowings would be
payable over five years or by the termination of the facilities. The
indebtedness to Congress is secured by a lien on all of the Company's assets,
including a mortgage on the Company's printing facility.
Financing activities during the nine months ended December 31, 1996 related
primarily to the December 1996 refinancing of the indebtedness incurred in the
September 1996 Webworks asset acquisition, as well as replacing the Company's
revolving credit line and retiring subordinated debt.
20
<PAGE>
Investment activities included capital expenditures of $193,000 and $266,000
for fiscal years 1995 and 1996, respectively, and a $2.02 million increase in
gross fixed assets for the nine months ended December 31, 1996, including
$1.59 million in assets purchased from Webworks and $396,000 in expenditures
to replace equipment and repair building damage related to the March 1996
fire. The remaining capital expenditures reflect normal and customary costs
associated with the continued operation and upgrading of existing machines.
The Company plans to make capital purchases of approximately $2.0 million
after completion of the relocation of certain of its assets to a new facility
to increase its pre-press and post-press capabilities, including $300,000 to
increase the capacity and performance of an existing press.
The Company has also executed an agreement to lease, and a contract to
purchase, a facility adjacent to its existing building to accommodate the
Company's expansion for the acquisition of the Webworks assets and additional
post-press equipment. The purchase price (if the purchase is consummated) and
the cost of upgrading leasehold improvements should approximate $1.7 million
and $250,000, respectively. Capital expenditures, the building purchase and
improvements and additional asset acquisitions are expected to be financed
through internally generated funds, the proceeds from this Offering and funds
available under the Congress revolving credit facility.
21
<PAGE>
BUSINESS
WebWorld owns and operates a commercial printing facility and offers pre-
press, printing and post-press services to mid- and large-sized customers in
the Southwestern United States. Through its high production web presses the
Company offers a broad range of services, including printing magazines,
catalogs, tabloids, inserts and mail wraps on a range of paper stocks. Through
pre-press and post-press production services, the Company provides customers
with services such as converting supplied data and information into printing
plates and stapling, binding, sorting and folding printed materials for mass
mailings. The Company primarily uses high production web presses to print
materials which are often mass produced and distributed; for example, the
Company prints the weekly edition of The Dallas Morning News TV Magazine.
WebWorld believes a large part of its success to date has resulted from its
ability to make three strategic acquisitions which increased its printing
capabilities, provided greater purchasing efficiencies and increased operating
efficiencies through overhead reductions as a percentage of sales while
expanding the scope of printing related services offered to its customers.
BUSINESS STRATEGY
The Company has increased shareholder value by making strategic acquisitions
and quickly integrating operations to produce efficiencies in materials, labor
and overhead. These actions have enabled the Company to provide the customer
service and attention to detail of a small printer with the diverse capability
and economic advantage of a large printer.
The Company plans to grow its business through the following expansion
strategy:
. Implement Integrated Commercial Web Press Facility. With the acquisition
of the presses from Webworks and the planned relocation of these presses
to the Company's facilities, the Company will have nine presses, five of
which are high production web presses, in a centralized location. This
critical mass of printing capability enables the Company to print a
variety of commercial, high volume materials and to dedicate presses to
the type of paper stock, reducing clean-up time and achieving a higher
press utilization rate. In addition to expanded production capabilities,
a concentration of high production presses in one location as compared
to presses scattered among several locations allows the Company to
minimize delivery and transportation costs and to achieve other
operational efficiencies. The Company intends to increase its pre-press
and post-press production services to appeal to a diversified customer
base. The Company believes that developing a series of high capacity,
integrated web press facilities capable of servicing the needs of most
mid-to-large size users of commercial printed materials will provide a
sustainable, competitive advantage.
. Strategic Acquisitions. The commercial printing industry is highly
fragmented and continues to undergo consolidation at all levels to meet
changing customer demands. The Company plans to target acquisitions of
web printers which will diversify its customer base, business mix and
geographical coverage. Acquisition targets would be required to have
characteristics which would enable rapid consolidation and integration
into existing operations and produce cost savings and overhead
reductions.
. Single-Source Service Provider. WebWorld intends to expand its pre-press
and post-press capabilities to provide a one-stop service for many of
its customers. The Company intends to purchase additional equipment to
expand the Company's pre-press and post production services such as high
speed binding and stitching, ink jetting, in-line finishing and mailing.
These value-added services often produce higher margins than printing
alone and are in demand by high-volume users.
. Develop Direct Marketing. In order to develop its long-term
relationships with a broad and diverse customer base, WebWorld is
expanding its in-house marketing staff. The objective of this program is
to produce a base of recurring printing jobs on a regularly scheduled
basis and then seek higher margin value-added opportunities to utilize
additional capacity. By expanding the in-house marketing efforts, the
Company plans to decrease its historical pattern of using print brokers
to fill excess capacity.
22
<PAGE>
INDUSTRY BACKGROUND
The commercial printing industry is one of the largest and most fragmented
manufacturing industries in the United States, with total 1995 sales estimated
at $124 billion by Printing Industries of America, Inc. ("PIA"), a national
trade organization. PIA has estimated that there were approximately 25,174
commercial printing companies in the nation in 1995. Of these, approximately
13% (or 3,262) had over 20 employees. The printing services market includes
general commercial printing, financial printing, printing and publishing of
books, printing and publishing of newspapers and periodicals, quick printing,
and production of business forms and greeting cards. Within the printing
services market, the Company serves a portion of the general commercial
printing sector, which had total U.S. sales of approximately $40 billion in
1995, based on PIA sources.
OPERATIONS
There are a number of different printing processes, each with its own
distinguishing qualities and appearance characteristics. Short to medium run-
length commercial work generally is printed on sheet-fed presses, while long-
run commercial printing projects typically are printed on web presses in which
the paper is fed through the press from a large roll. The ink on printed
materials may be air-dried, which is generally a lower cost method but creates
a product that can be easily smeared, such as newsprint. Alternatively, ink
can be dried in a heatset process which uses ovens to create a brighter, more
durable finish. Over 90% of the Company's press capabilities are heatset.
Paper varies by type and appearance, including newsprint, coated stock, off-
set and hi-brite. Coated stock is associated with a glossier, brighter finish
such as for magazines and some catalogues while newsprint is used for
newspapers and other mass-produced products.
The Company was incorporated in 1993 and acquired in 1994 the business of
Newspaper Enterprises, Inc., which primarily printed The Dallas Morning News
TV Magazine. Also in 1994, the Company acquired certain assets of Computer
Language Research, Inc., including three half-web presses and certain post-
production equipment. In September 1996, the Company purchased two full web
presses from Webworks, which has enabled the Company to increase operating
efficiencies by assigning presses to generally run specific types of paper
stocks. The three-month period ending December 31, 1996 was the first quarter
to reflect increased customer growth including certain customers who
previously did business with Webworks. In this quarter, revenues were $5.5
million compared to $3.8 million in the quarter ended September 30, 1996,
representing an increase of 45%.
The Company currently operates nine presses that vary in size and speed and
can produce printed materials that range in page size, type of paper, number
of pages and the amount of color required. Of the nine presses, five are full
web presses, three are half-web presses and one is a sheet fed press. The
paper used in a full web press is generally 35 inches in width while the paper
printed on a half web press is generally 17 1/2 inches in width. All of the
Company's web presses use offset printing, which is a printing process
involving the transfer of an inked impression from a thin metal plate to a
rubber blanket and finally to the paper. In the web offset printing process,
the paper is fed through the press from a large roll of paper and is printed
on both sides of the paper. By varying the size and capabilities of its
presses, the Company can simultaneously perform of variety of printing jobs on
a cost-effective basis. The Company believes that it can compete effectively
in the Southwestern United States market place for many types of printing
products having medium to large print runs as well as time sensitive products
of any size.
23
<PAGE>
The Company currently operates the following presses:
<TABLE>
<CAPTION>
TYPE OF PRESS NAME SPECIFICATIONS
------------- ---- --------------
<C> <C> <S>
Full Web Presses: Hantscho Mark IV Web Heatset Perfecting Offset 22.75" Cutoff, 8 units
with 5 roll stands,
Inline fold, glue and
trim
Hantscho Mark II Web Perfecting Offset 22.75" Cutoff, 8 units
with 2 roll stands,
Inline fold
Harris 800 Heatset Web Perfecting Offset Double round 22.75"
Cutoff, 6 units with 3
roll stands, Inline
fold, glue and trim
Harris M200 Heatset Web Perfecting Offset 22.75" Cutoff, 8 units
with 2 roll stands,
Inline fold
Goss SSC Non-heatset Web Perfecting Offset 22.75" Cutoff, 8 units
with 3 roll stands,
Inline fold, glue and
trim
Half Web Presses: Didde Webcom 700 with U.V. dryers. 22" cutoff, 8 units,
sheeter
Didde Glaser DG175-B Non-Heatset 22" cutoff, 4 units,
sheeter
Didde Glaser 860 Non-Heatset 22" cutoff, 4 units,
sheeter
Sheet Fed Press: AB Dick 9850 Press with T Head
</TABLE>
Although the Company has to date been able to acquire its printing presses
at prices less than their replacement costs, there is no assurance that it
will continue to be able to do so. See "Risk Factors--Nature of Commercial
Printing Business." A new press offering comparable characteristics to the
full web heat set presses operated by the Company generally ranges in price
from $6 to $12 million.
WebWorld also offers services in the pre-press and post-press operations.
Commercial pre-press services involve photographically duplicating mechanical
images and/or digitally producing images, separating color images into process
colors, assembling films and burning the film images onto plates. The post-
press operations provided by the Company include cutting, trimming, folding,
binding, finishing and distributing the finished product. The Company has 10
major pieces of post-press equipment to perform these functions. The Company
plans to expand its packaging and distribution services to handle bulk
shipments and mass mailings in order to meet customer needs and to increase
its higher margin services.
The Company's sense of urgency and scheduling flexibility allow it to
consistently react to its customers' requirement. Because of the need for
rapid implementation of printing projects, from conception through delivery,
the Company must maintain physical plant and customer service staff which
allow it to maximize work loads when called upon to do so. Consequently, the
Company does not always operate at full capacity.
The Company continuously reviews its printing equipment needs and evaluates
advances in computer software, hardware and peripherals, computer networking
and telecommunication systems as they relate to the Company's operations.
WebWorld is installing a printing software program and has hired a full-time
employee to integrate the program with the Company's production and financial
systems in order to develop a comprehensive management information system.
SERVICES
The Company believes that by operating printing presses that vary in size
and capabilities, it can offer a broad range of printing and printing related
services. The Company's categories of its printed materials are as follows:
24
<PAGE>
. Magazines. The Company prints a variety of magazine products utilizing
various printing technologies. The Company is able to print materials
that combine different paper types and are bound and trimmed in a single
operation. Other magazines are produced on various presses and bound in
off line operations. Portions of magazines are also printed for
inclusion with other materials in a final product. Magazines are
normally repetitive and run on pre-defined schedules. The Company's
customers in this area include a daily newspaper and a large public
university.
. Catalogs. The Company prints a variety of catalogs, the basic production
of which is essentially the same as a magazine. The catalog segment
tends to be seasonal in nature and is much more sensitive to economic
conditions. The Company's customers in this segment include local
community colleges and several large universities.
. Tabloids. The Company prints a variety of tabloids which resemble
newspapers in various sizes. Tabloids range in size and complexity based
on subject matter. Tabloids are often found inside of newspapers, in
magazine racks and are sold through subscription in highly targeted
markets. The Company's customers in this segment include local daily
newspapers, a state lottery commission and local municipalities.
. Inserts and Mail Wraps. The Company prints inserts and mail wraps to
support the direct mail market place. The focus of this line is in
smaller to medium sized markets where a variety of products are
required. The Company's customers in this segment include local daily
newspapers and marketing companies.
MARKETING AND SALES
The Company's business is service-oriented, and its primary marketing focus
is on responding rapidly to customer requirements. Responsiveness is essential
because of the typically short lead time on most printing jobs handled by the
Company. The Company's printing operations are designed to maintain maximum
flexibility to meet customer needs both on a scheduled and an emergency basis.
The Company targets those printing runs that will best utilize its equipment,
expertise and market orientation, and will maximize its profitability. Another
important aspect of the Company's marketing strategy is attention to quality
and price.
The Company initially focused its marketing efforts on its relationship with
The Dallas Morning News and filled excess capacity by selectively bidding
printing jobs through independent print brokers. The Company is now developing
an in-house professional marketing team and has recruited a sales staff of six
full time employees whose experience in the printing industry range from four
to 30 years. The marketing team is led by a Vice President of Sales and
Marketing who has over 14 years of sales experience with commercial printers.
Because the printing business requires a great deal of interaction with
customers, including personal sales calls, art work reviews, reviews of color
and other proofs and "press checks" (customer approval of the printed piece
while it is on the printing press), the Company's increasing emphasis on in-
house marketing efforts rather than print brokers would allow the Company to
develop more independent client relationships and to have greater interaction
with the end user of the printed products. Through its salespeople and other
management professionals, the Company will be able to develop stricter control
of the printing process from the time a prospective customer is introduced,
through credit checks, pricing, scheduling, pre-press, printing and post-press
operations.
CUSTOMERS
Due to the project-oriented nature of customers' printing requirements,
sales to particular customers may vary significantly from year to year
depending upon the number and size of their projects. The Company's single
largest customer is The Dallas Morning News, which accounted for approximately
56% and 55% of the Company's sales in fiscal 1995 and 1996, respectively.
Because of increased sales volume to other customers, The Dallas Morning News
accounted for approximately 36% of the Company's sales in the first nine
months of fiscal 1997.
25
<PAGE>
The Company's predecessor entered into an agreement with The Dallas Morning
News in 1978, and this agreement has been renewed for successive terms ranging
in duration from one to three years. The Company's current contract expires in
January 1998.
PURCHASING AND RAW MATERIALS
The Company purchases various materials, including paper, ink, film, offset
plates, chemicals and solvents, glue and wire, from a number of suppliers. The
Company's most significant expenditures are for paper. The Company purchases
paper directly from a number of manufacturers and distributors. In general,
the Company has not experienced any significant difficulty in obtaining raw
materials necessary for its operations. The price of paper, however, has
experienced much volatility in recent years, and future increases in the price
of paper could adversely impact the Company's operating costs and its
financial performance.
FACILITIES AND CAPABILITIES
The Company owns a 60,000-square foot facility on six acres of land in an
industrial park located in Dallas, Texas. Approximately three acres are
available for expansion. The original 45,000 square foot building was
constructed in 1971 and an additional 15,000 square feet were added in 1981. A
portion of this facility was damaged in a fire in March 1996. Although the
fire resulted in substantial damage to the Company's electrical and mechanical
systems, these systems have now been repaired and up-graded. Congress and
Webworks have a lien on this property.
In September 1996, the Company entered into a one-year lease with Webworks
to continue the operation of the presses purchased from Webworks in its
existing facility until the Company's facilities could be expanded to
consolidate all operations. The Company has entered into a five-year lease for
an approximately 84,000 square foot building adjacent (but not attached) to
the Company's owned facility, and a contract to purchase the facility by
December 31, 1997. The Company is relocating the former Webworks assets to the
Company's facilities prior to September 1997. In connection with relocating
the assets acquired from Webworks to the Company's facilities, the two
printing presses acquired from Webworks will be dismantled in the existing
facility and reassembled in the Company's other facilities. The Company
estimates that each press will be out of operation for two to six months. In
connection with the relocation, and the Company plans to stagger the
relocation of the presses so one of the presses will be operating at all
times.
WebWorld does not anticipate the relocation of these presses to adversely
impact its ability to service existing business. Excess capacity is currently
being reserved, at the expense of new sales, to ensure its ability to meet all
customer commitments. Proper scheduling of existing resources and negotiations
with clients should allow for some excess capacity during this period.
Potential negative sales impact may be felt in the Company's ability to
rapidly respond to new short-term sales opportunities. In addition, there can
be no assurance that the relocation will be timely completed, that the costs
will not be in excess of estimated costs or that the operation of printing
presses to be relocated will not be materially impaired as a result of the
relocation. If unexpected problems occur with the printing presses or the
relocation in general, the Company's operations and financial performance will
be materially and adversely impacted.
COMPETITION
The Company competes with a number of other commercial printers, some of
which are subsidiaries or divisions of companies having greater financial
resources than those of the Company. Because of the nature of the Company's
business, most of the Company's competition is in the local printing market.
The major competitive factors in the Company's commercial printing business
are ongoing customer service, quality of finished products and price. Customer
service often is dependent on production and distribution capabilities and
availability of printing time on equipment which is appropriate in size and
function for a given project. In addition, competition in the commercial
printing area is based upon the ability to perform the services described with
speed and accuracy. Price and the quality of supporting services are also
important in this regard. WebWorld believes it competes effectively on all of
these bases.
26
<PAGE>
EMPLOYEES
As of December 31, 1996, the Company had a total of 144 employees (of which
18 were in administration, seven in sales and marketing and 119 in
operations), 39 of whom were salaried or commissioned employees and 105 of
whom were hourly employees. None of its employees are represented by a
collective bargaining agreement. The Company considers its relationship with
its employees to be good.
LEGAL PROCEEDINGS
From time to time the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. While the
Company maintains insurance coverage against potential claims in an amount
which it believes to be adequate, there can be no assurance that the Company's
insurance coverage will be adequate to cover all liabilities arising out of
such claims or that any such claims will be covered by the Company's
insurance. While the outcome of lawsuits or other proceedings against the
Company cannot be predicted with certainty, the Company does not believe these
matters will have a material adverse effect on its business or financial
position.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
The Company is subject to the environmental laws and regulations of the
United States and the state of Texas concerning emissions into the air,
discharges into waterways and the generation, handling and disposal of waste
materials. Responsible agencies include, but are not limited to, the U.S.
Environmental Protection Agency, the Texas Natural Resource Conservation
Commission and regulatory agencies at the county and local level. The printing
business generates substantial quantities of inks, solvents and other waste
products requiring disposal under the numerous federal, state and local laws
and regulations relating to the environment. The Company typically recycles
waste paper, returns salvageable waste ink to its suppliers and contracts for
the removal of other waste products. The Company believes it is in substantial
compliance with all applicable air quality, waste disposal and other
environmental-related rules and regulations as well as with other general
employee health and safety laws and regulations. However, there can be no
assurance that future changes in such laws and regulations will not have a
material effect on the Company's operations.
27
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information concerning the persons
who are (i) executive officers, (ii) key employees or (iii) directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Barry B. Conrad....... 56 Chairman of the Board and Director
Richard J. Wiencek.... 58 Chief Executive Officer, President and Director
Bruce E. Fredriks..... 48 Vice President--Finance and Administration, Chief
Financial Officer, Treasurer and Secretary
Charles B. Combs, 64 Vice President--Engineering
Jr...................
Christopher A. 41 Vice President--Sales and Marketing
Schall...............
Dale H. Davenport..... 49 Vice President--Operations
Floyd W. Collins...... 44 Director
Brian A. Harpster..... 52 Director
Robert D. Kopitke..... 55 Director
</TABLE>
Barry B. Conrad has served as Chairman of the Board and a director of the
Company since the Company's inception. Mr. Conrad is a co-founder and Managing
Partner of Conrad/Collins Merchant Banking Group Ltd. ("MBG"), a Dallas,
Texas-based merchant bank formed in 1988 that is active in leveraged buyouts
of middle-market companies in the Southwestern United States. Mr. Conrad has
extensive experience in investment banking, including more than five years as
head of corporate finance for Rauscher Pierce Refsnes, Inc. Prior to joining
Rauscher Pierce Refsnes, Inc. in 1983, he served for approximately ten years
as Chief Executive Officer of Hart Delta, Inc., a pharmaceutical manufacturing
firm. He also serves on the Board of DSI Toys, Inc.
Richard J. Wiencek has been the President and Chief Executive Officer of the
Company and a director since the Company's inception. Prior to co-founding the
Company, Mr. Wiencek served in various executive positions with Computer
Language Research, Inc., a software development company, for 15 years, most
recently as Group Vice President, Corporate Operations. Mr. Wiencek's
responsibilities at Computer Language Research, Inc. included managing print
operations, telecommunications and product marketing as well as implementing a
corporate automation strategy connecting clients and employees nationwide
through common communications networks and standardized application software.
Prior to joining Computer Language Research, Inc., Mr. Wiencek served for
approximately 14 years in various financial and operations management
positions with Texas Instruments, Inc.
Bruce E. Fredriks has served as the Vice President--Finance and
Administration and Chief Financial Officer of the Company since May 1996.
Prior to joining the Company, he was an account executive with Business
Systems Engineering Inc. From 1972 through November 1995, Mr. Fredriks was
with Caltex Petroleum Corporation, an international petroleum company, where
he held various executive and managerial positions both domestically and
internationally, most recently as Coordinator in Accounting Policies and
Controls. Mr. Fredriks is a certified public accountant.
Charles B. Combs, Jr. has served as the Vice President--Engineering since
1995. He has over 40 years experience in the printing industry, including all
aspects of printing such as pre-press, press, finishing and administration.
Prior to joining the Company, he was the Chief Operating Officer for Anchor
Press, a commercial printing company, in Fort Worth from 1993 to 1994. From
1987 to 1993, Mr. Combs owned and operated his own company, Combs
International Graphics, which designed, constructed and installed large
printing facilities in the United States and Africa.
Christopher A. Schall joined the Company in June 1996 as Vice President--
Sales and Marketing. Prior to joining the Company, he was Vice President of
Sales with Proctor Press, Inc., a printing company, from 1994 to
28
<PAGE>
1996. Prior to joining Proctor Press, Inc., he was a Senior Sales
Representative with Hoechstetter Printing Company, a commercial printing
company, from 1990 to 1994.
Dale H. Davenport joined the Company in February 1997 as the Vice
President--Operations. He has over 25 years experience in the printing
industry, including sales, operations and administration. Prior to joining the
Company, he was the Plant Manager for KOPCO, Inc., a printing company, from
1994 to 1997. From 1992 to 1994, Mr. Davenport was the General Manager for
Sierra Press, a printing company.
Floyd W. Collins has served as a director of the Company since March 1997.
Mr. Collins has been a co-founder and Managing Partner of MBG since 1988. Mr.
Collins has an extensive background in private equity investing, including
service as Executive Vice President of Hickory Venture Capital Corporation and
General Partner of Sunwestern Investment Group.
Brian A. Harpster has served as a director since February 1994. Mr. Harpster
has been engaged in investment and financial consulting for more than the past
five years through the ownership and management of Holly Investments, L.P.,
and Offshore Consulting Services, Inc.
Robert D. Kopitke has served as a director since February 1994. Mr. Kopitke
has been engaged in general business consulting for more than the past five
years as President of The Gensal Group, Inc.
BOARD OF DIRECTORS
Upon the consummation of the Offering, the Board of Directors of the Company
will consist of five members. Each director will hold office until the annual
meeting of the shareholders of the Company next following his election, until
his successor is elected and qualified. The holders of the shares of Common
Stock, voting separately as a class, will be entitled to elect all of the
directors. The Representatives have the right to nominate an advisory director
to the Company's Board of Directors. See "Underwriting."
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company will receive an annual fee of $5,000 as compensation for his or
her services as a member of the Board of Directors. All directors of the
Company are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees thereof, and for other
expenses incurred in their capacities as directors of the Company. Directors
will also be eligible to participate in the Company's stock option plan. See
"Stock Option Plan".
In February 1994, the Company also entered into a management agreement with
MBG, of which Barry B. Conrad, the Chairman of the Board of the Company, and
Floyd W. Collins, a director of the Company, are principals. Under the terms
of the agreement, MBG provided supervisory management services to the Company,
including the negotiation, financing and consummation of all of the
acquisitions made by the Company. MBG has earned as fees $100,000, $100,000,
and $125,000 during fiscal years 1995 and 1996 and for the nine months ended
December 31, 1996, respectively. Pursuant to the management agreement, the
Company granted MBG an option to purchase 83,250 shares of common stock at an
exercise price of $.30 per share. As of April 1996, all the options became
fully vested, and were exercised.
In February 1994, the Company entered into a sales consulting agreement with
The Gensal Group, Inc., of which Robert D. Kopitke is a principal, under which
The Gensal Group, Inc. earned as fees $30,000, $30,000, and $ 52,500 during
fiscal years 1995 and 1996 and the nine months ended December 31, 1996,
respectively. Pursuant to such agreement, the Company granted The Gensal
Group, Inc. an option to purchase 83,250 shares of Common Stock at an exercise
price of $.30 per share. As of April 1996, all the options became fully vested
and were exercised. The agreement was terminated, effective April 30, 1997,
although Mr. Kopitke will be paid on a project basis for any future sales
consulting performed for the Company.
29
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established two committees: a Compensation
Committee and an Audit Committee. Each of these committees has two or more
members who serve at the discretion of the Board of Directors. The
Compensation Committee, currently comprised of Messrs. Conrad, Wiencek and
Kopitke, is responsible for reviewing and making recommendations to the Board
of Directors with respect to compensation of executive officers, other
compensation matters and awards under the Company's stock option plan. The
Audit Committee, currently comprised of Messrs. Collins, Kopitke and Harpster,
is responsible for reviewing the Company's financial statements, audit
reports, internal financial controls and the services performed by the
Company's independent public accountants, and for making recommendations with
respect to those matters to the Board of Directors.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the total annual
compensation paid or accrued by the Company to or for the account of the Chief
Executive Officer who was the only executive officer of the Company whose
total cash compensation for the fiscal years ended March 31, 1995 and 1996
exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------- ALL OTHER
FISCAL SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) $ ($)(1)
--------------------------- ------ -------- ------- ------------
<S> <C> <C> <C> <C>
Richard J. Wiencek, President and CEO 1996 $168,000 $26,813 $5,102
1995 $160,000 12,944 $4,453
</TABLE>
- --------
(1) Represents the Company's contribution under the Company's 401(k) savings
plan and premiums paid by the Company on a life insurance policy, the
beneficiary of which is Mr. Wiencek's estate.
The Company entered into an employment agreement with Richard J. Wiencek,
the Company's President and Chief Executive Officer, in February 1994. The
agreement provided for an initial term of five years and an automatic renewal
for additional successive one year terms. The agreement also provided for a
base salary of $160,000 (subject to annual increases in the discretion of the
Company's Board of Directors) and annual bonuses equal to 25% of the Company's
"free cash flow" as defined in the agreement. In April 1997, the Company
amended and restated the Employment Agreement with Mr. Wiencek to provide for
a three year term ending March 31, 2000. The new agreement provides for a base
salary of $168,000 (subject to annual increase in the discretion of the
Compensation Committee of the Company's Board of Directors) and the right to
participate in such bonus and other benefit plans as determined by the
Compensation Committee.
STOCK OPTION PLAN
The Company maintains the NEI WebWorld, Inc. Stock Option Plan (the "Option
Plan") which provides for the grant of options to eligible employees and
directors for the purchase of Common Stock of the Company. The Option Plan
covers, in the aggregate, a maximum of 350,000 shares of Common Stock. The
Option Plan provides for the granting of both incentive stock options (as
defined in Section 422 of the Internal Revenue Code of 1986) and nonqualified
stock options (options which do not meet the requirements of Section 422).
Under the Option Plan, the exercise price may not be less than the fair market
value of the Common Stock on the date of the grant of the option. No options
have been granted under the Option Plan.
30
<PAGE>
The Compensation Committee of the Board of Directors (the "Committee")
administers and interprets the Option Plan and is authorized to grant options
thereunder to all eligible employees of the Company, including officers. The
Committee designates the optionees, the number of shares subject to the
options and the terms and conditions of each option. Options under the Option
Plan generally vest over a five year period. Certain changes in control of the
Company will cause the options to vest immediately. Each option granted under
the Option Plan must be exercised, if at all, during a period established in
the grant which may not exceed 10 years from the later of the date of grant or
the date first exercisable. An optionee may not transfer or assign any option
granted and may not exercise any options after a specified period subsequent
to the termination of the optionee's employment with the Company.
OPTION GRANTS
None of the Company's executive officers were granted options during the
year ended March 31, 1996. The Company has no outstanding options to purchase
shares of its capital stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors consists of
three members, Messrs. Conrad, Wiencek and Kopitke. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any entity which has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles of Incorporation limit the liability of directors of
the Company to the Company or its shareholders to the fullest extent permitted
by Texas Business Corporations Act (the "TBCA").
WebWorld's Bylaws provide that the Company shall indemnify each of its
directors and officers, acting in such capacity, so long as such person acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Company. Such indemnification may be made
only upon a determination by the Board of Directors that such indemnification
is proper in the circumstances because the person to be indemnified has met
the applicable standard of conduct to permit indemnification under the law.
The Company is also required to advance to such persons payment for their
expenses incurred in defending a proceeding to which indemnification might
apply, provided the recipient provides an undertaking agreeing to repay all
such advanced amounts if it is ultimately determined that he is not entitled
to be indemnified.
The Company has entered into indemnification and hold harmless agreements
with each of its directors, whereby the Company is required to indemnify such
persons to the fullest extent permitted by law.
As of this date hereof, there is no pending litigation or proceeding
involving a director, officer, employee or agent of the Company where
indemnification will be required or permitted, and the Company is not aware of
any threatened litigation or proceeding which may result in a claim for such
indemnification.
Insofar as indemnification for liabilities arising from the 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.
31
<PAGE>
CERTAIN TRANSACTIONS
The Company believes that all of the transactions set forth below were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal shareholders and
affiliates, will be approved by a majority of the Board of Directors,
including a majority of the independent and disinterested outside directors,
and will be on terms no less favorable to the Company than could be obtained
from unaffiliated third parties.
In April 1996, the Board of Directors of the Company vested all of the
outstanding options granted in 1994 (covering an aggregate of 416,250 shares
of Common Stock) under certain agreements with Mr. Wiencek, MBG and The Gensal
Group, Inc. These shareholders exercised the outstanding options in April 1996
and purchased the underlying shares of Common Stock. In connection with this
exercise, Mr. Wiencek issued a note to the Company in the principal amount of
$75,000 which becomes due and payable in April 2001. Each of MBG and The
Gensal Group, Inc. issued a note to the Company for the exercise price of its
options in the principal amount of $25,000 which has the same terms as the
note issued by Mr. Wiencek. These notes bear interest at a per annum rate of
6%.
The Company has entered into a management agreement with MBG, an affiliate
of two of its directors, and an employment agreement with its president and
previously had entered into a consulting agreement with a director. See
"Management--Board of Directors" and "--Executive Compensation."
In connection with the organization of the Company and the funding of the
Company's acquisition of Newspaper Enterprises, Inc. in February 1994, MBG and
Holly Investments, L.P. contributed $500,000 and $250,000, respectively, to
the Company and received an aggregate of 58% and 29%, respectively (after
giving effect to the conversion of outstanding shares of preferred stock and
dividends accrued thereon), of the capital stock of the Company.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1996 and as
adjusted to reflect the sale of Common Stock being offered by the Company
hereby, and the conversion of the outstanding shares of preferred stock for
(1) each person known by the Company to own beneficially 5% or more of the
Common Stock, (2) each director and executive officer of the Company and (3)
all directors, nominees for director and executive officers of the Company as
a group. Except pursuant to applicable community property laws and except as
otherwise indicated, each shareholder identified in the table possesses sole
voting and investment power with respect to its or his shares.
<TABLE>
<CAPTION>
PERCENTAGE OWNED
NUMBER OF ------------------------------
NAME SHARES BEFORE OFFERING AFTER OFFERING
---- --------- --------------- --------------
<S> <C> <C> <C>
Barry B. Conrad(1).................... 1,422,464 52.3% 38.2%
Richard J. Wiencek(2)................. 416,250 15.3% 11.2%
Bruce E. Fredriks..................... -0- -0- -0-
Charles B. Combs, Jr. ................ -0- -0- -0-
Christopher A. Schall................. -0- -0- -0-
Dale H. Davenport..................... -0- -0- -0-
Floyd W. Collins(1)................... 1,422,464 52.3% 38.2%
Brian A. Harpster(3).................. 669,608 24.6% 18.0%
Robert D. Kopitke(4).................. 124,875 4.6% 3.4%
All directors, nominees for director
and executive officers as a group
(nine individuals)................... 2,633,197 96.8% 70.8%
</TABLE>
- --------
(1) Includes 1,339,214 shares owned of record by Conrad/Collins Merchant
Banking Fund Ltd., a Texas limited partnership ("MBF") of which MBG is the
general partner. The general partner of MBG is Conrad Collins,
32
<PAGE>
Inc., a Texas corporation, of which Messrs. Conrad and Collins are the sole
directors and shareholders. Also includes 83,250 shares owned by MBG. The
address of Messrs. Conrad and Collins is 700 N. Pearl, Suite 1910, Dallas,
Texas 75201.
(2) Mr. Wiencek's address is 4647 Bronze Way, Dallas, Texas 75236.
(3) Consists of 669,608 shares held by Holly Investments, L.P., of which Mr.
Harpster's spouse is the beneficial owner. Mr. Harpster's address is 1324
E. Grand Avenue, Ponca City, Oklahoma 74601.
(4) Consists of 124,875 shares held by The Gensal Group, Inc., of which Mr.
Kopitke is the principal shareholder.
DESCRIPTION OF CAPITAL STOCK
WebWorld's authorized capital stock consists of 20,000,000 shares of Common
Stock, $.01 par value, and 2,000,000 shares of preferred stock, $1.00 par
value per share ("Preferred Stock").
The following description of the Company's capital stock does not purport to
be complete and is subject in all respects to applicable Texas law and to the
provisions of the Company's Articles of Incorporation and By-laws, as amended
to date.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders, including the election of
directors. The Common Stock does not have cumulative voting rights, which
means that the holders of a majority of the shares voting for election of
directors can elect all members of the Board of Directors. Dividends may be
paid ratably to holders of Common Stock when and if declared by the Board of
Directors out of funds legally available therefor. Upon liquidation or
dissolution of the Company, the holders of Common Stock will be entitled to
share ratably in the assets of the Company legally available for distribution
to shareholders after payment of all liabilities and the liquidation
preferences of any outstanding Preferred Stock.
The holders of Common Stock have no preemptive or conversion rights or other
subscription rights and are not subject to redemption or sinking fund
provisions or to calls or assessments by the Company. The shares of Common
Stock offered hereby will be, when issued and paid for, fully paid and not
liable for call or assessment. The Company has applied for listing of the
Common Stock on the Pacific Stock Exchange and Nasdaq SmallCap Market.
As of March 1, 1997, there were seven holders of record of Common Stock.
PREFERRED STOCK
The Company may issue Preferred Stock in one or more series and the Board of
Directors may designate the dividend rate, voting rights and other rights,
preferences and restrictions of each series. It is not possible to share the
actual effect of the issuance of any shares of Preferred Stock upon the rights
of holders of the Common Stock until the Board of Directors determines the
specific rights of the holders of such Preferred Stock. However, the effects
might include, among other things, restricting dividends on the Common Stock,
diluting the voting power of the Common Stock, impairing the liquidation
rights of the Common Stock and delaying or preventing a change in control of
the Company without further action by the shareholders. The Company presently
has no plans to issue any shares of Preferred Stock.
The Company previously issued an aggregate of 935,000 shares of preferred
stock in three different series. The holders of these shares agreed with the
Company to convert such shares into an aggregate of 2,008,823 shares of Common
Stock on the effective date of this Offering. Unless the context otherwise
indicates, all of the historical financial statements and other financial
information set forth herein gives effect to such conversion into Common
Stock. See Note 10 of Notes to Financial Statements.
33
<PAGE>
WARRANTS
The Warrants will be issued in registered form pursuant to an agreement
dated the date of this Prospectus (the "Warrant Agreement"), between the
Company and American Stock Transfer & Trust Company, as the Warrant Agent (the
"Warrant Agent"). The following discussion of certain terms and provisions of
the Warrants is qualified in its entirety by reference to the Warrant
Agreement. A form of the certificate representing the Warrants which form a
part of the Warrant Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
Each of the Warrants entitles the registered holder to purchase one share of
Common Stock. The Warrants are exercisable at a price equal to 125% of the
Share Offering Price (which exercise price has been arbitrarily determined by
the Company and the Representatives) subject to certain adjustments. The
Warrants are entitled to the benefit of adjustments in their exercise prices
and in the number of shares of Common Stock or other securities deliverable
upon the exercise thereof in the event of a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.
The Warrants may be exercised at any time and continuing thereafter until
the close of five years from the date hereof, unless such period is extended
by the Company. After the expiration date, Warrant holders shall have no
further rights. Warrants may be exercised by surrendering the certificate
evidencing such Warrant, with the form of election to purchase on the reverse
side of such certificate properly completed and executed, together with
payment of the exercise price and any transfer tax, to the Warrant Agent. If
less than all of the Warrants evidenced by a warrant certificate are
exercised, a new certificate will be issued for the remaining number of
Warrants. Payment of the exercise price may be made by cash, bank draft or
official bank or certified check equal to the exercise price.
Warrant holders do not have any voting or any other rights as shareholders
of the Company. The Company has the right at any time beginning six months
from the date hereof to redeem the Warrants, at a price of $.05 per Warrant,
by written notice to the registered holders thereof, mailed not less than 30
nor more than 60 days prior to the Redemption Date. The Company may exercise
this right only if the closing bid price for the Common Stock for seven
trading days during a 10 consecutive trading day period ending no more than 15
days prior to the date that the notice of redemption is given, equals or
exceeds $ per share, subject to adjustment. If the Company exercises its
right to call Warrants for redemption, such Warrants may still be exercised
until the close of business on the day immediately preceding the Redemption
Date. If any Warrant called for redemption is not exercised by such time, it
will cease to be exercisable, and the holder thereof will be entitled only to
the repurchase price. Notice of redemption will be mailed to all holders of
Warrants of record at least 30 days, but not more than 60 days, before the
Redemption Date. The foregoing notwithstanding, the Company may not call the
Warrants at any time that a current registration statement under the Act is
not then in effect. Any redemption of the Warrants during the one-year period
commencing on the date of this Prospectus shall require the written consent of
the Representatives.
The Warrant Agreement permits the Company and the Warrant Agent without the
consent of Warrant holders, to supplement or amend the Warrant Agreement in
order to cure any ambiguity, manifest error or other mistake, or to address
other matters or questions arising thereafter that the Company and the Warrant
Agent deem necessary or desirable and that do not adversely affect the
interest of any Warrant holder. The Company and the Warrant Agent may also
supplement or amend the Warrant Agreement in any other respect with the
written consent of holders of not less than a majority in the number of the
Warrants then outstanding; however, no such supplement or amendment may (i)
make any modification of the terms upon which the Warrants are exercisable or
may be redeemed; or (ii) reduce the percentage interest of the holders of the
Warrants without the consent of each Warrant holder affected thereby.
In order for the holder to exercise a Warrant, there must be an effective
registration statement, with a current prospectus on file with the Commission
covering the shares of Common Stock underlying the Warrants, and the issuance
of such shares to the holder must be registered, qualified or exempt under the
laws of the state in which
34
<PAGE>
the holder resides. If required, the Company will file a new registration
statement with the Commission with respect to the securities underlying the
Warrants prior to the exercise of such Warrants and will deliver a prospectus
with respect to such securities to all holders thereof as required by Section
10(a)(3) of the Act. See "Risk Factors--Necessity to Maintain Current
Prospectus" and "State Blue Sky Registration Required to Exercise Warrants."
At the closing of this Offering, the Company will issue to the
Representatives or their designees, for nominal consideration,
Representative's Warrants to purchase up to 100,000 Shares and 100,000
Underlying Warrants. The Representatives' Warrants will be exercisable for a
four-year period commencing one year from the effective date of this Offering
at an exercise price of 120% of the price at which the Common Stock and
Warrants are sold to the public, subject to adjustment. The Representative's
Warrants will not be transferable, except (i) to officers of the
Representative, other Underwriters, and officers and partners thereof; (ii) by
will; or (iii) by operation of law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is American
Stock Transfer & Trust Company, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
The Company has outstanding 2,719,778 shares of Common Stock. In addition,
the Company has 350,000 shares reserved for issuance upon exercise of options
granted under the Company's Stock Option Plan, none of which are immediately
exercisable. Of the 3,719,778 shares to be outstanding after the Offering, the
1,000,000 shares sold to the public hereby will be freely tradeable without
restrictions or registration under the Act, except that any shares purchased
by "affiliates" of the Company, as that term is defined in Rule 144 ("Rule
144") under the Act ("Affiliates"), may generally only be sold to clients
within the limitations of Rule 144 described below. An aggregate of 1,000,000
shares will be issued upon the exercise of the Warrants. The Company has
agreed to register these shares under the Act in order to permit the resale of
such shares in the open market from time to time and has agreed to maintain
the effectiveness of such registration for one year. Following the sale of
such shares pursuant to an effective registration statement filed in
connection with such registration, these shares shall be freely tradeable. The
remaining 2,719,778 shares were issued and sold by the Company in private
transactions in reliance upon exemptions from registration under the Act and
are, therefore deemed "restricted securities" under Rule 144 which may not be
sold publicly unless the shares are registered under the Act or are sold under
Rule 144. Under Rule 144, substantially all of the remaining restricted
securities would become eligible for resale 90 days after the date the Company
becomes subject to the reporting requirements of the Exchange Act, although
2,633,197 of such shares are subject to contractual resale restrictions.
The Company, the Company's executive officers and directors, and
shareholders of the Company that own in the aggregate 96% of the Common Stock
outstanding prior to the Offering have agreed not to offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
exercisable for or convertible into Common Stock for a period of one year
after the date of this Prospectus without the prior written consent of the
Representative.
In general, under Rule 144 a person (or persons whose sales are aggregated)
who beneficially owns restricted securities for one year or any other shares
not contemplated as restrictive securities without regard to such one-year
holding period, is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the then outstanding shares
of the Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain manner-of-sale provisions,
notice requirements and the availability of current public information about
the Company. A person who has not been an affiliate of the Company at any time
during the three months preceding a sale, and who beneficially owns shares
last acquired from the Company or an affiliate of the Company at least two
years previously, is entitled to sell all such shares under Rule 144 without
regard to any of the limitations of the Rule.
35
<PAGE>
REGISTRATION RIGHTS
Upon the expiration of the contractual one-year lock-up period described
above, certain shares issued or issuable upon the exercise of options granted
prior to the date of this Prospectus also may be issuable for sale in the
public market pursuant to Rule 701 under the Securities Act. In general, Rule
701 permits resales of shares issued pursuant to certain compensatory benefit
plans and contracts commencing at the end of the 90 day period after the
Company becomes subject to the reporting requirements of the Exchange Act. If
all of the requirements of Rule 701 are satisfied, and upon completion of the
one-year period, an additional 416,250 shares of Common Stock issued in 1996
upon exercise of previously granted options will be eligible for sale, subject
to the repayment of notes issued for the payment of the exercise price.
The Company intends to file a registration statement under the Securities
Act to register all shares of Common Stock issuable pursuant to the Company's
Stock Option Plan. See "Management--Stock Option Plan." Subject to the
completion of the one-year period described above, shares of Common Stock
issued after the effective date of such registration statement upon the
exercise of awards issued under such plan generally will be eligible for sale
in the public market.
The Company cannot predict the effect, if any, that sales of restricted
securities or the availability of such securities for sale could have on the
market price, if any, prevailing from time to time. Nevertheless, sales of
substantial amounts of the Company's securities, including the securities
offered hereby, could adversely affect prevailing market prices of the
Company's securities and the Company's ability to raise additional capital by
occurring at a time when it would be beneficial for the Company to sell
securities.
36
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, for whom First London Securities Corporation and RAS
Securities Corp. are acting as the Representatives, have severally agreed to
purchase from the Company an aggregate of 1,000,000 shares of Common Stock
("Shares") and 1,000,000 Warrants. The number of Shares and Warrants which
each Underwriter has agreed to purchase is set forth opposite its name.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NAME SHARES WARRANTS
---- --------- ---------
<S> <C> <C>
First London Securities Corporation.....................
RAS Securities Corp.....................................
--------- ---------
Total................................................. 1,000,000 1,000,000
========= =========
</TABLE>
The Securities are offered by the Underwriters subject to prior sale, when,
as and if delivered to and accepted by the Underwriters and subject to
approval of certain legal matters by counsel and certain other conditions. The
Underwriters are committed to purchase all Securities offered by this
Prospectus, if any are purchased.
The Company has been advised by the Representatives that the Underwriters
propose initially to offer the Securities offered hereby to the public at the
offering price set forth on the cover page of this Prospectus. The
Representatives has advised the Company that the Underwriters propose to offer
the Securities through members of the NASD, and may allow a concession, in
their discretion, to certain dealers who are members of the NASD and who agree
to sell the Securities in conformity with the NASD Conduct Rules. Such
concessions shall not exceed the amount of the underwriting discount that the
Underwriters are to receive.
The Company has granted to the Representatives an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an additional 150,000
Shares and an additional 150,000 Warrants at the public offering price less
the underwriting discount set forth on the cover page of this Prospectus (the
"Over-Allotment Option"). The Representatives may exercise the Over-Allotment
Option solely to cover over-allotments in the sale of the Securities being
offered by this Prospectus.
Officers and directors of the Company may introduce the Representatives to
persons to consider the Offering and purchase Securities either through the
Representatives, other Underwriters, or through participating dealers. In this
connection, officers and directors will not receive any commissions or any
other compensation.
The Company has agreed to pay the Representatives a commission of 10% of the
gross proceeds of the offering (the "Underwriting Discount"), including the
gross proceeds from the sale of the Over-Allotment Option, if exercised. In
addition, the Company has agreed to pay to the Representatives a non-
accountable expense allowance of two percent (2%) of the gross proceeds of
this Offering, including proceeds from any Securities purchased pursuant to
the Over-Allotment Option. The Representatives' expenses in excess of the non-
accountable expense allowance will be paid by the Representatives. To the
extent that the expenses of the Representatives are less than the amount of
the non-accountable expense allowance received, such excess shall be deemed to
be additional compensation to the Representatives. The Company has also agreed
to pay the Representatives upon the exercise or redemption of the Warrants a
fee equal to 5% of the gross proceeds received by the Company from the
exercise of the Warrants and 5% of the aggregate redemption price for the
Warrants redeemed. Such fee will be paid to the Representatives or their
designees no sooner than twelve months after the effective date of this
Offering. Additionally, the Representatives or their designees must be
designated in writing by the Warrant holders as having solicited the Warrant
in order to receive the fee. Additionally, the Representatives shall have the
right to nominate an Advisory Director to the Company's Board of Directors.
The
37
<PAGE>
Advisory Director will have the same privileges as a normal director,
including equal compensation, but will forfeit the right to vote on Board
issues. The Representatives have informed the Company that it does not expect
sales to discretionary accounts to exceed 5% of the total number of Securities
offered by the Company hereby.
Prior to this Offering, there has been no public market for the Shares or
Warrants of the Company. Consequently, the initial public offering price for
the Securities, and the terms of the Warrants (including the exercise price of
the Warrants), have been determined by negotiation between the Company and the
Representatives. Among the factors considered in determining the public
offering price were the history of, and the prospect for, the Company's
business, an assessment of the Company's management, its past and present
operations, the Company's development and the general condition of the
securities market at the time of this Offering. The initial public offering
price does not necessarily bear any relationship to the Company's assets, book
value, earnings or other established criteria of value. Such price is subject
to change as a result of market conditions and other factors, and no assurance
can be given that a public market for the Shares or Warrants will develop
after the close of this Offering, or if a public market in fact develops, that
such public market will be sustained, or that the Shares or Warrants can be
resold at any time at the offering or any other price. See "Risk Factors."
At the closing of this Offering, the Company will issue to the
Representatives or their designee, for nominal consideration, Representatives'
Warrants to purchase up to 100,000 Shares and 100,000 Underlying Warrants. The
Representatives' Warrants will be exercisable for a four-year period
commencing one year from the effective date of this Offering at an exercise
price of 120% of the price at which the Common Stock and Warrants are sold to
the public, subject to adjustment. The Representatives' Warrants will not be
transferable, except (i) to officers of the Representatives, other
Underwriters, and officers and partners thereof; (ii) by will; or (iii) by
operation of law.
The Representatives' Warrant contains provisions providing for appropriate
adjustment in the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, stock split or similar transaction. The
Representatives' Warrant contain net issuance provisions permitting the
holders thereof to elect to exercise the Representatives' Warrant in whole or
in part and instruct the Company to withhold from the securities issuable upon
exercise, a number of securities, valued at the current fair market value on
the date of exercise, to pay the exercise price. Such net exercise provision
has the effect of requiring the Company to issue shares of Common Stock
without a corresponding increase in capital. A net exercise of the
Representatives' Warrant will have the same dilutive effect on the interests
of the Company's shareholders as will a cash exercise. The Representatives'
Warrant does not entitle the holders thereof to any rights as a shareholder of
the Company until such Representatives' Warrant is exercised and shares of
Common Stock are purchased thereunder.
The Company has agreed to indemnify the Underwriters against any costs or
liabilities incurred by the Underwriters by reasons of misstatements or
omissions to state material facts in connection with the statements made in
the Registration Statement and the Prospectus. The Underwriters have in turn
agreed to indemnify the Company against any liabilities by reason of
misstatements or omissions to state material facts in connection with the
statements made in the Prospectus, based on information relating to the
Underwriters and furnished in writing by the Underwriters. To the extent that
this section may purport to provide exculpation from possible liabilities
arising from the federal securities laws, in the opinion of the Commission,
such indemnification is contrary to public policy and therefore unenforceable.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to
copies of each such agreement which are filed as exhibits to the Registration
Statement. See "Available Information."
38
<PAGE>
LEGAL MATTERS
Legal matters in connection with the Common Stock and Warrants being offered
hereby will be passed upon for the Company by Crouch & Hallett, L.L.P.,
Dallas, Texas. Certain legal matters will be passed upon for the Underwriters
by Jackson & Walker, L.L.P.
EXPERTS
The financial statements of the Company as of March 31, 1996, and December
31, 1996, and for each of the two years in the period ended March 31, 1996,
and for the nine months ended December 31, 1996, included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
39
<PAGE>
NEI WEBWORLD, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT.............................................. F-2
FINANCIAL STATEMENTS AND NOTES:
Balance Sheets as of March 31, 1996, and December 31, 1996 ............... F-3
Statements of Operations for the Years Ended March 31, 1995 and 1996, and
for the Nine Months Ended December 31, 1995 (unaudited) and 1996 ........ F-4
Statements of Shareholders' Equity for the Years Ended March 31, 1995 and
1996, and for the Nine Months Ended December 31, 1996 ................... F-5
Statements of Cash Flows for the Years Ended March 31, 1995 and 1996, and
for the Nine Months Ended December 31, 1995 (unaudited) and 1996 ........ F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of NEI WebWorld, Inc.:
We have audited the accompanying balance sheets of NEI WebWorld, Inc. as of
March 31, 1996, and December 31, 1996, and the related statements of
operations, shareholders' equity and cash flows for each of the two years in
the period ended March 31, 1996, and for the nine months ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of NEI WebWorld, Inc. as of March 31, 1996,
and December 31, 1996, and the results of its operations and its cash flows
for each of the two years in the period ended March 31, 1996, and for the nine
months ended December 31, 1996, in conformity with generally accepted
accounting principles.
Dallas, Texas
April 11, 1997
----------------
To the Directors and Shareholders of NEI WebWorld, Inc.:
The accompanying financial statements are presented to give effect to the
conversion of preferred stock into 2,008,823 shares of common stock in
connection with the Company's contemplated offering as described in Note 10 to
the financial statements. The above report is in the form that we will sign
upon the effectiveness of such event assuming that, from April 11, 1997 to the
effective date of such event, no other material events have occurred that
would affect these financial statements.
Deloitte & Touche LLP
Dallas, Texas
April 11, 1997
F-2
<PAGE>
NEI WEBWORLD, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
---------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................ $ 500 $ 500
Accounts receivable--net (Notes 3 and 7)............ 1,718,046 2,723,738
Inventories (Note 7)................................ 607,538 929,235
Prepaid expenses and other.......................... 20,145 443
Deferred income tax benefits (Note 9)............... 13,292 --
Deferred costs on insurance claims in process (Note
6)................................................. 290,172 --
---------- ----------
Total current assets.............................. 2,649,693 3,653,916
PROPERTY, PLANT AND EQUIPMENT--Net (Notes 4 and 7).... 2,870,215 4,573,785
INTANGIBLES AND OTHER ASSETS--Net (Note 5)............ 657,951 540,532
DEFERRED INCOME TAX BENEFITS (Note 9)................. 42,024 37,000
---------- ----------
TOTAL............................................. $6,219,883 $8,805,233
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable (Note 7)............................... $ 950,000 $1,461,831
Current portion of long-term debt (Note 7).......... 689,904 664,286
Accounts payable.................................... 706,156 1,578,365
Accrued expenses and other liabilities.............. 129,613 251,695
Accrued management and consulting fees (Note 13).... 32,500 82,500
Accrued equipment installation costs (Note 2)....... -- 580,000
Income taxes payable (Note 9)....................... -- 45,526
---------- ----------
Total current liabilities......................... 2,508,173 4,664,203
LONG-TERM DEBT--Less current portion (Note 7)......... 3,020,027 3,395,714
COMMITMENTS (Note 8)
SHAREHOLDERS' EQUITY (Notes 10 and 11):
Common stock put warrants for 90,000 shares, at
estimated redemption value......................... 50,000 --
Common stock: 20,000,000 shares of $.01 par value
authorized; 2,203,628 shares and 2,719,778 shares
issued and outstanding, respectively............... 22,036 27,198
Additional paid-in capital.......................... 853,849 1,033,687
Accumulated deficit................................. (234,202) (190,569)
Notes receivable--shareholders...................... -- (125,000)
---------- ----------
Total shareholders' equity........................ 691,683 745,316
---------- ----------
TOTAL............................................. $6,219,883 $8,805,233
========== ==========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
NEI WEBWORLD, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
------------------------ ------------------------
1995 1996 1995 1996
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES (Note 3)........ $12,005,532 $14,285,858 $11,039,603 $12,820,032
COST OF SALES............. 9,775,507 12,239,998 9,416,389 10,611,446
----------- ----------- ----------- -----------
GROSS PROFIT.............. 2,230,025 2,045,860 1,623,214 2,208,586
OPERATING EXPENSES:
Selling, general and
administrative (Note
12).................... 912,390 1,164,963 923,931 1,166,539
Depreciation--property.. 378,151 410,702 305,926 378,899
Amortization--
intangibles............ 232,624 232,485 174,430 174,163
Management and
consulting fees (Note
13).................... 140,250 157,408 152,950 138,499
----------- ----------- ----------- -----------
Total................. 1,663,415 1,965,558 1,557,237 1,858,100
----------- ----------- ----------- -----------
OPERATING INCOME.......... 566,610 80,302 65,977 350,486
OTHER INCOME (EXPENSE):
Interest expense (Note
7)..................... (420,856) (445,154) (335,052) (374,986)
Other................... 3,943 25,776 23,932 19,413
Gain on fire insurance
settlement (Note 6).... -- -- -- 271,265
----------- ----------- ----------- -----------
Total................. (416,913) (419,378) (311,120) (84,308)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAX EXPENSE AND
EXTRAORDINARY ITEM....... 149,697 (339,076) (245,143) 266,178
INCOME TAX (BENEFIT)
EXPENSE (Note 9)......... 47,823 (29,019) (21,764) 90,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM....... 101,874 (310,057) (223,379) 176,178
EXTRAORDINARY ITEM--Loss
on debt retirement (net
of income tax benefit of
$36,000) (Note 7)........ -- -- -- (72,545)
----------- ----------- ----------- -----------
NET INCOME (LOSS)......... $ 101,874 $ (310,057) $ (223,379) $ 103,633
=========== =========== =========== ===========
PRO FORMA EARNINGS PER
SHARE:
Income (loss) before
extraordinary item..... $ (0.11) $ (0.08) $ 0.06
=========== =========== ===========
Net income (loss)....... $ (0.11) $ (0.08) $ 0.04
=========== =========== ===========
PRO FORMA COMMON SHARES
OUTSTANDING.............. 2,719,778 2,719,778 2,719,778
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
NEI WEBWORLD, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON COMMON STOCK ADDITIONAL NOTES TOTAL
STOCK PUT ----------------- PAID-IN ACCUMULATED RECEIVABLE- SHAREHOLDERS'
WARRANTS SHARES AMOUNT CAPITAL DEFICIT SHAREHOLDERS EQUITY
--------- --------- ------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT APRIL 1,
1994................... $ 50,000 2,003,828 $20,038 $ 823,462 $ 6,366 $ -- $ 899,866
Accretion on preferred
stock previously
outstanding (Note
10).................. -- 99,900 999 101,027 (102,026) -- --
Accretion for
estimated redemption
value of common stock
put warrants for
90,000 shares........ 159,124 -- -- -- (159,124) -- --
Net income............ -- -- -- -- 101,874 -- 101,874
-------- --------- ------- ---------- --------- --------- ---------
BALANCES AT MARCH 31,
1995................... 209,124 2,103,728 21,037 924,489 (152,910) -- 1,001,740
Accretion on preferred
stock previously
outstanding (Note
10).................. -- 99,900 999 (70,640) 69,641 -- --
Accretion (decrease)
for estimated
redemption value of
the common stock put
warrants............. (159,124) -- -- -- 159,124 -- --
Net loss.............. -- -- -- -- (310,057) -- (310,057)
-------- --------- ------- ---------- --------- --------- ---------
BALANCES AT MARCH 31,
1996................... 50,000 2,203,628 22,036 853,849 (234,202) -- 691,683
Accretion on preferred
stock previously
outstanding (Note
10).................. -- 99,900 999 59,001 (60,000) -- --
Issuance of common
stock warrants for
80,000 shares........ 23,500 -- -- -- (23,500) -- --
Redemption of common
stock warrants for
170,000 shares....... (73,500) -- -- -- 23,500 -- (50,000)
Exercise of stock
options.............. -- 416,250 4,163 120,837 -- (125,000) --
Net income............ -- -- -- -- 103,633 -- 103,633
-------- --------- ------- ---------- --------- --------- ---------
BALANCES AT DECEMBER 31,
1996................... $ -- 2,719,778 $27,198 $1,033,687 $(190,569) $(125,000) $ 745,316
======== ========= ======= ========== ========= ========= =========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
NEI WEBWORLD, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
---------------------- -----------------------
1995 1996 1995 1996
---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........... $ 101,874 $ (310,057) $(223,379) $ 103,633
Extraordinary loss on debt
retirement................. -- -- -- 108,545
Gain on fire insurance
settlement (Note 6)........ -- -- -- (271,265)
Noncash items in net income:
Depreciation and
amortization............. 610,775 643,187 473,294 544,964
Amortization of debt
discount................. 8,956 9,510 7,062 8,098
Gain on retirement of
asset.................... -- (17,032) -- --
Deferred income taxes..... (37,083) (18,233) (13,675) 18,316
Cash from (used for)
operating working capital:
Accounts receivable....... (442,699) (272,919) (402,855) (509,828)
Inventories............... (523,761) 333,659 (163,359) 231,241
Prepaid expenses and
other.................... 2,850 17,928 (7,030) 19,702
Costs related to insurance
claims settlements (Note
6)....................... -- (127,741) -- (83,227)
Accounts payable and
accrued liabilities...... 158,235 (179,315) 226,628 215,490
Income taxes payable...... 47,542 (47,542) (46,906) 45,526
---------- ---------- --------- -----------
Net cash provided by
(used for) operating
activities............. (73,311) 31,445 (150,220) 431,195
---------- ---------- --------- -----------
INVESTING ACTIVITIES:
Acquisition of assets (Note
2)......................... (217,063)
Additions to property, plant
and equipment.............. (193,079) (266,420) (198,382) (429,707)
Proceeds from insurance
settlements (Note 6)....... 61,853 21,824 -- 578,965
Increase in intangibles and
other assets............... (20,201) -- -- (90,079)
---------- ---------- --------- -----------
Net cash used for
investing activities..... (151,427) (244,596) (198,382) (157,884)
---------- ---------- --------- -----------
FINANCING ACTIVITIES:
Borrowings on notes payable
and long-term debt......... 400,000 550,000 850,000 4,711,831
Payments/retirement of notes
payable and long-term
debt....................... (553,808) (636,849) (460,470) (4,935,142)
Borrowings under capital
lease arrangements......... -- 300,000 -- --
Redemption of warrants...... -- -- -- (50,000)
---------- ---------- --------- -----------
Net cash provided by (used
for) financing
activities............... (153,808) 213,151 389,530 (273,311)
---------- ---------- --------- -----------
INCREASE (DECREASE) IN CASH... (378,546) -- 40,928 --
CASH:
Beginning of period......... 379,046 500 500 500
---------- ---------- --------- -----------
End of period............... $ 500 $ 500 $ 41,428 $ 500
========== ========== ========= ===========
SUPPLEMENTAL INFORMATION:
Interest paid............... $ 436,075 $ 445,806 $ 327,990 $ 366,573
========== ========== ========= ===========
Income taxes paid
(received)................. $ 40,000 $ 47,000 $ 47,000 $ (9,842)
========== ========== ========= ===========
Noncash investing and
financing activities:
Acquisition of assets for
long-term debt (Note 2).. $ 1,010,000
===========
Exercise of stock options
for notes receivable
(Note 11)................ $ 125,000
===========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
NEI WEBWORLD, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995 AND 1996,
AND NINE MONTHS ENDED DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business--NEI WebWorld, Inc. (the "Company") is in the business of printing
television programming schedules, advertising circulars, school catalogs and
other similar supplements for newspapers and periodicals. The Company
commenced operations in February 1994 following an acquisition accounted for
under the purchase method.
Preparation of Financial Statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the financial statements and the
reported amounts of revenues and expenses for the period. Differences from
those estimates are recorded in the period they become known.
Revenues are recognized as sales primarily when print jobs are shipped.
Also, in accordance with trade practice, revenues are accrued for jobs in
process at year-end on the basis of production activity at pro rata billing
value of work completed.
Inventories, which consist primarily of paper, are stated at the lower of
cost (first-in, first-out method) or market.
Property, Plant and Equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are provided
using the straight-line method over the estimated useful lives of the assets
as follows: building and improvements--7 to 40 years, printing equipment and
other property--5 to 11 years.
Intangibles and Other Assets are amortized on a straight-line basis over
five years.
Financial Instruments consist of cash, receivables, payables and debt, the
carrying values of which are a reasonable estimate of their fair values due to
their short maturities or current interest rates.
Deferred Income Taxes are provided under the asset and liability method for
temporary differences in the recognition of income and expense for tax and
financial reporting purposes.
Stock-Based Compensation arising from stock option grants is accounted for
by the intrinsic value method under APB Opinion No. 25. Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," is
effective for the Company beginning April 1, 1996, although no options have
been granted since that date. This statement requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. As permitted by SFAS No. 123, the Company will
continue to apply APB Opinion No. 25 to its stock-based compensation awards to
employees and will disclose the required pro forma effect on net income and
earnings per share.
Pro Forma Earnings Per Share are computed based on the weighted average
number of common shares restated for the common stock split and the preferred
stock conversion discussed in Notes 10 and 11 outstanding in fiscal 1996 and
in the interim periods presented.
F-7
<PAGE>
NEI WEBWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. ASSET ACQUISITION
Effective September 13, 1996, the Company acquired certain printing
equipment and other assets and assumed certain liabilities from Webworks, Inc.
("Webworks"), a subsidiary of Morris Newspaper Corporation, for $50,000 cash,
a $1,010,000 note payable to the seller (Note 7) and $167,063 of acquisition
costs ($70,000 for brokerage and related acquisition services--see Note 13;
$58,000 for legal services; and $39,063 for consulting and related services)
primarily paid in cash. This total purchase price of $1,227,063 was allocated
to the assets acquired and liabilities assumed in proportion to their fair
values as shown below:
<TABLE>
<S> <C>
Current assets acquired--primarily receivables and
inventories................................................ $1,048,802
Current liabilities assumed................................. (828,802)
Accrued equipment installation costs........................ (580,000)
----------
Net current liabilities..................................... (360,000)
Web presses and other printing equipment acquired........... 1,587,063
----------
$1,227,063
==========
</TABLE>
The acquired printing equipment is located in a facility leased under a
short-term operating lease. The estimated costs for the Company to relocate
and install the equipment in its facilities have been accrued, based on the
installation plan initiated at acquisition. The installation commenced in
March 1997 and is expected to be completed in September 1997.
3. ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
---------- ------------
<S> <C> <C>
Trade:
Billed........................................... $1,616,545 $2,694,549
Accrued revenues on jobs in process.............. 43,209 84,854
Other accounts receivable.......................... 60,644 16,686
---------- ----------
1,720,398 2,796,089
Less allowance for doubtful accounts............... 2,352 72,351
---------- ----------
Accounts receivable--net........................... $1,718,046 $2,723,738
========== ==========
</TABLE>
Revenues and accounts receivable from significant customers represent the
following percentages of the Company's net sales and accounts receivable:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, NINE MONTHS ENDED DECEMBER 31,
----------------------------------------- -----------------------------------------
1995 1996 1995 (UNAUDITED) 1996
-------------------- -------------------- -------------------- --------------------
ACCOUNTS ACCOUNTS ACCOUNTS ACCOUNTS
NET SALES RECEIVABLE NET SALES RECEIVABLE NET SALES RECEIVABLE NET SALES RECEIVABLE
--------- ---------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Customer A.............. 56% 48% 55% 36% 53% 39% 36% 18%
Customer B.............. 16% 7% 6% 1% 6% 1% 1% 1%
Customer C.............. -- -- 6% 14% 5% 11% 10% 7%
Customer D.............. 4% 6% 5% 9% 5% 17% 7% 7%
</TABLE>
F-8
<PAGE>
NEI WEBWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
---------- ------------
<S> <C> <C>
Land.............................................. $ 186,264 $ 186,264
Building and improvements......................... 863,830 1,181,156
Printing equipment and other property............. 2,611,376 4,374,719
Furniture and fixtures............................ 27,909 29,709
Automotive and office equipment................... 8,000 8,000
---------- ----------
3,697,379 5,779,848
Less accumulated depreciation and amortization.... 827,164 1,206,063
---------- ----------
Property, plant and equipment--net................ $2,870,215 $4,573,785
========== ==========
</TABLE>
5. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
---------- ------------
<S> <C> <C>
Noncompete agreement (with prior owner of the
Company; five-year term from February 1994--see
Notes 1 and 7)................................... $ 750,000 $ 750,000
Goodwill.......................................... 305,533 305,533
Debt issuance costs............................... 80,322 90,079
Organizational costs.............................. 25,235 25,235
---------- ----------
1,161,090 1,170,847
Less accumulated amortization..................... 503,139 630,315
---------- ----------
Intangibles and other assets--net................. $ 657,951 $ 540,532
========== ==========
</TABLE>
6. FIRE INSURANCE CLAIMS
On March 6, 1996, a fire damaged a portion of the Company's facilities.
Related to this fire, the Company deferred costs totaling $290,172, consisting
primarily of $162,431 for the net book value of property identified as damaged
by the fire, $62,042 for cleanup costs and $65,699 for restoration and
enhancement costs incurred through March 31, 1996. The Company continued to
incur cleanup and restoration costs after March 31, 1996, and was in the
process of finalizing its claim with an insurance company at that date.
In the nine months ended December 31, 1996, the Company incurred additional
cleanup costs of $83,227, received insurance proceeds of $578,965 and recorded
a gain of $271,265. Also, total restoration and enhancement costs of $395,903
were recorded as additions to buildings and improvements and to equipment.
F-9
<PAGE>
NEI WEBWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. NOTES PAYABLE, CREDIT FACILITIES AND CAPITALIZED LEASE OBLIGATIONS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
---------- ------------
<S> <C> <C>
Notes payable to lender under term loans, due in
monthly principal installments of $38,690, plus in-
terest at lender's prime rate (8% at December 31,
1996), plus 1.5%, balance due December 31, 1998, col-
lateralized by substantially all Company assets...... $ -- $3,250,000
Subordinated note payable to Webworks, interest at 12%
payable quarterly, plus principal installments of
$100,000 on September 12, 1997 and 1998, and $310,000
on September 12, 1999, collateralized by certain
property............................................. -- 510,000
Subordinated note payable to prior owner, due in an-
nual principal installments of $100,000, plus inter-
est at 8% payable quarterly, through February 28,
1999................................................. 300,000 300,000
Note payable to bank under term loan, due in monthly
installments of $9,320, including interest at 8.64%,
balance due March 31, 1999, collateralized by sub-
stantially all Company assets........................ 859,660 --
Subordinated notes payable to lender (net of $31,434
unamortized discount assigned to common stock war-
rant), interest at 12% payable quarterly, plus prin-
cipal installments of $62,500 per quarter beginning
June 30, 1997 through March 31, 2000, collateralized
by substantially all Company assets.................. 718,566 --
Capital lease obligations, due in monthly installments
of $58,660, including interest at 8.6% to 10.9%
through December 31, 2000, collateralized by the
leased equipment. Future minimum lease payments total
$2,100,431, which includes interest of $268,726...... 1,831,705 --
---------- ----------
3,709,931 4,060,000
Less current portion.................................. 689,904 664,286
---------- ----------
Long-term debt--less current portion.................. $3,020,027 $3,395,714
========== ==========
</TABLE>
Notes payable of $1,461,831 at December 31, 1996, are outstanding under a
$3,750,000 revolving loan agreement as of that date which matures December 31,
1998, and is subject to annual renewals thereafter. Borrowings under the
revolving loan are subject to borrowing base requirements which may be
adjusted at the lender's discretion, bear interest payable monthly at lender's
prime rate plus 1.25%, and are collateralized by a lockbox requirement and by
substantially all Company assets. The revolving loan carries a .25% annual
commitment fee, payable quarterly, on the unused portion of the loan.
The loan agreement and notes payable to lender under the revolving loan and
term loans require maintenance of specified levels of adjusted net worth and
limit additional debt, investing activities, payment of dividends, purchases
of Company stock, other changes in ownership and transactions with related
parties. The loan agreement carries a $1,000 monthly servicing fee and early
termination fees of $270,000 prior to December 31, 1997, $180,000 prior to
December 31, 1998, and $90,000 prior to the end of any renewal period.
The loan agreement also provides for capital expenditures loans of up to
$2,000,000, which would bear interest at the lender's prime rate, plus 1.5%,
would be payable monthly over five years or by the termination of the
agreement, and would be collateralized by substantially all Company assets. No
capital expenditures loans are outstanding at December 31, 1996.
F-10
<PAGE>
NEI WEBWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In December 1996, a portion of the proceeds under these facilities were used
by the Company to retire the notes payable to the bank under the previous
revolving line of credit, the term loans and the subordinated notes payable
discussed below. In connection with this debt retirement, an extraordinary
loss of $108,545 (before tax benefits of $36,000) was recognized, including
write offs of the related debt issuance costs of $33,000 and unamortized debt
discount of $23,000.
Notes payable of $950,000 at March 31, 1996, were outstanding under a
$1,100,000 revolving bank line of credit which matures March 31, 1997 (as
revised on September 13, 1996). Borrowings under the line of credit were
subject to borrowing base requirements, bearing interest payable monthly at
the bank's base rate (8.25% at March 31, 1996) plus 1.5% and collateralized by
substantially all Company assets. The revolving line of credit carried a
commitment fee of .25% on the unused portion of the loan. These notes payable
were retired in December 1996.
On September 13, 1996, the subordinated lender and the Company amended the
subordinated loan agreement. The amended agreement provided for an accelerated
payment on the original loan of $50,000 payable on September 19, 1996, without
prepayment penalty. In addition, this lender received warrants to purchase
80,000 shares of the Company's stock for $1 a share, and granted the Company
the option to repay the loan in full by December 31, 1996, without any
prepayment penalties and repurchase the 1994 and 1996 warrants for $50,000.
This note payable was retired and the warrants were redeemed in December 1996.
Long-term debt under the agreements existing at December 31, 1996, matures
as follows:
<TABLE>
<S> <C>
Fiscal year ending March 31:
1997......................................................... $ 216,071
1998 (including $448,215 for the nine months ending
December 31, 1997).......................................... 664,285
1999......................................................... 2,869,644
2000......................................................... 310,000
----------
$4,060,000
==========
</TABLE>
8. COMMITMENTS
Purchase Commitments--In March 1997, the Company entered into an
unconditional purchase obligation to a printing materials supplier for
purchases at market value through March 2000. Minimum future purchases under
this agreement are as follows:
<TABLE>
<S> <C>
Fiscal year ending March 31:
1997........................................................... $ 16,667
1998........................................................... 200,000
1999........................................................... 200,000
2000........................................................... 183,333
--------
$600,000
========
</TABLE>
F-11
<PAGE>
NEI WEBWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Operating Leases--During the period ended, and subsequent to, December 31,
1996, the Company has entered into long-term noncancelable operating leases
for certain equipment and for an adjacent plant facility. Minimum future
rental commitments for these leases at December 31, 1996, are as follows:
<TABLE>
<S> <C>
Fiscal year ending March 31:
1997......................................................... $ 2,133
1998......................................................... 186,402
1999......................................................... 221,976
2000......................................................... 214,620
2001......................................................... 213,444
2002......................................................... 213,444
2003......................................................... 88,935
----------
$1,140,954
==========
</TABLE>
The Company has entered into a contract to purchase the leased plant
facility for $1,700,000 by December 31, 1997. Should the Company fail to close
this transaction, the lease remains in effect and provides a five-year renewal
option at market rates. Rent expense under operating leases for the nine
months ended December 31, 1996, was $2,133.
9. INCOME TAXES
The tax effects of significant items comprising the Company's net deferred
income tax benefit are as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Current:
Allowance for accounts receivable, not
currently deductible.......................... $ 1,000 $ 25,000
Vacation and bonus accruals, not currently
deductible.................................... 7,000 29,000
Other.......................................... 5,292 (6,000)
Valuation allowance............................ -- (48,000)
-------- --------
Total current assets......................... 13,292 --
Long-term:
Accelerated depreciation and amortization for
tax purposes.................................. (68,468) (79,000)
Gain on fire insurance settlement, not
currently taxable............................. -- (92,000)
Net operating loss carryforward (expiring
2011)......................................... 120,000 120,000
Alternative minimum tax credit carryforward.... 68,000 101,000
Valuation allowance............................ (77,508) (13,000)
-------- --------
Total long-term assets....................... 42,024 37,000
-------- --------
Net deferred tax asset........................... $ 55,316 $ 37,000
======== ========
</TABLE>
F-12
<PAGE>
NEI WEBWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The resulting components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
---------------------- --------------------
1995 1996 1995 1996
---------- ---------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current.................... $ 84,906 $ (10,786) $ (8,089) $ 35,684
Deferred................... (37,083) (95,741) (13,675) 34,824
Change in valuation
allowance................. -- 77,508 -- (16,508)
---------- ---------- -------- --------
Income tax expense
(benefit)................. $ 47,823 $ (29,019) $(21,764) $ 54,000
========== ========== ======== ========
</TABLE>
Income (loss) before income taxes and the related income tax (benefit) for
the nine months ended December 31, 1996, are as follows:
<TABLE>
<CAPTION>
INCOME TAX
AMOUNT (BENEFIT)
-------- ----------
<S> <C> <C>
Income before income tax expense and extraordinary
item.............................................. $316,178 $ 90,000
Extraordinary item................................. (108,545) (36,000)
-------- --------
$207,633 $ 54,000
======== ========
</TABLE>
Income tax expense (benefit) varies from the amount determined by applying
the statutory federal income tax rate of 34% to income before income taxes and
extraordinary item as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
---------------------- --------------------
1995 1996 1995 1996
---------- ----------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income tax expense
(benefit) computed at
federal statutory rate... $ 50,897 $ (115,286) $(83,349) $ 90,501
Change in valuation
allowance................ -- 77,508 58,131 (16,508)
Expenses not deductible
for tax purposes......... -- 9,779 7,334 3,645
Other..................... (3,074) (1,020) (3,880) 12,362
--------- ----------- -------- --------
Income tax expense
(benefit)................ $ 47,823 $ (29,019) $(21,764) $ 90,000
========= =========== ======== ========
</TABLE>
10. PREFERRED STOCKS CONVERTED
The Company is authorized to issue 2,000,000 shares of $1 par value
preferred stock. In fiscal 1996 and prior years, the Company had Series A, B
and C preferred stocks issued and outstanding, which had annual cumulative
dividends (payable in Series C preferred stock) and mandatory redemption
features requiring annual accretion. These preferred stocks were converted to
common stock when the registration statement related to the contemplated
offering was declared effective. The financial statements are presented as if
these stocks were converted at the beginning of the periods reported.
11. COMMON STOCK
Common Stock--On March 31, 1997, the Company effected a 3.33-to-one stock
split. At the effective date of the contemplated offering, the Company
converted Series A, B and C preferred stocks to 2,008,823 shares of common
stock. All share data has been restated for these events.
Common Stock Put Warrants--In connection with the subordinated notes payable
to lender, in February 1994, the Company issued warrants for 90,000 shares of
common stock. The warrants were exercisable at any
F-13
<PAGE>
NEI WEBWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
time on or prior to the expiration date of February 28, 2004, and entitled the
holder to purchase common stock for $1 per share, subject to certain
adjustments. An estimated initial value of $50,000 was assigned to the
warrants. The warrant holder could require the Company to purchase the
warrants or common shares issued upon exercise of the warrants (warrant
shares) on or after February 28, 2000, until the expiration date, subject to
certain limitations.
In September 1996, the Company issued to the warrant holder additional
warrants for the purchase of 80,000 shares of common stock for $1 per share,
valued at $23,500, and in December 1996, redeemed the total 170,000 warrants
outstanding for $50,000.
Common Stock Options--Under a stock option plan, options for no more than
150,000 shares of common stock were authorized to be granted to certain
Company employees and consultants at prices equal to or greater than the fair
market value of the common stock as determined by the Board of Directors at
the dates of grant. In February 1994, the Company granted a principal
officer/shareholder, a director/shareholder and a preferred shareholder
options to purchase a total of 125,000 shares of common stock at an exercise
price of $1 per share. The options were exercisable subject to the Company's
attainment of certain earnings requirements. At March 31, 1996, 25,000 options
were exercisable.
In April 1996, the Company vested all options previously granted and
terminated that plan. These options for 125,000 shares of common stock were
exercised for notes receivable totaling $125,000, which are classified as a
reduction of shareholders' equity. The notes (with recourse) bear interest at
6% payable annually and mature April 2001.
On April 4, 1997, the Company adopted the 1997 Stock Option Plan (the
"Plan") which authorizes the Company to grant to employees and directors
incentive and nonqualified options to purchase up to 350,000 shares of common
stock at a price not less than the fair market value of the common stock on
the date of grant. Options under the Plan expire no more than ten years from
the later of the date of grant or the date first exercisable. Vesting
provisions are at the discretion of the Board of Directors. No options have
been granted under the Plan.
12. EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) savings plan which covers substantially all
of its regular employees. The Company's annual contribution to the savings
plan is determined at the discretion of the Board of Directors. The Company
recorded contributions of approximately $31,000, $36,000 and $23,000 for
fiscal years 1996 and 1995 and for the nine months ended December 31, 1996,
respectively.
13. TRANSACTIONS WITH RELATED PARTIES
The Company has an agreement with a preferred shareholder to provide
supervisory management services to the Company. Management fees totaled
$100,000 in fiscal 1996 and 1995, with $25,000 included in accrued management
and consulting fees at March 31, 1996. For the nine months ended December 31,
1996, management fees totaled $125,000, $50,000 of which related to the
acquisition of Webworks assets and refinancing of long-term debt. At December
31, 1996, $75,000 is included in accrued management and consulting fees.
The Company had a consulting agreement with a director and shareholder which
provides for a fixed fee each quarter and a contingent fee based on the
Company's sales growth. Consulting fees totaled $30,000 in fiscal 1996 and
1995, with $7,500 included in accrued management and consulting fees at March
31, 1996. For the nine months ended December 31, 1996, consulting fees totaled
$52,500, $30,000 of which related to the acquisition of Webworks assets. At
December 31, 1996, $7,500 is included in accrued management and consulting
fees. Effective April 1997, this agreement was terminated.
F-14
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CON-
NECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES TO ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED,
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO
DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITA-
TION. 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 INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HERE-
OF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 3
Prospectus Summary....................................................... 4
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 15
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 22
Management............................................................... 28
Certain Transactions..................................................... 32
Principal Shareholders................................................... 32
Description of Capital Stock............................................. 33
Shares Eligible For Future Sale.......................................... 35
Underwriting............................................................. 37
Legal Matters............................................................ 39
Experts.................................................................. 39
Index to Financial Statements............................................ F-1
</TABLE>
----------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPEC-
TUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,000,000 SHARES OF
COMMON STOCK
1,000,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
NEI WEBWORLD, INC.
----------------
PROSPECTUS
, 1997
----------------
FIRST LONDON SECURITIES CORPORATION
RAS SECURITIES CORP.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the Texas Business Corporation Act provides generally and
in pertinent part that a Texas corporation may indemnify its directors and
officers against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by them in connection with any suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) if, in connection with
the matters in issue, they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, in connection with any criminal suit or proceeding, if in connection with
the matters in issue, they had no reasonable cause to believe their conduct
was unlawful.
The registrant's Articles of Incorporation provide that a director of the
registrant shall not be liable to the registrant or its shareholders for any
act or omission in such director's capacity as a director to the fullest
extent permitted by Texas statutory or decisional law.
The Company's Bylaws provide that the Company shall indemnify each of its
directors and officers, acting in such capacity, so long as such person acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Company. Such indemnification may be made
only upon a determination that such indemnification is proper in the
circumstances because the person to be indemnified has met the applicable
standard of conduct to permit indemnification under the law. The Company is
also required to advance to such persons payment for their expenses incurred
in defending a proceeding to which indemnification might apply, provided the
recipient provides an undertaking agreeing to repay all such advanced amounts
if it is ultimately determined that he is not entitled to be indemnified.
The Company has entered into Indemnification and Hold Harmless Agreements
with its directors which provide that the Company will indemnify its directors
to the fullest extent permitted by applicable law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amount shown are estimates
except the Securities and Exchange Commission registration and NASD filing
fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 6,441
NASD filing fee.................................................. 2,931
Pacific Stock Exchange and Nasdaq SmallCap Market listing fee.... 27,500
Underwriters' non-accountable expense allowance.................. 175,375
Legal fees and expenses.......................................... 125,000
Accounting fees and expenses..................................... 120,000
Printing and engraving expenses.................................. 30,000
Transfer agent and registrar fees and expenses................... 3,000
Blue Sky fees and expenses....................................... 15,000
Miscellaneous expenses........................................... 19,753
--------
Total........................................................ $525,000
========
</TABLE>
II-1
<PAGE>
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES.
Since March 7, 1994, the Company has not sold or issued any unregistered or
registered securities, other than (i) the issuance of 416,250 shares of Common
Stock in April 1996 upon the exercise (at $.30 per share) of options granted
in February 1994 and (ii) the issuance of 185,000 shares of Series C Preferred
Stock on March 31, 1997 as a dividend on the Series A Convertible Preferred
Stock and Series B Redeemable Preferred Stock outstanding as of such date. The
Company relied on the exemption provided by Section 4(2) of the Act. Each of
the purchasers of these shares was, or was an affiliate of, a member of the
Board of Directors of the Company and therefore an "accredited investor" as
defined in the regulations promulgated under the Act.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Articles of Incorporation of NEI WebWorld, Inc., as amended.*
3.2 Bylaws, as amended and restated, of NEI WebWorld, Inc.
4.1 Form of Warrant Agreement.*
4.2 Form of Representative's Warrant Agreement.*
5.1 Opinion of Crouch & Hallett, L.L.P.
10.1 Amended and Restated Employment Agreement of Richard M. Wiencek.*
10.2 Consulting Agreement of Robert D. Kopitke.
10.3 Management Agreement of Conrad/Collins Merchant Banking Group, Ltd.
10.4 NEI WebWorld, Inc. Stock Option Plan.
10.5 Contract with The Dallas Morning News.
10.6 Loan and Security Agreement by and among the Company and Congress
Financial Corporation (Southwest), dated December 31, 1996.
10.7 Promissory Note issued by NEI WebWorld, Inc. to The Webworks, Inc. as
of September 13, 1996 as amended by the Modification of Promissory
Note dated December 30, 1996.
10.8 Subordinated Note dated February 28, 1994 in the amount of $500,000
executed by NEI WebWorld, Inc. (formerly known as NEI Acquisition
Corporation) to Robert L. Jensen.
10.9 Form of note dated April 2, 1996 issued by certain shareholders of NEI
WebWorld, Inc. in connection with stock option exercises.
10.10 Form of Indemnification and Hold Harmless Agreement.
23.1 Consent of Deloitte & Touche LLP.*
23.2 Consent of Crouch & Hallett, L.L.P. (included in Exhibit 5.1).
24.1 Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Filed herewith (all other exhibits previously filed).
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(b) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-2
<PAGE>
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) The Registrant hereby undertakes (1) to file, during any period in which
it offers or sells securities, a post-effective amendment to this Registration
Statement, to include any prospectus required by section 10(a)(3) of the Act,
to reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statements, and to include any additional or changed material
information on the plan of distribution; (2) that, for the purpose of
determining any liability under the Act, to treat each post-effective
amendment as a new Registration Statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and (3) to file a post-effective
amendment to remove from registration any of the securities being registered
which remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising from the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENT OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THIS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
DALLAS, STATE OF TEXAS ON THE 22ND DAY OF APRIL, 1997.
NEI WEBWORLD, INC.
By: /s/ Richard J. Wiencek
-----------------------------------
RICHARD J. WIENCEK, PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES ON THE 22ND DAY OF APRIL, 1997.
NAME TITLE
/s/ Richard J. Wiencek President and Chief Executive
- ------------------------------------- Officer and Director
RICHARD J. WIENCEK
Vice President--Finance and
* Administration and Chief Financial
- ------------------------------------- Officer (Principal Financial
BRUCE E. FREDRIKS Officer)
/s/ Barry B. Conrad Director and Chairman of the Board
- -------------------------------------
BARRY B. CONRAD
Director
*
- -------------------------------------
FLOYD W. COLLINS
Director
*
- -------------------------------------
BRIAN A. HARPSTER
Director
*
- -------------------------------------
ROBERT D. KOPITKE
*By:
/s/ Barry B. Conrad
-----------------------------------
BARRY B. CONRAD, ATTORNEY IN FACT
II-4
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
NEI WEBWORLD, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation hereby adopts the following
Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is NEI Webworld, Inc. (the "Corporation").
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by the
shareholders of Corporation at a special meeting of such shareholders conducted
on April 4, 1997.
The first two sentences contained in Article V are hereby amended to read
in their entirety as follows:
"A. The corporation is authorized to issue two classes of shares of
capital stock, designated "Common Stock" and "Preferred Stock", respectively.
The aggregate number of shares of Common Stock authorized to be issued is
20,000,000 shares with a par value of $.01 per share."
The remaining text of Article V is not amended or modified in any manner by
these Articles of Amendment.
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of such
adoption and the number of shares entitled to vote thereon was as follows:
<PAGE>
<TABLE>
<CAPTION>
Number of Number of Number of Entitled to
Shares Shares Entitled Votes per Vote as a Voted For Voted Against
Designation Outstanding to Vote Share Class Amendment Amendment
- ------------- ----------- --------------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Common 710,955 710,955 710,955 N/A 710,955 -0-
Preferred
Series A 271,500 271,500 904,095* -0- 904,095 -0-
Series B 478,500 -0- N/A N/A N/A N/A
Series C 185,000 -0- N/A N/A N/A N/A
</TABLE>
- --------------------
* Reflects increased voting power resulting from 2.33 for 1 Common Stock
dividend granted in March 1996.
IN WITNESS WHEREOF, the Corporation has executed this document as of April
8, 1997.
NEI WEBWORLD, INC.
By: /s/ Richard J. Wiencek
-------------------------------
Richard J. Wiencek, President
2
<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
NEI WEBWORLD, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation hereby adopts the following
Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is NEI Webworld, Inc. (the "Corporation").
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by the
shareholders of Corporation at a special meeting of such shareholders conducted
on April 4, 1997.
Article V is hereby amended to read in its entirety as follows:
"The corporation is authorized to issue two classes of shares of
capital stock, designated "Common Stock" and "Preferred Stock", respectively.
The aggregate number of shares of Common Stock authorized to be issued is
20,000,000 shares with a par value of $.01 per share. The aggregate number of
shares of Preferred Stock authorized to be issued is 2,000,000 shares with a par
value of $1.00 per share. Shares of the Preferred Stock may be issued from time
to time in one or more series, each such series to have such distinctive
designation or title as may be fixed by the Board of Directors prior to the
issuance of any shares thereof. Each such series shall have such designations,
preferences, limitations and relative rights, including voting rights, as shall
be stated in the resolution or resolutions providing for the issuance of such
series of Preferred Stock, as may be adopted from time to time by the Board of
Directors prior to the issuance of any shares thereof, in accordance with the
laws of the State of Texas. The Board of Directors, in such resolution or
resolutions, may increase or decrease the number of shares within each such
series; provided, however, the Board of Directors may not decrease the number of
shares within a series to less than the number of shares within such series that
are then issued."
<PAGE>
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of
such adoption and the number of shares entitled to vote thereon was as follows:
<TABLE>
<CAPTION>
Number of Number of Number of Entitled to
Shares Shares Entitled Votes per Vote as a Voted For Voted Against
Designation Outstanding to Vote Share Class Amendment Amendment
- ----------- ----------- --------------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Common 710,955 710,955 710,955 N/A 710,955 -0-
Preferred
Series A 271,500 271,500 904,095* 904,095 904,095 -0-
Series B 478,500 478,500 478,500 478,500 478,500 -0-
Series C 185,000 185,000 185,000 185,000 185,000 -0-
- -----------------------------
</TABLE>
* Reflects increased voting power resulting from 2.33 for 1 Common Stock
dividend granted in March 1996.
IN WITNESS WHEREOF, the Corporation has executed this document as of
____________________, 1997.
NEI WEBWORLD, INC.
By:
--------------------------------
Richard J. Wiencek, President
2
<PAGE>
EXHIBIT 4.1
WARRANT AGREEMENT
THIS WARRANT AGREEMENT ("Agreement") is made and entered into as of this
___ day of ________, 1997, by and between NEI WebWorld, Inc., a corporation
organized and existing under the laws of the State of Texas ("Company"), and
AMERICAN STOCK TRANSFER & TRUST COMPANY, a national banking association, as
warrant agent ("Warrant Agent").
WHEREAS, the Company proposes to offer and sell a maximum of 1,150,000
shares of common stock ("Common Stock"), $.01 par value per share, (which
includes 150,000 shares of Common Stock pursuant to the Underwriters' over-
allotment option) at a purchase price of $____ per share and 1,150,000
Redeemable Common Stock Purchase Warrants ("Warrants") (which includes 150,000
Warrants pursuant to the Underwriters' over-allotment option) at a purchase
price of $____ per Warrant pursuant to a Registration Statement on Form SB-2
(the "Prospectus"), File Number 333-23023, filed with the Securities and
Exchange Commission; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, registration of transfer, exchange and exercise of the
Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant
----------------------------
Agent to act as agent for the Company in accordance with the instructions
hereinafter set forth in this Agreement, and the Warrant Agent hereby accepts
such appointment.
2. Form of Warrants. The text and the terms of the Warrants, and the
----------------
form of election to purchase shares of Common Stock appearing on the reverse
side thereof shall be substantially as set forth in Exhibit A attached hereto
and made a part hereof. The Warrants shall be executed on behalf of the Company
by the manual or facsimile signature of the Chairman or a vice Chairman of the
Company and by the manual or facsimile of the secretary or assistant secretary
of the Company under its corporate seal, affixed or in facsimile.
The Warrants shall be dated by the Warrant Agent as of the initial date of
issuance thereof, and upon transfer or exchange, the Warrant shall be dated as
of such subsequent issuance date.
3. Registration and Countersignature. The Warrant Agent shall maintain
---------------------------------
books for the transfer and registration of the Warrants. Upon the initial
issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the names of the respective registered holders, and upon subsequent
issuance, such Warrants shall be registered in the names of the respective
succeeding registered holders. The Warrants shall be countersigned by the
Warrant Agent (or by any successor to the Warrant Agent then acting as warrant
agent under this Agreement) and shall not be valid for
1
<PAGE>
any purpose unless so countersigned. Warrants may be so countersigned, however,
by the Warrant Agent (or by its successor as warrant agent) and be delivered by
the Warrant Agent, notwithstanding that the persons whose manual or facsimile
signature appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature or delivery. Until a
Warrant is transferred on the books of the Warrant Agent, the Company and the
Warrant Agent may treat any registered holder of Warrants as the absolute owner
thereof for all purposes, notwithstanding any notice to the contrary.
4. Registration of Transfers and Exchanges. The Warrant Agent shall
---------------------------------------
transfer any outstanding Warrants on the books to be maintained by the Warrant
Agent for that purpose, upon surrender thereof for transfer, properly endorsed
or accompanied by appropriate instructions for transfer with proper documentary
stamps affixed thereto, if requested. Upon any such transfer, a new Warrant
shall be issued to the transferee, and the surrendered Warrant shall be canceled
by the Warrant Agent. Warrants so canceled shall be delivered by the Warrant
Agent to the Company from time to time. Warrants may be exchanged at the option
of the holder thereof when surrendered at the office of the Warrant Agent, for
another Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock. The Warrant Agent is hereby irrevocably authorized to countersign
and deliver the Warrants in accordance with the provisions of this Paragraph 4,
and the Company, whenever required by the Warrant Agent, will supply the Warrant
Agent with Warrants duly executed on behalf of the Company for such purpose.
5. Exercise of Warrants. Subject to the provisions of this Agreement,
--------------------
each registered holder of Warrants shall have the right, which right may be
exercised as in such Warrants as expressed, to purchase from the Company, and
the Company shall issue and sell to such registered holder of Warrants, the
number of fully paid and nonassessable shares of Common Stock specified in such
Warrants, upon surrender to the Company at the office of the Warrant Agent, with
the form of election to purchase on the reverse side thereof duly completed and
signed, and upon payment to the Warrant Agent for the account of the Company of
the Exercise Price for the number of shares of Common Stock in respect of which
such Warrants are then exercised. Payment of such Exercise Price may be made in
cash or by certified check, bank draft, or postal or express money order,
payable in United States dollars, to the order of the Company. Subject to the
provisions of Paragraph 8 hereof, upon such surrender of Warrants and payment of
the Exercise Price as aforesaid, the Company, acting through the Warrant Agent,
shall issue and cause to be delivered with all reasonable dispatch to or upon
the written order of the registered holder of such Warrants and in such name or
names as such registered holder may designate, a certificate or certificates for
the number of full shares of Common Stock so purchased upon the exercise of such
Warrants. Such certificates shall be deemed to have been issued, and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Common Stock, as of the date of surrender of such Warrants and
payment of the Exercise Price, as aforesaid; provided, however, that if, at the
date of surrender of such Warrants and the payment of such Exercise Price, the
transfer books for the Common Stock purchasable upon the exercise of such
Warrants shall be closed, the certificates for the shares in respect of which
such Warrants are then exercised shall be issuable as of the date on
2
<PAGE>
which such books shall next be opened, and until such date the Company shall be
under no duty to deliver any certificate for such shares; provided further,
however, that the transfer books aforesaid, unless otherwise required by law,
shall not be closed at any one time for a period longer than 20 days. The right
of purchase represented by the Warrants shall be exercisable, at the election of
the registered holders thereof, either as an entirety or, from time to time, for
only part of the shares specified therein, and in the event that any Warrant is
exercised in respect of less than all of the shares specified therein at any
time prior to the date of expiration of the Warrants, a new Warrant or Warrants
will be issued for the remaining number of Common Stock specified in the Warrant
so surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrants pursuant to the provisions
of this Paragraph 5 and of Paragraph 3 of this Agreement, and the Company,
whenever required by the Warrant Agent, will supply the Warrant Agent with
Warrants duly executed on behalf of the Company for such purposes.
Notwithstanding anything contained herein to the contrary, no Warrant may
be exercised if the issuance of Common Stock in connection therewith would
constitute a violation of the registration provisions of federal or state
securities laws.
Upon thirty (30) days prior written notice to all holders of the Warrants,
the Company shall have the right to reduce the exercise price and/or extend the
term of the Warrants in compliance with the requirements of Rule 13e-4 to the
extent applicable.
The "Exercise Price" of the Warrants shall mean the exercise price
specified in the Warrants until the occurrence of a re-capitalization or
reclassification that, pursuant to the provisions hereof, shall require an
increase or decrease in the exercise price of the Warrants, and thereafter shall
mean said price as adjusted from time to time in accordance with the provisions
hereof. No such adjustment shall be made unless such adjustment would change
the then purchase price per share by ten cents ($.10) or more; provided,
however, that all adjustments not so made shall be deferred and made when the
aggregate thereof would change the then purchase price per share by ten cents
($.10) or more. No adjustment made pursuant to any provision hereof shall have
the effect of increasing the total consideration payable upon exercise of any of
the Warrants.
6. Adjustments in Certain Cases. In case the Company shall at any time
----------------------------
prior to the exercise or termination of any of the Warrants effect a re-
capitalization or reclassification of such character that its Common Stock shall
be changed into or become exchangeable for a larger or smaller number of shares,
then, upon the effective date thereof, the number of shares of Common Stock that
the holders of the Warrants shall be entitled to purchase upon exercise thereof
shall be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in such number of shares of Common Stock by reason of such
re-capitalization or reclassification, and the purchase price per share of such
re-capitalized or reclassified Common Stock shall, in the case of an increase in
the number of shares, be proportionately decreased and, in the case of a
decrease in the number of shares, be proportionately increased.
3
<PAGE>
In case the Company shall at any time prior to the exercise or termination
of any of the Warrants distribute to holders of its Common Stock cash, evidences
of indebtedness, or other securities or assets, other than as dividends or
distributions payable out of current or accumulated earnings, then, in any such
case, the holders of the Warrants shall be entitled to receive, upon exercise
thereof, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
that such holder would have been entitled to receive with respect to the Common
Stock as a result of the happening of such event, had the Warrants been
exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (without giving effect to any restriction upon such
exercise).
In case the Company shall at any time prior to the exercise or termination
of any of the Warrants consolidate or merge with any other corporation or
transfer all or substantially all of its assets to any other corporation
preparatory to a dissolution, then the Company shall, as a condition precedent
to such transaction, cause effective provision to be made so that the holders of
the Warrants, upon the exercise thereof after the effective date of such
transaction, shall be entitled to receive the kind and amount of shares,
evidences of indebtedness, and/or other property receivable on such transaction
by a holder of the number of shares of Common Stock as to which the Warrants
were exercisable immediately prior to such transaction (without giving effect to
any restriction upon such exercise); and, in any such case, appropriate
provision shall be made with respect to the rights and interests of the holders
thereof to the effect that the provisions of the Warrants shall thereafter be
applicable (as nearly as may be practicable) with respect to any shares,
evidences of indebtedness, or other securities or assets thereafter deliverable
upon exercise of the Warrants.
Whenever the number of shares of Common Stock or other types of securities
or assets purchasable upon exercise of any of the Warrants shall be adjusted as
provided herein, the Company shall forthwith obtain and file with its corporate
records a certificate or letter from a firm of independent public accountants of
recognized standing setting forth the computation and the adjusted number of
shares of Common Stock or other securities or assets purchasable hereunder
resulting from such adjustments, and a copy of such certificate or letter shall
be mailed to each of the registered holders of the Warrants. Any such
certificate or letter shall be conclusive evidence as to the correctness of the
adjustment or adjustments referred to therein and shall be available for
inspection by the holders of the Warrants on any day during normal business
hours.
In the event that at any time as a result of an adjustment made pursuant
hereto the holders of the Warrants shall become entitled to purchase upon
exercise thereof shares, evidences of indebtedness, or other securities or
assets (other than Common Stock, then, wherever appropriate, all references
herein to Common Stock shall be deemed to refer to and include such shares,
evidences of indebtedness, or other securities or assets, and thereafter the
number of such shares, evidences of indebtedness, or other securities or assets
shall be subject to adjustment from time to time in a manner and upon terms as
nearly equivalent as practicable to the provisions hereof.
4
<PAGE>
7. Redemption. The Warrants may be redeemed at the option of the
----------
Company, at a redemption price of $.05 per Warrant, upon not less than thirty
(30) days nor more than sixty (60) days prior written notice, if the closing
price of the Common Stock, as reported by the principal exchange on which the
Common Stock is traded, the Nasdaq Small Cap Market or the National Quotation
Bureau, Incorporated, as the case may be, for seven (7) days during any ten (10)
consecutive trading day period ending not more than fifteen (15) days prior to
the date the notice of redemption is marked equals or exceeds $__.00 per share
(200% of the Share Offering Price), subject to adjustment under certain
circumstances during a period of thirty (30) consecutive trading days ending not
earlier than ten (10) of the date of the Warrants are called for redemption and
provided there is a current registration statement under the Securities Act of
1933, as amended, with respect to the issuance and sale of Common Stock upon the
exercise of the Warrants. Any redemption of the Warrants during the one-year
period commencing on _________, 1997 shall require the written consent of First
London Securities Corporation the representative of the Underwriters. On and
after the date fixed for redemption, the Registered Holder shall have no rights
with respect to the Warrants except to receive the $.05 per Warrant upon
surrender of this Warrant Certificate.
8. Payment of Taxes. The Company will pay all documentary stamp taxes,
----------------
if any, attributable to the initial issuance of securities upon the exercise of
the Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes that may be payable in respect of any transfer involved in the
issuance or delivery of any securities in a name other than that of the
registered holder of Warrants in respect of which such securities are issued
and, in such case, neither the Company nor the Warrant Agent shall be required
to issue or deliver any certificate representing such securities or any Warrant
until the person requesting the same has paid to the Company or the Warrant
Agent the amount of such tax or has established to the Company's satisfaction
that such tax has been paid.
9. Mutilated or Missing Warrants. In case any of the Warrants shall be
-----------------------------
mutilated, lost, stolen or destroyed, the Warrant Agent may countersign and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant or in lieu of and substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence satisfactory to the Warrant Agent of
such loss, theft or destruction of such Warrants and indemnity, if requested,
also satisfactory to them. Applicants for such substitute Warrants shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company or the Warrant Agent may prescribe.
10. Reservation of Common Stock. Prior to the issuance of any Warrants,
---------------------------
there shall have been reserved, and the Company shall at all times keep reserved
out of the authorized and unissued Common Stock, a number of shares of Common
Stock sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the transfer agent for the Common Stock and
every subsequent transfer agent for any of the Company's Common Stock issuable
upon the exercise of any of the rights of purchase aforesaid are hereby
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued Common Stock as shall be requisite for such purpose.
The Company agrees that all Common Stock issued upon exercise of the Warrants
5
<PAGE>
shall be, at the time of delivery of the certificates representing such Common
Stock, validly issued and outstanding, fully paid and non-assessable. The
Company will keep a copy of this Agreement on file with the transfer agent for
the Common Stock and with every subsequent transfer agent for the Company's
Common Stock issuable upon the exercise of the right of purchase represented by
the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such transfer agent stock certificates required to honor
outstanding Warrants that have been exercised. The Company will supply such
transfer agent with duly executed stock certificates for such purpose. All
Warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled by the Warrant Agent and shall thereafter be delivered to the Company,
and such canceled Warrants shall constitute sufficient evidence of the number of
shares of Common Stock that have been issued upon the exercise of such Warrants.
All Warrants surrendered for transfer, exchange or partial exercise shall be
canceled by the Warrant Agent and delivered to the Company. Promptly after the
date of expiration of the Warrants, the Warrant Agent shall certify to the
Company the total aggregate amount of Warrants then outstanding and, thereafter,
no Common Stock shall be subject to reservation in respect of such Warrants.
11. Disposition of Proceeds on Exercise of Warrants. Unless otherwise
-----------------------------------------------
instructed by the Company in writing, the Warrant Agent shall account promptly
to the Company with respect to Warrants exercised and shall promptly deposit in
an account for the benefit of the Company, in a bank designated by the Company,
all moneys received by the Warrant Agent for the purchase of Common Stock
through the exercise of such Warrants.
12. Merger or Consolidation or Change of Name of Warrant Agent. Any
----------------------------------------------------------
corporation or company that may succeed to the business of the Warrant Agent by
merger or consolidation or otherwise to which the Warrant Agent shall be a
party, or any corporation or company or otherwise succeeding to the business of
the Warrant Agent shall be the successor to the Warrant Agent hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, however, that such corporation would be eligible
for appointment as a successor Warrant Agent under the provision of Paragraph 14
of this Agreement. In case at the time such successor to the Warrant Agent
shall succeed to the agency created by this Agreement or in case at any time the
name of the Warrant Agent shall be changed, and any of the Warrants shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent and deliver such
Warrants so countersigned; and in case at the time any of the Warrants shall not
have been countersigned, the successor to the Warrant Agent may countersign such
Warrants, either in the name of the predecessor Warrant Agent or in the name of
the successor Warrant Agent; and in all such cases, such Warrants shall have the
full force provided in the Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrants shall have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and
deliver Warrants so countersigned; and if at that time any of the Warrants shall
not have been countersigned, the Warrant Agent may countersign such Warrants
6
<PAGE>
either in its prior name or in its changed name; and in all such cases, such
Warrants shall have the full force provided in the Warrants and this Agreement.
13. Duties of the Warrant Agent.
---------------------------
(a) The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company shall be bound:
(i) The statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same, except such as describe
the Warrant Agent or action or actions taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the
Warrants, except as herein otherwise provided.
(ii) The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement or
in the Warrants to be complied with by the Company.
(iii) The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder, either itself, or
by or through its attorneys, agents or employees.
(iv) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company), and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or advice of such counsel,
provided the Warrant Agent shall have exercised reasonable care in the selection
and continued employment of such counsel.
(v) The Warrant Agent shall incur no liability or responsibility
to the Company or to any holder of any Warrant for any action taken in reliance
upon any notice, resolution, waiver, consent, order, certificate or other paper,
document or instrument reasonably believed by it to have been signed, sent or
presented by the proper party or parties.
(vi) The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement; to reimburse the Warrant Agent for all expenses, taxes,
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement; and to indemnify the Warrant
Agent and save it harmless from and against any and all liabilities, including
judgments, costs and reasonable attorneys' fees for anything done or omitted by
the Warrant Agent in the execution of this Agreement, except as a result of the
Warrant Agent's negligence or bad faith.
7
<PAGE>
(vii) The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding, or to take any other action likely to
involve expense, unless the Company or one or more registered holders of
Warrants shall furnish the Warrant Agent with reasonable security and indemnity.
All rights of action under this Agreement or under any of the Warrants or in the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
benefit of the registered holders of the Warrants, as their respective rights or
interests may appear.
(viii) The Warrant Agent and any shareholder, director, officer,
partner or employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(ix) The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything that it may do or refrain from doing in
connection with this Agreement, except for its own negligence or bad faith.
(x) The Warrant Agent shall keep copies of this Agreement
available for inspection by holders of the Warrants during normal business hours
at its principal office in New York.
14. Change of Warrant Agent. The Warrant Agent may resign and be
-----------------------
discharged from its duties under this Agreement by giving notice in writing to
the Company and by giving notice by mailing to holders of the Warrants at their
addresses as such addresses appear on the Warrant register of such resignation,
specifying a date when such resignation shall take effect, which date shall not
be less than 30 days after the mailing of said notice. The Warrant Agent may be
removed at the discretion of the Company by like notice to the Warrant Agent
from the Company and by like mailing of notice to the holders of the Warrants.
If the Warrant Agent shall resign or be removed or otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after
such removal, or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by the registered
holder of a Warrant (who shall, with such notice, submit his Warrant for
inspection by the Company), then the registered holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. After appointment, any successor Warrant Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed, but the former
Warrant Agent shall deliver and transfer to the successor Warrant Agent any
property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the
8
<PAGE>
Company shall give notice thereof to the predecessor Warrant Agent and each
transfer agent for the Common Stock, and shall forthwith give notice to the
holders of the Warrants in the manner prescribed in this section. Failure to
file or mail any notice provided for in this Section 14, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of any successor Warrant Agent, as the
case may be.
15. Identity of Transfer Agent. Forthwith upon the appointment of any
--------------------------
transfer agent other than the Warrant Agent for the Common Stock of the Company
issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such transfer agent.
16. Notices. Any notice pursuant to this Agreement to be given or made by
-------
the Warrant Agent or by the registered holder of any Warrant to the Company
shall be deemed to have been sufficiently given or made if sent by certified
mail, return receipt requested, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
To the Company: NEI WebWorld, Inc.
North Tower, Plaza of the Americas
Suite 1910
Dallas, TX 75201
To the Warrant Agent: American Stock Transfer & Trust Company
40 Wall Street - 46th Floor
New York, NY 10005
Any notice pursuant to this Agreement to be given or made by the Company or by
the registered holder of any Warrant to the Warrant Agent shall be deemed to
have been sufficiently given or made if sent by certified mail, return receipt
requested, postage prepaid, addressed (until another address is filed in writing
by the Warrant Agent with the Company) to the Warrant Agent as set forth above.
17. Standard of Conduct. Notwithstanding any implication to the contrary
-------------------
elsewhere herein, whenever the Company or the Warrant Agent are required or
permitted to make any judgment or to take any action, no such judgment or action
shall be made or taken in bad faith or in any arbitrary or capricious fashion.
18. Supplements and Amendments. The Company and the Warrant Agent may,
--------------------------
from time to time, supplement or amend this Agreement without the approval of
any of the holders of the Warrants in order to cure any ambiguity or to correct
or supplement any provision contained herein that may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder that the Company and the
Warrant Agent may deem necessary or desirable, that shall not be inconsistent
with the provisions of the Warrants, and that shall not materially adversely
affect the rights of the holders of the Warrants.
9
<PAGE>
19. Successors. All of the covenants and provisions hereof by or for the
----------
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
20. Merger or Consolidation of the Company. The Company will not merge or
--------------------------------------
consolidate with or into any other corporation, unless the corporation resulting
from such merger or consolidation (if not the Company) shall expressly assume,
by supplemental agreement satisfactory in form to the Warrant Agent and executed
and delivered to the Warrant Agent, the due and punctual performance and
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
21. Texas Contract. This Agreement and each Warrant issued hereunder
--------------
shall be deemed to be a contract made under the laws of the State of Texas and
for all purposes shall be construed in accordance with the laws of said state.
22. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give any person or corporation, other than the Company, the Warrant
Agent and the registered holders of the Warrants, any legal or equitable right,
remedy or claim under this Agreement, but this Agreement shall be for the sole
and exclusive benefit of the Company and the Warrant Agent and their respective
successors and of the holders of the Warrant Certificates.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
NEI WebWorld, Inc.
By:
-------------------------------
Its:
-------------------------------
ATTEST:
- --------------------------
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By:
-------------------------------
Its:
------------------------------
ATTEST:
- -------------------------
11
<PAGE>
EHXIBIT A
<PAGE>
No. W ____ VOID AFTER _______, 2002
_________ WARRANTS
REDEEMABLE COMMON STOCK PURCHASE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
NEI WEBWORLD, INC.
CUSIP _________
THIS CERTIFIES THAT, FOR VALUE RECEIVED the holder hereof or registered assigns
(the "Registered Holder") is the owner of the number of Redeemable Common Stock
Purchase Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Common Stock, $.01 par
value, of NEI WebWorld, Inc., a Texas corporation (the "Company"), at any time
between __________, 1997 (the "Initial Warrant Exercise Date"), and the
Expiration Date (as hereinafter defined) upon the presentation and surrender of
this Warrant Certificate with the Subscription Form on the reverse hereof duly
executed, at the corporate office of American Stock Transfer & Trust Company, 40
Wall Street, 46th Floor, New York, New York 10005, as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of $___________ subject
to adjustment (the "Purchase Price"), in lawful money of the United States of
America in cash or by check made payable to the Warrant Agent for the account of
the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated ________, 1997,
by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (Texas time) on ________,
2002. If each such date shall in the State of Texas be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall mean
5:00 p.m. (Texas time) the next following day which in the State of Texas is not
a holiday or a day on which banks are authorized to close.
<PAGE>
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement under the
Federal securities laws, use its best efforts to cause the same to become
effective, use its best efforts to keep such registration statement current, if
required under the Act, while any of the Warrants are outstanding, and deliver a
prospectus which complies with Section 10(a)(3) of the Act to the Registered
Holder exercising this Warrant. This Warrant shall not be exercisable by a
Registered Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
of Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at the redemption price of $.05 per
Warrant, on not less than 30 nor more than 60 days written notice ("Notice of
Redemption") if the closing price for the Common Stock for seven trading days
during a 10 consecutive trading day period ending not more than 15 days prior to
the date notice of redemption is mailed equals or exceeds $____ per share (200%
of the initial offering price to the public) subject to adjustment under certain
circumstances and provided there is then a current registration statement under
the Securities Act of 1933, as amended, with respect to the issuance and sale of
Common Stock upon the exercise of the Warrants. On and after the date fixed for
redemption, the Registered Holder shall have no rights with respect to the
Warrants except to receive the $.05 per Warrant upon surrender of this Warrant
Certificate.
Under certain circumstances, First London Securities Corporation
collectively shall be entitled to receive an aggregate of five percent (5%) of
the Purchase Price of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
<PAGE>
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Texas without giving effect to conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated:__________________, 1997
[SEAL] NEI WEBWORLD, INC.
By:
-------------------------------
By:
--------------------------------
COUNTERSIGNED:
AMERICAN STOCK TRANSFER
AND TRUST COMPANY
as Warrant Agent
By:
---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
FORM OF SUBSCRIPTION
--------------------
(To be signed only upon exercise of Warrant)
TO: NEI WebWorld, Inc.
North Tower, Plaza of the Americas
Suite 1910
Dallas, Texas 75201
The undersigned, the Holder of Warrant Certificate number ____ (the
"Warrant"), representing ______________ Warrants of NEI WebWorld, Inc. (the
"Company"), which Warrant Certificate is being delivered herewith, hereby
irrevocably elects to exercise the purchase right provided by the Warrant
Certificate for, and to purchase thereunder, _____________ shares of Common
Stock of the Company, and herewith makes payment of $____________ therefor, and
requests that the certificates for such securities be issued in the name of, and
delivered to, ____________ _____________________________ whose address is
____________________________________, all in accordance with the Warrant
Agreement and the Warrant Certificate.
Dated:
----------------------------
----------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant Certificate)
-----------------------------------
-----------------------------------
(Address)
<PAGE>
EXHIBIT 4.2
REPRESENTATIVE'S WARRANT AGREEMENT (the "Representative's Warrant
Agreement" or "Agreement"), dated as of _______________, 1997, between NEI
WebWorld, Inc. (the "Company"), and FIRST LONDON SECURITIES CORPORATION (the
"Representative").
W I T N E S S E T H:
--------------------
WHEREAS, the Representative has agreed, pursuant to that certain
underwriting agreement dated as of the date hereof by and between the Company
and the Representative (the "Underwriting Agreement"), to act as the
representative of the Underwriters in connection with the Company's proposed
public offering (the "Public Offering") of 1,000,000 shares of the Company's
Common Stock at $____ per share (the "Common Stock IPO Price") and 1,000,000
Redeemable Common Stock Purchase Warrants (the "Public Warrants") at $____ per
warrant (the "Warrant IPO Price"); and
WHEREAS, the Company proposes to issue to the Representative and/or persons
related to the Representative as those persons are defined in Rule 2710 of the
NASD Conduct Rules (the "Holder"), 100,000 warrants ("Common Stock
Representative Warrants") to purchase 100,000 shares of the Company's Common
stock (the "Shares") and 100,000 warrants ("Warrant Representative Warrants") to
purchase 100,000 Common Stock Purchase Warrants ("Underlying Warrants")
exercisable to purchase 100,000 shares of the Company's Common Stock. The
"Common Stock Representative Warrants" and the "Warrant Representative Warrants"
are collectively referred to as the "Warrants". The "Shares" and the
"Underlying Warrants" are collectively referred to as the "Warrant Securities";
and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Holders in consideration for, and as part of
the compensation in connection with, the Representative acting as representative
pursuant to the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of 100.00 AND NO CENTS ($100.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant and Period.
----------------
The Public Offering has been registered under a Registration Statement on
Form SB-2 (File No. 333-23023) (the "Registration Statement") and declared
effective by the Securities and Exchange Commission (the "SEC" or "Commission")
on _____________, 1997 (the "Effective Date"). This Agreement, relating to the
purchase of the Warrants, is entered into pursuant to the Underwriting Agreement
between the Company and the Representative, as representative of the
Underwriters, in connection with the Public Offering.
Pursuant to the Warrants, the Holders are hereby granted the right to
purchase from the Company, at any time during the period commencing one year
from the Effective Date and expiring four (4) years thereafter (the "Expiration
Time"), up to 100,000 Shares at an initial exercise price (subject to adjustment
as provided in Article 8 hereof) of $____ per share (120% of the Common Stock
IPO Price) and/or 100,000 Underlying Warrants at an initial exercise price of
$____ per warrant (120% of the Warrant IPO Price) (the "Purchase Price"),
subject to the terms and conditions of this Agreement. Each Underlying Warrant
is exercisable to purchase one (1) share of Common Stock at $____ per share
during the four (4) year period commencing one year from the Effective Date.
Except as specifically otherwise provided herein, the Shares and the
Underlying Warrants constituting the Warrant Securities shall bear the same
terms and conditions as such securities described under the caption "Description
of Securities" in the Registration Statement, and as designated in the Company's
Articles of Incorporation and any amendments thereto, and the Underlying
Warrants shall be governed by the terms of the Warrant Agreement executed in
connection with the Company's public offering (the "Warrant Agreement"), except
as provided herein, and the Holders shall have registration rights under the
Securities Act of 1933, as amended (the "Act"), the Shares, the Underlying
Warrants, and the shares of Common Stock underlying the Underlying Warrants, as
more fully described in paragraph Article 7 of this Representative's Warrant
Agreement. In the event of any extension of the expiration date or reduction of
the exercise price of the Public Warrants, the same such changes to the
Underlying Warrants shall be
<PAGE>
simultaneously effected, except that the Underlying Warrants shall expire no
later than five (5) years from the Effective Date.
2. Warrant Certificates.
--------------------
The warrant certificates (the "Warrant Certificate") delivered and to be
delivered pursuant to this Agreement shall be in the form set forth in the form
of Warrant Certificate, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
-------------------
3.1 Full Exercise.
-------------
(i) The Holder hereof may effect a cash exercise of the Common Stock
Representative Warrants and/or the Warrant Representative Warrants and/or
the Underlying Warrants by surrendering the Warrant Certificate, together
with a Subscription in the form of Exhibit "A" attached thereto, duly
executed by such Holder to the Company, at any time prior to the Expiration
Time, at the Company's principal office, accompanied by payment in cash or
by certified or official bank check payable to the order of the Company in
the amount of the aggregate purchase price (the "Aggregate Price"), subject
to any adjustments provided for in this Agreement. The aggregate price
hereunder for each Holder shall be equal to the exercise price as set forth
in Article 6 hereof multiplied by the number of Warrants, Underlying
Warrants or Shares that are the subject of each Holder's Warrant (as
adjusted as hereinafter provided).
(ii) The Holder hereof may effect a cashless exercise of the Common
Stock Representative Warrants and/or the Underlying Warrants by delivering
the Warrant Certificate to the Company together with a Subscription in the
form of Exhibit "B" attached thereto, duly executed by such Holder, in
which case no payment of cash will be required. Upon such cashless
exercise, the number of Shares to be purchased by each Holder hereof shall
be determined by dividing: (i) the number obtained by multiplying the
number of Shares that are the subject of each Holder's Warrant Certificate
by the Purchase Price plus the amount, if any, by which the then Market
Value (as hereinafter defined) exceeds the Purchase Price; by (ii) the per
share Purchase Price. In no event shall the Company be obligated to issue
any fractional securities and, at the time it causes a certificate or
certificates to be issued, it shall pay the Holder in lieu of any
fractional securities or shares to which such Holder would otherwise be
entitled, by Company check, in an amount equal to such fraction multiplied
by the Market Value. The Market Value shall be determined on a per Share
basis as of the close of the business day preceding the exercise, which
determination shall be made as follows: (a) if the Common Stock is listed
for trading on a national or regional stock exchange or is included on the
Nasdaq National Market or Small-Cap Market, the average closing sale price
quoted on such exchange or the Nasdaq National Market or Small-Cap Market
which is published in The Wall Street Journal for the ten (10) trading days
-----------------------
immediately preceding the date of exercise, or if no trade of the Common
Stock shall have been reported during such period, the last sale price so
quoted for the next day prior thereto on which a trade in the Common Stock
was so reported; or (b) if the Common Stock is not so listed, admitted to
trading or included, the average of the closing highest reported bid and
lowest reported ask price as quoted on the National Association of
Securities Dealer's OTC Bulletin Board or in the "pink sheets" published by
the National Daily Quotation Bureau for the first day immediately preceding
the date of exercise on which the Common Stock is traded.
3.2 Partial Exercise. The securities referred to in Section 3.1 above
----------------
also may be exercised from time to time in part by surrendering the Warrant
Certificate in the manner specified in Section 3.1 hereof, except that with
respect to a cash exercise, the Purchase Price payable shall be equal to the
number of securities being purchased hereunder multiplied by the per security
Purchase Price, subject to any adjustments provided for in this Agreement. Upon
any such partial exercise, the Company, at its expense, will forthwith issue to
the Holder hereof a new Warrant
2
<PAGE>
Certificate or Warrants of like tenor calling in the aggregate for the number of
securities (as constituted as of the date hereof) for which the Warrant
Certificate shall not have been exercised, issued in the name of the Holder
hereof or as such Holder (upon payment by such Holder of any applicable transfer
taxes) may direct.
4. Issuance of Certificates.
------------------------
Upon the exercise of the Warrants and/or the Underlying Warrants, the
issuance of certificates for the shares of Common Stock and/or other securities
shall be made forthwith (and in any event within three (3) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Articles 5 and 7 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares of
Common Stock and/or other securities shall be executed on behalf of the Company
by the manual or facsimile signature of the then present Chairman or Vice
Chairman of the Board of Directors or Chairman or Vice Chairman of the Company
under its corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the then present Secretary or Assistant Secretary of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants.
-----------------------------------
The Holder of a Warrant Certificate, by acceptance thereof, covenants and
agrees that the Warrants may not be sold, transferred, assigned, hypothecated or
otherwise disposed of, in whole or in part, for a period of one (1) year from
the Effective Date of the Public Offering, except (a) to officers of the
Representative or to officers and partners of the other Underwriters or Selected
Dealers participating in the Public offering; (b) by will; or (c) by operation
of law.
6. Exercise Price.
--------------
6.1 Initial and Adjusted Exercise Prices.
------------------------------------
The initial exercise price of each Common Stock Representative Warrant
shall be $____ per share (120% of the Common Stock IPO Price) . The initial
exercise price of each Warrant Representative Warrant shall be $____ per
Underlying Warrant (120% of the Warrant IPO Price). The initial exercise price
of each Underlying Warrant shall be $____ per share. The adjusted exercise
price shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Article 8 hereof. The Warrant Representative Warrants and the Underlying
Warrants are exercisable during the four (4) year period commencing one year
from the Effective Date.
6.2 Exercise Price.
--------------
The term "Exercise Price" herein shall mean the initial exercise price or
the adjusted exercise price, depending upon the context.
3
<PAGE>
7. Registration Rights.
-------------------
7.1 Registration Under the Securities Act of 1933.
---------------------------------------------
The Shares, the Underlying Warrants and the shares of Common Stock issuable
upon exercise of the Underlying Warrants (collectively the "Registrable
Securities") have been registered under the Securities Act of 1933, as amended
(the "Act"). Upon exercise, in part or in whole, of the Warrants, certificates
representing the Shares, the Underlying Warrants and/or the shares of Common
Stock issuable upon exercise of the Underlying Warrants shall bear the following
legend in the event there is no current registration statement effective with
the Commission at such time as to such securities:
The securities represented by this certificate may not be offered or sold
except pursuant to (i) an effective registration statement under the Act,
(ii) to the extent applicable, Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of securities) , or (iii) an
opinion of counsel, if such opinion shall be reasonably satisfactory to
counsel to the issuer, that an exemption from registration under such Act
and applicable state securities laws is available.
7.2 Piggyback Registration.
----------------------
If, at any time commencing after the Effective Date of the Public Offering
and expiring seven (7) years thereafter, the Company prepares and files a post-
effective amendment to the Registration Statement, or a new registration
statement, under the Act, or files a Notification on Form 1-A or otherwise
registers securities under the Act, or files a similar disclosure document with
the Commission (collectively the "Registration Documents") as to any of its
securities under the Act (other than under a registration statement pursuant to
Form S-8), it will give written notice by registered mail, at least thirty (30)
days prior to the filing of each such Registration Document, to the
Representative and to all other Holders of the Registrable Securities of its
intention to do so. If the Representative and/or other Holders of the
Registrable Securities notify the Company within twenty (20) days after receipt
of any such notice of its or their desire to include any such Registrable
Securities in such proposed Registration Documents, the Company shall afford the
Representative and such Holders of such Registrable Securities the opportunity
to have any Registrable Securities registered under such Registration Documents
or any other available Registration Document.
Notwithstanding the provisions of this Section 7.2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
7.3 Demand Registration.
-------------------
(a) At any time commencing one (1) year after the Effective Date of the
Public Offering, and expiring four (4) years thereafter, the Holders of
Registrable Securities representing more than 50% of such securities at that
time outstanding shall have the right (which right is in addition to the
registration rights under Section 7.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Commission at the
sole expense of the Company, on one occasion, a registration statement and/or
such other documents, including a prospectus, and/or any other appropriate
disclosure document as may be reasonably necessary in the opinion of both
counsel for the Company and counsel for the Representative and Holders, in order
to comply with the provisions of the Act, so as to permit a public offering and
sale of their respective Registrable Securities for nine (9) consecutive months
(or such longer period of time as permitted by the Act) by such Holders and any
other Holders of any of the Registrable Securities who notify the Company within
ten (10) days after being given notice from the Company of such request (a
"Demand Registration"). A Demand Registration shall not be counted as a Demand
Registration hereunder until such Demand Registration has been declared
effective by the SEC and maintained continuously effective for a period of at
least nine months or such shorter period when all Registrable Securities
included therein have been sold in accordance
4
<PAGE>
with such Demand Registration, provided that a Demand Registration shall be
counted as a Demand Registration hereunder if the Company ceases its efforts in
respect of such Demand Registration at the request of the majority Holders
making the demand for a reason other than a material and adverse change in the
business, assets, prospects or condition (financial or otherwise) of the Company
and its subsidiaries taken as a whole.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by the majority of the Holders to
all other registered Holders of any of the Registrable Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and subsection
(a) of this Section 7.3. at any time commencing one (1) year after the Effective
Date of the Public Offering, and expiring four (4) years thereafter, the Holders
of any Registrable Securities representing more than 50% of such securities
shall have the right, exercisable by written request to the Company, to have the
Company prepare and file, on one occasion, with the Commission a registration
statement or any other appropriate disclosure document so as to permit a public
offering and sale for nine (9) consecutive months (or such longer period of time
as permitted by the Act) by any such Holder of Registrable Securities; provided,
however, that the provisions of Section 7.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders participating in the offering pro-
rata.
(d) Any written request by the Holders made pursuant to this Section 7.3
shall:
(i) specify the number of Registrable Securities which the Holders
intend to offer and sell and the minimum price at which the Holders intend
to offer and sell such securities;
(ii) state the intention of the Holders to offer such securities for
sale;
(iii) describe the intended method of distribution of such
securities; and
(iv) contain an undertaking on the part of the Holders to provide all
such information and materials concerning the Holders and take all such
action as may be reasonably required to permit the Company to comply with
all applicable requirements of the Commission and to obtain acceleration of
the effective date of the registration statement.
(e) In the event the Company receives from the Holders of any Registrable
Securities representing more than 50% of such securities at that time
outstanding, a request that the Company effect a registration on Form S-3 with
respect to the Registrable Securities and if Form S-3 is available for such
offering, the Company shall, as soon as practicable, effect such registration as
would permit or facilitate the sale and distribution of the Registrable
Securities as are specified in the request. All expenses incurred in connection
with a registration requested pursuant to this Section shall be borne by the
Company. Registrations effected pursuant to this Section 7.3 (e) shall not be
counted as registrations pursuant to Section 7.3 (a) and 7.3 (c) hereof.
7.4 Covenants of the Company With Respect to Registration.
-----------------------------------------------------
In connection with any registration under Section 7.2 or 7.3 hereof, the
Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration statement
within forty-five (45) days of receipt of any demand pursuant to Section 7.3,
and shall use its best efforts to have any such registration statement declared
effective at the earliest practicable time. The Company will promptly notify
each seller of such Registrable Securities and confirm such advice in writing,
(i) when such registration statement becomes effective, (ii) when any
5
<PAGE>
post-effective amendment to such registration statement becomes effective and
(iii) of any request by the SEC for any amendment or supplement to such
registration statement or any prospectus relating thereto or for additional
information.
The Company shall furnish to each seller of such Registrable Securities
such number of copies of such registration statement and of each such amendment
and supplement thereto (in each case including each preliminary prospectus and
summary prospectus) in conformity with the requirements of the Act, and such
other documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities by such seller.
(b) The Company shall pay all costs (excluding transfer taxes, if any, and
fees and expenses of Holder's counsel and the Holder's pro-rata portion of the
selling discount or commissions), fees and expenses in connection with all
registration statements filed pursuant to Sections 7.2 and 7.3(a) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. The Holder will pay all costs, fees and
expenses in connection with any registration statement filed pursuant to Section
7.3(c). If the Company shall fail to comply with the provisions of Section
7.3(a), the Company shall, in addition to any other equitable or other relief
available to the Holder, be liable for any or all special and consequential
damages sustained by the Holder requesting registration of their Registrable
Securities.
(c) The Company shall prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be reasonably necessary to keep such registration statement
effective for at least nine months (or such longer period as permitted by the
Act), and to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the seller or
sellers of Registrable Securities set forth in such registration statement. If
at any time the SEC should institute or threaten to institute any proceedings
for the purpose of issuing a stop order suspending the effectiveness of any such
registration statement, the Company will promptly notify each seller of such
Registrable Securities and will use all reasonable efforts to prevent the
issuance of any such stop order or to obtain the withdrawal thereof as soon as
possible. The Company will use its good faith reasonable efforts and take all
reasonably necessary action which may be required in qualifying or registering
the Registrable Securities included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
required by the Holder, provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction. The
Company shall use its good faith reasonable efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities of the United States
or any State thereof as may be reasonably necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities.
(d) The Company shall indemnify the Holder of the Registrable Securities to
be sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section 20
(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), against
all loss, claim, damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Act, the Exchange Act or
otherwise, arising from such registration statement but only to the same extent
and with the same effect as the provisions pursuant to which the Company has
agreed to indemnify the Representative as contained in the Underwriting
Agreement.
(e) If requested by the Company prior to the filing of any registration
statement covering the Registrable Securities, each of the Holders of the
Registrable Securities to be sold pursuant to a registration statement, and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 (a) of the
Exchange Act, against all loss, claim, damage or expense or liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under the Act,
the Exchange Act or otherwise, arising from written information furnished by
such Holder, or their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same effect as the
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<PAGE>
provisions contained in the Underwriting Agreement pursuant to which the
Representative has agreed to indemnify the Company, except that the maximum
amount which may be recovered from each Holder pursuant to this paragraph or
otherwise shall be limited to the amount of net proceeds received by the Holder
from the sale of the Registrable Securities.
(f) Nothing contained in this Agreement shall be construed as requiring the
Holders to exercise their Warrants or Underlying Warrants prior to the filing of
any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other than
the Registrable Securities to be included in any registration statement filed
pursuant to Section 7.3 hereof without the prior written consent of the Holders
of the Registrable Securities representing a majority of such securities.
(h) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement) , and (ii) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and the
managing underwriter copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(j) With respect to a registration statement filed pursuant to Section 7.3,
the Company, if requested, shall enter into an underwriting agreement with the
managing underwriter, reasonably satisfactory to the Company, selected for such
underwriting by Holders holding a majority of the Registrable Securities
requested to be included in such underwriting. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders, if required by the
underwriter to be parties to any underwriting agreement relating to an
underwritten sale of their Registrable Securities, may, at their option, require
that any or all the representations, warranties and covenants of the Company to
or for the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(k) Notwithstanding the provisions of paragraph 7.2 or paragraph 7.3 of
this Agreement, the Company shall not be required to effect or cause the
registration of Registrable Securities pursuant to paragraph 7.2 or paragraph
7.3 hereof if, within thirty (30) days after its receipt of a request to
register such Registrable Securities (i) counsel for the Company delivers an
opinion to the Holders requesting registration of such Registrable Securities,
in form and substance satisfactory to counsel to such Holder, to the effect that
the entire number of Registrable Securities proposed
7
<PAGE>
to be sold by such Holder may otherwise be sold, in the manner proposed by such
Holder, without registration under the Securities Act, or (ii) the SEC shall
have issued a no-action position, in form and substance satisfactory to counsel
for the Holder requesting registration of such Registrable Securities, to the
effect that the entire number of Registrable Securities proposed to be sold by
such Holder may be sold by it, in the manner proposed by such Holder, without
registration under the Securities Act.
(l) After completion of the Public Offering, the Company shall not,
directly or indirectly, enter into any merger, business combination or
consolidation in which (a) the Company shall not be the surviving corporation
and (b) the stockholders of the Company are to receive, in whole or in part,
capital stock or other securities of the surviving corporation, unless the
surviving corporation shall, prior to such merger, business combination or
consolidation, agree in writing to assume the obligations of the Company under
this Agreement, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which the Holders would be
entitled to receive in exchange for Registrable Securities under any such
merger, business combination or consolidation, provided that to the extent such
securities to be received are convertible into shares of Common Stock of the
issuer thereof, then any such shares of Common Stock as are issued or issuable
upon conversion of said convertible securities shall also be included within the
definition of "Registrable Securities".
8. Adjustments to Exercise Price and Number of Securities.
------------------------------------------------------
8.1 Adjustment for Dividends, Subdivisions, Combinations or
-------------------------------------------------------
Reclassification.
----------------
In case the Company shall (a) pay a dividend or make a distribution in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (b) subdivide its outstanding shares of Common Stock into a
greater number of shares, (c) combine its outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of its shares
of Common Stock any shares of capital stock of the Company; then, and in each
such case, the per share Exercise Price and the number of Warrant Securities in
effect immediately prior to such action shall be adjusted so that the Holder of
this Warrant thereafter upon the exercise hereof shall be entitled to receive
the number and kind of shares of the Company which such Holder would have owned
immediately following such action had this warrant been exercised immediately
prior thereto. An adjustment made pursuant to this Section shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this Section, the Holder of this Warrant shall
become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such class of capital stock.
Immediately upon any adjustment of the Exercise Price pursuant to this
Section, the Company shall send written notice thereof to the Holder of Warrant
Certificates (by first class mail, postage prepaid), which notice shall state
the Exercise Price resulting from such adjustment, and any increase or decrease
in the number of Warrant Securities to be acquired upon exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
8.2 Adjustment For Reorganization, Merger or Consolidation.
------------------------------------------------------
In case of any reorganization of the Company or consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental Warrant agreement providing that the Holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the
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<PAGE>
Company for which such Warrant might have been exercised immediately prior to
such reorganization, consolidation, merger, conveyance, sale or transfer. Such
supplemental Warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8.1 and such registration
rights and other rights as provided in this Agreement. The Company shall not
effect any such consolidation, merger, or similar transaction as contemplated by
this paragraph, unless prior to or simultaneously with the consummation thereof,
the successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing, receiving, or leasing
such assets or other appropriate corporation or entity shall assume, by written
instrument executed and delivered to the Holders, the obligation to deliver to
the Holders, such shares of stock, securities, or assets as, in accordance with
the foregoing provisions, such holders may be entitled to purchase, and to
perform the other obligations of the Company under this Agreement. The above
provision of this Subsection shall similarly apply to successive consolidations
or successively whenever any event listed above shall occur.
8.3 Dividends and Other Distributions.
---------------------------------
In the event that the Company shall at any time prior to the exercise of
all of the Warrants and/or Underlying Warrants distribute to its stockholders
any assets, property, rights, evidences of indebtedness, securities (other than
a distribution made as a cash dividend payable out of earnings or out of any
earned surplus legally available for dividends under the laws of the
jurisdictions of incorporation of the Company), whether issued by the Company or
by another, the Holders of the unexercised Warrants shall thereafter be
entitled, in addition to the shares of Common Stock or other securities and
property receivable upon the exercise thereof, to receive, upon the exercise of
such Warrants, the same property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled to
receive at the time of such distribution as if the Warrants had been exercised
immediately prior to such distribution. At the time of any such distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this subsection or an adjustment to the Exercise Price, which
shall be effective as of the day following the record date for such
distribution.
8.4 Adjustment in Number of Securities.
----------------------------------
Upon each adjustment of the Exercise Price pursuant to the provisions of
this Article 8, the number of securities issuable upon the exercise of each
Warrant and/or Underlying Warrant shall be adjusted to the nearest full amount
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of securities issuable upon exercise of the
Warrants and/or the Underlying Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
8.5 No Adjustment of Exercise Price in Certain Cases.
------------------------------------------------
No adjustment of the Exercise Price shall be made if the amount of said
adjustment shall be less than 5 cents ($.05) per Share, provided, however, that
in such case any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least 5 cents ($.05) per Share.
8.6 Accountant's Certificate of Adjustment.
--------------------------------------
In each case of an adjustment or readjustment of the Exercise Price or the
number of any securities issuable upon exercise of the Warrants and/or
Underlying Warrants, the Company, at its expense, shall cause independent
certified public accountants of recognized standing selected by the Company (who
may be the independent certified public accountants then auditing the books of
the Company) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to any Holder of
the Warrants and/or Underlying Warrants at the Holder's address as shown on the
Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including, but not limited to, a statement of (i) the
Exercise Price at the
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<PAGE>
time in effect, and (ii) the number of additional securities and the type and
amount, if any, of other property which at the time would be received upon
exercise of the Warrants and/or Underlying Warrants.
8.7 Adjustment of Underlying Warrant Exercise Price.
-----------------------------------------------
With respect to any of the Underlying Warrants whether or not the
Underlying Warrants have been exercised (or are exercisable) and whether or not
the Underlying Warrants are issued and outstanding, the Underlying Warrant
exercise price and the number of shares of Common Stock underlying such
Underlying Warrants shall be automatically adjusted in accordance with the
Warrant Agreement between the Company and the Company's transfer agent, upon
occurrence of any of the events relating to adjustments described therein.
Thereafter, the Underlying Warrants shall be exercisable at such adjusted
Underlying Warrant exercise price for such adjusted number of underlying shares
of Common Stock or other securities, properties or rights.
9. Exchange and Replacement of Warrant Certificates.
------------------------------------------------
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of securities in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interest.
----------------------------------
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the Warrants and/or
Underlying Warrants, nor shall it be required to issue script or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests may be eliminated, at the Company's option, by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights, or in lieu thereof paying cash equal to such
fractional interest multiplied by the current value of a share of Common Stock.
11. Reservation and Listing.
-----------------------
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants and the Underlying Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof. The Company covenants and agrees that, upon exercise of
the Warrants and/or the Underlying Warrants, and payment of the Exercise Price
therefor, all shares of Common Stock and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as the Warrants
and/or Underlying Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Warrants and the Underlying Warrants to be listed and quoted (subject to
official notice of issuance) on all securities Exchanges and Systems on which
the Common Stock and/or the Public Warrants may then be listed and/or quoted,
including Nasdaq.
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<PAGE>
12. Notices to Warrant Holders.
--------------------------
Nothing contained in this Agreement shall be construed as conferring upon
the Holders of the Warrants and/or Underlying Warrants the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders, for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the warrants and/or Underlying Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date of the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notices shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. Underlying Warrants.
-------------------
The form of the certificate representing the Underlying Warrants (and the
form of election to purchase shares of Common Stock upon the exercise of the
Underlying Warrants and the form of assignment printed on the reverse thereof)
shall be substantially as set forth in the exhibits to the Warrant Agreement.
Subject to the terms of this Agreement, one (1) Underlying Warrant shall
evidence the right to initially purchase one (1) fully-paid and non-assessable
share of Common Stock at an initial purchase price of $____ during the four (4)
year period commencing one year after the Effective Date of the Registration
Statement, at which time the Underlying Warrants, unless the exercise period has
been extended, shall expire. The exercise price of the Underlying Warrants and
the number of shares of Common Stock issuable upon the exercise of the
Underlying Warrants are subject to adjustment, whether or not the Warrants have
been exercised and the Underlying Warrants have been issued, in the manner and
upon the occurrence of the events set forth in the Warrant Agreement, which is
hereby incorporated herein by reference and made a part hereof as if set forth
in its entirety herein. Subject to the provisions of this Agreement and upon
issuance of the Underlying Warrants, each registered holder of such Underlying
Warrant shall have the right to purchase from the Company (and the Company shall
issue to such registered holders) up to the number of fully-paid and non-
assessable shares of Common Stock (subject to adjustment as provided in the
Warrant Agreement) set forth in such Warrant Certificate, free and clear of all
preemptive rights of stockholders, provided that such registered Holder complies
with the terms governing exercise of the Underlying Warrant set forth in the
Warrant Agreement, and pays the applicable exercise price, determined in
accordance with the terms of the Warrant Agreement. Upon exercise of the
Underlying Warrants, the Company shall forthwith issue to the registered Holder
of any such Underlying Warrant in his
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<PAGE>
name or in such name as may be directed by him, certificates for the number of
shares of Common Stock so purchased. Except as otherwise provided herein and in
this Agreement, the Underlying Warrants shall be governed in all respects by
the terms of the Warrant Agreement. The Underlying Warrants shall be
transferable in the manner provided in the Warrant Agreement, and upon any such
transfer, a new Underlying Warrant certificate shall be issued promptly to the
transferee. The Company covenants to send to each Holder, irrespective of
whether or not the Warrants have been exercised, any and all notices required by
the Warrant Agreement to be sent to holders of Underlying Warrants.
14. Notices.
-------
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly given when personally
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of any of the Registrable Securities,
to the address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth below or to such other
address as the Company may designate by notice to the Holders.
Barry Conrad, Chairman
NEI WebWorld, Inc.
North Tower, Plaza of the Americas
Suite 1910
Dallas, Texas 75201
With a copy to: Bruce H. Hallett
Crouch & Hallett, L.L.P.
717 North Harwood, Suite 1400
Dallas, Texas 75201
15. Entire Agreement: Modification.
------------------------------
This Agreement (and the Underwriting Agreement and Warrant Agreement to the
extent applicable) contain the entire understanding between the parties hereto
with respect to the subject matter hereof, and the terms and provisions of this
Agreement may not be modified, waived or amended except in a writing executed by
the Company and the Holders of at least a majority of Registrable Securities
(based on underlying numbers of shares of Common Stock). Notice of any
modification, waiver or amendment shall be promptly provided to any Holder not
consenting to such modification, waiver or amendment.
16. Successors.
----------
All the covenants and provisions of this Agreement shall be binding upon
and inure to the benefit of the Company, the Holders and their respective
successors and assigns hereunder.
17. Termination.
-----------
This Agreement shall terminate at the close of business on ____________,
2002. Notwithstanding the foregoing, the indemnification provisions of Section
7 shall survive such termination.
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18. Governing Law; Submission to Jurisdiction.
-----------------------------------------
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Texas and for all
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws. The
Company, the Representative and the Holders hereby agree that any action,
proceeding or claim arising out of, or relating in any way to, this Agreement
shall be brought and enforced in a federal or state court of competent
jurisdiction with venue only in the State District court in Dallas, County,
Texas or the United States District Court for the Northern District of Texas,
and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Representative and the Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, the Representative
and the Holders (at the option of the party bringing such action, proceeding or
claim) may be served by transmitting a copy thereof, by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
set forth in Section 14 hereof. Such mailing shall be deemed personal service
and shall be legal and binding upon the party so served in any action,
proceeding or claim.
19. Severability.
------------
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
20. Captions.
--------
The caption headings of the Sections of this Agreement are for convenience
of reference only and are not intended, nor should they be construed as, a part
of this Agreement and shall be given no substantive effect.
21. Benefits of this Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Representative and any other
registered Holder of the Warrant Certificates or Registrable Securities any
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Representative and any other Holder of the Warrant Certificates or Registrable
Securities.
22. Counterparts.
------------
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
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IN WITNESS HEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
NEI WebWorld, Inc.
By:
---------------------------------
Barry Conrad, Chairman
Attest:
- ------------------------
, Secretary
- --------------
FIRST LONDON SECURITIES CORPORATION
By:
---------------------------------
Douglas Nichols, President
14
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EXHIBIT A
<PAGE>
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M, EASTERN TIME ON _____________, 2002
NO. W-______
___________ Common Stock ___________ Warrant
Representative Representative
Warrants Warrants
or
___________ Underlying
Warrants
This Warrant Certificate certifies that ___________________, or registered
assigns, is the registered holder of _____________ Common Stock Representative
Warrants and/or ________ Warrant Representative Warrants and/or
_________________ Underlying Warrants of NEI WebWorld, Inc. (the "Company").
Each Common Stock Representative Warrant permits the Holder hereof to purchase
initially, at any time from _________, 1998 ("Purchase Date") until 5:30 p.m.
Eastern Time on ____________, 2002 ("Expiration Date"), one (1) share of the
Company's Common Stock at the initial exercise price, subject to adjustment in
certain events (the "Exercise Price"), of $____ per share (120% of the public
offering price). Each Warrant Representative Warrant permits the Holder hereof
to purchase initially, at any time from the Purchase Date until four (4) years
from the Purchase Date, one (1) Underlying Warrant at the Exercise Price of
$____ per Underlying Warrant (120% of the public offering price). Each
Underlying Warrant permits the Holder thereof to purchase, at any time from the
Purchase Date until four (4) years from the Purchase Date, one (1) share of the
Company's Common Stock at the Exercise Price of $____ per share.
<PAGE>
Any exercise of Common Stock Representative Warrants and/or Warrant
Representative Warrants and/or Underlying Warrants shall be effected by
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Representative's Warrant Agreement dated as of _____, 1997, between
the Company and First London Securities Corporation (the "Representative's
Warrant Agreement"). Payment of the Exercise Price shall be made by certified
check or official bank check in New York Clearing House funds payable to the
order of the Company in the event there is no cashless exercise pursuant to
Section 3.1(ii) of the Representative's Warrant Agreement. The Common Stock
Representative Warrants, the Warrant Representative Warrants, and the Underlying
Warrants are collectively referred to as "Warrants".
No Warrant may be exercised after 5:30 p.m., Eastern Time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Representative's Warrant
Agreement, which Representative's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation or rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Representative's Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Representative's Warrant Agreement.
Upon due presentment for registration or transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferees) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the
Representative's Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
2
<PAGE>
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the Holder hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the
Representative's Warrant Agreement shall have the meanings assigned to them in
the Representative's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of ____________________, 1997
NEI WebWorld, Inc.
By:
------------------------------
Barry Conrad, Chairman
(Seal)
Attest:
- ----------------------------------
- ----------------, Secretary
3
<PAGE>
EXHIBIT "A"
FORM OF SUBSCRIPTION (CASH EXERCISE)
------------------------------------
(To be signed only upon exercise of Warrant)
TO: NEI WebWorld, Inc.
North Tower, Plaza of the Americas
Suite 1910
Dallas, Texas 75201
The undersigned, the Holder of Warrant Certificate number ____ (the
"Warrant"), representing ______________ Common Stock Representative Warrants
and/or __________ Warrant Representative Warrants and/or _______________
Underlying Warrants of NEI WebWorld, Inc. (the "Company"), which Warrant
Certificate is being delivered herewith, hereby irrevocably elects to exercise
the purchase right provided by the Warrant Certificate for, and to purchase
thereunder, _____________ Shares and/or _____________ Underlying Warrants of the
Company, and herewith makes payment of $____________ therefor, and requests that
the certificates for such securities be issued in the name of, and delivered to,
________________________________________ whose address is
____________________________________, all in accordance with the
Representative's Warrant Agreement and the Warrant Certificate.
Dated:
----------------------------
---------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant Certificate)
----------------------------------
----------------------------------
(Address)
4
<PAGE>
EXHIBIT "B"
FORM OF SUBSCRIPTION (CASHLESS EXERCISE)
----------------------------------------
TO: NEI WebWorld, Inc.
North Tower, Plaza of the Americas
Suite 1910
Dallas, Texas 75201
The undersigned, the Holder of Warrant Certificate number ____ (the
"Warrant"), representing ___________ Common Stock Representative Warrants and/or
_________________ Underlying Warrants of NEI WebWorld, Inc. (the "Company"),
which Warrant is being delivered herewith, hereby irrevocably elects the
cashless exercise of the purchase right provided by the Representative's Warrant
Agreement and the Warrant Certificate for, and to purchase thereunder, Shares of
the Company in accordance with the formula provided at Section Three (3) of the
Representative's Warrant Agreement. The undersigned requests that the
certificates for such Shares be issued in the name of, and delivered to,
whose address is,
- ------------------
all in accordance with the Warrant Certificate.
Dated:
----------------------------
---------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant Certificate)
---------------------------------
---------------------------------
(Address)
5
<PAGE>
(FORM OF ASSIGNMENT)
(To be exercised by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______________________________________________________
hereby sells, assigns and transfers unto
(Print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
________________________________________________ Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, and full
power of substitution.
Dated: Signature:
- ---------------------------- --------------------------------
(Signature must conform in all
respects to name of holder as
specified on the fact of the
Warrant Certificate)
--------------------------------
(Insert Social Security or
Other Identifying Number of
Assignee)
6
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, dated as of April 1, 1997, is by and
between NEI WebWorld, Inc., a Texas corporation ("Company"), and Richard J.
Wiencek ("Executive").
W I T N E S S E T H:
-------------------
WHEREAS, Company and Executive have entered into an Employment Agreement
dated as of February 28, 1994; and
WHEREAS, Company and Executive desire to amend and restate such Employment
Agreement;
NOW, THEREFORE, in consideration of the foregoing recital and of the mutual
covenants set forth below, the parties hereto agree as follows:
1. Employment. Company agrees to employ Executive, on the terms and
----------
conditions set forth below. Executive's job title shall be President and Chief
Executive Officer (or such other position as Company and Executive may mutually
agree) and his duties shall include those customarily performed by a chief
executive officer of a corporation, and performing such other similar services
for Company as may be directed from time to time by the Board of Directors of
Company. Executive agrees during the term of his employment to devote his full
business time (at least 40 hours per week) and his best efforts, skills and
abilities exclusively to the performance of his duties as stated in this
Agreement and to the furtherance of Company's business. Executive shall also
use his best efforts to preserve the business of Company and the good will of
all employees, customers, suppliers and other persons having business relations
with Company.
2. Term. The employment of Executive shall begin on the date of this
----
Agreement and shall continue until the earliest of:
(i) the date Company terminates it for "just cause" upon three days written
notice,
(ii) the death or disability of Executive,
(iii) March 31, 2000,
<PAGE>
(iv) the date Company terminates it without just cause upon 30 days written
notice, or
(v) the date Executive terminates it for any reason (it being understood by
the parties that any resignation by Executive from his employment, unless
specifically requested by Company, shall be deemed a termination by Executive).
For purposes of this Section 2, "just cause" for termination shall mean:
(i) the failure or refusal of Executive to comply with the reasonable rules
and procedures established by the Board of Directors of the Company or to employ
reasonable acts or services, as and when requested, from the Board of Directors
of the Company (except when such performance would be a violation of any
existing law) for a period of 30 days after written notice of such failure or
refusal;
(ii) the failure of the Company to achieve results of operations that do
not substantially meet the budget prepared by management at the commencement of
each fiscal year;
(iii) the indictment of Execu tive for any felony, failure to abide by the
terms of this Agreement, or the com mission of an act of bad faith, fraud,
embezzlement, misappropriation, dishonesty, moral turpitude, or any act, or the
occurrence of state of facts, which renders Executive incapable of performing
his duties hereunder, or in the judgment of the Company, prove prejudicial to
the Company's best interest, or which adversely affects or could reasonably be
expected to adversely affect the Company or the Company's reputation.
2
<PAGE>
Notwithstanding anything to the contrary in this Agreement, the provisions
of Sections 5, 6 and 7 shall survive any termination of Executive's employment
under this Agreement.
3. Compensation.
------------
(a) Base salary. Executive agrees to accept as full consideration for his
employment, $168,000.00 per year during the term of this Agreement, payable in
accordance with Company's standard payroll procedures, subject to all
appropriate withholdings. Executive's salary will be reviewed annually by the
Board of Directors of the Company.
(b) Bonuses. Executive shall be entitled to receive bonuses from the
Company pursuant to the terms of such plans (anticipated to be based upon
earnings per share growth) as are established by the Compensation Committee of
the Board of Directors of the Company.
3
<PAGE>
(c) Car allowance. Executive shall receive a car allowance of $500 per
month to be used to pay the reasonable operating and maintenance expenses of an
automobile related to its business use.
(d) Vacation, medical insurance and fringe benefits. Executive shall be
entitled to four weeks paid vacation per year. Executive shall also participate
in all benefit plans in which employees of the Company participate and such
other fringe benefits as the Board of Directors of Company may, in its sole
discretion, determine.
(e) Business expenses. Upon proper documentation and compliance with
Company procedures by Executive, Company shall reimburse Executive for all
business expenses incurred by him on behalf of Company.
(f) Stock Options. Executive shall be entitled to receive grants of
options under the Company's Stock Option Plan as determined by the Compensation
Committee of the Board of Directors.
4. Compensation upon Termination.
-----------------------------
(a) Termination by Company for just cause; termination by Executive. Upon
termination of Executive's employment by Company for just cause or termination
by Executive, Company shall pay to Executive all compensation payable hereunder
that has accrued through the date of termination.
(b) Death or disability. Upon termination of Executive's employment as a
result of the death or disability of Executive, Company shall pay to Executive
(or his estate or legal representative, as the case may be) (i) all compensation
payable hereunder that has accrued through the date of termination and (ii) the
base salary which would have been payable to Executive had this Agreement
remained in effect for the 90 days subsequent to the date of termination. All
payments under clause (ii) above shall be made on the normal base salary payment
dates in the normal installments.
4
<PAGE>
(c) Termination by Company without just cause. Upon termination of
Executive's employment by Company without just cause (other than a termination
as of the Expiration Date resulting from the expiration of this Agreement),
Company shall pay to Executive (i) all compensation payable hereunder that has
accrued through the date of termination, (ii) the base salary which would have
been payable to Executive had this Agreement remained in effect for a period
equal to 12 months subsequent to the date of termination, and (iii) the prorated
portion (based upon the number of full months during which Executive was
employed by the Company) of the bonus which the Executive would have earned
hereunder with respect to the fiscal year during which Executive was terminated.
All payments under clause (ii) above shall be made on the normal base salary
payment dates in the normal installments. Executive's medical insurance shall
be continued for the same period for which salary payments are continued
hereunder.
5
<PAGE>
5. Nondisclosure Agreement. Executive, during the term of employment
-----------------------
under this Agreement, shall have access to and become familiar with various
trade secrets and proprietary and confidential information consisting of, but
not limited to, processes, computer programs, compilations of information,
records, sales procedures, customer requirements, pricing techniques, customer
lists, methods of doing business and other confidential information
(collectively referred to as the "Trade Secrets"), which are owned by Company
and regularly used in the operation of its business, but in connection with
which Company takes precautions to prevent dissemination to persons other than
certain directors, officers and employees. Executive acknowledges and agrees
that the Trade Secrets (1) are secret and not known in the industry; (2) are
entrusted to Executive after being informed of their confidential and secret
status by Company and because of the fiduciary position occupied by Executive
with Company; (3) have been developed by Company for and on behalf of Company
through substantial expenditures of time, effort and money and are used in its
business; (4) give Company an advantage over competitors who do not know or use
the Trade Secrets; (5) are of such value and nature as to make it reasonable and
necessary to protect and preserve the confidentiality and secrecy of the Trade
Secrets; and (6) the Trade Secrets are valuable, special and unique assets of
Company, the disclosure of which could cause substantial injury and loss of
profits and goodwill to Company. Executive shall not use in any way or disclose
any of the Trade Secrets, directly or indirectly, either during the term of this
Agreement or at any time thereafter, except as required in the course of his
employment under this Agreement. All files, records, documents, information,
data and similar items relating to the business of Company, whether prepared by
Executive or otherwise coming into his possession, shall remain the exclusive
property of Company and shall not be removed from the premises of Company under
any circumstances without the prior written consent of the Board of Directors of
Company (except in the ordinary course of business during Executive's period of
active employment under this Agreement), and in any event shall be promptly
delivered to Company upon termination of Executive's employment. Executive
agrees that upon his receipt of any subpoena, process or other request to
produce or divulge, directly or indirectly, any Trade
6
<PAGE>
Secrets to any entity, agency, tribunal or person, Executive shall timely notify
and promptly hand deliver a copy of the subpoena, process or other request to
the Chief Executive Officer of Company.
6. Noncompetition Agreement. Executive acknowledges and agrees that the
------------------------
training he will receive, the experience he will gain while employed and the
information he will acquire regarding the Trade Secrets will enable him to
injure Company if he should compete with Company in a business that is
competitive with the business conducted or to be conducted by Company. For
these reasons, Executive hereby agrees as follows:
(a) Without the prior written consent of Company, Executive shall not,
during the period of employment with Company, directly or indirectly, either as
an individual, a partner or a joint venturer, or in any other capacity, (i)
invest (other than investments in publicly-owned companies which constitute not
more than 10% of the voting securities of any such company) or engage in any
business that is competitive with that of Company or its affiliates, (ii) accept
employment with or render services to a competitor of Company or any of its
affiliates as a director, officer, agent, employee or consultant, (iii) contact,
solicit or attempt to solicit or accept business from any (A) customers of
Company or its affiliates or (B) person or entity whose business Company or its
affiliates is soliciting, (iv) contact, solicit or attempt to solicit or accept
or direct business that is competitive with such business being conducted by
Company or any of its affiliates during Executive's employment under this
Agreement from any of the customers of Company or any of its affiliates, or (v)
take any action inconsistent with the fiduciary relationship of an employee to
his employer. As used in this Section 6 and in Section 7 of this Agreement,
"affiliates" shall mean persons or entities that directly, or indirectly through
one or more intermediaries, control or are controlled by, or are under common
control with, Company.
(b) Upon any termination or cessation of his employment with Company for
any reason whatsoever, and for a period of two years thereafter, Executive shall
not, directly or indirectly, either as an individual, a partner or a joint
venturer, or in any other capacity (i) invest (other than investments in
publicly-owned companies which constitute not more than 10% of the voting
securities of any such company) or engage in any business that is competitive
with that of Company or its affiliates, (ii) accept employment with or render
services to a competitor of Company or its affiliates as a director, officer,
agent, employee or consultant, or (iii) contact, solicit or attempt to solicit
or accept business (A) from any of the customers of Company or its affiliates as
of the date of this Agreement or at the time of Executive's termination or
cessation of employment, or (B) from any person or entity whose business Company
or its affiliates were soliciting as of such time.
7
<PAGE>
7. Nonemployment Agreement. For a period of two years after the
-----------------------
termination or cessation of his employment with Company for any reason
whatsoever, Executive shall not, on his own behalf or on behalf of any other
person, partnership, association, corporation or other entity, hire or solicit
or in any manner attempt to influence or induce any employee of Company or its
affiliates to leave the employment of Company or its affiliates, nor shall he
use or disclose to any person, partnership, association, corporation or other
entity any information obtained while an employee of Company concerning the
names and addresses of Company's employees.
8. Severability. The parties hereto intend all provisions of Sections 6
------------
and 7 hereof to be enforced to the fullest extent permitted by law.
Accordingly, should a court of competent jurisdiction determine that the scope
of any provision of Sections 6 and 7 hereof is too broad to be enforced as
written, the parties intend that the court reform the provision to such narrower
scope as it determines to be reasonable and enforceable. In addition, however,
Executive agrees that the noncompetition agreements, nondisclosure agreements
and nonemployment agreements set forth above each constitute separate agreements
independently supported by good and adequate consideration and shall be
severable from the other provisions of, and shall survive, this Agreement. The
existence of any claim or cause of action of Executive against Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Company of the covenants and agreements of Executive contained in
the noncompetition, nondisclosure or nonemployment agreements. If any provision
of this Agreement is held to be illegal, invalid or unenforceable under present
or future laws effective during the term hereof, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision never comprised a part of this Agreement; and
the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
9. Affiliates. Executive will use his best efforts to ensure that no
----------
relative of his or corporation of which he is an officer, director or
shareholder, or other affiliate of his, shall take any action that Executive
could not take without violating any provision of this Agreement.
10. Remedies. Executive recognizes and acknowledges that the
--------
ascertainment of damages in the event of his breach of any provision of this
Agreement would be difficult, and Executive agrees that Company, in addition to
all
8
<PAGE>
other remedies it may have, shall have the right to injunctive relief if there
is such a breach.
11. Acknowledgements. Executive acknowledges and recognizes that the
----------------
enforcement of any of the noncompetition provisions in this Agreement by Company
will not interfere with Executive's ability to pursue a proper livelihood.
Executive further represents that he is capable of pursuing a career in other
industries to earn a proper livelihood. Executive recognizes and agrees that
the enforcement of this Agreement is necessary to ensure the preservation and
continuity of the business and good will of Company. Executive agrees that due
to the nature of Company's business, the noncompetition restrictions set forth
in this Agreement are reasonable as to time and geographic area.
12. Notices. Any notices, consents, demands, requests, approvals and
-------
other communications to be given under this Agreement by either party to the
other shall be deemed to have been duly given if given in writing and either (i)
personally delivered or sent by mail, registered or certified, postage prepaid
with return receipt requested, or by recognized next day delivery service,
addressed as follows: (i) if to Company, at its principal executive offices in
Dallas, Texas or (ii) if to Executive, at his address as set forth on the
payroll records of Company. Notices delivered personally shall be deemed
communicated as of actual receipt; mailed notices shall be deemed communicated
as of three days after mailing.
13. Entire Agreement. This Agreement supersedes any and all other
----------------
agreements, either oral or written, between the parties hereto with respect to
the subject matter hereof and contains all of the covenants and agreements
between the parties with respect thereto.
14. Modification. No change or modification of this Agreement shall be
------------
valid or binding upon the parties hereto, nor shall any waiver of any term or
condition in the future be so binding, unless such change or modification or
waiver shall be in writing and signed by the parties hereto.
15. Governing Law and Venue. The parties acknowledge and agree that this
-----------------------
Agreement and the obligations and undertakings of the parties hereunder will be
performable in Dallas, Dallas County, Texas. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas. If any
action is brought to enforce or interpret this Agreement, venue for such action
shall be in Dallas County, Texas.
16. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall constitute an original, but all of which shall constitute one
document.
9
<PAGE>
17. Costs. If any action at law or in equity is necessary to enforce or
-----
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which he or it may be entitled.
18. Estate. If Executive dies prior to the expiration of the term of
------
employment, any monies that may be due him from Company under this Agreement as
of the date of his death shall be paid to his estate.
19. Assignment. Company shall have the right to assign this Agreement to
----------
its successors or assigns. The terms "successors" and "assigns" shall include
any person, corporation, partnership or other entity that buys all or
substantially all of Company's assets or all of its stock, or with which Company
merges or consolidates. The rights, duties and benefits to Executive hereunder
are personal to him, and no such right or benefit may be assigned by him.
20. Binding Effect. This Agreement shall be binding upon the parties
--------------
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and permitted assigns.
21. Waiver of Breach. The waiver by Company of a breach of any provision
----------------
of this Agreement by Executive shall not operate or be construed as a waiver of
any subsequent breach by Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Company:
NEI WEBWORLD, INC.
By: /s/ BARRY B. CONRAD
-------------------------------------
Barry B. Conrad
Chairman
10
<PAGE>
Executive:
/s/ RICHARD J. WIENCEK
----------------------------------------
Richard J. Wiencek
11
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement
No. 333-23023 of NEI WebWorld, Inc. of our report dated April 11, 1997 appearing
in the Prospectus, which is a part of such Registration Statement, and to the
reference to us under the heading "Experts" in such Prospectus.
Dallas, Texas
April 18, 1997
------------------------------------------------
The financial statements of NEI WebWorld, Inc. appearing in the above Prospectus
are presented to give effect to the conversion of preferred stock into 2,008,823
shares of common stock in connection with the Company's contemplated offering as
described in Note 10 to the financial statements. On the effective date of the
Registration Statement, the above consent is in the form that we will sign upon
the effectiveness of such event assuming that, from April 11, 1997 to the
effective date of such event, no other material events have occurred that would
affect these financial statements.
Deloitte & Touche LLP
Dallas, Texas
April 22, 1997
