<PAGE>
As filed with the Securities and Exchange Commission on May 2, 1997
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTERGAMES, INC.
(Exact name of Small Business Issuer in its Charter)
TEXAS 8732 74-2797240
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation Code Number)
or Organization)
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3321 WESTLAKE DRIVE
AUSTIN, TEXAS 78746
(512) 306-8836
(Address and telephone number
of Principal Executive Offices
and Principal Place of Business)
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KATHLEEN S. SULLIVAN
3321 WESTLAKE DRIVE
AUSTIN, TEXAS 78746
(512) 306-8836
(Name, Address and Telephone Number of Agent for Service)
---------------
COPIES TO:
WALTER EARL BISSEX, ESQ.
LISA N. TYSON, ESQ.
WINSTEAD SECHREST & MINICK P.C.
100 CONGRESS AVENUE
SUITE 800
AUSTIN, TEXAS 78701-4042
(512) 474-4330
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this Registration Statement.
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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PROPOSED PROPOSED
NUMBER OF MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS SHARES TO BE OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value...... 400,000 $5.00 $2,000,000.00 $606.06
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</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
INTERGAMES, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM SB-2
---------------
ITEM REGISTRATION STATEMENT CAPTION OR LOCATION
NUMBER ITEM AND HEADING IN PROSPECTUS
------ -------------------------------- ---------------------------
1. Front of Registration Statement
and Outside Front Cover of
Prospectus . . . . . . . . . . . Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus . . . . Inside Front and Outside
Back Cover Page
3. Summary Information and Risk
Factors . . . . . . . . . . . . . Prospectus Summary; Risk
Factors
4. Use of Proceeds . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . Outside Front Cover Page;
Determination of Offering
Price
6. Dilution . . . . . . . . . . . . Dilution
7. Selling Security-Holders . . . . Not Applicable
8. Plan of Distribution . . . . . . Outside Front Cover Page;
Plan of Distribution
9. Legal Proceedings . . . . . . . . Business
10. Directors, Executive Officers,
Promoters and Control Persons . . Management
11. Security Ownership of Certain
Beneficial Owners and Management. Principal Shareholders
12. Description of Securities . . . . Description of Securities
13. Interests of Named Experts and
Counsel . . . . . . . . . . . . . Not Applicable
14. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities . . . . . . . . . Risk Factors
15. Organization Within Last Five
Years . . . . . . . . . . . . . . Certain Relationships and
Related Transactions
16. Description of Business . . . . . Business
17. Management's Discussion and
Analysis or Plan of Operation . . Plan of Operation
18. Description of Property . . . . . Business
19. Certain Relationships and Related
Transactions . . . . . . . . . . Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters . . . Not Applicable
21. Executive Compensation . . . . . Management
22. Financial Statements . . . . . . Financial Statements
23. Changes in and Disagreements with
Accountants or Accounting and
Financial Disclosure . . . . . . Not Applicable
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 2, 1997
PROSPECTUS
400,000 Shares
INTERGAMES, INC.
Common Stock
InterGames, Inc., a Texas corporation ("Intergames" or the "Company"),
is offering up to 400,000 shares of its Common Stock, par value $0.01 per
share. Prior to this offering, there has been no public market for the
Common Stock, and there can be no assurance that such a market will develop
or, if developed, that it will be sustained.
The initial public offering price for the Common Stock will be $5.00 per
share. The initial public offering price has been arbitrarily determined by
the Company and does not necessarily bear any relationship to the Company's
book value, assets, net worth, financial condition or any other established
criteria of value. See "Determination of Offering Price."
Persons who wish to purchase shares of Common Stock in this offering
must submit a subscription agreement, together with the required payment, to
the Company. The minimum subscription is 50 shares. See "Plan of
Distribution."
The required minimum number of shares to be sold in the offering (the
"Minimum Offering") is 100,000 shares. Pending the sale of the Minimum
Offering, all proceeds of this offering will be deposited into a non-interest
bearing account (the "Escrow Account") at Brenham National Bank, Brenham,
Texas. In the event that the Minimum Offering is not sold within a period of
60 days from the date of this Prospectus (the "Initial Offering Period")
(which period may be extended, at the Company's discretion, for up to three
additional 30-day periods), this offering will terminate and all funds will
be promptly returned to subscribers by the Company, without interest. If the
Minimum Offering is sold within the Initial Offering Period, or any
extensions thereof, the offering will continue until the Company has sold all
of the 400,000 shares offered hereby (the "Maximum Offering"), or such
earlier date as the Company may close or terminate the offering.
-------------------------
THE COMPANY HAS A LIMITED OPERATING HISTORY. THE SECURITIES OFFERED HEREBY
ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION FROM THE PUBLIC OFFERING PRICE. THE SECURITIES OFFERED HEREBY
SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE ENTIRE LOSS OF
THEIR INVESTMENT. SEE "RISK FACTORS" (BEGINNING ON PAGE 7 OF THIS
PROSPECTUS) FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Proceeds to
Public Company(1)
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Per Share . . . . . . . . . . $ 5.00 $ 5.00
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Total Minimum . . . . . . . . $ 500,000.00 $ 500,000.00
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Total Maximum . . . . . . . . $ 2,000,000.00 $2,000,000.00
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(1) Before deducting certain estimated expenses payable by the Company in the
amount of $75,000 for the Minimum Offering and $110,000 for the Maximum
Offering, and certain commissions or concessions in the amount of up to
$0.25 per share, which may be deducted from the offering price for sales
made to registered securities dealers or paid by the Company to registered
securities dealers.
-------------------------
The shares are being offered by the Company subject to certain conditions.
The Company reserves the right to withdraw or cancel such offer and reject any
order, in whole or in part.
The date of this Prospectus is _______, 1997
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 relating to the Common
Stock offered hereby. This Prospectus, which is part of the Registration
Statement, does not contain all of the information included in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement, including the exhibits and schedules thereto.
Statements contained in this Prospectus concerning the provisions or contents
of any contract, agreement or any other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or
document filed as an exhibit to the Registration Statement, reference is made
to such exhibit for a more complete description of the matters involved.
The Registration Statement, including the exhibits and schedules thereto,
may be inspected and copied at prescribed rates at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
DC 20549 and at the Commission's regional offices at 7 World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.
As a result of this offering, the Company will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, in accordance therewith, will
file periodic reports, proxy statements and other information with the
Commission. Such periodic reports, proxy statements and other information will
be available for inspection and copying at the public reference facilities and
regional offices referred to above, and on the Company's Web site at
http://www.TheGameMaster.com. The Commission also maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission.
The Company intends to furnish to its stockholders annual reports
containing audited consolidated financial statements certified by independent
public accountants for each fiscal year and quarterly reports containing
unaudited consolidated financial statements for the first three quarters of
each fiscal year.
2
<PAGE>
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA,
INCLUDING THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN
THIS PROSPECTUS.
THE COMPANY
The Company is engaged in the creation, design, development and
operation of an interactive entertainment site on the Internet, located at
www.TheGameMaster.com (the "Site"). Internet users may access the Site and
play games for no charge. Before playing a game on the Site, however, each
user must complete a one-time registration process that requires the user to
answer a series of lifestyle and demographic questions. The detailed data
collected from individuals who complete the registration process ("members")
is maintained by the Company in a proprietary database called
DeliveryMaster-TM-. The DeliveryMaster-TM- database is the foundation from
which the Company's revenues are to be generated.
Management believes that the Company's Site is the first interactive
Internet site to provide both passive and moderated game programs in which
participants can win instant prizes. The Company's moderated programs
provide television-style programming in an interactive environment that
allows a large audience to "watch" the programs, with contestants being called
from the audience. In addition to the entertainment value of watching the
game as a television-style experience, there is an incentive to participate
as a result of the possibility of winning a prize. Prizes are awarded both
during and at the conclusion of each program. The Company's primary
programming design strategy is to design interactive entertainment
programming that only requires the functions contained in the "normal" Internet
browser software utilizing standard Hyper Text Markup Language ("HTML")
commands. Management estimates that this design strategy allows 93% of the
potential market of Internet users access to the Site. To date, the Company
has designed six programs utilizing proprietary software. The initial
programs are COMEONDOWN!!!-TM- (audience programming utilizing other games),
SLOTS-OF-LUCK-TM- (individual play), TRIVIALMATTERS-TM- (individual play and
audience programming), TRICTRAX-TM- (individual play and audience
programming), PENNYWISE-TM- (individual play and audience programming) and
SEARCHPARTY-TM- (individual play).
The Company projects three primary sources of revenue: market research
sales, advertising sales and on-line catalog sales. To date, the Company has
had only limited advertising sales (all of which sales have been in the form
of contributed prizes), insignificant catalog sales and no market research
sales. The Company's long-term objective is to become a leading provider of
demographic, lifestyle and consumer information. Initially, this goal will
be accomplished by attracting members through interactive entertainment
programming on the Internet. In the future, the Company intends to position
itself for the convergence of the computer and other media technologies, such
as television, into a central entertainment access vehicle with direct
audience interaction, applying the Company's data collection model to new
communication technologies as they emerge.
The Company offers clients two market research models and intends to
develop additional market research models in the event that the Maximum
Offering is consummated. The Company has designed an interactive survey
model in the form of a "slot machine" game that resides on the Site. Members
answer survey questions designed by the client and are rewarded with "tokens"
for each question completed. These tokens are then used by the member to
"spin" the slot machine. Slot machine winners receive prizes offered by the
client. The slot machine gathers survey results and demographic information
about the members answering the questions and adds the required information
to the DeliveryMaster database. The Company also offers an e-mail survey
model that gives clients the ability to ask questions of individuals listed
in the DeliveryMaster database through a targeted e-mail program. Clients
create specific queries that the Company e-mails to targeted demographic
profiles in the existing DeliveryMaster database.
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3
<PAGE>
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The Company provides its clients the opportunity to advertise on the
Site in connection with its entertainment programming. Advertisers may
purchase a full-page, scrollable, full color advertisement for any program,
reinforced with several banner advertisements on succeeding pages. Game
prizes may also be the client's products. Full-page advertisements may be
either general or targeted, utilizing a number of filters to identify
potential customers based upon the member's demographic and lifestyle profile.
The Company offers its clients the ability to sell products to its
registered members directly through its on-line catalog, called
PrizeCatalog-TM-. The PrizeCatalog may be accessed directly at
www.PrizeCatalog.com or through the Site. The products and services are
offered for sale only to the Company's registered members, and are bought by
the Company at wholesale and resold at retail or a discounted retail
depending on special promotions being run. Upon receipt of an order, the
sale is fulfilled directly by the client. PrizeCatalog serves as an on-line
retailer of products and services, without a fulfillment center (the Company
will keep no inventory). PrizeCatalog has a shopping cart system and "secure
server" for purchase of any product in the catalog. Visa, MasterCard,
Digicash and CyberCash are accepted for payment.
The Company was incorporated under the laws of the State of Texas in
October 1996, and its principal executive offices are located at 3321
Westlake Drive, Austin, Texas 78746. The Company's telephone number is
512/306-8836.
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4
<PAGE>
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THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby. . . . . A minimum of 100,000 shares and a maximum of 400,000 shares.
Offering price . . . . . . . . . . . $5.00 per share
Minimum subscription . . . . . . . . 50 shares
Escrow . . . . . . . . . . . . . . . All subscriptions will be deposited by the Company into the Escrow
Account. If the Minimum Offering is not sold within the Initial
Offering Period, or any extensions thereof, all monies received will
be refunded promptly to investors without interest. After the Initial
Closing (defined below), proceeds of additional subscriptions will be
deposited into the Escrow Account pending Subsequent Closings (defined
below). See "Plan of Distribution."
Initial closing. . . . . . . . . . . The initial closing of the offering (the "Initial Closing") will occur
upon receipt of subscriptions acceptable to the Company sufficient to
complete the Minimum Offering.
Subsequent closings. . . . . . . . . Sales of shares of Common Stock after the Initial Closing ("Subsequent
Closings") will be closed from time to time up to an aggregate of the
Maximum Offering.
Common Stock to be outstanding
after the offering(1). . . . . . . 1,000,000 shares if the Minimum Offering is sold, and 1,300,000 shares
if the Maximum Offering is sold.
Use of proceeds. . . . . . . . . . . To repay indebtedness; to hire additional technical and administrative
personnel for the purpose of expanding and improving programming; to
hire additional sales personnel and to finance marketing activities;
for general corporate purposes; and, if the Maximum Offering is sold,
to finance additional research and development.
</TABLE>
-------------------------------
(1) Excludes 35,000 shares of Common Stock issuable upon the exercise of
currently exercisable stock options. See "Management - Stock Options."
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5
<PAGE>
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SUMMARY FINANCIAL DATA
The Company is a development stage company and has no significant revenues or
earnings from operations.
From Inception Three Months
(October 1, 1996) Ended
to March 31, 1997
December 31, 1996 (unaudited)
----------------- --------------
Summary of Loss Data:
Net Revenues $ 5,635 $ 25,200
Expenses 42,614 68,005
Net loss during development stage (36,979) (42,805)
Loss per common share (0.04) (0.05)
Operating Data:
Registered members(1) 1,928 7,341
Banner impressions per week(2) 12,522 27,866
March 31, 1997
------------------------------------
Actual As Adjusted(3)
--------- ----------------------
Minimum Maximum
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Balance Sheet Data:
Working Capital $(58,149) $366,851 $1,831,851
Total Assets $ 39,652 $405,941 $1,870,941
Total Liabilities $ 58,711 0 0
Shareholders' Equity $(19,059) $405,941 $1,870,941
-------------------------------
(1) Number reflects actual number as of last day of period.
(2) Number reflects actual number for the last week of the period.
(3) Adjusted to reflect the sale by the Company of the Minimum Offering
and the Maximum Offering at a public offering price of $5.00 per
share, and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
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4
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN OF THE RISK FACTORS SET FORTH BELOW AND
ELSEWHERE IN THIS PROSPECTUS. AN INVESTMENT IN THE COMMON STOCK OFFERED
HEREBY INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS, PRIOR TO MAKING AN INVESTMENT IN THE COMMON
STOCK OFFERED IN THIS PROSPECTUS.
RISKS INHERENT IN A START-UP COMPANY
NO OPERATING HISTORY/DOUBTS AS TO GOING CONCERN. The Company is a newly
formed development stage company with no history of operations and no
significant revenues. As a result of the Company's limited operating history
and the nature of the markets in which it competes, the Company is unable to
accurately forecast its revenues. The Company currently intends to increase
its operating expenses substantially following the offering to hire additional
personnel, to fund marketing programs and possibly to fund research and
development programs. To the extent that such expenses are not subsequently
followed by increased revenues, the Company's business condition and operating
results will be materially adversely affected.
Businesses that are starting up or in their initial stages of
development present substantial business and financial risks and may suffer
significant losses from which they cannot recover. The Company will face all
of the challenges of any new business enterprise, including but not limited
to (i) developing and implementing a workable business plan; (ii) engaging
the services of qualified support personnel, consultants and management;
(iii) establishing budgets; and (iv) implementing appropriate financial
controls and internal operating policies and procedures. In addition, the
Company and its prospects must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in the new and rapidly
evolving market for Internet products and services. There can be no
assurance that the Company will be successful in addressing such risks.
The Company does not have significant cash and has not had significant
operations since the inception of its development stage. As noted in the
independent accountants opinion, there is substantial doubt about the
Company's ability to continue as a going concern without the realization of
additional adequate financing.
LIMITED CAPITAL/NEED FOR ADDITIONAL CAPITAL. The Company currently has
no significant operating capital and is totally dependent upon receipt of the
proceeds of this offering to finance operations. Even if the Maximum
Offering is sold, the amount of capital available to the Company will be
extremely limited, and may not be sufficient to enable the Company to fully
conduct its proposed business operations without additional fund raising. If
only the Minimum Offering is sold, management estimates the Company will be
able to fully implement and operate the Site as originally designed for
approximately one year, after which time the Company may be forced to seek
additional financing, through public or private offerings of debt or equity.
The Company has no commitments for additional cash funding beyond the
proceeds expected to be received from this offering, and there can be no
assurance that such funding will be available, or, if available, that the
terms thereof will be attractive to the Company.
LEVERAGE. If the Company obtains additional financing in the form of
public or private debt, particularly if only the Minimum Offering is sold,
the Company may become highly leveraged and may have substantial debt service
obligations. Such leverage could present significant risks to an investor in
the Common Stock. There can be no assurance that the Company would be able
to generate sufficient cash flow to make timely payments of principal and
interest on indebtedness. In that event, the Company could default on such
indebtedness, which could result, among other things, in a foreclosure or
other actions of creditors against collateral securing such indebtedness.
LACK OF DEPTH OF MANAGEMENT. As compared to many other public
companies, the Company lacks a depth of managerial and technical personnel.
The Company has no full-time employees and depends entirely upon the efforts
of its founders for its operations. The Company believes that its future
success depends in large part on its ability to attract, retain and motivate
highly skilled management personnel. The Company has no plans to hire any
management personnel unless greater than the Minimum Offering is sold, and
there can be no assurance that the Company will succeed in attracting such
management personnel.
7
<PAGE>
DEPENDENCE ON THE EFFORTS OF FOUNDERS. The Company currently has no
employees and, therefore, the success of the Company will depend in large
measure on the efforts and assistance of its founders. All of the founders
of the Company maintain part- to full-time employment outside the Company and
may not be able to devote sufficient attention to the Company to ensure its
success until earnings justify additional time be devoted to the Company.
Such outside employment may also create conflicts of interest. There is no
assurance such conflicts could be resolved favorably for the Company;
however, Texas corporate law requires all officers and directors of the
Company to act according to their fiduciary duties to the stockholders.
PAYMENT OF DIVIDENDS. The Company has not paid dividends on its Common
Stock to date and does not anticipate paying dividends on its Common Stock in
the foreseeable future. There is no assurance that the Company's operations
will generate net profits from which to pay cash dividends. Investors who
anticipate the need of immediate income from an investment should not
purchase the shares of Common Stock being offered hereby.
RISKS RELATED TO THE NATURE OF THE COMPANY'S BUSINESS
DEPENDENCE ON CONTINUED GROWTH IN USE OF INTERNET. The Company's future
success is substantially dependent upon continued growth in the use of the
Internet and the Web. Rapid growth in the use of and interest in the
Internet and the Web is a recent phenomenon. There can be no assurance that
communication or commerce over the Internet will become widespread. The
Internet may not prove to be a viable commercial marketplace for a number of
reasons, including potentially inadequate development of the necessary
infrastructure, such as a reliable network backbone, or timely development of
performance improvements. In addition, to the extent that the Internet
continues to experience significant growth in the number of users and level
of use, there can be no assurance that the Internet infrastructure will
continue to be able to support the demands placed upon it by such potential
growth. In addition, the Internet could lose its viability due to delays in
the development or adoption of new standards and protocols required to handle
increased levels of Internet activity, or due to increased governmental
regulation. Changes in or insufficient availability of telecommunications
services to support the Internet could result in slower response times and
adversely affect the usage of the Web and the Company's services. If use of
the Internet does not continue to grow, or if the Internet infrastructure
does not effectively support growth that may occur, the Company's business,
results of operations and financial condition would be materially and
adversely affected.
COMPETITION ON THE INTERNET. The market for Internet products and
services is highly competitive and competition is expected to continue to
increase significantly. Management estimates that there are currently over
800,000 Web sites on the Internet. The cost of creating an Internet Web site
is relatively low, thus increasing the likelihood that competition for
impressions on the Internet will become even more intense, and that the
Internet will become even more cluttered with sites, making the Company's
Site difficult to find.
ABILITY TO ATTRACT PAID ADVERTISERS. Because the Company expects to
derive a substantial portion of its revenues from advertising, the future
success of the Company is highly dependent on the development of the Internet
as an advertising medium. Most of the Company's advertising customers will
have only limited experience with the Web as an advertising medium, have not
allocated a significant portion of their advertising budget for Web-based
advertising, and may not find such advertising to be effective for promoting
their products and services relative to traditional print and broadcast
media. No standards have yet been widely accepted for the measurement of the
effectiveness of Web-based advertising, and there can be no assurance that
such standards will develop significantly to support Web-based advertising as
a significant advertising medium. The Internet industry is young and has few
proven products and services. Moreover, critical issues concerning the
commercial use of the Internet (including security, reliability, cost, ease
of use and access, quality of service and acceptance of advertising) remain
unresolved and may negatively affect the growth of Internet use or the
attractiveness of Internet advertising. If widespread commercial use of the
Internet does not develop as an effective and measurable means for
advertising, the Company's business, results of operations and financial
condition will be materially and adversely affected.
The Company's ability to generate advertising revenues will not only
depend on advertisers' acceptance of the Internet as an attractive and
sustainable medium, but also on the Company's ability to generate a large
base of registered members and to provide member demographics that will be
attractive to advertisers. The Company's ability to provide timely, accurate
and pertinent data to potential advertisers will depend on its ability to
collect high quality data through player registrations. If player
receptivity to the Company's registration process is low or if the Company
for any reason cannot rely on the integrity of the data it receives, the
Company will not be able to provide high quality, useful data to potential
advertisers.
8
<PAGE>
There is intense competition in the sale of advertising on the Internet.
Competition among current and future providers of Web-based advertising, as
well as competition with other traditional media for advertising placements,
could result in significant price competition and reductions in advertising
revenues.
COMPETITION AMONG MARKET RESEARCH PROVIDERS. Overall, the
technology-focused market research industry is highly competitive. The
Company will compete directly with significant providers of (i)
analyst-based, technology-focused market research (such as Intelliquest,
Gartner Group, Inc., META Group, Inc. and Forrester Research, Inc.); (ii)
survey-based, general market research (such as A. C. Nielsen Company, NFO
Research, Inc., Information Resources, Inc. and The NPD Group, Inc.); and
(iii) analyst-based general business consulting. Although only a few of these
competitors have to date offered survey-based, technology-focused market
research that competes directly with the Company's products and services,
many of these competitors have substantially greater financial, information
gathering and marketing resources than the Company and could decide to
increase their resource commitments to the Company's market. Moreover, each
of these companies currently competes indirectly, if not directly, for funds
available within aggregate industry-wide market research budgets. There are
few barriers to entry into the Company's market, and increased competition
could adversely affect the Company's operating results. There can be no
assurance that the Company will be able to compete successfully against
existing or new competitors.
ABILITY TO ATTRACT PLAYERS AND REGISTERED MEMBERS. The Company's future
success depends upon its ability to deliver original and entertaining
programming in order to attract users with demographic characteristics
valuable to the Company's customers. There can be no assurance that the
Company's programming will be attractive to a sufficient number of users to
generate market research and advertising revenues. There also can be no
assurance that the Company will be able to anticipate, monitor and
successfully respond to rapidly changing consumer tastes and preferences so
as to attract a sufficient number of users to its Site. Internet users can
freely navigate and instantly switch among a large number of Internet sites,
making it difficult for the Company to distinguish its Site and attract
users. If the Company is unable to develop programming that allows it to
attract, retain and expand a loyal base of registered members, the Company
will be unable to generate revenues, and its business, financial condition
and operating results will be materially adversely affected.
The market for computer and television entertainment-related products and
the consumers utilizing them is highly competitive. The Company expects to
encounter intense competition in the computer-game and television entertainment
field, competing with companies that have been in existence for a longer period
than the Company and have significantly greater financial, marketing, personnel
and other resources than the Company. In addition, it is likely that
competition for computer-game and television entertainment products will become
even more intense with the expansion of game-related programs developed and
marketed by such companies as Sony, Nintendo and SEGA. There can be no
assurance that the development of the Company's Site will successfully attract
a sufficient number of players and registered members to adequately provide for
the Company's financial requirements. Failure to attract a sufficient number
of players and registered members would have a material adverse effect on the
Company's business, results of operations and financial conditions.
ENHANCEMENT OF SITE AND DEVELOPMENT OF NEW PRODUCTS. To remain
competitive, the Company must continue to enhance and improve the
functionality and features of the Site, as well as other branded media
properties that may be developed. There can be no assurance that the Company
will be able to successfully achieve these goals. If only the Minimum
Offering is completed, relatively few resources will be budgeted for research
and development of new programs or enhancement of existing programs.
Certain key elements of the Company's business strategy are the
development and introduction of new programs and improved technology for its
database. There can be no assurance that the Company will be successful in
developing or introducing such products or that such products will achieve
market acceptance or enhance the Company's brand name recognition.
Furthermore, enhancements of or improvements to the Company's Site or
database may contain undetected errors that require significant design
modifications, resulting in a loss of customer confidence. Any failure of
the Company to effectively develop and introduce these products, or failure
of such products to achieve market acceptance, could adversely affect the
Company's business, results of operations and financial conditions.
TECHNOLOGICAL CHANGE. The market for Internet products and services is
characterized by rapid technological developments, evolving industry
standards and customer demands, and frequent new product introductions and
enhancements. These market characteristics are exacerbated by the emerging
nature of this market and the fact that many companies are
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expected to introduce new Internet products and services in the near future.
The Company's future success will depend in significant part on its ability
to continually improve the performance, features and reliability of its Site
and database in response to both evolving demands of the marketplace and
competitive product offerings, and there can be no assurance that the Company
will be successful in doing so.
RISK OF CAPACITY CONSTRAINTS AND SYSTEMS FAILURES. A key element of the
Company's strategy is to generate a high volume of registered members and
impressions. Accordingly, the performance of the Company's programs and
database technology is critical to the Company's reputation, its ability to
attract advertisers and to achieve market acceptance of these products. Any
system failure that causes interruption or an increase in response time of the
Company's products could result in less traffic to the Company's Site and, if
sustained or repeated, could reduce the attractiveness of the Company's
products to customers and players. The Company does not carry business
interruption insurance to compensate the Company for losses that may occur. An
increase in the volume of players and impressions could strain the Company's
capacity, which could lead to slower response time or system failures, and
adversely affect the number of impressions received by advertising and thus the
Company's advertising revenues. In addition, as the number of Web users
increases, there can be no assurance that the Company's products, media
properties and infrastructure will be able to scale accordingly.
ONLINE ORDER RISK. A key element of the Company's strategy is to expand
and develop the online catalog of the products of the Company's advertisers.
Online purchasing of goods and services by consumers is in an early stage of
development and has been hindered to date by, among other things, a lack of
widely accepted secure payment mechanisms. Failure to produce significant
catalog sale revenues could have a material adverse effect on the Company.
GOVERNMENT REGULATION. There are strict federal and state laws regulating
prize fulfillment, free giveaways and sweepstakes. Failure by the Company to
comply with such laws could have a material adverse impact on the Company. In
addition, a number of legislative initiatives exist domestically and abroad
that seek to regulate the electronic collection of data about persons. An
increasing number of court cases have been brought seeking damages and
injunctive relief for actions allegedly violating so-called "rights of
privacy." The law in this area, both statutory and case law, is highly
unsettled. No assurance can be given, therefore, that the Company will be
allowed to continue to pursue existing or proposed products and services.
As a provider of Internet content, the Company is subject to the
provisions of the recently enacted Communications Decency Act (the "CDA"),
which, among other things, imposes criminal penalties on anyone that
distributes "obscene" or "indecent" material over the Internet. The manner
in which the CDA will be interpreted and enforced and its effect on the
Company's operations cannot yet be fully determined. The CDA could dampen
the growth of the Internet generally and decrease the acceptance of the
Internet as an advertising medium, and could have a material adverse effect
on the Company's business, financial condition or operating results. It is
also possible that new laws and regulations will be adopted covering issues
such as privacy, copyright infringement, obscene or indecent communication
and the pricing, characteristics and quality of Internet products and
services. Application to the Internet of existing laws and regulations
governing issues such as property ownership, libel and personal privacy is
also subject to substantial uncertainty.
Except as described above, the Company is not currently subject to
direct regulation by any governmental agency in the United States, other than
regulations applicable to businesses generally
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's
operating results may fluctuate significantly in the future as a result of a
variety of factors, many of which are outside the Company's control. These
factors include the level of usage of the Internet, demand for Internet
advertising, seasonal trends in both Internet usage and advertising
placements, the advertising budgets of advertisers, the amount and timing of
capital expenditures and other costs relating to the expansion of the
Company's operations, the introduction of new products or services by the
Company or its competitors, pricing changes in the industry, technical
difficulties, general economic conditions and economic conditions specific to
the Internet and online media. Due to all of the foregoing factors, in some
future quarter the Company's operating results may fall below the expectations
of securities analysts and investors. In such event, the price of the
Company's Common Stock would likely be materially and adversely affected.
TRADEMARKS AND PROPRIETARY RIGHTS. The Company has not registered any
of its unique intellectual property, including all of its technologies,
programs and tradenames. The Company relies on a combination of copyright,
trademark and trade secret laws and third-party non-disclosure agreements to
protect its intellectual property. There can be no assurance, however, that
the steps taken by the Company to date to protect its intellectual property
will be adequate to prevent misappropriation of such rights or that third
parties will not independently develop functionally equivalent or superior
systems,
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software or procedures. Use or infringement of the Company's intellectual
property by others could have an adverse effect on the Company's business,
results of operations and financial condition. See "Business--Intellectual
Property."
RISKS RELATED TO THE OFFERING
BEST EFFORTS OFFERING/NO FIRM COMMITMENT. The Common Stock offered
hereby is offered by the Company on a "best efforts" basis. There is no
underwriter and no firm commitment from anyone to purchase any of the shares
offered. No assurance can be given that any or all of the shares will be
sold.
UNCERTAIN PUBLIC MARKET FOR SHARES/SHARES NOT LISTED. At present, the
Company's Common Stock is not traded publicly. There is no assurance that a
trading market will develop, or, if developed, that it will be sustained. The
Company will not list the shares on any exchange or on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") because it will not
be able to meet the financial criteria for any such listing. Therefore, any
investment in the Common Stock will be very illiquid. The Company does intend
to post a list of potential buyers and sellers on the Company's Site and to
implement a matching system on its Site for potential buyers and sellers of the
Common Stock; however, there can be no assurance that these efforts will create
a viable market for the Common Stock. A purchaser of shares of Common Stock
may find it difficult to resell such shares should he or she desire to do so.
Furthermore, the shares are not marginable and it is unlikely that a lending
institution would accept the Company's Common Stock as collateral for a loan.
ARBITRARY OFFERING PRICE. The offering price of the Common Stock has
been arbitrarily determined by the Company. There is not necessarily any
relationship between the offering price of the Common Stock and the Company's
book value, assets, earnings, net worth or other economic or recognized
criteria of future value of the Company's Common Stock.
VOLATILITY OF STOCK PRICE. If a public market develops for the Common
Stock, many factors will influence the market prices. The Common Stock will
be subject to significant fluctuation in response to variations in operating
results of the Company, investor perceptions of the Company, supply and
demand, interest rates, general economic conditions and those specific to the
industry, developments with regard to the Company's activities, future
financial condition and management.
BROAD DISCRETION AS TO USE OF PROCEEDS. The Company's management will
have wide discretion as to the exact allocation and priority and timing of
the allocation of funds raised in the offering. The allocation of the
proceeds of the offering may vary significantly depending upon numerous
factors, including the success that the Company has marketing its services.
Accordingly, management will have broad discretion with respect to the
expenditure of the net proceeds of the offering. Investors purchasing the
Common Stock offered hereby will be entrusting their funds to the Company's
management, upon whose judgment the subscribers must depend. See "Use of
Proceeds."
APPLICABILITY OF LOW PRICED STOCK RISK DISCLOSURE REQUIREMENTS. If the
trading price of the shares of Common Stock offered hereby falls below $5.00
per share, such shares will be considered low priced securities under rules
promulgated under the Exchange Act. Under these rules, broker-dealers
participating in transactions in low priced securities must first deliver a
risk disclosure document that describes the risks associated with such
stocks, the broker-dealer's duties, the customer's rights and remedies, and
certain market and other information, and make a suitability determination
approving the customer for low priced stock transactions based on the
customer's financial situation, investment experience and objectives.
Broker-dealers must also disclose these restrictions in writing to the
customer and obtain specific written consent of the customer, and provide
monthly account statements to the customer. The likely effect of these
restrictions will be a decrease in the willingness of broker-dealers to make
a market for the Common Stock, decreased liquidity of the Common Stock and
increased transaction costs for sales and purchases of the Common Stock as
compared to other securities.
BENEFITS TO PRESENT STOCKHOLDERS/DISPROPORTIONATE RISKS. Collectively,
the existing shareholders of the Company own 900,000 shares of the Company's
currently outstanding Common Stock, for which they paid $0.01 per share. If
the Minimum Offering is sold, upon completion of the offering, present
stockholders will own 90% of the then outstanding Common Stock, and investors
in the offering will own the remaining 10%, for which they will have paid
$500,000. If the Maximum Offering is sold, upon completion of the offering
present stockholders will own 69.2% of the then outstanding Common Stock, and
investors in the offering will own the remaining 30.8%, for which they will
have paid $2,000,000. Thus, investors in the offering will contribute to the
capital of the Company a disproportionately greater percentage than the
ownership they receive.
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DILUTION. The present shareholders of the Company acquired their Common
Stock for $0.01 per share, substantially less than the $5.00 per share to be
paid by investors in the offering. Investors who purchase the shares of
Common Stock sold in this offering will experience immediate substantial
dilution in the book value of the Common Stock that they acquire of $4.63 per
share (or 92.6%) if the Minimum Offering is sold, and of $3.58 per share (or
71.6%) if the Maximum Offering is sold, which amounts represent the
respective differences between the net tangible book per share of the Common
Stock after the offering and the initial public offering price of $5.00 per
share. See "Dilution."
POTENTIAL ISSUANCE OF ADDITIONAL COMMON AND PREFERRED STOCK. The
Company is authorized to issue up to 8,000,000 shares of Common Stock, of
which no more than 1,300,000 shares will be issued and outstanding upon
completion of this offering. To the extent of such authorization, the Board
of Directors of the Company will have the ability, without seeking
shareholder approval, to issue additional shares of Common Stock in the
future for such consideration as the Board of Directors may consider
sufficient. The issuance of additional Common Stock in the future will
reduce the proportionate ownership and voting power of the Common Stock
offered hereby. The Company is also authorized to issue up to 2,000,000
shares of preferred stock, the rights and preferences of which may be
designated in series by the Board of Directors. To the extent of such
authorization, such designations may be made without shareholder approval.
The Board of Directors has not designated any series or issued any shares of
preferred stock. The designation and issuance of series of preferred stock
in the future would create additional securities which would have dividend
and liquidation preferences over the Common Stock offered hereby. See
"Description of Securities."
SHARES ELIGIBLE FOR FUTURE SALE. All of the existing 900,000 shares of
Common Stock currently outstanding were offered and sold by the Company in
private transactions in reliance upon an exemption from registration under
the Securities Act of 1933, as amended (the "Securities Act"). Accordingly,
all of such shares are "restricted securities" as defined by Rule 144 under
the Securities Act and cannot be resold without registration except in
reliance on Rule 144 or another applicable exemption from registration. In
general, under Rule 144 a person (or persons whose shares are required to be
aggregated), including any affiliates of the Company, who beneficially owns
restricted shares for a period of at least one year is entitled to sell
within any three month period shares equal in number to the greater of (i)
one percent of the then outstanding shares of Common Stock (13,000 shares if
the Maximum Offering is sold) or (ii) the average weekly trading volume of
the same class of shares during the four calendar weeks preceding the filing
of the required notice of sale with the Commission. The seller must also
comply with the notice and manner of sale requirements of Rule 144, and there
must be current public information available about the Company. In addition,
any person (or persons whose shares are required to be aggregated) who is
not, at the time of sale, nor during the preceding three months, an affiliate
of the Company, and who has beneficially owned restricted shares for at least
two years, can sell such shares without regard to notice, manner of sale,
public information or the volume limitations described above. Shares of
Common Stock will first become eligible for resale under Rule 144 in October
1998, assuming the other requirements of Rule 144 are met.
As of the date of this Prospectus, currently exercisable options to
purchase 35,000 shares of the Company's Common Stock are outstanding. See
"Management--Stock Options." No prediction can be made as to the effect, if
any, that future sales of the Common Stock issuable upon exercise of these
options, future sales of the above described outstanding Common Stock, or the
availability of such Common Stock for sale, will have on the market price
prevailing from time to time. Sales of substantial amounts of such Common
Stock in the public market, or the perception that such sales could occur,
could adversely affect the then prevailing market price.
LIMITED LIABILITY OF OFFICERS AND DIRECTORS. The Company's Articles of
Incorporation provide that to the fullest extent permitted by Texas law, no
director shall be personally liable to the Company or its shareholders for
monetary damages for acts or omissions that occur in the directors' capacity as
directors, except for acts or omissions for (i) a breach of the duty of loyalty
to the Company or its shareholders; (ii) a bad faith breach of a director's
duty to the Company, intentional misconduct, or a knowing violation of the law;
or (iii) transactions from which a director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of
the director's office. Under the Texas Business Corporations Act (the "TBCA")
this provision of the Articles of Incorporation relieves the Company's
directors from personal liability to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability arising from a judgment or other final adjudication establishing
(i) any breach of the director's duty of loyalty; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; or (iii) transactions in which the director received an improper benefit.
In addition, subject to the same provisions set forth above, the Company's
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Bylaws provide that persons employed by or agents of the Company may be
indemnified to the same extent as directors of the Company.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or
controlling person of the Company 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 offered, the Company will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
DETERMINATION OF OFFERING PRICE
The offering price of the Common Stock offered hereby has been
arbitrarily determined by the Company, and should not be viewed as an
indication of the actual value of the Company. There is not necessarily any
relationship between the offering price of the Common Stock and the Company's
book value, assets, earnings, net worth or other economic or recognized
criteria of future value of the Company's shares. Each prospective investor
should make an independent evaluation of the fairness of such price. See
"Plan of Distribution."
LIMITED STATE REGISTRATION
Only residents of those states in which the Common Stock offered hereby
has been qualified for sale under applicable securities or Blue Sky laws may
purchase shares in this offering. Each potential investor will be required
to execute a subscription agreement which, among other things, requires the
potential investor to certify his or her state of residence. A potential
investor who is a resident of a state other than a state in which the Common
Stock offered hereby has been qualified for sale may request that the Company
register the shares in the state in which such investor resides, however, the
Company is under no obligation to do so and may refuse any such request.
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USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby (after
offering expenses, but not considering any selling commissions or concessions
that may be paid by the Company) are estimated to range from $425,000 if the
Minimum Offering is sold to $1,890,000 if the Maximum Offering is sold. The
Company intends to use the net proceeds of this offering as set forth below.
See "Plan of Operation."
<TABLE>
APPROXIMATE APPROXIMATE
MINIMUM PERCENTAGE OF MAXIMUM PERCENTAGE OF
OFFERING NET PROCEEDS OFFERING NET PROCEEDS
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Repayment of bridge financing(1) $100,000 23.5% $ 100,000 5.3%
Personnel:
Administrative 15,600 3.7 83,950 4.4
Sales 18,000 4.2 117,000 6.2
Technical 41,500 9.9 184,350 9.8
Management fees 72,000 16.9 -- 0.0
Monthly overhead 24,000 5.6 41,850 2.2
Marketing 37,800 8.9 680,450 36.0
Professional services 68,000 16.0 84,000 4.4
Technical equipment 8,500 2.0 34,000 1.8
Research and development -- 0.0 179,500 9.5
Working capital 39,600 9.3 384,900 20.4
-------- ------ ---------- ------
Total $425,000 100.0% $1,890,000 100.0%
-------- ------ ---------- ------
-------- ------ ---------- ------
</TABLE>
- ----------------
(1) The bridge financing is evidenced by a promissory note (the "Bridge Note")
that bears interest at a compounded annual rate of 10% and is payable on
demand. See "Certain Transactions."
The foregoing represents the best estimate by the Company of its use of
net proceeds based upon present planning and business conditions. The
proposed application of proceeds is subject to change as market and financial
conditions change. Although the Company does not contemplate material
changes in the proposed use of net proceeds, to the extent the Company finds
that adjustment is required by reason of changing business conditions or
other changes, the amounts shown may be adjusted among the intended uses.
All proceeds from the sale of the Common Stock offered hereby will be
deposited into the Escrow Account. After release from escrow, the proceeds
will be invested by the Company in short-term obligations of the U.S.
government, its agencies and divisions, pending the uses described above.
DIVIDEND POLICY
The Company has not paid or declared cash distributions or dividends to
date and does not intend to pay cash dividends on the Common Stock in the
foreseeable future. The Company currently intends to retain all earnings, if
any, to finance the development and expansion of its operations. The
declaration of cash dividends in the future will be determined by the Board
of Directors based upon the Company's earnings, financial condition, capital
requirements and other relevant factors.
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DILUTION
The net tangible book value of the Company as of March 31, 1997 was
($54,855), or approximately ($0.06) per share of Common Stock outstanding at
that date. Net tangible book value per share represents the amount of the
Company's shareholders' equity less intangible assets, divided by the number of
shares of Common Stock outstanding. As of March 31, 1997, the Company had
intangible assets with a net book value of $35,798. Net tangible book value
per share dilution represents the difference between the amount per share paid
by purchasers of Common Stock in the offering and the pro forma net tangible
book value per share after the offering.
The following tables set forth, assuming the sale of both the Minimum
Offering and the Maximum Offering, the difference between the existing
shareholders and the purchasers of Common Stock in the offering with respect to
the number of shares purchased from the Company, the total consideration paid
and the average price per share paid.
SALE OF MINIMUM OFFERING(1)
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- -------- ------- -------------
Existing Shareholders(2) 900,000 90.0% $ 9,000 1.8% $0.01
New Investors 100,000 10.0 500,000 98.2 5.00
--------- ----- -------- -----
Total 1,000,000 100.0% $509,000 100.0%
--------- ----- -------- -----
--------- ----- -------- -----
________________
(1) Assumes the sale of 100,000 shares.
(2) Excludes 35,000 shares of Common Stock issuable upon the exercise of
currently exercisable stock options. See "Management--Stock Options."
SALE OF MAXIMUM OFFERING(1)
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- -------------
Existing Shareholders(2) 900,000 69.2% $ 9,000 0.4% $0.01
New Investors 400,000 30.8 2,000,000 99.6 5.00
--------- ----- ---------- -----
Total 1,300,000 100.0% $2,009,000 100.0%
--------- ----- ---------- -----
--------- ----- ---------- -----
________________
(1) Assumes the sale of 400,000 shares.
(2) Excludes 35,000 shares of Common Stock issuable upon the exercise of
currently exercisable stock options. See "Management--Stock Options."
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After giving effect to the sale by the Company of the Minimum Offering and
the Maximum Offering at a purchase price of $5.00 per share as of March 31,
1997, the pro forma net tangible book value of the Company, the increase in net
tangible book value to the existing shareholders and the decrease in net
tangible book value to purchasers of shares in the offering are summarized in
the following table:
MINIMUM MAXIMUM
------- -------
Offering price per share $ 5.00 $ 5.00
Net tangible book value per share at
March 31, 1997(1) $(0.06) $(0.06)
Pro forma net tangible book value per
share after the offering $ 0.37 $ 1.42
Net tangible book value increase to
existing shareholders after the offering $ 0.43 $ 1.48
Net tangible book value decrease (dilution)
to purchasers of shares in the offering $ 4.63 $ 3.58
Percentage dilution to new shareholders 92.60% 71.60%
________________
(1) Calculated based on 900,000 shares outstanding.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 on an actual basis and as adjusted to (i) give effect to the
sale of the Minimum Offering and the Maximum Offering at a public offering
price of $5.00 per share, and (ii) the application of the estimated net
proceeds therefrom as described under "Use of Proceeds." This table should
be read in conjunction with "Summary Financial Data" and the Financial
Statements of the Company appearing elsewhere in this Prospectus.
<TABLE>
MARCH 31, 1997
--------------------------------
ACTUAL AS ADJUSTED
-------- ---------------------
MINIMUM MAXIMUM
-------- ----------
<S> <C> <C> <C>
Current liabilities $58,711 - -
Long-term debt - - -
Preferred Stock, $0.10 par value, 2,000,000 shares
authorized, none issued and outstanding - - -
Common Stock, $0.01 par value, 8,000,000 shares
authorized, 900,000 shares issued and outstanding
actual; 1,000,000 shares issued and outstanding,
as adjusted if the Minimum Offering is sold, and
1,300,000 shares issued and outstanding, as
adjusted if the Maximum Offering is sold $ 9,000 $ 10,000 $ 13,000
Additional paid-in capital 51,725 475,725 1,937,725
Accumulated deficit (79,784) (79,784) (79,784)
-------- -------- ----------
Total stockholders' equity $(19,059) $405,941 $1,870,941
-------- -------- ----------
Total capitalization $39,652 $405,941 $1,870,941
-------- -------- ----------
-------- -------- ----------
</TABLE>
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PLAN OF OPERATION
OVERVIEW
The Company was organized and began operations in October 1996 by
developing its Internet Site called "TheGameMaster.com". The Company is
currently still in the development stage and has generated limited, in-kind
revenues to date from the sponsors of its entertainment programming.
Currently, the Company operates three interactive entertainment programs on
the Site of the six programs that have been developed. One of these programs
is an audience program currently scheduled for only one hour per week. See
"Business--The Programming." No revenue has been generated from the Company's
marketing activity and insignificant catalog sales have been realized.
The Company's Plan of Operation for the next 12 months is dependent upon
whether the Minimum or Maximum Offerings are achieved. Management believes
that the Minimum Offering will be sufficient to sustain the Company until
client revenues are realized.
PLAN OF OPERATION
The Company seeks to expand and maintain its existing Site, with the
objective of building a loyal audience. In the short term, the Company is
focused on developing interactive television-style programs that will attract
and keep the interest of users, thereby increasing the size and value of the
Company's database of demographic information. Constant development is an
integral part of this strategy. Changing the content of the existing Site,
introducing new attractions to the Site, and introducing a variety of prizes
are paramount in attracting a loyal audience.
If the Minimum Offering is closed, the Company will hire the necessary
staff to expand the availability of its scheduled audience programming, to
activate three additional programs that have already been developed, and to
attract additional sponsors. The Company will add additional personnel in
the areas of prize fulfillment and administration. The addition of personnel
in these two areas will allow the Company to increase sales and marketing
efforts. Management of the Company will be obtained on a part-time basis
through an agreement with an affiliate of the Company. See "Certain
Transactions."
If the Maximum Offering is closed, the Company will be engaged in expanded
research and development, which will result in introducing new programs and
improving the on-line catalog. New technologies such as Shockwave and Java
will be included in the research and development efforts, resulting in new
features and enhanced performance of existing programs. Management of the
Company will be obtained by hiring full-time officers and directors of the
Company. See "Management--Executive and Director Compensation."
The Company markets its Site to various Internet Web sites, directories and
listing services. Additionally, the Company has initiated a banner advertising
program across the Internet. The Company plans to market the Site via print
and electronic media. The Company's focus concerning market research will be
on building the Company's member database to a statistically significant size.
To accomplish this task, the Company has developed a marketing strategy that
incorporates promotion and targeted Internet advertising. If the Maximum
Offering is closed, these efforts will be increased, and the Company will also
engage a public relations firm to aid in making the Site a recognized name in
Internet entertainment. The Company does not anticipate significant market
research revenues can be realized until the Company's database has been
significantly increased through the attraction of a large audience to its
programming.
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BUSINESS
OVERVIEW
The Company is engaged in the creation, design, development and operation
of an interactive entertainment site on the Internet, located at
www.TheGameMaster.com (the "Site"). Internet users may access the Site and
play games for no charge. Before playing a game on the Site, however, each
user must complete a one-time registration process that requires the user to
answer a series of lifestyle and demographic questions. The detailed data
collected from members is maintained by the Company in a database called
DeliveryMaster-TM-. The DeliveryMaster-TM- database is the foundation from
which the Company's revenues are to be generated.
The Company projects three primary sources of revenue: market research
sales, advertising sales and on-line catalog sales. To date, the Company has
had only limited advertising sales (all of which have been in the form of
contributed prizes), insignificant catalog sales and no market research sales.
The Company's long-term objective is to become a leading provider of
demographic, lifestyle and consumer information. Initially, this goal will be
accomplished by attracting members through interactive entertainment
programming on the Internet. In the future, the Company intends to position
itself for the convergence of the computer and other media technologies, such
as television, into a central entertainment access vehicle with direct audience
interaction, applying the Company's data collection model to new communication
technologies as they emerge.
Initially, the Company expects that a significant portion of its revenues
will come from advertising and on-line catalog sales. The advertising will
consist of both general and targeted full-page and banner advertising on game
sites. "General" advertising is not directed at a specific audience and
"targeted" advertising is directed at a specific audience through demographic
and lifestyle filters utilizing the Company's database obtained from its
members. The Company also expects to obtain revenues from on-line sales of
products of the various sponsors. Sales will be made only to individuals who
have registered to play games.
INDUSTRY BACKGROUND
CREATION OF A MASS COMMUNICATION MEDIUM
The Internet is a world wide collection of computer networks made up of
millions of private and public computers linked through the World Wide Web (the
"Web"). The Internet was initially used by academic institutions and
government agencies for quick and efficient communication. The proliferation
of personal computers, along with technological advances and the development of
graphical browsers, have allowed for the commercialization of the Internet.
The Internet provides an interactive environment that allows for the exchange
of graphic and textual information to millions of users. Through the
development and acceptance of Web browsers and search engines, the Internet has
become easily accessible.
Rapid growth in the number of Internet users has resulted in the
development of an emerging new mass communications medium. Industry sources
estimate the current number of households in the United States using the
Internet to be 15 million, which is approximately 15% of the 99 million
households in the United States. According to information published by
International Data Corporation, the projected number of Internet users by the
year 1999 is 200 million.
ADVERTISING ON THE INTERNET
According to Jupiter Communications, more than 900 Web sites offer
advertising space. The current advertising model on the Internet involves
banner advertisements that deliver a message to a general audience. The
advertiser is charged for the number of times the banner is viewed
("impressions"). New improvements to the current banner advertising model
include targeted audience delivery of the advertiser's message. Internet
advertising generated approximately $267 million in 1996. Jupiter
Communications projects Internet advertising revenue to reach $5 billion
annually by the year 2000. Of the Internet sites which generated advertising
revenue in 1996, Jupiter Communications reported that the top ten sites in the
third quarter accounted for approximately 64% of all revenue. These sites were
Netscape, Yahoo!, Infoseek, Excite, Lycos, CNET,
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WebCrawler, ZDNet, Magellan and ESPNet (SportsZone). Web advertisers include
Ford Motor Company, Toyota, Colgate, Proctor and Gamble, Microsoft, Pizza Hut,
ESPN and Levi Strauss. (Source: Jupiter Communications).
Management believes that advertisers desire more responsive and accountable
advertising systems for use on the Internet. General advertising message
delivery to unqualified audiences through "push" advertising is being largely
replaced with targeted message delivery to interested and qualified audiences
through "pull" advertising. "Push" advertisements are aimed at general
audiences and require no interaction with the advertiser. "Pull"
advertisements are aimed at specific audiences of targeted user profiles that
provide the facility for audience interaction.
CATALOG SALES THROUGH THE INTERNET
Forrester Research estimates that approximately $518 million of goods and
services were purchased on-line in 1996. Forrester forecasts on-line sales for
the year 2000 to be over $6 billion. The variety of companies that sell
through the Internet include Amazon.com (books), Music BLVD, 1-800-Music Now,
C.D. World, Video Online Express, J.Crew, J.C. Penny, L.L. Bean, Spiegel, Lands
End, Dell Computers, CyberWarehouse, The Sharper Image, 1-800-Flowers, AOL and
Yahoo.
CONVERGENCE OF THE PERSONAL COMPUTER AND OTHER TECHNOLOGY ACCESS VEHICLES
The computer, the television set and other technology are forecasted to
converge, creating a central entertainment vehicle that can access multiple
entertainment media, including interactive television programming and the
Internet. In December 1996, several companies began selling products that link
the television to the Internet. This movement has the potential to radically
alter the Internet user base through expanded audience size. Access to the
Internet through the television is expected to produce a large audience and
erode traditional advertising revenues. Companies that are currently marketing
products to allow the user to access the Internet via the television include
WEBTV, Magnavox, Sony, Zenith, Akai, Bandai, Diba and Sega.
THE INTERGAMES OPPORTUNITY
The Company believes that successful Internet advertising requires direct
and meaningful interaction between buyers and sellers. The Company's
entertainment programs have been designed to allow for this interaction in a
fun environment. Advertisers will receive data based upon interaction with
consumers and potential customers through one-on-one surveys, and through the
delivery of highly targeted messages. Advertisers will also obtain sales
through the Company's on-line catalog on the Site.
MARKET RESEARCH
The Company currently offers clients two market research models and intends
to develop additional market research models in the event that the Maximum
Offering is consummated. The Company has designed an interactive survey model
in the form of a "slot machine" game that resides on the Site. Consumers
answer survey questions designed by the client and are rewarded with "tokens"
for each question completed. These tokens are then used to "spin" the slot
machine. Slot machine winners receive prizes offered by the client. The slot
machine gathers survey results and demographic information about the registered
members answering the questions. The Company also offers an e-mail survey
model that gives clients the ability to ask questions of individuals in the
DeliveryMaster database through a targeted e-mail program. Clients create
specific queries that the Company e-mails to targeted demographic profiles in
the existing DeliveryMaster database.
ADVERTISING
At present, various mediums exist for advertisers. Until the advent of the
Internet, reaching a preferred demographic profile was often difficult and
expensive. Most advertising vehicles have no mechanism for targeted message
delivery. Only through specialty publications, direct mail and other limited
media can a targeted audience be reached. Even in these situations, only a
small percent of the audience actually meet advertiser's desired profiles. The
Internet offers the ability to ask questions of the audience. By collecting
lifestyle and demographic information, a profile can be created that can be
matched with the desired audience profiles of the advertisers. This process
allows direct one-to-one message delivery to the
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actual target market. The delivery of this information can be tracked to see
which potential customers were reached, and how many times. The Company
believes that this type of tracking creates the accurate and accountable
measuring systems that advertisers are demanding.
The Company's advertising sales efforts are concentrated on consumer
product companies that desire to reach a highly targeted audience.
Advertisers are offered general market delivery and targeted market delivery.
General market delivery is available to the entire population of the Company's
registered members. Targeted market delivery offers the advertiser the
ability to use "target filters" generated through the lifestyle questions in
the registration process. By choosing multiple filters, an advertiser can
narrow the message delivery to specific audiences.
FULL-PAGE ADVERTISEMENTS. A full-page advertisement is similar to the
advertisement experienced in traditional print media and is offered to the
Company's program sponsors. The member is exposed to a scrollable, full color
advertisement. The full-page advertisement is reinforced with several banner
advertisements on succeeding pages. The prize that is awarded may also be the
sponsor's. Full-page advertisements may be either general or targeted.
Pricing of targeted advertisements is based upon the number of filters utilized
to identify the potential customer.
BANNER ADVERTISEMENTS. Banner advertisements appear on the screen while a
visitor to the Site is viewing other information. Banner advertisements may be
either targeted or general.
CUSTOMIZED ADVERTISING. The Company believes that advertising income can
be enhanced by offering specifically tailored advertising vehicles and game
programs to particular sponsors. These custom packages could involve
customizing the Company's existing advertising products and games or
integrating the Company's games into a customer's Web site. This capability,
coupled with additional target filtering, would create products meeting a
customer's own specifications.
ON-LINE CATALOG SALES
The Company offers advertisers the ability to sell products to its
registered members directly through its on-line catalog, called
PrizeCatalog-TM-. The PrizeCatalog on-line catalog may be accessed directly
at www.PrizeCatalog.com or through the Site. The products and services are
offered for sale only to the Company's registered members, and are bought by
the Company at wholesale and resold at retail or a discounted retail depending
on special promotions being run. Upon receipt of an order, the sale is
fulfilled directly by the sponsor. PrizeCatalog serves as an on-line retailer
of products and services, without a fulfillment center (the Company will keep
no inventory). PrizeCatalog has a shopping cart system and "secure server" for
purchase of any product in the catalog. Visa, MasterCard, Digicash and
CyberCash will be accepted for payment.
Management believes that catalog sales will be driven by the size of the
registered member base, their propensity for mail order and online shopping,
the depth and scope of products offered for sale and product pricing.
Management believes that depth and uniqueness of product offerings will make
PrizeCatalog attractive. In addition, because the products available for sale
will also be given away as prizes through the games, members will have constant
reinforcement of the existence and content of PrizeCatalog. The demographic
profile of the Company's registered database indicates that approximately 55%
of it members shop via mail order or online, thereby demonstrating the
propensity to purchase directly. By offering a variable schedule of discounts
and specials, the Company can create an atmosphere through PrizeCatalog that
encourages shoppers to regularly visit the Site to see what specials are coming
and when. The Company plans to market the catalog via targeted direct mail
advertisements focused on certain demographic profiles of proven mail order
buyers.
DATABASE
The DeliveryMaster-TM- database is the Company's proprietary database of
registered members and their demographic and lifestyle information. Members
must complete a one time registration profile form that asks 22 questions, such
as gender, age group, education, interests, sports, income range, occupation,
family size, marital status, hobbies, music, Internet related information,
computer system information, and personal tastes in mail-order activities.
Additional information can be gathered through pop-up questions and incentive
programs designed to reward members for providing additional information. This
profile provides a detailed demographic picture of each member. This detailed
demographic information will be used to match
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appropriate advertisers with appropriate potential buyers, giving advertisers
exposure to a very detailed and targeted market through targeting filters.
THE PROGRAMMING
The Company's primary programming design strategy is to design interactive
entertainment programming that only requires the functions contained in the
"normal" Internet browser software utilizing standard Hyper Text Markup
Language ("HTML") commands. This design strategy allows 93% of the potential
market of Internet users access to the Site. The Company has designed six
programs utilizing proprietary software. In the event the Maximum Offering is
completed, the Company intends to develop entertainment programming taking
advantage of new technology improvements and reduced restrictions on
communication speeds. Special programs will be available to those Internet
users with system capabilities that allow Java, Shockwave, streaming video and
audio and other plug-in technologies. These programs will be versions of the
HTML programs initially presented.
Management believes that the Company's Site is the first interactive
Internet site to provide both passive and moderated game programs in which
participants can win instant prizes. The Company's moderated programs provide
television-style programming in an interactive environment that allows a large
audience to "watch" the programs, with contestants being called from the
audience. In addition to the entertainment value of watching the game as a
television-style experience, there is an incentive to participate as a result
of the possibility of winning a prize. Prizes are awarded both during and at
the conclusion of each program. Below is a description of the six interactive
programs the Company has developed to date.
COMEONDOWN!!-TM- is an audience program currently offered for one hour each
week. Currently, up to 50 people can participate at one time. Management
believes that this game is the Internet's first television-style audience based
program. Contestants are randomly chosen from the audience and called into the
game for their chance to win prizes. After each round at least one new
audience member is asked to participate for his or her chance to win. Members
register for COMEONDOWN!! based on a posted schedule. Audience programming can
be scheduled for either 30 or 60 minute playtime depending on the game.
Members may enter the PLAYERSLOUNGE-TM- chat room while waiting for the next
game to start. Multiple games are involved in COMEONDOWN!! such as
TRIVIALMATTERS-TM-, PENNYWISE-TM-, and TRICTRAX-TM-.
SLOTS-OF-LUCK-TM- is an individual play program currently active on the
Site. Players play SLOTS-OF-LUCK by inserting "tokens." These tokens are
gathered while participating on the Company's Web Site. An account is
automatically kept for each member. Variable numbers of tokens are awarded at
various times for completion (win or lose) of other programs, as consolation
prizes, and for being in the PLAYERSLOUNGE chat room. Each token is good for
one try at SLOTS-OF-LUCK. Tumblers on the slot machine contain graphics of
sponsors' logos, with associated prizes for getting three of the same logos in
a row. Tokens have no monetary value. The sole vehicle for receiving tokens
is game play resulting in an incentive to play games, to receive tokens and to
spin for other prizes.
TRIVIALMATTERS-TM- is an individual play program currently active on the
Site and an audience program on COMEONDOWN!!. Ten questions are posed in a
selected category (i.e., science, geography, sports, history, entertainment).
Players' final scores are added to the prize pool. Each day's high scorer
wins a prize. Daily winners are also eligible for weekly and monthly prizes.
TRICTRAX-TM- is an individual play program and an audience play program for
COMEONDOWN!!. This program is currently inactive because of lack of a sponsor.
After selecting a category (i.e., classical, classic rock, country & western,
pop), participants are given a question and a clue. Players then download
TRICTRAX audio clips in the form of WAV files, listen to the audio clip, and
attempt to answer the question, giving the name of the artist, song name or
both. The final score is added to a TRICTRAX prize pool, from which winners
are named daily, weekly and monthly.
PENNYWISE-TM- is an individual play program and an audience play program
for COMEONDOWN!!. This program is currently inactive because of lack of a
sponsor. The participant receives a credit card and chooses a category (i.e.,
big boy's toys, trendy fashions, appliances or cars). The participant is then
given a description and shown a picture of the product. Participants must
then guess the price of the product to the nearest penny. The difference
between the answer and the exact price will be added to the credit card
account. The lowest total balance each day, week and month will win.
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SEARCHPARTY-TM- is an individual play program that is not active because of
lack of a sponsor. This Web-wide scavenger hunt requires players to track down
clues and graphics that are hidden all over the Web. Participants are given a
list of clues and riddles that help direct the participant's "surfing" of the
Web for answers to questions. SEARCHPARTY will also be available in a
children's version for educational purposes. Participants must answer the
riddle to win.
The Company currently gives away prizes donated by sponsors that have an
average retail value of $35.00. These prizes include food, clothing, music
(CD's and tapes), electronic items and computer related products. Sponsors
that have participated in TheGameMaster programs include Lisa's Gourmet Snacks,
Mayacamas Foods, Rossi Pasta, System Design Solutions, Antones Records, Olglio
Records, The Spy Exchange, West Indies Connection, Buckeye Beans, The Video
Professor, Off The Wall Magnetics and Glyph Quest.
INTELLECTUAL PROPERTY
The Company has no registered trademarks or copyrights. The Company relies
on a combination of copyright, trademark and trade secret laws and third-party
non-disclosure agreements to protect its intellectual property. A substantial
amount of uncertainty exists concerning the application of copyright laws to
the Internet, and there can be no assurance that existing laws will provide
adequate protection for the Company's original content. In addition, because
copyright laws do not prohibit independent development of similar content,
there can be no assurance that copyright laws will provide any competitive
advantage to the Company.
Management of the Company intends to use a portion of the proceeds of this
offering to register certain trademarks and service marks owned by the Company,
including the "GameMaster" trade name. There can be no assurance that the
Company will be able to secure registration for any of its marks.
The Company intends to file patent applications with respect to certain of
its software systems, methods and related technologies, but there can be no
assurance that such applications will be granted or that any future patents
will not be challenged, invalidated or circumvented, or that the rights granted
thereunder will provide a competitive advantage for the Company. In addition,
the Company relies on certain technology licensed from third parties, and may
be required to license additional technology in the future. The Company's
ability to generate revenues from Internet commerce may also depend on data
encryption and authentication technologies that the Company may be required to
license from third parties. There can be no assurance that these third party
technology licenses will be available or will continue to be available to the
Company on acceptable commercial terms or at all. The inability to enter into
and maintain any of these technology licenses could have a material adverse
effect on the Company's business, financial condition or operating results.
Policing unauthorized use of the Company's proprietary technology and other
intellectual property rights could entail significant expense and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford the Company little or
no effective protection of its intellectual property. In addition, there can
be no assurance that third parties will not bring claims of copyright or
trademark infringement against the Company or claim that the Company's use of
certain technologies violates a patent. The Company anticipates an increase in
patent infringement claims involving Internet-related technologies as the
number of products and competitors in this market grows and as related patents
are issued. Further, there can be no assurance that third parties will not
claim that the Company has misappropriated their creative ideas or formats or
otherwise infringed upon their proprietary rights in connection with its
Internet content or programming. Any claims of infringement, with or without
merit, could be time consuming to defend, result in costly litigation, divert
management attention, require the Company to enter into costly royalty or
licensing arrangements or prevent the Company from using important technologies
or methods, any of which could have a material adverse effect on the Company's
business, financial condition or operating results.
As a publisher and a distributor of content over the Internet, the Company
also faces potential liability for defamation, negligence, copyright, patent or
trademark infringement and other claims based on the nature and content of the
materials that it publishes or distributes. Such claims have been brought, and
sometimes successfully pressed, against online services. Any imposition of
liability that is not covered by insurance or is in excess of insurance
coverage could have a material adverse effect on the Company's business,
financial condition or operating results.
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REGULATION AND LICENSES
There are strict federal and state laws regulating prize fulfillment, free
giveaways and sweepstakes. Management of the Company believes that it is in
substantial compliance with all such regulations. From time to time, the
Company's programming or prize structure may be modified to accommodate prize
fulfillment rules.
In addition, a number of legislative initiatives exist domestically and
abroad that seek to regulate the electronic collection of data about persons.
An increasing number of court cases have been brought seeking damages and
injunctive relief for actions allegedly violating so-called "rights of
privacy." The law in this area, both statutory and case law, is highly
unsettled. No assurance can be given, therefore, that the Company will be
allowed to continue to pursue existing or proposed products and services.
As a provider of Internet content, the Company is subject to the provisions
of the recently enacted Communications Decency Act (the "CDA"), which, among
other things, imposes criminal penalties on anyone that distributes "obscene"
or "indecent" material over the Internet. The manner in which the CDA will be
interpreted and enforced and its effect on the Company's operations cannot yet
be fully determined. The CDA could dampen the growth of the Internet generally
and decrease the acceptance of the Internet as an advertising medium, and could
have a material adverse effect on the Company's business, financial condition
or operating results. It is also possible that new laws and regulations will
be adopted covering issues such as privacy, copyright infringement, obscene or
indecent communications and the pricing, characteristics and quality of
Internet products and services. Application to the Internet of existing laws
and regulations governing issues such as property ownership, libel and personal
privacy is also subject to substantial uncertainty.
Other than described above, the Company is not currently subject to direct
regulation by any governmental agency in the United States, other than
regulations applicable to businesses generally.
COMPETITION
The market for Internet products and services is highly competitive and
competition is expected to continue to increase significantly. Management
estimates that there are currently over 800,000 Web sites on the Internet. The
cost of creating an Internet Web site is relatively low, thus increasing the
likelihood that competition for impressions on the Internet will become even
more intense, and that the Internet will become even more cluttered with sites,
making the Company's Site difficult to find.
There is intense competition in the sale of advertising on the Internet
among current and future providers of Web-based advertising, as well as with
other traditional media for advertising placements. According to Jupiter
Communications, more than 900 Web sites offer advertising space. See
"Business--Industry Background--Advertising on the Internet." Many of the
Company's competitors have been in existence for a longer period than the
Company and have significantly greater financial, marketing, personnel and
other resources than the Company.
Overall, the technology-focused market research industry is highly
competitive. The Company will compete directly with significant providers of
(i) analyst-based, technology-focused market research (such as Intelliquest,
Gartner Group, Inc., META Group, Inc. and Forrester Research, Inc.);
(ii) survey-based, general market research (such as A. C. Nielsen Company, NFO
Research, Inc., Information Resources, Inc. and The NPD Group, Inc.); and
(iii) analyst-based general business consulting. Although only a few of these
competitors have to date offered survey-based, technology-focused market
research that competes directly with the Company's products and services, many
of these competitors have substantially greater financial, information
gathering and marketing resources than the Company and could decide to increase
their resource commitments to the Company's market. Moreover, each of these
companies currently competes indirectly, if not directly, for funds available
within aggregate industry-wide market research budgets.
The market for computer entertainment-related products and the consumers
utilizing them is also highly competitive. The Company expects to encounter
intense competition in the computer-game entertainment field, competing with
companies which have been in existence for a longer period than the Company and
have significantly greater financial, marketing, personnel and other resources
than the Company. In addition, it is likely that competition for computer-game
entertainment products will become even more intense with the expansion of
game-related programs developed and marketed by such companies as Sony,
Nintendo and SEGA.
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EMPLOYEES
The Company currently has no employees. If the Minimum Offering is sold, the
Company intends to initially have three employees, none of whom will be
founders. If the Maximum Offering is sold, the Company intends to initially
hire ten employees, including the founders. See "Management."
PROPERTIES
The Company shares office space in Austin, Texas at no cost with CyberMall
Corporation, Inc. ("CyberMall"), an Internet service provider owned by
Roderick E. Gilchrist and Joshua E. Buettner, both officers, directors and
shareholders of the Company. The Company maintains no other physical premises.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
NAME AGE POSITION
<S> <C> <C>
Roderick E. Gilchrist 49 Chairman of the Board and Chief Executive Officer
Joshua E. Buettner 32 Chief Operating Officer and a Director
Kathleen S. Sullivan 37 Chief Financial Officer and a Director
Stephen P. Colmar 41 Secretary and a Director
David B. Foreman 37 Director
</TABLE>
RODERICK E. GILCHRIST, a founder of the Company, has been a director and
the Chief Executive Officer of the Company since October 1996. Mr. Gilchrist
is also currently President and a shareholder of CyberMall, which he
co-founded in June 1995. From September 1989 to May 1993, Mr. Gilchrist was
founder and President of LapPaq Computer Corporation. From 1987 to 1992, Mr.
Gilchrist was a divisional sales manager of Piiceon, Inc., a subsidiary of
Dynatech. Mr. Gilchrist also co-founded Australasian Memory, P/L in 1987 and
was Executive Vice President and served on the board of directors from 1987
to February 1995. Mr. Gilchrist graduated with an Applied Science Degree from
Delta College in 1972.
JOSHUA E. BUETTNER, a founder of the Company, has been a director and
the Chief Operating Officer of the Company since October 1996. Mr. Buettner
is also currently Executive Vice President and a shareholder of CyberMall,
which he co-founded in June 1995. Prior to 1995, Mr. Buettner was a student.
KATHLEEN S. SULLIVAN has been a director and the Chief Financial Officer
of the Company since October 1996. Ms. Sullivan is also currently the Chief
Financial Officer of Absolute Healthcare, a position she has held since
October 1994. Mrs. Sullivan was employed as a Certified Public Accountant
for Lockart & Associates from October 1989 to October 1994. Ms. Sullivan has
a Bachelors degree in Accounting from the University of Texas at Austin.
STEPHEN P. COLMAR has been a director and the Secretary of the Company
since October 1996. Mr. Colmar is co-founder and a principal in Colmar,
Crawford & Parkhouse, Inc., a position he has held since March 1996. Mr.
Colmar is also co-founder and a principal in Colmar & Crawford, Inc., a
position he has held since November 1993. Both of these companies are
investment banking companies. From 1980 to 1993, Mr. Colmar was President and
Chief Executive Officer of Integrated Risk Incorporated, a private investment
firm that specialized in early stage investments. Mr. Colmar founded
American Information Corp., a data processing company, in 1980 and acted as
its Chairman from 1980 to 1983. Mr. Colmar earned a Graduate degree in
Marketing from the University of Tulsa, Oklahoma School of Business. Mr.
Colmar has served as Director of American Information Corporation, Integrated
Risk Incorporated and their portfolio companies, Used Equipment Inc. and 6th
Street Productions.
DAVID B. FOREMAN has been a director of the Company since April 1997.
Mr. Foreman is also currently Executive Vice President for Lisa's Gourmet
Snacks, Inc., a national snack food company, a position he has held since
June 1996. From August 1989 to June 1995, Mr. Foreman was national marketing
and sales director for Guiltless Gourmet, a national snack food company.
From June 1995 to June 1996, Mr. Foreman was a self-employed consultant in
the snack and specialty food industry.
The following individual serves as an advisory member of the Board of
Directors of the Company:
EUGENE LOWENTHAL, PHD. is currently an independent consultant and is a
partner of Growth Capital Partners of Houston. Mr. Lowenthal has served in
senior management positions with Microelectronics and Computer Technology
Corporation (MCC) and MRI Systems Corporation and was Director of Strategic
Planning for Intel's System Division. Mr. Lowenthal also serves on the Board
of Directors of the American Institute for Learning. Mr. Lowenthal's past
directorships have included Infoglide Corporation, Reliant Data Systems and
General Computer Systems.
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EXECUTIVE AND DIRECTOR COMPENSATION
The executive officers of the Company currently receive no compensation.
In the event the Minimum Offering is completed, the executive officers will
continue to receive no compensation except for indirect compensation through
a consulting contract. See "Certain Transactions." In the event the Maximum
Offering is completed, Mr. Gilchrist and Mr. Buettner will become employees
of the Company and will initially receive a total annual compensation
package, including a performance bonus, of $90,000 each. Except for the
stock options described below, the Company does not currently compensate its
directors for their services and has no existing plan to do so.
STOCK OPTIONS
On April 13, 1997, the Company granted an option to purchase 20,000
shares of Common Stock to Mr. Foreman and an option to purchase 5,000 shares
of Common Stock to Mr. Lowenthal. The Company also granted an option to
purchase 10,000 shares of Common Stock to a sales agent of the Company who is
to become an employee of the Company upon completion of the offering. These
stock options entitle the holders to purchase the Company's Common Stock at
any time between the date of grant and April 12, 2002 at a price of $4.00 per
share.
The Company does not currently have a stock option plan and has no
current plans to adopt one. However, in order to attract competent employees
to manage future growth of the Company, it may be necessary to adopt benefit
plans that grant substantial equity interests in the Company at prices
significantly below the offering price.
EMPLOYMENT AGREEMENTS
The Company has no employment agreements with any of its employees.
CERTAIN TRANSACTIONS
In October 1996, the Company entered into an agreement with CyberMall to
design, produce and maintain the Company's Site. CyberMall has been paid
$45,645 of fees and expenses pursuant to this agreement through April 15,
1997. In the event the Maximum Offering is completed, this agreement will
terminate. In the event the Minimum Offering is completed, CyberMall will be
paid $72,000 annually for administrative services, in addition to certain
other fees and expenses. CyberMall is owned by Roderick E. Gilchrist,
Chairman of the Board and Chief Executive Officer of the Company, and Joshua
E. Buettner, Chief Operating Officer and a director of the Company.
FSF, Inc., the majority shareholder of the Company, is the holder of the
Bridge Note. The Bridge Note, which is payable upon demand and has an
outstanding principal balance as of April 15, 1997 of $62,928, will be fully
repaid with the proceeds of this offering and bears interest at 10%.
On October 1, 1996, the Company issued a total of 462,800 shares of
Common Stock to the promoters of the Company. Set forth below is the name of
each promoter, position of each such promoter with the Company, the number of
shares of Common Stock originally issued to each promoter and the
consideration received by the Company from each promoter for the shares
issued to such promoter. Other than the shares of Common Stock shown below,
and except as otherwise described in this Prospectus, no promoter has
received anything of value from the Company. The persons listed in the table
below are the only promoters of the Company.
Promoter Position Shares Consideration
- -------- -------- ------ -------------
Roderick E. Gilchrist Chairman of the Board 178,000 $1,780
and Chief Executive Officer
Joshua E. Buettner Chief Operating Officer 178,000 $1,780
and a Director
Kathleen S. Sullivan Chief Financial Officer 53,400 $ 534
and a Director
Stephen P. Colmar Secretary and a Director 53,400 $ 534
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PRINCIPAL SHAREHOLDERS
The following table sets forth as of the date of this Prospectus certain
information with respect to the beneficial ownership of the Common Stock by
(i) each person who is known by the Company to be the beneficial owner of
more than 5% of the outstanding shares of Common Stock of the Company, (ii)
each of the Company's directors, and (iii) all directors and executive
officers of the Company as a group. Unless otherwise indicated, each of the
shareholders listed below has sole voting and investment power with respect
to the shares of Common Stock beneficially owned.
<TABLE>
PERCENTAGE OF PERCENTAGE OF
SHARES PERCENTAGE OF COMMON SHARES COMMON SHARES
BENEFICIALLY COMMON SHARES HELD IF HELD IF
OWNED BEFORE HELD BEFORE MINIMUM MAXIMUM
NAME AND ADDRESS OFFERING OFFERING OFFERING IS SOLD OFFERING IS SOLD
- ---------------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
FSF, Inc. (1) 427,200 47.5% 42.7% 32.9%
Joshua E. Buettner (2) 160,200 17.8% 16.0% 12.3%
Roderick E. Gilchrist (2)(3) 132,307 14.7% 13.2% 10.2%
Kathleen S. Sullivan (2)(4) 480,600 53.4% 48.1% 37.0%
Stephen P. Colmar (2)(5) 53,400 5.9% 5.3% 4.1%
Jodi Lynn Gilchrist (6) 45,693 5.1% 4.6% 3.5%
David B. Foreman (7) 20,000 2.2% 2.0% 1.5%
All executive officers and
directors as a group (5 persons)
(3)(4)(5)(7) 846,507 92.0% 83.0% 64.1%
</TABLE>
- ----------------------
(1) The address of FSF, Inc. is 2525 Wallingwood, Suite 1-B, Austin, Texas
78746.
(2) The address of the officers of the Company is 3321 Westlake Drive,
Austin, Texas 78746.
(3) Includes 96,120 shares owned by Mr. Gilchrist's spouse, but does not
include 45,693 shares owned by Mr. Gilchrist's adult daughter, as to
which shares Mr. Gilchrist disclaims beneficial ownership.
(4) Includes 427,200 shares which Ms. Sullivan may be deemed to
beneficially own by virtue of her ownership of the only outstanding
voting shares of common stock of FSF, Inc. and her position as the
sole director, President, Secretary and Treasurer of FSF, Inc. Also
includes 10,000 shares owned by each of her children.
(5) Includes 13,350 shares owned by Mr. Colmar's spouse and 6,675 shares
owned by each of his children.
(6) Ms. Gilchrist is Roderick E. Gilchrist's daughter. Her address is
5141 Ganymede Drive, Austin, Texas 78727.
(7) Includes 20,000 shares underlying a currently exercisable option to
purchase Common Stock.
DESCRIPTION OF SECURITIES
AUTHORIZED SHARES
The authorized capital stock of the Company consists of 8,000,000 shares
of Common Stock and 2,000,000 shares of preferred stock.
COMMON STOCK
As of the date of the Prospectus, there were 900,000 shares of Common
Stock outstanding and held of record by 18 shareholders. All of these shares
were offered and sold in private transactions in reliance on an exemption
from registration under the Securities Act. Accordingly, such shares are
"restricted securities" as defined by Rule 144 under the Securities Act and
cannot be resold without registration except in reliance on Rule 144 or
another applicable exemption from registration. Each share of Common Stock
entitles the holder to one vote on all matters submitted to a vote of the
stockholders. Since the holders of Common Stock do not have cumulative voting
rights, holders of more than 50% of the
28
<PAGE>
outstanding shares can elect all of the directors of the Company, and holders
of the remaining shares by themselves cannot elect any directors. Holders of
Common Stock will be entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company,
holders of the Common Stock have the right to a ratable portion of the assets
remaining after payment of liabilities. All shares of Common Stock
outstanding and to be outstanding upon completion of this offering are and
will be fully paid and non-assessable.
PREFERRED STOCK
The Company is authorized to issue up to 2,000,000 shares of preferred
stock, par value of $0.10 per share, in one or more series, with such voting
powers, or without voting powers, and with such designations, preferences and
relative participating optional or other special rights, qualifications,
limitations or restrictions, as shall be set forth in resolutions providing
for the issue thereof adopted by the Board of Directors. No preferred stock
is currently outstanding.
TRANSFER AGENT AND ANNUAL REPORT
The Company will serve as its own transfer agent for its Common Stock.
Each year, the Company will prepare and distribute to shareholders an annual
report which describes the nature and scope of the Company's business and
operations for the prior year and contains a copy of the Company's audited
financial statements for its most recent fiscal year. Because of the
development stage of the Company, however, there will be no annual report
issued until after December 31, 1997, the Company's first full year of
operations.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have 1,000,000 shares
of Common Stock outstanding if the Minimum Offering is sold, and 1,300,000
shares of Common Stock outstanding if the Maximum Offering is sold. Of these
shares, 100,000 shares (assuming the Minimum Offering is sold) and 400,000
shares (assuming the Maximum Offering is sold) will be freely tradeable
without restriction or further registration under the Securities Act, except
for shares purchased by "affiliates" of the Company, which will be subject to
the resale limitations of Rule 144 under the Securities Act. As defined in
Rule 144, an affiliate of an issuer is a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with, such issuer, and generally includes members of the Board
of Directors and senior management.
The remaining outstanding shares (the "Restricted Shares") are deemed
"restricted securities" under Rule 144 in that they were originally issued
and sold by the Company in private transactions in reliance upon an exemption
under the Securities Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell within any three-month
period Restricted Shares that were acquired from the Company or an
"affiliate" of the Company not less than one year before the sale, in an
amount that does not exceed the greater of 1% of the then outstanding shares
of Common Stock (13,000 shares based on the number of shares to be
outstanding after the offering, if the Maximum Offering is sold) or the
average weekly trading volume in the public market during the four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner and notice of sale and the availability of
public information concerning the Company. A person (or persons whose shares
are aggregated) who is not an "affiliate" of the Company at the time of sale
and has not been such an "affiliate" at any time during the three months
preceding such sale, and whose Restricted Shares were acquired from the
Company or an affiliate of the Company at least two years before the sale
would be entitled to sell such shares under Rule 144 without regard to the
volume limitations, manner-of-sale provisions, notice or public information
requirements described above. Rule 144A under the Securities Act permits the
immediate sale by the current holders of Restricted Shares of all or a
portion of their shares to certain qualified institutional buyers as defined
in Rule 144A.
As of the date of this Prospectus, options to purchase 35,000 shares of
the Company's Common Stock are outstanding, all of which are currently
exercisable. See "Management--Stock Options." Shares of Common Stock issued
29
<PAGE>
upon exercise of such options will be restricted securities under Rule 144,
and must be sold in accordance with the provisions thereof.
No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
shares in the public market could adversely affect market prices of the
shares and make it more difficult for the Company to sell equity securities
in the future at a time and price which it deems appropriate.
PLAN OF DISTRIBUTION
The Company is offering to sell, on a best efforts basis, a minimum of
100,000 shares and a maximum of 400,000 shares of its Common Stock at an
initial public offering price of $5.00 per share. The offering will begin on
the date of this Prospectus and continue until either the Maximum Offering
has been sold or the Company terminates the offering, unless the Minimum
Offering is not sold within 60 days from the date of this Prospectus (which
period may be extended, at the Company's discretion, for up to three
additional 30-day periods), in which case the offering will immediately
terminate.
The Company plans to offer and sell the shares directly to investors who
reside in selected states and has not retained any underwriters, brokers or
placement agents in connection with the offering. The Company reserves the
right, however, to use brokers or placement agents and could pay commissions
equal to as much as 5% of the gross proceeds. The Company intends to contact
prospective investors by publicizing the offering through a posting on the
Company's Site. The Company also intends to publicize the offering through
newspaper advertisements, trade shows and through private meetings. The
Company also intends to contact additional potential investors by direct
e-mail and regular mail solicitation. Clifford L. Haigler, Assistant
Secretary of the Company, will conduct the offering on behalf of the Company.
Shares may be purchased by completing and delivering the Company's
Subscription Agreement along with the purchase price by check to the Company.
A copy of the Subscription Agreement is attached at the end of this
Prospectus at page x-1. Within 10 days of its receipt of a Subscription
Agreement accompanied by a check for the purchase price, the Company will
send by electronic mail or first class mail a written confirmation to notify
the subscriber of the extent, if any, to which such subscription has been
accepted by the Company.
All subscription proceeds will be deposited by the Company into the
Escrow Account. If the Initial Closing does not occur, all proceeds held in
the Escrow Account will be returned by the Company to the investors without
interest. Upon consummation of the Initial Closing, investors will be sent
stock certificates representing the number of shares they have purchased.
After the Initial Closing, proceeds of additional subscriptions will be
deposited into the Escrow Account pending Subsequent Closings. All of the
proceeds held in the Escrow Account, including interest thereon, will be
disbursed after each closing to the Company's general account. Subsequent
Closings will occur from time to time until the Maximum Offering has occurred
or the Company has elected to terminate the offering. In either of such
events, any subscriptions not accepted by the Company will be returned to the
subscriber without interest. See "Use of Proceeds."
The offering price of the shares was determined arbitrarily by the
Company, and should not be considered as an indication of the actual value of
the Company. In determining the offering price, the Company considered,
among other things, the Company's lack of operating history, its limited
financial resources, its growth and profit potential, the amount of dilution
to investors in the offering and the risk of investing in the Company.
There is no public trading market for the Company's Common Stock and
there can be no assurance that an active public market will develop in the
near future as a result of this offering. The Company's long-term plan for
providing liquidity to its shareholders is to develop a public market for its
Common Stock by developing a mechanism on the Internet for trading of its
Common Stock. The Company has not solicited any securities brokers to become
market-makers of the shares, nor does the Company have current plans to do so.
30
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares offered hereby will be passed
upon for the Company by Winstead Sechrest & Minick P.C., Austin, Texas.
EXPERTS
The financial statements included in this Prospectus and in the
Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their report (which contain an explanatory paragraph regarding the Company's
ability to continue as a going concern) appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
31
<PAGE>
INTERGAMES, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants F - 2
Balance Sheets F - 3
Statements of Loss During the Development Stage F - 4
Statements of Stockholders' Deficit F - 5
Statements of Cash Flows F - 6
Summary of Significant Accounting Policies F - 7
Notes to Financial Statements F - 9
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
InterGames, Inc.
Austin, Texas
We have audited the accompanying balance sheet of InterGames, Inc. as of
December 31, 1996, and the related statements of loss during the development
stage, stockholders' deficit, and cash flows for the period from inception
(October 1, 1996) through 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of InterGames, Inc. at
December 31, 1996 and the results of its operations and its cash flows for the
period from inception (October 1, 1996) through December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage, has not achieved
its planned level of operations or realized significant revenues and has
incurred losses. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
BDO SEIDMAN, LLP
Austin, Texas
March 18, 1997
F-2
<PAGE>
INTERGAMES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31, March 31,
1996 1997
------------ -----------
(UNAUDITED)
ASSETS
Current assets:
Cash $ 554 $ 562
Computer equipment, less accumulated depreciation
of $59 and $237 3,470 3,292
Computer software, less accumulated amortization
of $837 and $3,347 (Note 2) 29,308 35,798
-------- --------
Total assets $ 33,332 $ 39,652
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Stockholder loan (Note 2) $ 33,928 $ 56,928
Accrued expenses 1,508 1,783
-------- --------
Total current liabilities 35,436 58,711
-------- --------
Long-term debt -
Contingency (Note 1)
Stockholders' deficit:
Preferred stock, $0.10 par value; 2,000,000
shares authorized; none issued -
Common stock, $0.01 par value; 8,000,000 shares
authorized 9,000 9,000
Additional paid-in capital (Note 4) 25,875 51,725
Deficit accumulated during the development stage (36,979) (79,784)
-------- --------
Total stockholders' deficit (2,104) (19,059)
-------- --------
Total liabilities and stockholders' deficit $ 33,332 $ 39,652
-------- --------
-------- --------
See accompanying summary of significant accounting
policies and notes to financial statements.
F-3
<PAGE>
INTERGAMES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF LOSS DURING THE DEVELOPMENT STAGE
<TABLE>
For the period
from inception Three months
(October 1, 1996) to ended Since
December 31, 1996 March 31, 1997 Inception
-------------------- -------------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Advertising fees $ - $ - $ -
Advertiser contributed prizes 5,635 25,200 30,835
-------- -------- --------
Total Revenue $ 5,635 $ 25,200 $ 30,835
-------- -------- --------
EXPENSES:
Prize fulfillment 6,635 28,700 35,335
Professional services 8,000 7,250 15,250
Depreciation and amortization 896 2,688 3,584
General and administrative (Note 4) 25,875 25,850 51,725
Interest expense and other 1,208 3,517 4,725
-------- -------- --------
Total Expenses $ 42,614 $ 68,005 $110,619
-------- -------- --------
Net loss during the development stage $(36,979) $(42,805) $(79,784)
-------- -------- --------
-------- -------- --------
Loss per common share $ (0.04) $ (0.05)
-------- --------
-------- --------
Weighted average number of common
shares outstanding 907,000 907,000
-------- --------
-------- --------
</TABLE>
See accompanying summary of significant accounting
policies and notes to financial statements.
F-4
<PAGE>
INTERGAMES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
Deficit
Accumulated
Common Stock Additional During the
------------------ Paid-In Development
Shares Amount Capital Stage Total
------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Issuance of common stock at
inception (October 1, 1996) 900,000 $9,000 $ - $ - $ 9,000
Services contributed by stockholders
(Note 4) - - 25,875 - 25,875
Net loss during the development
stage - - - (36,979) (36,979)
------- ------ ------- -------- --------
Balance at December 31, 1996 900,000 $9,000 $25,875 $(36,979) $ (2,104)
Service contributed by stockholders
(unaudited) - - 25,850 - 25,850
Net loss during the development
stage (unaudited) - - - (42,805) (42,805)
------- ------ ------- -------- --------
Balance at March 31, 1996
(unaudited) 900,000 $9,000 $51,725 $(79,784) $(19,059)
------- ------ ------- -------- --------
------- ------ ------- -------- --------
</TABLE>
See accompanying summary of significant accounting
policies and notes to financial statements.
F-5
<PAGE>
INTERGAMES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
For the period
from inception Three months
(October 1, 1996) to ended Since
December 31, 1996 March 31, 1997 Inception
-------------------- -------------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss during the development stage $(36,979) $(42,805) $(79,784)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 896 2,688 3,584
Services contributed by stockholders
(Note 4) 25,875 25,850 51,725
Changes in assets and liabilities:
Accrued expenses 1,508 275 1,783
-------- -------- --------
Net cash used in operating activities $ (8,700) $(13,992) $(22,692)
-------- -------- --------
INVESTING ACTIVITIES:
Purchase of computer equipment (3,529) - (3,529)
Computer software (30,145) (9,000) (39,145)
-------- -------- --------
Net cash used in investing activities $(33,674) $ (9,000) $(42,674)
-------- -------- --------
FINANCING ACTIVITIES:
Issuance of common stock 9,000 - 9,000
Proceeds from stockholder loan 33,928 23,000 56,928
-------- -------- --------
Net cash provided by financing activities 42,928 23,000 65,928
-------- -------- --------
Net increase in cash 554 8 562
Cash beginning of period - 554 -
-------- -------- --------
Cash, end of period $ 554 $ 562 $ 562
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying summary of significant accounting
policies and notes to financial statements.
F-6
<PAGE>
INTERGAMES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
InterGames, Inc. (the "Company") was incorporated on October 1, 1996 in
the state of Texas. The Company is engaged in the creation, design,
development and operation of an interactive entertainment site on the Internet.
The content of this entertainment site is used as a vehicle to carry consumers
through an interactive demographic and lifestyle data collection model,
developed by the Company, which offers advertisers the ability to both target
their message to the desired audience, obtain marketing information, and make
product sales directly via an online catalogue.
The Company operates an Internet interactive entertainment web site from
its headquarters in Austin, Texas. The web site can be accessed on the
Internet at www.TheGameMaster.com. At the web site, users may play a variety
of video type games at no charge. The Company awards prizes to players based
on their performance. Prizes are contributed by various advertisers.
The Company generates revenues from fees for advertising, marketing
research and retail sales through the prize catalog. While anyone in the world
with access to the Internet may play, most users are located in the United
States and Canada.
To date, substantially all of the Company's efforts have been devoted to
marketing, research and software development. The Company is in the
development stage and has not achieved its planned level of operations or
realized significant revenues.
BASIS OF PRESENTATION
The accompanying balance sheet as of March 31, 1997 and the statements of
operations and cash flows for the three months ended have not been audited.
However, in the opinion of management, they include all adjustments necessary
for a fair presentation of the financial position and the results of operations
for the period presented. The results of operations for the three months ended
March 31, 1997 are not necessarily indicative of results to be expected for any
future period.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues from services are recognized as services are rendered.
COMPUTER EQUIPMENT
Equipment is stated at cost. Depreciation is computed on the straight-
line method over the estimated useful lives of the assets (5 years).
Expenditures that increase the value or extend the life of an asset are
capitalized, while
F-7
<PAGE>
costs of maintenance and repairs are expensed as incurred. Gains or losses on
disposals of assets are recognized upon disposition.
COMPUTER SOFTWARE
Internally developed game software is stated at cost. Amortization is
computed on the straight-line method over the estimated useful life of the
software (3 years). Game software is periodically assessed for impairment of
value and any loss is recognized upon impairment.
INCOME TAXES
The Company follows the liability method of accounting for income taxes as
required by Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR
INCOME TAXES. This method provides deferred income taxes based on enacted
income tax rates in effect on the dates on which temporary differences between
the financial reporting and tax bases of assets and liabilities are expected to
reverse. The effect on deferred tax assets and liabilities of a change in
income tax rates is recognized in the period in which the change is determined.
ADVERTISER CONTRIBUTED PRIZES
The Company awards prizes to players based on their performance. The non-
cash prizes are contributed to the Company by various advertisers in exchange
for advertising time on the web site. Prizes are booked as revenue at the
advertisers' respective cost when they are awarded to the players. The prizes
are simultaneously expensed at cost. As of December 31, 1996 there were no
prizes in inventory.
NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"), issued by the FASB is effective for financial statements for
fiscal years beginning after December 15, 1997. This pronouncement provides a
different method of calculating earnings per share than is currently used in
accordance with APB 15, "Earnings per Share." SFAS 128 provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per share
includes no dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity. Management does not
anticipate a significant impact on earnings per share as a result of
implementing SFAS 128.
LOSS PER COMMON SHARE
Loss per common share is computed by dividing net loss by the weighted
average number of common shares and common share equivalents outstanding (if
dilutive) during each period. Stock options granted on April 13, 1997, at a
price less than the expected initial public offering price, are treated as
outstanding for all periods presented
F-8
<PAGE>
INTERGAMES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(1) GOING CONCERN UNCERTAINTY AND MANAGEMENT'S PLANS
The Company's financial statements have been presented on the basis that
it is a going concern which contemplates the realization of assets and the
satisfaction of liabilities in the usual course of business. The Company is in
the development stage and has not achieved its planned level of operations or
realized significant revenues and has incurred significant losses.
The Company's continued existence is dependent upon its ability to obtain
additional financing as contemplated by the proposed offering of its common
stock, and ultimately profitable operations.
Although it cannot be assured that the Company will be able to continue as
a going concern, management believes the Company's proposed stock offering and
its plans to achieve profitability should enable the Company to meet its
obligations and sustain its operations. If the Company's proposed stock
offering should prove to be unsuccessful, the Company would renegotiate
existing lending arrangements and reduce its expenditures on promotion and
administration to preserve cash liquidity.
(2) RELATED PARTY TRANSACTIONS
GAME SOFTWARE AND OFFICE SPACE
The Company developed the Internet site and the associated game software
at a cost of $30,145 pursuant to an agreement with a corporation which is
controlled by two of the Company's officers. The Company also shares
office space in Austin, Texas at no cost with this related corporation
(see Note 4).
STOCKHOLDER LOAN
On October 1, 1996, the Company received an unsecured loan from a
stockholder. Subsequent to December 31, 1996, the loan was assigned by
the stockholder to a corporation controlled by an officer of the Company.
The balance of this loan was $33,928 at December 31, 1996. The stated
annual interest rate is 10% and the loan is due on demand. Accrued
interest as of December 31, 1996 was $508.
(3) INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The tax effects of significant items comprising the Company's net deferred
tax assets are as follows:
December 31, 1996 March 31, 1997
----------------- --------------
(UNAUDITED)
Deferred tax assets (liabilities):
Net operating loss carryforward $ 12,613 $ 27,220
Fixed assets (40) (94)
-------- --------
$ 12,573 $ 27,126
Valuation allowance (12,573) (27,126)
-------- --------
Total $ - $ -
-------- --------
-------- --------
F-9
<PAGE>
INTERGAMES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
At December 31, 1996 the Company had available for federal income tax
purposes approximately $32,000 of net operating loss carryforwards. This
potential future tax benefit will expire in the year 2011. Under the Tax
Reform Act of 1986, as amended, an annual limitation will be placed on the
amount of net operating loss carryforwards which may be utilized if there are
substantial changes in the ownership of the Company.
In accordance with the provisions of SFAS No. 109 "Accounting for Income
Taxes", management has elected to record a valuation allowance to offset
deferred tax assets generated by the net operating loss carryforward.
(4) SERVICES CONTRIBUTED BY STOCKHOLDERS
During 1996, certain stockholders of the Company performed services for
the Company at no cost. The estimated fair value of the contributed services
through December 31, 1996 was $25,875. In order to reflect the use of these
services in the financial statements, the Company recognized an expense of
$25,875, and a related increase to additional paid-in capital.
(5) SUBSEQUENT EVENTS
Subsequent to December 31, 1996, a principal stockholder assigned 427,200
common shares (par value $0.01 per share) to a corporation which is controlled
by an officer of the Company. This principal shareholder did, however, retain
beneficial ownership of the shares.
In March 1997, the stockholder loan discussed in Note 2 was assigned to a
corporation which is controlled by an officer of the Company.
On April 13, 1997, the Company granted an option to purchase 25,000 shares
of common stock in the aggregate to two executives of the Company. The Company
also granted an option to purchase 10,000 shares of common stock to a sales
agent. These stock options entitle the holders to purchase the Company's
common stock at any time between the date of grant and April 12, 2002 at a
price of $4.00 per share.
(6) RISKS AND UNCERTAINTIES
The Company's future success is substantially dependent upon continued
growth in the use of the Internet and the Web. The market for Internet
products and services is highly competitive and competition is expected to
continue to increase significantly. Because the Company expects to derive a
substantial portion of its revenues from advertising, the future success of the
Company is highly dependent on the development of the Internet as an
advertising medium.
F-10
<PAGE>
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
No dealer, salesman or any other 400,000 SHARES
person is authorized to give any
information or to make any
representations not contained in
this Prospectus in connection with
the offering covered by this
Prospectus. If given or made, such
information or representations must INTERGAMES, INC.
not be relied upon as having been
authorized by the Company. This
Prospectus does not constitute an
offer to sell, or a solicitation of
an offer to buy, the Shares where,
or to any person to whom, it is COMMON STOCK
unlawful to make such offer or
solicitation. Neither the delivery
of this Prospectus nor any sale
made hereunder shall, under any
circumstances, create an
implication that there has not been
any change in the facts set forth
in this Prospectus or in the
affairs of the Company since the
date hereof.
Until ____________, 1997 (25
calendar days after the date of
this Prospectus), all dealers
effecting transactions in the
Shares, whether or not
participating in this distribution,
may be required to deliver a
Prospectus.
_______________
TABLE OF CONTENTS
PAGE
Available Information 2
Prospectus Summary 3 _______________
Risk Factors 7
Determination of Offering Price 13 PROSPECTUS
Limited State Registration 13 _______________
Use of Proceeds 14
Dividend Policy 14
Dilution 15
Capitalization 17
Plan of Operation 18
Business 19
Management 26
Certain Transactions 27
Principal Shareholders 28 ____________, 1997
Description of Securities 28
Shares Eligible for Future Sale 29
Plan of Distribution 30
Legal Matters 31
Experts 31
Index to Financial Statements F-1
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Texas Business Corporation Act ("TBCA") provides that a corporation may
indemnify any of its directors and officers against liability in connection
with a proceeding if (i) the director or officer acted in good faith; (ii) in
the case of conducting an official capacity, the director or officer reasonably
believed that his or her conduct was in the corporation's best interest;
(iii) in all other cases, the director or officer reasonably believed that his
or her conduct was not opposed to the corporation's best interests; and (iv) in
connection with any criminal proceeding, the director or officer had no
reasonable cause to believe his or her conduct was unlawful. However, the TBCA
provides that no indemnification may be made if the director or officer was
(i) found liable on the basis that personal benefit was improperly received by
him or her, whether or not the benefit resulted from an action taken in the
person's official capacity or (ii) was found liable to the corporation. No
indemnification may be made in respect of any proceeding in which the director
or officer was found liable for willful or intentional misconduct on the
performance of his or her duty to the corporation. In cases where the director
or officer is wholly successful, on the merits or otherwise, in the defense of
any proceeding instigated because of his or her status as an officer or
director of a corporation, the TBCA mandates that the corporation indemnify the
director or officer against reasonable expenses incurred by him or her in the
proceeding. Notwithstanding the foregoing, the TBCA provides that a court of
competent jurisdiction, upon application, may order that an officer or director
be indemnified for reasonable expenses actually incurred, if, in consideration
of all relevant circumstances, the court determines that such individual is
fairly and reasonably entitled to indemnification, notwithstanding the fact
that (i) he or she was adjudged liable to the corporation or (ii) he or she was
adjudged liable on the basis that personal benefit was improperly received by
him or her.
The Company's Articles of Incorporation provides that to the fullest extent
permitted by Texas law, no director shall be personally liable to the Company
or its shareholders for monetary damages for acts or omissions that occur in
the directors' capacity as directors, except for acts or omissions for (i) a
breach of the duty of loyalty to the Company or its shareholders; (ii) a bad
faith breach of a director's duty to the Company, intentional misconduct, or a
knowing violation of the law; or (iii) transactions from which a director
received an improper benefit, whether or not the benefit resulted from an
action taken within the scope of the director's office. Under the TBCA this
provision on the Articles of Incorporation relieves the Company's directors
from personal liability to the Company or its shareholders for monetary damages
for breach of fiduciary duty as a director, except for liability arising from a
judgment or other final adjudication establishing (i) any breach of the
directors duty of loyalty; (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; or
(iii) transactions in which the director received an improper benefit. In
addition, subject to the same provisions set forth above, the Company's Bylaws
provide that persons employed by or agents of the Company may be indemnified to
the same extent as directors of the Company.
II-1
<PAGE>
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 hereby. All amounts
are estimated except the Commission registration fee.
Minimum Maximum
------- --------
SEC registration fee $ 606 $ 606
Blue Sky fees and expenses 5,000 8,000
Accounting fees and expenses 10,000 15,000
Legal fees and expenses 43,000 60,000
Printing and engraving expenses 5,000 5,000
Registrar and transfer agent's fees N/A N/A
Miscellaneous fees and expenses 11,394 21,394
------- --------
Total $75,000 $110,000
------- --------
------- --------
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On October 1, 1996, the Company issued 900,000 shares of its Common Stock
to the current shareholders of the Company for $9,000 cash, pursuant to the
organization of the Company. Such issuance was made under the exemption
provided for in Section 4(a) of the Securities Act of 1933, as the sale was
not made in a public or underwritten offering.
On April 13, 1997, the Company granted immediately exercisable options to
purchase 35,000 shares of the Company's Common Stock. The options, 20,000 of
which were issued to Mr. David Foreman, a director of the Company, 10,000 of
which were issued to Mr. Steve Cox, a sales consultant to the Company, and
5,000 of which were issued to Mr. Eugene Lowenthal, an advisory director to
the Company, entitle the holders to purchase the underlying shares of Common
Stock at any time before April 12, 2002 at a price of $4.00 per share.
II-2
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
3.1(1) Articles of Incorporation of InterGames, Inc.
(the "Company")
3.2(1) Bylaws of the Company
4.1(2) Form of Certificate evidencing Common Stock
5(2) Opinion of Winstead Sechrest & Minick P.C.
10.1(2) Development and Maintenance Agreement by and
between the Company and CyberMall Corporation, Inc.,
dated October 15, 1996.
10.2(1) Form of Stock Option Agreement
23.1(2) Consent of BDO Seidman, LLP
23.2(2) Consent of Winstead Sechrest & Minick P.C.
24(1) Power of Attorney
27(2) Financial Data Schedule
- -------------
(1) Filed herewith
(2) To be filed by amendment
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officer and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Company
pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the
time it was declared effective.
(ii) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new
II-3
<PAGE>
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.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Austin, State of Texas, on May 2, 1997.
INTERGAMES, INC.
By: /s/ Roderick E. Gilchrist
------------------------------
Roderick E. Gilchrist
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears below
hereby constitutes and appoints Roderick E. Gilchrist and Kathleen S. Sullivan
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/Roderick E. Gilchrist Chairman of the Board and May 2, 1997
- --------------------------- Chief Executive Officer
Roderick E. Gilchrist
/s/Joshua E. Buettner Director, Chief Operating Officer May 2, 1997
- ---------------------------
Joshua E. Buettner
/s/Kathleen S. Sullivan Director, Chief Financial Officer May 2, 1997
- ---------------------------
Kathleen S. Sullivan
/s/Stephen P. Colmar Director, Secretary May 2, 1997
- ---------------------------
Stephen P. Colmar
/s/David B. Foreman Director May 2, 1997
- ---------------------------
David B. Foreman
II-4
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Intergames, Inc.
Austin, Texas
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 18, 1997, relating to the
financial statements of Intergames, Inc., which is contained in that
Prospectus. Our report contains an explanatory paragraph regarding the
Company's ability to continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
(Signed Manually)
BDO SEIDMAN, LLP
Austin, Texas
May 1, 1997
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
3.1(1) Articles of Incorporation of InterGames, Inc.
(the "Company")
3.2(1) Bylaws of the Company
4.1(2) Form of Certificate evidencing Common Stock
5(2) Opinion of Winstead Sechrest & Minick P.C.
10.1(2) Development and Maintenance Agreement by and
between the Company and CyberMall Corporation, Inc.,
dated October 15, 1996.
10.2(1) Form of Stock Option Agreement
23.1(2) Consent of BDO Seidman, LLP
23.2(2) Consent of Winstead Sechrest & Minick P.C.
24(1) Power of Attorney
27(2) Financial Data Schedule
- -------------
(1) Filed herewith
(2) To be filed by amendment
II-6
<PAGE>
ARTICLES OF INCORPORATION
OF
INTERGAMES, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as sole incorporator of a corporation under the provisions of the Texas
Business Corporation Act, adopts the following Articles of Incorporation:
ARTICLE 1
The name of the Corporation is InterGames, Inc.
ARTICLE 2
The period of duration of the Corporation is perpetual.
ARTICLE 3
The purpose for which the Corporation is organized is the transaction of
any or all lawful business.
ARTICLE 4
The aggregate number of shares of capital stock which the Corporation shall
have authority to issue is ten million (10,000,000) shares, composed of one
class of eight million (8,000,000) shares of Common Stock with the par value of
one cent ($0.01) per share; and another class of two million (2,000,000) shares
of Serial Preferred Stock, par value $0.10 per share. The Serial Preferred
Stock may be issued in one or more series, from time to time, at the discretion
of the Board of Directors without the necessity of stockholder approval, with
each such series to consist of such number of shares and to have such voting
powers (whether full or limited, or no voting powers) and such designations,
powers, preferences and relative, participating, optional, redemption,
conversion, exchange or other special rights, and such qualifications,
limitations or restrictions thereof, as shall be stated in the resolution or
resolutions providing for the issuance of such series adopted by the Board of
Directors, and the Board of Directors is hereby expressly vested with the
authority, to the full extent now or hereafter provided by law, to adopt any
such resolution or resolutions. Each share of any series of Serial Preferred
Stock shall be identical with all other shares of such series, except as to the
date from which dividends, if any, shall accrue. The Board of Directors shall
have the power and authority at any time and from time to time without the
necessity of stockholder approval to issue, sell, or otherwise dispose of any
authorized and unissued shares of any class of stock of the Corporation to such
persons or parties, including the holders of any class of stock, for such
<PAGE>
consideration (not less than the par value, if any, thereof) and upon such terms
and conditions as the Board of Directors in its discretion may deem for the best
interests of the Corporation.
ARTICLE 5
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done or property actually
received.
ARTICLE 6
No holder of any shares of any class of stock of the Corporation shall, as
such holder, have any preemptive or preferential right to receive, purchase, or
subscribe to (1) any unissued or treasury shares of any class of stock (whether
now or later authorized) of the Corporation; (2) any obligations, evidences of
indebtedness, or other securities of the Corporation convertible into or
exchangeable for, or carrying or accompanied by any rights to receive, purchase,
or subscribe to, any such unissued or treasury shares; (3) any right of
subscription to or to receive, or any warrant or option for the purchase of, any
of the foregoing securities; (4) any other securities that may be issued or sold
by the Corporation, other than such (if any) as the Board of Directors of the
Corporation, in its sole and absolute discretion, may determine from time to
time.
ARTICLE 7
Cumulative voting by the shareholders of the Corporation at any election
for Directors is expressly prohibited. The shareholders entitled to vote for
Directors in such election shall be entitled to cast one vote per directorship
for each share held, and no more.
ARTICLE 8
Except as expressly prohibited by the Texas Business Corporation Act, any
action requiring a vote of the shareholders can be approved by the affirmative
vote of the holders of outstanding shares of the Corporation representing a
majority of the aggregate votes entitled to vote thereon, or if different
classes of stock are outstanding and if voting by different classes has been
expressly provided, then any action requiring a vote of the shareholders can be
approved by the affirmative vote of the holders of a majority of the votes of
shareholders of each class that has been granted such class voting rights.
ARTICLE 9
The directors of the Corporation will not be liable to the Corporation or
its shareholders for monetary damages for acts or omissions that occur in the
directors' capacity as directors. This article does not limit the liability of
the directors for acts or omissions for: (1) a breach of the duty of loyalty to
the Corporation or its shareholders or members; (2) a bad faith breach of
-2-
<PAGE>
a director's duty to the Corporation, intentional misconduct, or a knowing
violation of the law; (3) a transaction from which a director received an
improper benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; or (4) an act or omission for which
the liability of a director is expressly provided by an applicable statute. The
Corporation shall indemnify every proposed, present or former director, officer,
employee or agent of the Corporation, or any person who may have served at its
request in a similar capacity against judgments, penalties, fines, settlements
and all other costs, expenses or assessments to the fullest extent permitted by
law including paying expenses in advance of the final disposition of such
matter. The indemnification provided herein shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any law, bylaw, agreement, vote of stockholders or disinterested directors or
otherwise or under any policy or policies of insurance purchased and maintained
by the Corporation on behalf of any such director or officer. Any repeal or
amendment of this Article 9 shall not diminish the rights of any such directors,
officers, employee or agent or the obligations of the Corporation with respect
to any claim arising from or related to the services of such person in any of
the foregoing capacities prior to any such repeal or amendment.
ARTICLE 10
Any action required by the Texas Business Corporation Act to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of the shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted.
Every written consent signed by the holders of less than all the shares
entitled to vote with respect to the action that is the subject of the consent
shall bear the date of signature of each shareholder who signs the consent. No
written consent signed by the holders of less than all the shares entitled to
vote with respect to the action that is the subject of the consent shall be
effective to take the action that is the subject of the consent unless within 60
days after the date of the earliest dated consent delivered to the Corporation
in the manner required by this Article, a consent or consents signed by the
holder or holders of shares having not less than the minimum number of votes
that would be necessary to take the action that is the subject of the consent
are delivered to the Corporation by delivery to its registered office,
registered agent, principal place of business, transfer agent, registrar,
exchange agent or an officer or agent of the Corporation having custody of the
books in which proceedings of meetings of shareholders are recorded. Delivery
shall be by hand or certified or registered mail, return receipt requested.
Delivery to the Corporation's principal place of business shall be addressed to
the president or principal executive officer of the Corporation.
-3-
<PAGE>
A telegram, telex, cablegram, or similar transmission by a shareholder, or
photographic, photostatic, facsimile, or similar reproduction of a writing
signed by a shareholder, shall be regarded as signed by the shareholder.
Prompt notice of the taking of any action by shareholders without a meeting
by less than unanimous written consent shall be given to those shareholders who
did not consent in writing to this action.
ARTICLE 11
The address of the registered office of the Corporation is 6034 W.
Courtyard, Suite 150, Austin, Texas 78730 and the name of the initial registered
agent of the Corporation at such address is Frank Arnold.
ARTICLE 12
The initial Board of Directors shall consist of one (1) member who shall
serve as the director until the first annual meeting of shareholders or until
his successors shall have been elected and qualified and whose name and address
is as follows,
Name Address
---- -------
Donald Daniels 2525 Wallingwood Drive, #1-B
Austin, Texas 78746
ARTICLE 13
The name and address of the incorporator of the Corporation is as follows:
Name Address
---- -------
Donald Daniels 2525 Wallingwood Drive, #1-B
Austin, Texas 78746
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<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand as of this 1st day of
October, 1996.
/s/ Donald Daniels
----------------------------------
-5-
<PAGE>
BYLAWS OF
INTERGAMES, INC.
AS ADOPTED BY THE BOARD OF DIRECTORS
ON OCTOBER 24, 1996
<PAGE>
BYLAWS OF
INTERGAMES, INC.
(THE CORPORATION)
ARTICLE I
OFFICES
1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be
located at 2525 Wallingwood, Suite 1-B, Austin, Texas 78746. The Board of
Directors has full power and authority to change the principal office from one
location to another by Board Resolution and by noting the changed address and
effective date below:
------------------------------------ -----------------------
ADDRESS DATE
------------------------------------ -----------------------
ADDRESS DATE
------------------------------------ -----------------------
ADDRESS DATE
1.2 OTHER OFFICES. The Corporation may also have offices at other places
both within and without the State of Texas as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of the shareholders for the
election of directors and such other business as may properly be brought before
the meeting shall be held at such place within or without the State of Texas and
at such date and time as shall be designated by the Board of Directors and
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
2.2 FAILURE TO HOLD ANNUAL MEETING. Failure to hold any annual meeting
shall not work a dissolution of the Corporation. If the annual meeting is not
held within any 13-month period, any court of competent jurisdiction in the
county in which the principal office of the Corporation is located may, on the
application of any shareholder, summarily order a meeting to be held.
<PAGE>
2.3 SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes may be called by the Chief Executive Officer or the
President. In addition, the Secretary, at the request in writing of a majority
of the Board of Directors, or at the request in writing of shareholders owning
shares representing not less than 10% of all of the votes entitled to vote at
the meetings. A request for a special meeting shall state the purpose or
purposes of the proposed meeting, and business transacted at any special meeting
of the shareholders shall be limited to the purposes stated in the notice.
2.4 NOTICE AND WAIVER OF NOTICE.
(a) Written notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than
fifty days before the date of the meeting in accordance with the provisions
for giving notice contained at Section 9.5 of these Bylaws by or at the
direction of the Chief Executive Officer, President or the Secretary to
each shareholder of record entitled to vote at such meeting.
(b) Notice may be waived in writing signed by the person or persons
entitled to such notice. Such waiver may be executed at any time before or
after the holding of such meeting. Attendance at a meeting shall
constitute a waiver of notice, except where the person attends for the
express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called.
2.5 RECORD DATE. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or entitled to receive payment of any dividend, the Board of Directors may in
advance establish a record date which must be at least ten but not more than
fifty days prior to such meeting. If the Board of Directors fails to establish
a record date, the record date shall be the date on which notice of the meeting
is mailed.
2.6 VOTING LIST.
(a) The officer or agent having charge of the stock transfer books
for shares of the Corporation shall make, at least ten days before each
meeting of shareholders, a complete list of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each, which
list, for a period of ten days prior to such meeting, shall be kept on file
at the registered office of the Corporation and shall be subject to
inspection by any shareholder at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting. The original stock transfer book shall be
prima-facie evidence as to who are the shareholders entitled to examine
such list or transfer books or vote at any meeting of shareholders.
-2-
<PAGE>
(b) Failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting.
(c) An officer or agent having charge of the stock transfer books who
shall fail to prepare the list of shareholders or keep the same on file for
a period of ten days or produce and keep it open for inspection as provided
in this section, shall be liable to any shareholder suffering damage on
account of such failure, to the extent of such damage. In the event that
such officer or agent does not receive notice of a meeting of shareholders
sufficiently in advance of the date of such meeting reasonably to enable
him to comply with the duties prescribed by these Bylaws, the Corporation,
but not such officer or agent shall be liable to any shareholder suffering
damage on account of such failure, to the extent of such damage.
2.7 QUORUM OF SHAREHOLDERS. The holders of issued and outstanding shares
representing a majority of votes entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or the Articles of Incorporation; furthermore, such majority, present in
person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting. At such
adjourned meeting, provided a quorum shall be present or represented thereat,
any business may be transacted which might have been transacted if the meeting
had been held in accordance with the original notice thereof.
2.8 WITHDRAWAL OF QUORUM. If a quorum is present at any meeting, the vote
of the holders of issued and outstanding shares representing a majority of votes
entitled to vote, present in person or represented by proxy, shall decide any
question brought before such meeting, unless the question is one upon which a
different vote is required by express provision of the statutes or by the
Articles of Incorporation or these Bylaws. The shareholders present at a
meeting at which a quorum is present may continue to transact business until
adjournment, despite the withdrawal of shareholders after the commencement of
the meeting which withdrawal leaves less than a quorum remaining at the meeting.
2.9 METHOD OF VOTING. Each outstanding share shall have the number of
vote(s) for such share as prescribed in the Articles of Incorporation and shall
be entitled to vote on each matter submitted to a vote at a meeting of
shareholders or otherwise to be voted on by shareholders, except to the extent
that such right is limited or denied by the Articles of Incorporation. A
shareholder may vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact. No proxy shall be
revocable unless expressly provided therein to be irrevocable and unless
otherwise made irrevocable by law.
2.10 ACTION WITHOUT MEETINGS. Any action required or which may be taken at
a meeting of the shareholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all the
shareholders entitled to vote with respect to the subject matter thereof and
such consent shall have the same force and effect as a unanimous vote
-3-
<PAGE>
of the shareholders. In addition, any action requiring a vote of the
shareholders can be taken without a meeting in accordance with the provisions
of the Texas Business Corporation Act.
ARTICLE III
DIRECTORS
3.1 POWERS. The business and affairs of the Corporation and all corporate
powers shall be managed by the Board of Directors, subject to any limitation
imposed by statute, the Articles of Incorporation or these Bylaws as to action
which requires authorization or approval by the shareholders.
3.2 NUMBER; QUALIFICATIONS. Subject to the provisions of the
Corporation's Articles of Incorporation, the number of Directors which shall
constitute the whole Board shall from time to time be fixed and determined by a
majority of the full Board, none of whom need be a resident of the State of
Texas or shareholders of the Corporation.
3.3 ELECTION. The Directors shall be elected at the annual meeting of the
shareholders, and each Director elected shall serve until his successor shall
have been elected and qualified.
3.4 VOTING. Every shareholder entitled to vote shall have the right to
vote the number of votes per share for shares owned by him for as many persons
as there are directors to be elected and for whose election he has the right to
vote.
3.5 REMOVAL OF DIRECTORS. At any meeting of shareholders called expressly
for the purpose of removing a Director, any Director or the entire Board of
Directors may be removed, with or without cause, by a vote of the holders of
shares representing a majority of the votes then entitled to vote at an election
of the Directors.
3.6 VACANCIES. Any vacancy in the Board of Directors caused by death,
resignation, removal or otherwise shall be filled by a majority of the remaining
Directors though less than a quorum of the Board of Directors. A Director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office.
3.7 INCREASE OR DECREASE IN NUMBER. The number of Directors may be
increased or decreased from time to time as provided herein but no decrease
shall have the effect of shortening the term of any incumbent Director. Any
directorship to be filled by reason of an increase in the number of Directors
may be filled by election at an annual or special meeting of shareholders or, at
the option of the Board of Directors, may be filled by appointment by the Board
of Directors for a term of office continuing only until the next election of one
or more Directors by the shareholders.
-4-
<PAGE>
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
4.1 PLACE. Meetings of the Board of Directors, regular or special, may be
held either within or without the State of Texas.
4.2 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held upon notice, or without notice unless notice is required under these Bylaws
and at such time and at such place as shall from time to time be determined by
the Board.
4.3 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the Chairman of the Board of Directors or the President and shall be
called by the Secretary on the written request of two Directors. Notice of each
special meeting of the Board of Directors shall be given to each Director at
least ten days before the date of the meeting.
4.4 NOTICE AND WAIVER OF NOTICE. Attendance of a Director at any meeting
shall constitute a waiver of notice of such meeting, except where a Director
attends for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened. Except as
may be otherwise provided by law or by the Articles of Incorporation or by these
Bylaws, neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
4.5 QUORUM OF DIRECTORS. At all meetings of the Board of Directors, a
majority of the Directors shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. If a quorum
shall not be present at any meeting of Directors, the Directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
4.6 ACTION WITHOUT MEETINGS. Any action required or permitted to be taken
at a meeting of the Board of Directors or any committee may be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed by
all the members of the Board of Directors or committee, as the case may be.
4.7 COMMITTEES. The Board of Directors may from time to time designate
members of the Board to constitute committees which shall in each case consist
of such number of Directors, not less than two, and shall have and may exercise
such power, as the Board may determine and specify in the respective resolutions
appointing them. A majority of all the members of any such committee may
determine its action and fix the time and place of its meeting, unless the Board
of Directors shall otherwise provide. The Board of Directors shall have power
at any time to change the number, subject as aforesaid, and members of any such
committee, to fill vacancies and to discharge any such committee.
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4.8 COMPENSATION. Directors shall receive such compensation for their
services as Director as may be determined by resolution of the Board of
Directors. The receipt of such compensation shall not preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
4.9 MEETING BY TELEPHONE. Any action required or permitted to be taken by
the Board of Directors or any committee thereof may be taken by means of a
meeting by conference telephone or similar communications equipment so long as
all persons participating in the meeting can hear each other. Any person
participating in such meeting shall be deemed to be present in person at such
meeting, except when a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
4.10 ASSENT TO ACTION. A Director of the Corporation who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his dissent or
abstention shall be entered into the minutes of the meeting or unless he shall
file his written dissent or abstention to such action with the person acting as
the Secretary of the meeting before the adjournment thereof or shall forward
such dissent or abstention by notice as provided in Section 9.5 of these Bylaws
to the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent or abstain shall not apply to a Director who
voted in favor of such action. If the minutes inaccurately reflect the position
a Director actually took at a meeting, the presumption can be rebutted by such
Director promptly notifying the Secretary upon such Director's receipt of the
minutes.
ARTICLE V
OFFICERS
5.1 ELECTION, NUMBER, QUALIFICATION, TERM, COMPENSATION. The officers of
the Corporation shall be elected by the Board of Directors and shall consist of
a President and a Secretary. The Board of Directors shall also elect a Chairman
of the Board and may elect any number of Vice Presidents, a Treasurer, one or
more Assistant officers and agents as it shall deem necessary, who shall hold
their offices for such terms and shall have such authority and exercise such
powers and perform such duties as shall be determined from time to time by the
Board by resolution not inconsistent with these Bylaws. Two or more offices may
be held by the same person. None of the officers need be a Director. The Board
of Directors shall have the power to enter into contracts for the employment and
compensation of officers for such terms as the Board deems advisable. The
salaries of all officers and agents of the Corporation shall be fixed by the
Board of Directors.
5.2 REMOVAL. The officers of the Corporation shall hold office until
their successors are elected or appointed and qualify, or until their death or
until their resignation or removal from office. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board
whenever in its judgment, the best interest of the Corporation will be served
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thereby. Such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointments of an officer shall not
of itself create contract rights.
5.3 VACANCIES. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise shall be filled by the Board of
Directors.
5.4 AUTHORITY. Officers and agents shall have such authority and perform
such duties in the management of the Corporation as may be provided in these
Bylaws.
5.5 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all
meetings of the Board of Directors and shall have such other powers and duties
as may from time to time be prescribed by the Board of Directors upon written
directions given to him pursuant to resolutions duly adopted by the Board of
Directors.
5.6 CHIEF EXECUTIVE OFFICER AND PRESIDENT. The Chief Executive Officer
and President shall be the chief executive officer of the Corporation, shall
have general and active management of the business and affairs of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall preside at all meetings of the
shareholders. He shall also preside at all meetings of the Board of Directors
in the absence or disability of the Chairman of the Board.
5.7 VICE PRESIDENT. Vice Presidents, if any are elected, in the order of
their seniority unless otherwise determined by the Board of Directors, shall, in
the absence or disability of the President, perform the duties and have the
authority and exercise the powers of the President. They shall perform such
other duties and have such other authorities and powers as the Board of
Directors may from time to time prescribe or as the Chief Executive Officer may
from time to time delegate.
5.8 SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all of the proceedings
of the meetings of the Board of Directors and of the shareholders in a minute
book to be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, under whose supervision he shall be. He shall keep in safe
custody the seal of the Corporation and, when authorized by the Board of
Directors, shall affix the same to any instrument requiring it and, when so
affixed, it may be attested by his signature or by the signature of an Assistant
Secretary or of the Treasurer, if one is elected.
5.9 TREASURER. The Treasurer, if one is elected, shall be the Chief
Financial Officer of the Company and shall:
(a) Have custody of the corporate funds and securities and shall keep
full and accurate accounts and records of receipts, disbursements and other
transactions in books
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belonging to the Corporation, and deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors;
(b) Disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Chief Executive Officer and the Board of Directors, at
its regular meetings, or when the Chief Executive Officer or Board of
Directors so requires, an account of all his transactions as Treasurer and
of the financial condition of the Corporation;
(c) If required by the Board of Directors, give the Corporation a
bond of such type, character and amount as the Board of Directors may
require; and
(d) Perform such other duties and have such other authority and
powers as the Board of Directors or Chief Executive Officer may from time
to time prescribe or delegate.
5.10 ASSISTANT SECRETARY AND ASSISTANT TREASURER. In the absence of the
Secretary or Treasurer, an Assistant Secretary or Treasurer, respectively, shall
perform the duties of the Secretary or Treasurer. Assistant Treasurers may be
required to give bond as in 5.9(c). The Assistant Secretaries and Assistant
Treasurers, in general shall have such powers and perform such duties as the
Treasurer or Secretary, respectively, or the Board of Directors or Chief
Executive Officer may prescribe.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
6.1 CERTIFICATES. The shares of the Corporation shall be represented by
certificates signed by the President and Secretary of the Corporation, and may
be sealed with the seal of the Corporation or a facsimile thereof. The
signature of the President and Secretary upon a certificate may be a facsimile
if the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the Corporation itself or an employee of the Corporation.
The certificates shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued. Each certificate shall state on
the face thereof, the holder's name, the number and class of shares, and the par
value of such shares or a statement that such shares are without par value.
6.2 PAYMENT, ISSUANCE. Shares may be issued for such consideration, not
less than the par value thereof, as may be fixed from time to time by the Board
of Directors. The consideration for the payment of shares shall consist of
money paid, labor done or property actually received. Shares may not be issued
until the full amount of the consideration fixed therefore has been paid.
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6.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed upon
the making of an affidavit of that fact by the person claiming the certificate
to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, prescribe such terms and conditions as it
deems expedient and may require such indemnities as it deems adequate to protect
the Corporation from any claim that may be made against it with respect to any
such certificate alleged to have been lost or destroyed.
6.4 REGISTRATION OF TRANSFER. Shares of stock shall be transferable only
on the books of the Corporation by the holder thereof in person or by his duly
authorized attorney. Upon surrender to the Corporation or the Transfer Agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto and the old
certificate canceled and the transaction recorded upon the books of the
Corporation.
6.5 REGISTERED OWNER. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of Texas.
ARTICLE VII
DIVIDENDS
7.1 DECLARATION AND PAYMENT. Subject to statute and the Articles of
Incorporation, dividends may be declared by the Board of Directors, in its
discretion, at any regular or special meeting, pursuant to law and may be paid
in cash, in property or in the Corporation's own shares.
7.2 RESERVES. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve fund for meeting contingencies, or for equalizing dividends, or for
repair or maintaining any property of the Corporation, or for such other purpose
as the Directors shall think conducive to the interest of the Corporation, and
the Directors may modify or abolish any such reserve in the manner in which it
was created.
ARTICLE VIII
INDEMNIFICATION
8.1 DEFINITIONS. For purposes of this Article VIII only, the following
terms are used as defined herein:
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(a) "Corporation" includes not only the Corporation as used
throughout these Bylaws but also each and every predecessor entity of the
Corporation.
(b) "Director" means any person who is or was a Director of the
Corporation and any person who, while a Director of the Corporation, is or
was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other
enterprise.
(c) "Expenses" includes court costs and attorney's fees.
(d) "Official capacity," when used with respect to a Director, means
the office of Director in the Corporation, and when used with respect to a
person other than a Director, means the elective or appointive office in
the Corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf of the
Corporation; provided, however, that the term "official capacity" does not
include service for any other foreign or domestic corporation or any
partnership, joint venture, sole proprietorship, trust, employee benefit
plan, or other enterprise.
(e) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative,
or investigative, any appeal in such an action, suit or proceeding, and any
inquiry or investigation that could lead to such an action, suit or
proceeding.
8.2 DISCRETIONARY INDEMNIFICATION OF OFFICERS AND DIRECTORS. The
Corporation may, upon compliance with all the terms and conditions of this
Section 8.2, indemnify a person who was, is or is threatened to be made a named
defendant or respondent in a proceeding because the person is or was a Director
or officer against penalties (including excise and similar taxes) fines,
settlements and reasonable expenses actually incurred by such person in
connection with such proceeding; provided, however, that if the proceeding was
brought by or on behalf of the Corporation, such indemnification shall be
limited to reasonable expenses actually incurred by such person in connection
with the proceeding. Notwithstanding the foregoing, such person:
(a) May not be indemnified for obligations resulting from a
proceeding (i) in which such person is found liable on the basis that
personal benefit was improperly received by such person, whether or not the
benefit resulted in an action taken in such person's official capacity, or
(ii) in which such person is found liable to the Corporation.
(b) May not be indemnified for obligations resulting from a
proceeding unless it is determined, in the manner provided in
Section 8.2(c) below, that such person (i) conducted himself or herself in
good faith, (ii) reasonably believed, in the case of conduct in his or her
official capacity, that his or her conduct was in the Corporation's best
interests, and in all other cases, that his or her conduct was at least not
opposed to
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the Corporation's best interests, and (iii) in the case of any criminal
proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
(c) May not be indemnified unless a determination of permissibility
of indemnification hereunder is made by a majority vote of a quorum of the
Board of Directors, consisting of directors who at the time of the vote are
not named defendants or respondents in the proceeding; provided, however,
that if such a quorum cannot be obtained, the determination shall be made
by (i) a majority vote of a committee of the Board of Directors, designated
to act in the matter by a majority vote of all Directors, consisting solely
of two or more Directors who at the time of the vote are not named
defendants or respondents in the proceeding; or (ii) by special legal
counsel selected by majority vote of a quorum of the Board of Directors or
of a committee of the Board who at the time of the vote are not named
defendants or respondents in the proceeding or, if such a quorum cannot be
obtained and such a committee cannot be established, by a majority vote of
all Directors; or (iii) by the shareholders in a vote that excludes the
vote of shareholders who are named defendants or respondents in the
proceeding.
(d) May not be indemnified unless authorization of indemnification
and determination as to reasonableness of expenses shall be made in the
same manner as the determination that indemnification is permissible,
except that if the determination that indemnification is permissible is
made by special legal counsel, authorization of indemnification and
determination as to reasonableness of expenses shall be made in the same
manner specified in Section 8.2(c)(ii) above for the selection of special
legal counsel.
8.3 REQUIRED INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Corporation
shall indemnify an officer or Director against reasonable expenses incurred by
such person in connection with a proceeding in which such person is a named
defendant or respondent because such person is or was an officer or Director of
the Corporation if such person has been wholly successful, on the merits or
otherwise, in the defense of the proceeding or if otherwise required pursuant to
the Articles of Incorporation or statute.
8.4 EXPENSES ADVANCED. Reasonable expenses incurred by an officer or
Director of the Corporation who was, is or is threatened to be made a named
defendant or respondent in a proceeding may be paid or reimbursed by the
Corporation in advance of the final disposition of the proceeding only if:
(a) the Corporation receives (i) a written affirmation by the officer
or Director of such person's good faith belief that he or she has met the
standard of conduct necessary for indemnification under the provisions of
Section 8.2(b) above, and (ii) a written undertaking by or on behalf of the
officer or Director to repay the amount paid or reimbursed if it is
ultimately determined that he or she has not met those requirements; and
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(b) a determination is made that the facts then known would not
preclude indemnification under the provisions of Section 8.2 above.
The written undertaking to repay set forth herein must be an unlimited
general obligation of the officer or Director but need not be secured, and may
be accepted without reference to the financial ability to make repayment.
Determinations and authorizations of payments hereunder must be made in the
manner specified by Section 8.2(c) for determining that indemnification is
permissible.
8.5 INDEMNIFICATION OF OTHERS. The Corporation may indemnify and advance
expenses to a person who is not or was not a Director or officer of the
Corporation but who is or was an employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of another
entity to the same extent that it may indemnify and advance expenses to officers
and directors under this Article VIII, subject to the same limitations
applicable to indemnification of officers and directors. Further, the
Corporation may indemnify and advance expenses to an officer or a person
identified in the first sentence of this Section 8.5 and who is not a Director
to such further extent, consistent with law, as may be provided by general or
specific action of its Board of Directors, or by contract or as permitted or
required by common law.
8.6 INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person permitted to be indemnified under this Article VIII against
any liability asserted against such person and incurred by him or her in the
stated capacity or arising out of his or her status as such a person, whether or
not the Corporation would have the power to indemnify such person against that
liability under this Article VIII or governing law.
8.7 REPORTS TO SHAREHOLDERS. Any indemnification of or advance of
expenses to an officer or Director in accordance with this Article VIII shall be
reported in writing to the shareholders with or before the notice of the next
meeting of the shareholders and, in any case, within the 12 month period
immediately following the date of any such indemnification or advance.
8.8 OTHER PROTECTION. The protection and indemnification provided
hereunder shall not be deemed to be exclusive of any other rights to which any
person may be entitled by law, under any agreement, insurance policy, vote of
the shareholders, or otherwise. Notwithstanding any other provision of this
Article VIII, the Corporation may pay or reimburse expenses incurred by an
officer or Director or any person that may be indemnified in Section 8.5 above
in connection with his or her appearance as a witness or other participation in
a proceeding at a time when such person is not a named defendant or respondent
in the proceeding.
8.9 INTENT; GOVERNING LAW. Notwithstanding any other provision of this
Article VIII, it is the intent that the Corporation shall, to the fullest extent
that it is empowered to do so by the Texas Business Corporation Act or any other
applicable laws as may from time to time be
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in effect, have the discretion to indemnify any of the persons identified in
this Article VIII who was, is or is threatened to be made a party to any
threatened, pending or completed proceeding, by reason of such person's
affiliation with the Corporation as stated in this Article VIII. In
furtherance of such intent, if any provision of this Article VIII shall be
held to be invalid or unenforceable, the validity and enforceability of the
remaining provisions shall not in any way be affected or impaired.
ARTICLE IX
GENERAL PROVISIONS
9.1 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
9.2 SEAL. The Corporation may but need not have a corporate seal. The
corporate seal, if adopted, shall be in such form as may be prescribed by the
Board of Directors. The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any manner reproduced.
9.3 MINUTES. The Corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of its shareholders
and Board of Directors, and shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a record
of its shareholders, giving names and addresses of all shareholders and the
number and class of the shares held by each.
9.4 AMENDMENT. These Bylaws may be altered, amended or repealed and new
Bylaws may be adopted by the Board of Directors, subject to repeal or change by
action of the shareholders, at any meeting of the Board of Directors at which a
quorum is present, provided notice of the proposed alteration, amendment or
repeal is contained in the notice of the meeting.
9.5 NOTICE. Whenever under provisions of the Texas Business Corporation
Act, the Articles of Incorporation or of these Bylaws notice is required to be
given to any Director or shareholder, it shall not be construed to mean personal
notice unless specifically required by such statute, Articles of Incorporation
or Bylaws, but such notice may be given in writing and delivered personally,
through the United States Mail, by a recognized delivery service (such as
Federal Express) or by means of telegram, telex or facsimile transmission,
addressed to such Director or shareholder, at his address or telex or
transmission number, as the case may be, as it appears on the records of the
Corporation, with postage and fees thereon prepaid. Such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
Mail or with an express delivery service or when transmitted by confirmed telex
or facsimile transmission or personally delivered, as the case may be. Whenever
any notice is required to be given under the provisions of applicable statutes
or of the Articles of Incorporation or of these Bylaws, a waiver thereof in
writing signed by the person or persons entitled to such notice,
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whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
The undersigned does hereby certify that the foregoing are Bylaws of the
Corporation as adopted by the Corporation on October 24, 1996.
/s/ Stephen P. Colmar
------------------------------------
Stephan P. Colmar, Secretary
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STOCK OPTION AGREEMENT
INTERGAMES, INC.
This STOCK OPTION AGREEMENT (the "Agreement") is made and entered into as
of the ____ day of _____, 1997, by and between INTERGAMES, INC., a Texas
corporation (herein called the "Company"), and ___________________ (herein
called the "Optionee").
W I T N E S S E T H :
WHEREAS, the Optionee [SERVES ON THE BOARD OF DIRECTORS OF THE COMPANY]
[PROVIDES CERTAIN CONSULTING SERVICES TO THE COMPANY]; and
WHEREAS, the Company has agreed to issue to the Optionee an option to
purchase shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), in consideration of the services provided by the Optionee to
the Company.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the parties hereto
agree as follows:
1. The Company hereby grants to the Optionee the right and option to
purchase, at the time and on the terms and conditions hereinafter set forth,
_____ shares of the presently authorized common stock, par value $0.01 per
share, of the Company (the "Common Stock") at the purchase price of FOUR DOLLARS
AND NO/100 ($4.00) per share.
2. This option shall continue for five (5) years from the date hereof,
except and to the extent that such term may be reduced as provided in Paragraph
9 hereof; provided, however, that if any termination date provided for herein
shall fall on a Saturday, Sunday or legal holiday, then such termination date
shall be deemed to be the first normal business day of the Company, at its
office specified in Paragraph 13 hereof, before such Saturday, Sunday or legal
holiday.
3. Except as otherwise provided herein, this option shall be exercisable
not later than five (5) years from the date hereof, and only to the extent of
shares that have vested in accordance with the following schedule:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Portion of Shares That is Vested
Vesting Date On or After Such Vesting Date
- -------------------------------------------------------------------------------
April 13, 1997 100%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Optionee's right to exercise the option granted hereunder accrues only in
accordance with the preceding sentence. This option shall be exercisable during
the lifetime of the
<PAGE>
Optionee only by him. In no event may the Optionee or any person exercising
this option pursuant to Paragraph 5 hereof exercise this option (before or
after any adjustment or substitution pursuant to Paragraph 8 or 9 hereof) for
a fraction of a share.
4. The option granted hereby shall be exercisable upon and subject to the
following terms and conditions:
(a) The option granted hereby may be exercised by delivering to the
Secretary of the Company from time to time within the time period specified
in Paragraph 3 hereof a written notice specifying the number of vested
shares the Optionee then desires to purchase.
(b) Upon receipt of the Optionee's written notice of exercise and
full compliance with all other obligations under this Agreement, the
Company shall allow the Optionee to consummate the purchase of the number
of shares indicated in the notice of exercise in accordance with the terms
of this Agreement.
(c) The Optionee shall have delivered to the Secretary of the Company
a cashier's check payable in United States currency (unless a personal
check shall be acceptable to such offer) to the order of the Company for an
amount equal to the option price for such number of shares. The check
shall be accompanied by such other instruments or agreements duly signed by
the Optionee as in the opinion of counsel for the Company may be necessary
or advisable in order that the issuance of such number of shares comply
with applicable rules and regulations under the Securities Act of 1933, as
amended (the "Act"), any appropriate state securities laws or any
requirement of any national securities exchange on which such stock may be
traded. As soon as practicable after any such exercise of the option in
whole or in part by the Optionee, the Company will deliver to the Optionee
a certificate for the number of shares with respect to which the option
shall have been so exercised, issued in the Optionee's name. Such stock
certificate shall carry such appropriate legend, and such written
instructions shall be given to the Company's transfer agent, as may be
deemed necessary or advisable by counsel to the Company to satisfy the
requirements of the Act or any state securities laws.
5. If the Optionee dies prior to _________, any unexercised portion of
this option may be exercised for the full number of shares, or any portion
thereof, except as to the issuance of fractional shares, at any time WITHIN
TWELVE (12) MONTHS from the date of death of the Optionee or within the
unexpired term of this option, whichever is shorter, by the person or persons to
whom the Optionee's rights under this option shall pass by the Optionee's will
or by the laws of descent and distribution, whichever is applicable.
6. Shares to be issued on the exercise of this option may, at the
election of the Company, be either authorized and unissued shares, or shares
previously issued and reacquired by the Company.
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7. The Company shall not be required to issue or deliver any certificates
for shares purchased upon the exercise of this option prior to: (i) the
obtaining of any approval from any governmental agency which the Company shall,
in its sole discretion, determine to be necessary or advisable; (ii) the
completion of any registration or other qualification of such shares under any
state or federal law or ruling or regulation of any governmental body which the
Company shall, in its sole discretion, determine to be necessary or advisable;
and (iii) the determination by the Company that the Optionee has tendered to the
Company the full purchase price plus any federal, state or local tax owed by the
Optionee as a result of exercising this option when the Company has a legal
liability to satisfy such tax. In addition, if shares reserved for issuance
upon the exercise of this option shall not then be registered under the Act, the
Company may, upon the Optionee's exercise of this option, require the Optionee
or his permitted transferee to represent in writing that the shares being
acquired are for investment and not with a view to distribution, and may mark
the certificate for the shares with a legend restricting transfer and may issue
stop transfer orders relating to such certificate to the Company's transfer
agent.
8. If, prior to the delivery of all the shares in respect to which this
option is granted, there shall be any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend payable in
shares of Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, the exercise or other price in respect of such option
and the appropriate price determination for such option shall be automatically
adjusted.
9. If, prior to the delivery of all the shares in respect to which this
option is granted, there shall be a consolidation or merger of the Company with
another corporation or entity or the adoption by the Company of a plan of
exchange affecting the Common Stock or any distribution to holders of Common
Stock of securities or property (other than normal cash dividends or dividends
payable in Common Stock), the Company shall make such adjustments or other
provisions as it may deem equitable, including adjustments to avoid fractional
shares, to give proper effect to such event. If the Company is merged into or
consolidated with another corporation under circumstances where the Company is
not the surviving corporation or where the Company will be a wholly owned
subsidiary of another corporation, or if the Company sells or otherwise disposes
of all or substantially all of its property or assets while the option remains
outstanding, (i) subject to the provisions of clause (ii) below, after the
effective date of such merger, consolidation, or sale, as the case may be, the
Optionee shall be entitled, upon exercise of the option, to receive, in lieu of
shares of Common Stock, the number and class of shares of such stock, other
securities, cash and other property or rights as the holders of shares of Common
Stock received pursuant to the terms of the merger, consolidation, or sale and
to which he would have been entitled if, immediately prior to such merger,
consolidation, or sale, he had been the holder of record of a number of shares
of Common Stock equal to the number of shares as to which the option shall be so
exercised; and (ii) the option may be cancelled by the Board of Directors of the
Company as of the effective date of any such merger, consolidation or sale,
provided that (x) such merger, consolidation or
-3-
<PAGE>
sale results in a change of control of the Company rather than a mere change
of form or domicile of the Company, (y) written notice of such cancellation is
given to the Optionee not later than 30 days prior to such effective date, and
(z) the Optionee shall have the right to exercise the option in full during
the said 30-day period preceding the effective date of such merger,
consolidation or sale.
10. Neither the Optionee nor his legal representative shall be or have any
of the rights or privileges of a shareholder of the Company in respect to any of
the shares issuable upon the exercise of this option unless and until
certificates representing such shares shall have been issued and delivered to
the Optionee.
11. Except as otherwise herein provided, this option and the rights and
privileges conferred hereby may not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option or any
right or privilege conferred hereby, contrary to the provisions hereof, this
option and the rights and privileges conferred hereby shall immediately become
null and void.
12. The Company shall have authority to make reasonable constructions of
this option and to correct any defect or supply any omission or reconcile any
inconsistency in this option, and to prescribe reasonable rules and regulations
relating to the administration of this option and other similar options granted
by the Company.
13. Any notice relating to this Agreement shall be in writing and
delivered in person or by registered mail to the Company at the Company's main
office, 3321 Westlake Drive, Austin, TX 78746, or to such other address as may
be hereafter specified by the Company, to the attention of its Secretary. All
notices to the Optionee or other person or persons then entitled to exercise the
option shall be delivered to the Optionee or such other person or persons at the
Optionee's address specified below.
14. Any payment or any issuance or transfer of shares of the Common Stock
to the Optionee or his legal representative, heir, legatee or distributee, in
accordance with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such persons hereunder. The Company may require
the Optionee, legal representative, heir, legatee or distributee, as a condition
precedent to such payment, to execute a release and receipt therefor in such
form as it shall determine.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
its name by its Chief Executive Officer and its corporate seal to be hereunto
affixed and attested by its Secretary on the date and year first above written,
and the Optionee has hereunto set his hand on the day and year specified above.
INTERGAMES, INC.
ATTEST:
By:
- --------------------------------- ---------------------------------
Stephen P. Colmar, Secretary Roderick E. Gilchrist
Chief Executive Officer
------------------------------------
[Optionee]
------------------------------------
Street Address (No P.O. Box please)
------------------------------------
City, State and Zip Code
-5-
<PAGE>
SUBSCRIPTION AGREEMENT
INTERGAMES, INC.
This Subscription Agreement, dated as of ________, 1997, is by and between
INTERGAMES, INC., a Texas corporation (the "Corporation"), and the undersigned
purchaser (the "Purchaser") of shares of common stock of the Corporation, par
value $.01 per share (the "Common Stock").
WHEREAS
The Corporation has filed with the Securities and Exchange Commission (the
"SEC") a registration statement on Form SB-2 (File No. 333-________) (as
amended, the "Registration Statement") pursuant to which it is offering for sale
to the public (the "Offering") up to 400,000 shares of its Common Stock. Prior
to the Offering, there has been no public market for the Common Stock. The
initial public offering price for the Common Stock is $5.00 per share.
The Purchaser desires to purchase shares of Common Stock from the
Corporation, and in consideration of the Corporation's agreement to sell shares
of Common Stock to the Purchaser, upon the terms and conditions set forth
herein, the Purchaser agrees and represents and warrants to the Corporation as
follows:
A. SUBSCRIPTION.
1. The Purchaser hereby subscribes for the number of shares of Common
Stock set forth on the signature page hereto. The purchase price (the "Purchase
Price") for the shares of Common Stock hereby subscribed for by the Purchaser is
set forth on the signature page hereto. The Purchase Price shall be payable by
check (or by such other form of cash payment as the Corporation desires to
accept) as described in the prospectus dated ____________, 1997 and filed by the
Corporation with the SEC on ____________, 1997 (the "Final Prospectus").
2. The Purchaser understands that the Purchase Price will be deposited
into an escrow account (the "Escrow Account") at [BANK], ________________, or
another federally insured institution, and that the shares of Common Stock
hereby subscribed for will not be issued, if at all, until the next closing, all
as more fully described in the Final Prospectus. In the event that the Minimum
Offering (as defined in the Final Prospectus) is not sold by the end of the
Initial Offering Period (as defined in the Final Prospectus), plus any
extensions thereof, as described in the Final Prospectus, the Purchase Price
will be returned to the Purchaser by the Corporation, without interest.
3. This subscription shall be deemed to be accepted by the Corporation
only when it is signed by the Corporation.
4. The Purchaser hereby acknowledges receipt of a copy of the
Registration Statement, including the Final Prospectus.
5. The Purchaser understands, acknowledges and agrees that:
a. This subscription may be accepted or rejected in whole or in part
by the Corporation in its sole and absolute discretion; provided that, in
the case of any rejection or partial acceptance, the Purchase Price payment
(or the portion thereof not accepted) will be promptly refunded, without
interest thereon. Upon acceptance hereof, the Purchaser will receive
confirmation of such acceptance.
b. The subscription period for the shares of Common Stock hereby
subscribed for will terminate on ____________, 1997, unless earlier
terminated or unless extended by the Corporation, as described in the Final
Prospectus. Any such early termination or extension will occur without
notice to any person, in the sole and absolute discretion of the
Corporation.
c. Subscriptions may not be withdrawn until the earlier to occur of
rejection by the Corporation or termination of the Offering.
<PAGE>
d. The Purchaser must purchase a minimum of 50 shares of Common
Stock.
e. No federal or state agency has made any finding or determination
as to the fairness of this Offering for investment or any recommendation or
endorsement of the Common Stock.
B. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
1. The Purchaser hereby represents and warrants to, and agrees with, the
Corporation (for the benefit of the Corporation and each officer, director,
employee and agent of the Corporation) as follows:
a. The Purchaser has carefully read and is familiar with the
Registration Statement, including the Final Prospectus, and all Exhibits to
the Registration Statement.
b. THE PURCHASER RECOGNIZES THAT AN INVESTMENT IN THE COMMON STOCK
INVOLVES CERTAIN RISKS, AND HAS TAKEN FULL COGNIZANCE OF AND UNDERSTANDS
ALL OF THE RISK FACTORS RELATED TO THE PURCHASE OF THE COMMON STOCK,
INCLUDING WITHOUT LIMITATION THOSE SET FORTH UNDER THE CAPTION "RISK
FACTORS" IN THE FINAL PROSPECTUS.
c. If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust, pension plan, estate, or other entity, (i)
the person signing this Agreement on behalf of such entity has been duly
authorized to execute and deliver this Agreement and all other instruments
executed and delivered on behalf of such partnership, corporation, trust,
pension plan, estate, or other entity in connection with the purchase of
the shares of Common Stock hereby subscribed for; and (ii) the signature of
the person signing this Agreement is binding upon such partnership,
corporation, trust, pension plan, estate, or other entity.
d. The address set forth on the signature page below is the
Purchaser's true and correct residence or principal place of business, and
the Purchaser has no present intention of becoming a resident of any other
state or jurisdiction or moving its principal place of business.
2. The foregoing representations and warranties are true, complete and
accurate as of the date hereof and shall be true, complete and accurate in all
respects as of the date of the acceptance hereof by the Corporation and the sale
of the shares of Common Stock hereby subscribed for to the Purchaser and shall
survive such date. IF IN ANY RESPECT SUCH REPRESENTATIONS AND WARRANTIES SHALL
NOT BE TRUE, COMPLETE AND ACCURATE IN ALL RESPECTS PRIOR THERETO, THE PURCHASER
WILL GIVE WRITTEN NOTICE OF SUCH FACT TO THE CORPORATION SPECIFYING WHICH
REPRESENTATIONS AND WARRANTIES ARE NOT TRUE, COMPLETE AND ACCURATE IN ALL
RESPECTS AND THE REASONS THEREFOR.
C. INDEMNIFICATION.
THE UNDERSIGNED ACKNOWLEDGES AND UNDERSTANDS THE MEANING AND LEGAL
CONSEQUENCES OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS SET FORTH IN THIS
AGREEMENT AND THAT THE CORPORATION HAS RELIED OR WILL RELY UPON SUCH
REPRESENTATIONS, WARRANTIES AND COVENANTS, AND THE UNDERSIGNED HEREBY AGREES TO
INDEMNIFY AND HOLD HARMLESS THE CORPORATION AND ITS OFFICERS, DIRECTORS,
CONTROLLING PERSONS, AGENTS AND EMPLOYEES, FROM AND AGAINST ANY AND ALL LOSS,
CLAIM, DAMAGE, LIABILITY OR EXPENSE, AND ANY ACTION IN RESPECT THEREOF, JOINT OR
SEVERAL, TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT, DUE TO OR ARISING OUT OF A
BREACH OF OR ALLEGED BREACH OF ANY SUCH REPRESENTATION, WARRANTY OR COVENANT,
TOGETHER WITH ALL REASONABLE COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES)
INCURRED BY ANY SUCH PERSON IN CONNECTION WITH ANY ACTION, SUIT, PROCEEDING,
DEMAND, ASSESSMENT OR JUDGMENT INCIDENT TO ANY OF THE MATTERS SO INDEMNIFIED
AGAINST. ALL REPRESENTATIONS, WARRANTIES AND COVENANTS CONTAINED IN THIS
AGREEMENT, AND THE INDEMNIFICATION CONTAINED HEREIN, SHALL SURVIVE THE
ACCEPTANCE OF THIS SUBSCRIPTION AND THE SALE OF THE SHARES OF COMMON STOCK TO
THE PURCHASER.
-2-
<PAGE>
D. MISCELLANEOUS.
1. All pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, neuter, singular or plural as the identity of
the person or persons may require.
2. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered,
telecopied and confirmed, or sent by registered or certified mail, return
receipt requested, (i) if to the Purchaser, at the address set forth on the
signature page hereof, and (ii) if to the Corporation, at 3321 Westlake Drive,
Austin, Texas 78746 Attention: Clifford L. Haigler, as either of such addresses
may be changed from time to time by notice given in accordance with this
paragraph.
3. Failure of the Corporation to exercise any right or remedy under this
Agreement or any other agreement between the Corporation and the Purchaser, or
otherwise, or delay by the Corporation in exercising same, will not operate as a
waiver thereof. No waiver by the Corporation will be effective unless and until
it is in writing and signed by the Corporation.
4. This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Texas, without regard to
provisions regarding conflicts of laws. This Agreement and the rights, powers
and duties set forth herein shall be binding upon the Purchaser, his heirs,
estate, legal representatives, successors and assigns and shall inure to the
benefit of the Corporation, its successors and assigns. In the event that any
provision of this Agreement, or the application hereof to any person or
circumstance, is held by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect under present or future laws effective
during the effective term of any such provision, such invalid, illegal or
unenforceable provision shall be fully severable; and this Agreement shall then
be construed and enforced as if such invalid, illegal or unenforceable provision
had not been contained in 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 from this
Agreement. Furthermore, in lieu of each such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
5. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended only by a
writing executed by all parties.
6. All representations, warranties and covenants contained in this
Agreement, and the indemnification contained in Paragraph C hereof, shall
survive the acceptance of the subscription. Purchaser acknowledges and agrees
that this Agreement shall survive (a) changes that are not material in the
transactions, documents and instruments described in the Final Prospectus and
(b) the death or disability of the Purchaser.
COMPLETE AND RETURN TWO ORIGINALS OF THE EXECUTED SIGNATURE PAGE TO THIS
AGREEMENT TO:
INTERGAMES, INC.
3321 WESTLAKE DRIVE
AUSTIN, TEXAS 78746
ATTN: CLIFFORD L. HAIGLER
-3-
<PAGE>
INTERGAMES, INC.
SUBSCRIPTION AGREEMENT
SIGNATURE PAGE
By executing this Agreement, the Purchaser acknowledges receipt of the
Registration Statement and the Final Prospectus.
IN WITNESS WHEREOF, the Purchaser has executed this Agreement as of the
_____ day of _________________, 1997.
Number of shares subscribed for at ------------------------------------
$5.00 per share: Print names(s) of Purchaser(s)
------------------
Total Purchase Price: $ ------------------------------------
-----------
By
----------------------------------
Signature(s) of
Print title of person signing, if signing
as an authorized representative of
Purchaser
MAKE CHECK PAYABLE TO THE ORDER OF: Address of Purchaser's residence or
principal place of business (Please
print or type):
INTERGAMES, INC. SPECIAL ACCOUNT
------------------------------------
------------------------------------
------------------------------------
SSN or Tax ID # of Purchaser:
------------------------------------
Please indicate by check mark the manner in which title is to be held:
___ Individual Ownership ___Trust
___ Separate Property ___Corporation
___ Community Property ___Pension Plan
___ Joint Tenancy ___Estate
___ Tenancy in Common (1) ___Other (please indicate) ______________
___ Partnership
- -------------
(1) Both husband and wife must sign.
- --------------------------------------------------------------------------------
Subscription for __________ shares at $5.00 per share, for a total of
$__________ accepted as of _______________, 1997.
INTERGAMES, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
-4-
<PAGE>
INDIVIDUAL, JOINT
OR PARTNER ACKNOWLEDGMENT
STATE OF __________ )
)
COUNTY OF _________ )
The undersigned Notary Public does hereby certify that on this _____ day of
___________, 1997, personally appeared _________________________________* known
to me to be the person whose name is subscribed to the foregoing instrument,
who, being by me duly sworn, declared and acknowledged to me that the same was
his free act and deed and that he executed and delivered same for the purposes
and consideration therein expressed and in the capacity therein stated, and that
the statements therein contained are true.
------------------------------------
Notary Public
My Commission Expires:
--------------
- -------------
* Insert name of individual or joint tenant or partner executing on behalf of
partnership.
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT BY HUSBAND AND WIFE AS TENANTS IN COMMON
STATE OF __________ )
)
COUNTY OF _________ )
The undersigned Notary Public does hereby certify that on this _____ day of
__________, 1997, personally appeared _________________________ and
________________________* known to me to be the persons whose names are
subscribed to the foregoing instrument, who, being by me duly sworn, declared
and acknowledged to me that the same were their free acts and deeds and that
they executed and delivered such instrument for the purposes and consideration
therein expressed and in the capacity therein stated, and that the statements
contained therein are true.
------------------------------------
Notary Public
My Commission Expires:
--------------
- -------------
*Insert names of husband and wife.
-5-
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF __________ )
)
COUNTY OF _________ )
On this _____ day of ____________, 1997, before me appeared
__________________________________* to me personally known, who, being by me
duly sworn, declared and acknowledged to me that he is the ___________________**
of _______________________*** and that the foregoing instrument was executed and
delivered on behalf of said corporation by authority of the Board of Directors
and said _______________________* acknowledged said instrument to be the free
act and deed of said corporation, and that the statements therein contained are
true.
------------------------------------
Notary Public
My Commission Expires:
--------------
- -------------
*Insert name of officer.
**Insert title of officer.
***Insert name of corporation.
- --------------------------------------------------------------------------------
TRUST, PENSION PLAN, OR ESTATE ACKNOWLEDGMENT
STATE OF __________ )
)
COUNTY OF _________ )
On this _____ day of ___________________, 1997, before me appeared
_____________________* to me personally known, who, being by me duly sworn,
declared and acknowledged to me that he is the Trustee, Administrator, or
Executor of the _______________________** and that the foregoing instrument was
executed and delivered on behalf of said Trust, Pension Plan, or Estate by
authority of its Trustee, Administrator, or Executor and said
___________________* acknowledged said instrument to be the free act and deed of
said Trust, Pension Plan, or Estate, and that the statements therein contained
are true.
------------------------------------
Notary Public
My Commission Expires:
--------------
- -------------
*Insert name of Trustee, Administrator, or Executor.
**Insert name of Trust, Pension Plan, or Estate.
-6-
