As filed with the Securities and Exchange Commission on December _____, 1997
Registration No. 333-_________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------------
JVWEB, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant specified in charter)
Delaware 7389 76-0552098
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(State of (Primary Industrial (I.R.S. Employer
Incorporation) Classification) I.D.#)
Greg J. Micek
5444 Westheimer, Suite 2080
Houston, Texas 77056
Tel: (713) 622-9287
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(Address, including zip code of principal place of business
and telephone number, including area code of
Registrant's principal executive offices.)
Greg J. Micek With a copy to:
President Randall W. Heinrich
5444 Westheimer, Suite 2080 Gillis & Slogar, L.L.P.
Houston, Texas 77094 1000 Louisiana, Suite 6905
Tel: (713) 622-9287 Houston, Texas 77002
(Name, address, including zip code (713) 951-9100
and telephone number, including
area code of agent for service.)
Approximate date of commencement date or proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [X].
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate Amount of
registered registered price per share offering price registration fee
<S> <C> <C> <C> <C>
Common Stock 250,000(1) -0- -0- -0-
Class A Warrants 1,000,000(1) -0- -0- -0-
Common Stock 1,000,000 $1.00 $ 1,000,000 $ 295.00
underlying Class
A Warrants
Class B Warrants 2,000,000(2) -0- -0- -0-
Common Stock 2,000,000 $2.00 $ 4,000,000 $1,180.00
underlying Class
B Warrants
Class C Warrants 2,000,000(3) -0- -0- -0-
Common Stock 2,000,000 $5.00 $10,000,000 $2,950.00
underlying Class
C Warrants
Common Stock 5,000,000(4) $1.00 $ 5,000,000 $1,475.00
Total 15,250,000 ------ $20,000,000 $5,900.00
</TABLE>
- --------------------
(1) To be distributed to the stockholders of LS Capital Corporation for no
consideration from such stockholders.
(2) To be issued to the holders of the Class A Warrants upon the exercise
thereof for no consideration from such holders.
(3) To be issued to the holders of the Class B Warrants upon the exercise
thereof for no consideration from such holders.
(4) To be offered on a delayed or continuous basis pursuant to possible
business combination transactions in the future at prices equivalent to
the then current market price or a slight discount therefrom; for
purposes of fee calculation, determined to be $1.00 per share.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine. <PAGE> PROSPECTUS
JVWEB INC.
250,000 Shares of Common Stock
1,000,000 Class A Warrants
2,000,000 Class B Warrants
2,000,000 Class C Warrants
This Prospectus relates to the distribution (the "Distribution") by LS
Capital Corporation, a Delaware corporation ("LS Capital"), to holders of record
of LS Capital common stock at the close of business on __________________ _____,
1998 (the "Record Date") of certain securities of JVWeb, Inc., a Delaware
corporation (the "Company"). The securities to be distributed include 250,000
shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), and 1,000,000 redeemable common stock purchase warrants (the "Class A
Warrants") entitling the holders thereof to acquire an aggregate of 1,000,000
shares of Common Stock at a per-share price of $1.00. The Common Stock and Class
A Warrants comprising the Distribution will trade separately immediately upon
issuance. See "DESCRIPTION OF CAPITAL STOCK." The Company is a new company
formed to pursue electronic commerce opportunities. See "BUSINESS."
In connection with the Distribution, each stockholder of LS Capital
owning at least 25 shares of LS Capital common stock will receive one share of
Common Stock and four Class A Warrants for each 25 shares of LS Capital common
stock owned on the Record Date. Fractional shares will not be issued. The
Distribution will result in approximately 3.73% of the outstanding shares of
Common Stock being distributed to holders of LS Capital common stock.
Certificates representing the number of shares of Common Stock and number of
Class A Warrants to which LS Capital stockholders are entitled, and checks
representing payment of cash dividends in lieu thereof, are being delivered to
LS Capital stockholders simultaneously with this Prospectus. Management believes
that shares of Common Stock and the Class A Warrants comprising the Distribution
and received by LS Capital's stockholders will be characterized as taxable
dividends to such stockholders upon receipt. See "THE DISTRIBUTION -- Certain
Federal Income Tax Consequences." FOR A DISCUSSION OF CERTAIN RISKS RELATING TO
THE OWNERSHIP OF THE COMMON STOCK, SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
UNTIL ___________________ _____, 1998, ALL DEALERS EFFECTING TRANSACTIONS
IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The date of this Prospectus is __________, 1998.
<PAGE>
No consideration will be paid by LS Capital's stockholders for the
shares of Common Stock and the Class A Warrants comprising the Distribution. The
Company will not receive any proceeds from the Distribution. There is no current
public trading market for the shares of Common Stock or the Class A Warrants.
Subject to the sponsorship of a market maker, shares of Common Stock and the
Class A Warrants will be traded in the over-the-counter market on the OTC
Electronic Bulletin Board.
In addition to the shares of Common Stock and the Class A Warrants
comprising the Distribution, the Company is also registering 5,000,000 shares of
Common Stock to be offered on a continuous or delayed basis in the future (at
prices equivalent to the then current market price of the Common Stock or at
slight discounts therefrom) in connection with future business combination
transactions. Moreover, the Company is also registering 2,000,000 redeemable
common stock purchase warrants (the "Class B Warrants") entitling the holders
thereof to acquire an aggregate of 2,000,000 shares of Common Stock at a
per-share price of $2.00. The Class B Warrants will be issued to the holders of
the Class A Warrants upon exercise of the Class A Warrants at rate of two Class
B Warrants for each Class A Warrant exercised, without the payment of any
additional consideration. The Company is also registering 2,000,000 redeemable
common stock purchase warrants (the "Class C Warrants") entitling the holders
thereof to acquire an aggregate of 2,000,000 shares of Common Stock at a
per-share price of $5.00. The Class C Warrants will be issued to the holders of
the Class B Warrants upon exercise of the Class B Warrants at rate of one Class
C Warrant for each Class B Warrant exercised, without the payment of any
additional consideration. The Class A Warrants, the Class B Warrants and the
Class C Warrants are hereinafter referred to as the "Warrants".
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 and exhibits relating
thereto (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), of which this Prospectus is a part. This Prospectus does
not contain all the information set forth in the Registration Statement.
Reference is made to such Registration Statement for further information with
respect to the Company and the securities of the Company covered by this
Prospectus. Statements contained herein concerning the provisions of documents
are necessarily summaries of such documents, and each statement is qualified in
its entirety by reference to the copy of the related document filed with the
Commission. The Commission maintains a World Wide Web site that contains
reports, proxy statements and information statements and other information
(including the Registration Statement) regarding issuers that file
electronically with the Commission. The address of such site is
http://www.sec.gov. The Registration Statement and exhibits may also be
inspected, and copies thereof may be obtained at prescribed rates, at the
offices of the Commission, Judiciary Plaza Building, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
The Company is not currently a reporting company under the Securities
Exchange Act of 1934 (the "Exchange Act"). However, the Company currently
intends to register and become a reporting company under the Exchange Act as
soon as possible after the Registration Statement is declared effective. Until
such registration, the Company intends to deliver voluntarily annual reports
with audited financial statements to the Company's stockholders and to file with
the Commission Annual Reports on Form 10-KSB, which will contain audited
financial statements. After they are filed, these Annual Reports and audited
financial statements can be inspected at, and copies downloaded from, the
Commission's World Wide Web site at the Internet address stated in the previous
paragraph. These Annual Reports and audited financial statements can also be
inspected, and copies thereof may be obtained at prescribed rates, at the
offices of the Commission at the addresses also stated in the previous
paragraph.
No person is authorized to give any information or to make any
representation not contained in this Prospectus, and, if given or made, any
information or representation not contained herein must not be relied upon as
having been authorized. This Prospectus does not constitute an offer to sell, or
a solicitation of an offer to purchase, any of the securities covered by this
Prospectus in any jurisdiction to or from any person to or from whom it is
unlawful to make such offer or such solicitation of an offer in such
jurisdiction. Neither the delivery of this Prospectus nor the securities covered
by this Prospectus shall, under any circumstances, create an implication that
there has been no change in the information set forth herein since the date
hereof.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
Company JVWeb, Inc. (the "Company") is a new Delaware corporation
formed to pursue electronic commerce opportunities. See
"BUSINESS." The Company's offices are located at 5444
Westheimer, Suite 2080, Houston, Texas 77056. The Company's
telephone number is (713) 622-9287.
Distributing LS Capital Corporation, a Delaware corporation.
Company
Primary To enable the Company to become a publicly traded corporation Purposes
of and realize the benefits resulting therefrom and to further Distribution the
business objectives of LS Capital.
Securities 250,000 shares of the Company's Common Stock, par value $.10
to be per share and 1,000,000 Class A Warrants. The shares of Common
Distributed Stock to be distributed constitute approximately 3.73% of the
outstanding shares of Common Stock of the Company as
of the date of the Distribution.
Distribution Each stockholder of LS Capital owning at least 25 shares of LS
Ratio Capital common stock will receive, for each 25 shares of LS
Capital common stock owned on the Record Date, one share of
Common Stock and four Class A Warrants.
Fractional Fractional shares will not be issued. LS Capital stockholders
Shares owning fewer than 25 shares of LS Capital common stock on the
Record Date will receive, in lieu of any share of Common
Stock, a cash dividend of $.01 per share of LS Capital Stock
owned on the Record Date. In addition, any LS Capital
stockholder receiving Common Stock in connection with the
Distribution and otherwise entitled to a fractional share of
Common Stock shall receive, in lieu of any fractional share of
Common Stock, a cash dividend of $.01 per share of LS Capital
common stock otherwise causing the fractional share, up to an
aggregate dividend of $.24.
Record Date Close of business on ____________________ _____, 1998.
Delivery of Certificates representing the shares of Common Stock and
Certificates/ Class A Warrants to which LS Capital stockholders are
Checks entitled, and checks representing payment for any fractional
shares that otherwise would be issued, are being delivered to
LS Capital stockholders simultaneously with this Prospectus.
<PAGE>
Tax The Distribution is not being structured on a basis tax-free Con- to LS
Capital stockholders, and management believes that the sequences Distribution
could not be structured on such a basis.
Management believes that shares of Common Stock comprising the
Distribution and received by LS Capital's stockholders
will be characterized as taxable dividends to such
stockholders upon receipt. See "THE DISTRIBUTION -- Certain
Federal Income Tax Consequences."
Other In addition to the shares of Common Stock and Class A Warrants Securities
comprising the Distribution, the Company is also registering Being 5,000,000
shares of Common Stock to be offered on a continuous Registered or delayed basis
in the future (at prices equivalent to the
then current market price of the Common Stock or at slight
discounts therefrom) in connection with future business
combination transactions. The Company is also registering
2,000,000 Class B Warrants that will be issued to the holders
of the Class A Warrants upon exercise of the Class A Warrants
at rate of two Class B Warrants for each Class A Warrant
exercised (without the payment of any additional
consideration), and 2,000,000 Class C Warrants that will be
issued to the holders of the Class B Warrants upon exercise of
the Class B Warrants at rate of one Class C Warrant for each
Class B Warrant exercised (without the payment of any
additional consideration).
Trading There is no current public trading market for the shares of
Market Common Stock or any of the Warrants. Subject to the
sponsorship of a market maker, shares of Common Stock and the
Class A Warrants will be traded in the over-the-counter market
on the OTC Electronic Bulletin Board. The Company expects that
the Class B Warrants and the Class C Warrants will be traded
in the over-the-counter market on the OTC Electronic Bulletin
Board at the time that they are issued.
Transfer The transfer agent and registrar for the Common Stock is Agent and
American Stock Transfer & Trust Company, with offices at 6201 Registrar 15th
Avenue, Brooklyn, New York, 11219.
Dividend The payment and amount of cash dividends on the Common Stock
Policy after the Distribution will be at the discretion of the
Company's Board of Directors. The Company has not heretofore
paid any dividends, and the Company does not currently
anticipate paying any dividends on its Common Stock. The
Company's dividend policy will be reviewed by the Company's
Board of Directors at such future times as may be appropriate,
and payment of dividends will depend upon the Company's
financial position, capital requirements and such other
factors as the Company's Board of Directors deems relevant.
Risk Stockholders should carefully consider the matters discussed Factors under
the section entitled "RISK FACTORS" in this Prospectus.
The Company has only a limited operating history and is
subject to all of the inherent risks of a developing business
enterprise. The Company is in need of additional capital and
has no constant and continual flow of revenues.
Use of The Company will not receive any proceeds from the
Proceeds Common Stock comprising the Distribution. Moreover, the
Company will not receive any proceeds when it issues any of
the other 5,000,000 shares of Common Stock covered by this
Prospectus. However, such other shares are intended to be used
for business combination transactions pursuant to which the
Company will acquire direct or indirect ownership of assets
and properties. The Company will receive all proceeds from the
exercise of the Warrants. Such proceeds are expected to be
used for general corporate purposes.
Inquiries Stockholders of LS Capital with inquiries relating to the Relating to
Distribution should contact LS Capital, by mail at LS Distribution Capital's
offices at 15915 Katy Freeway, Suite 250, Houston,
Texas 77094, or by telephone at 281/398-5588.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Prospectus under the captions
"PROSPECTUS SUMMARY," "RISK FACTORS," and "BUSINESS" regarding beliefs as to the
quantity and quality of electronic commerce that will be presented to and
pursued by the Company; the Company's ability to attract and enter into binding
arrangements with suitable joint venture partners and to identify and consummate
transactions with suitable acquisition candidates; the type of joint venture
arrangements the Company will enter into; the advantages of electronic commerce
and electronic content dissemination over traditional commerce and content
dissemination; the advantages of having integrated Internet skills and
abilities; the current status of the Internet service industry; the hesitancy of
businesses to pursue the Company strategies; the timeliness of pursuing the
Company's business plan; the future development of the Internet; the acceptance
by consumers, businesses and advertisers as to the offering of products,
services and advertising over the Internet; the Company's ability to succeed in
the electronic commerce market, to develop successful Web sites, to raise funds
and procure financing, establish and maintain third party relationships, and to
manage growth and integrate acquisitions; the development of a trading market
for shares of Common Stock and the Warrants; the Company's regulatory
compliance; the adequacy of insurance; the ability of the Company to attract and
retain competent personnel; the fairness of the Distribution to LS Capital
stockholders; the tax consequences of the Distribution; and other statements
contained herein regarding matters that are not historical facts, are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
under "RISK FACTORS." As a result, these forward-looking statements represent
the Company's judgment as of the date of this filing. The Company does not
express any intent or obligation to update these forward-looking statements.
RISK FACTORS
THE SECURITIES COVERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK AND,
THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. PROSPECTIVE INVESTORS
SHOULD READ THE ENTIRE PROSPECTUS AND CAREFULLY CONSIDER, AMONG THE OTHER
FACTORS AND FINANCIAL DATA DESCRIBED HEREIN, THE FOLLOWING RISK FACTORS:
1. Extremely Limited Operating History. The Company was incorporated in
October 1997 and at that time continued preliminary work commenced by the
founder of the Company several months earlier. Accordingly, there is no
meaningful operating history upon which to base an evaluation of the Company and
its business and prospects. The Company's business and prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as electronic commerce. Such
risks for the Company include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, identify and pursue suitable
electronic commerce opportunities; identify and enter into binding agreements
with suitable joint venture partners; identify and consummate suitable
acquisitions; develop and increase the Company's customer bases; implement and
successfully execute the Company's business and marketing strategy; continue to
develop and upgrade the Company's technology and transaction-processing systems;
create and constantly improve the Company's Web sites; provide superior customer
service and order fulfillment; respond to competitive developments; and attract,
retain and motivate qualified personnel. There can be no assurance that the
Company will be successful in addressing such risks, and the failure to do so
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
2. Fluctuations in Operating Results. The Company's operating results
are expected to fluctuate in the future due to a number of factors, many of
which are outside the Company's control. These factors include the level of
usage of the Internet; demand for products; services and advertising offered on
the Company's Web sites; the Company's ability to pursue suitable electronic
commerce opportunities, enter into suitable joint ventures and consummate
suitable acquisitions at a steady rate; the Company's ability to attract new
customers at a steady rate; the addition or loss of advertisers; the
introduction of new products, services or Web sites by the Company or its
competitors; pricing changes for Web-based products, services and advertising;
technical difficulties with respect to the Company's Web sites; costs relating
to acquisitions; and general economic conditions and economic conditions
specific to the Internet and Web sites. As a strategic response to changes in
the competitive environment, the Company may from time to time make certain
service, marketing or supply decisions or acquisitions that, while beneficial in
the long run, could have a material adverse effect on the Company's quarterly
results of operations and financial condition. The Company also expects that it
like other retailers may experience seasonality in its businesses in the future.
Due to all of the foregoing factors, in some future quarter the Company's
operating results may fall below the expectations of investors and any
securities analysts who follow the Common Stock. In such event, the trading
price of the Common Stock would likely be materially adversely affected.
Further, the Company believes that period-to-period comparisons of its financial
results may not necessarily be meaningful and should not be relied upon as an
indication of future performance.
3. Future Capital Needs; Uncertainty of Additional Financing. The
Company currently has no constant and continual flow of revenues. The Company's
future liquidity and capital requirements will depend upon numerous factors,
including the success of the Company's sites. The Company may be required to
raise additional funds through public or private financing, strategic
relationships or other arrangements. There can be no assurance that such
additional funding, if needed, will be available on terms acceptable to the
Company, or at all. Furthermore, debt financing (if available) may involve
restrictive covenants, which may limit the Company's operating flexibility with
respect to certain business matters. If additional funds are raised through the
issuance of equity securities, the percentage ownership of the stockholders of
the Company will be reduced, stockholders may experience additional dilution in
net book value per share, and such equity securities may have rights,
preferences or privileges senior to those of the holders of the Company's Common
Stock. While the Company's need for additional capital can not now be precisely
ascertained because of the uncertainty of the actual growth of the Company,
management believes that the Company's future capital needs will exceed the
Company's current financial position. The Company expects to finance its
operations for the remainder of fiscal 1998 through cash flow from operations,
proceeds from the exercise of the Warrants, the possible private placement of
the Company's equity securities, and the use of certain of the shares of Common
Stock covered by this Prospectus for purposes of acquisitions. The Company is
looking for sources of additional capital, but there can be no assurance that
such sources can be found or that, if found, the terms of such capital will be
commercially acceptable to the Company. If adequate funds are not available on
acceptable terms, the Company may be unable to take advantage of future
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
4. Dependence on the Internet. The Company's future success
substantially depends upon continued growth in the use of the Internet and the
Web in order to support the sale of the products, services and advertising
offered by the Company on its Web sites. 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 more widespread. 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 or that the performance or reliability
of the Web will not be adversely affected by this continued 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
also could result in slower response times and adversely affect usage of the Web
and the Company's Web sites. 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, operating results and financial condition would
be materially adversely affected.
5. Uncertain Acceptance of the Internet as a Medium for Commerce. The
success of the Company's business plan will depend upon the adoption of the
Internet as a medium for commerce by a broad base of consumers, vendors and
advertisers. The Company's target markets are expected to be comprised of
consumers, vendors and advertisers who have historically used traditional means
of commerce to conduct business. Most of the Company's customers, vendors and
advertisers will have only limited experience with the Web as a commercial
medium and may not find such a medium to be an effective way to transaction
business. For the Company to be successful, these consumers, vendors and
advertisers must accept and utilize novel ways of conducting business. Moreover,
critical issues concerning the commercial use of the Internet, such as ease of
access, security, reliability, cost and quality of service, development of the
necessary infrastructure (such as a reliable network backbone) and timely
development and commercialization of performance improvements (including high
speed modems), remain unresolved and may affect the growth of Internet use or
the attractiveness of conducting commerce by means of Web sites. The Company's
ability to generate significant revenues will depend upon, among other things,
consumer, vendor and advertiser acceptance of the Web as an effective and
sustainable commercial medium. There can be no assurance that there will be
broad acceptance of the Internet as an effective medium for commerce by
consumers, vendors and advertisers will develop successfully or achieve
widespread acceptance.
6. Developing Market. The electronic market for products, services and
advertising has only recently begun to develop and is rapidly changing. As is
typical for a new and rapidly evolving market, demand for products, services and
advertising over the Internet is subject to a high level of uncertainty, and
there exist few proven services and products. Since the market for electronic
commerce on the Internet is new and evolving, predictions of the size of this
market or its future growth rate, if any, are difficult. Moreover, 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 sufficiently to support Web-based advertising as a significant
advertising medium. In addition, there can be no assurance that advertisers will
determine that banner advertising is an effective or attractive advertising
medium, and there can be no assurance that the Company will effectively
transition to any other forms of Web-based advertising, should they develop.
Furthermore, certain advertising filter software programs are available that
limit or remove advertising from an Internet user's desktop. Such software, if
generally adopted by users, may have a materially adverse effect upon the
viability of advertising on the Internet. Moreover, there can be no assurance
that consumers and vendors will determine that the electronic medium is an
effective way to conduct commerce. If the markets for the Company's electronic
commerce fail to develop, develop more slowly than expected or become saturated
with competitors, or if the Company's electronic commerce does not achieve
market acceptance, the Company's business, results of operations and financial
condition will be materially adversely affected.
7. Opportunity Selection. Probably the most integral part of the
Company's business strategy is the identification and pursuit of potentially
successful electronic commerce opportunities. There can be no assurance that the
Company will be able to identify successful electronic commerce opportunities or
that the Company will be able to pursue these opportunities successfully even if
identified. There is no specific criterion for selecting electronic
opportunities. Accordingly, management will have significant flexibility in
selecting such opportunities. The failure of management to select good
electronic commerce opportunities would probably have a material adverse effect
on the Company's business, results of operations and financial condition.
8. Uncertain Acceptance of Brands. The Company believes that, due to
the growing number of Internet sites and the relatively low barriers to entry,
the importance of brand recognition will increase as more companies engage in
commerce over the Internet. Development and awareness of the Company's brands
will depend largely on the Company's success in establishing and maintaining
positions as leaders in Internet commerce and in providing high quality products
and services, which cannot be assured. In order to attract and retain customers,
vendors and advertisers and to promote and maintain the Company's brands in
response to competitive pressures, the Company may find it necessary to increase
its marketing and advertising budgets or otherwise to increase substantially its
financial commitment to creating and maintaining brand loyalty among vendors and
consumers. If the Company is unable to provide high quality products, services
and advertising or otherwise fail to promote and maintain its brands, or if the
Company is unable to (or incurs significant expenses in an attempt to) achieve
or maintain a leading position in Internet commerce or to promote and maintain
its brands, the Company's business, results of operations and financial
condition will be materially adversely affected.
9. Content and Graphic Development. Content and (to a lesser degree)
graphic development relating to the Company's Web sites are key elements to the
Company's success. If these sites fail to have solid content (which is modified
on a continual basis) and appealing graphics, the Company expects that it will
fail to develop successfully its brands, and consumers, vendors and advertisers
will not be attracted to, or will not continue to visit and utilize, the sites.
The Company has relied and will continue to rely substantially on content and
graphic development efforts of third parties. There can be no assurance that the
Company's current or future third-party affiliates will effectively implement
these properties, or that their efforts will result in significant revenue to
the Company. Any failure to develop and maintain high-quality and successful Web
sites could have a material adverse effect on the Company's business, results of
operations and financial condition.
10. Internet Commerce Security Risks. A significant barrier to
electronic commerce and communications is the secure transmission of
confidential information over public networks. The Company will rely on
encryption and authentication technology licensed from third parties to provide
the security and authentication necessary to effect secure transmission of
confidential information. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments will not result in a compromise or breach of the algorithms used by
the Company to protect customer transaction data. If any such compromise of the
Company's security were to occur, it could have a material adverse effect on the
Company's business, results of operations and financial condition. A party who
is able to circumvent the Company's security measures could misappropriate
proprietary information or cause interruptions in the Company's operations. The
Company may be required to expend significant capital and other resources to
protect against the threat of such security breaches or to alleviate problems
caused by such breaches. Concerns over the security of Internet transactions and
the privacy of users may also inhibit the growth of the Internet generally, and
the Web in particular, especially as a means of conducting commercial
transactions. To the extent that activities of the Company or third party
contractors involve the storage and transmission of proprietary information,
such as credit card numbers, security breaches could expose the Company to a
risk of loss or litigation and possible liability. There can be no assurance
that the Company's security measures will prevent security breaches or that
failure to prevent such security breaches will not have a material adverse
effect on the Company's business, results of operations and financial condition.
11. Risks Associated with Technological Change. The Internet and
electronic markets are characterized by rapid technological change, changes in
user and customer requirements, frequent new service or product introductions
embodying new technologies and the emergence of new industry standards and
practices that could render the Company's existing Web sites and technology
obsolete. The Company's performance will depend, in part, on its ability to
license leading technologies, enhance its existing services, and respond to
technological advances and emerging industry standards and practices on a timely
and cost-effective basis. The development of Web sites entails significant
technical and business risks. There can be no assurance that the Company will be
successful in using new technologies effectively or adapting its Web sites to
consumer, vendor, advertising or emerging industry standards. If the Company is
unable, for technical, legal, financial or other reasons, to adapt in a timely
manner in response to changing market conditions or customer requirements, the
Company's business, results of operations and financial condition would be
materially adversely affected.
12. Risk of System Failure; Single Site. The Company's success largely
depends upon communications hardware and computer hardware made available by a
third party in a facility located in Arizona. Like all computer systems, this
system is vulnerable to damage from earthquake, fire, floods, power loss,
telecommunications failures, break-ins and similar events. Despite the security
measures of the Company, its servers are also vulnerable to computer viruses,
physical or electronic break-ins and similar disruptive problems, which could
lead to interruptions, delays, loss of data or cessation in service to users of
the Company's services and products. The Company does not presently have
redundant systems or a formal disaster recovery plan. The Company's does not now
and will not for the foreseeable future maintain business interruption
insurance. Any system failure that causes interruption or an increase in
response time of the Company's Web sites could result in less traffic to such
sites and, if sustained or repeated, could reduce the attractiveness to
consumers, vendors and advertisers of the products, services and advertising
offered by the Company. In addition, a key element of the Company's strategy is
to generate a high volume of visits to and activity with respect to the
Company's Web sites. An increase in the volume of visits to the Company's Web
sites could strain the capacity of the software or hardware deployed by the
Company, which could lead to slower response time or system failures, and
adversely affect sales of products, services and advertising and the number of
impressions received by advertising and thus the Company's advertising revenues.
13. Reliance on Merchandise Vendors. The Company expects that it will
entirely depend upon vendors to supply it with merchandise for sale through its
Web sites, and the availability of merchandise is unpredictable. The Company
expects that it will have no long-term contracts or arrangements with its
vendors that guarantee the availability of merchandise for its businesses. There
can be no assurance that the Company's current and future vendors will continue
to sell merchandise to the Company or otherwise provide merchandise for sale
through the Company's Web sites or that the Company will be able to establish
new vendor relationships that ensure merchandise will be available. The Company
will also rely on many of its vendors and its joint venture partners to process
and ship merchandise to customers. The Company will have limited control over
the shipping procedures of its vendors and its joint venture partners, and
shipments by these vendors and joint venture partners may be subject to delays.
Although most merchandise sold by the Company is expected to carry a warranty
supplied either by the manufacturer or the vendor and the Company will not be
obligated to accept merchandise returns, the Company may be constrained to
accept returns from customers for which the Company may not receive
reimbursements from its vendors or manufacturers. If the Company is unable to
develop and maintain satisfactory relationships with vendors on acceptable
commercial terms, if the Company is unable to obtain sufficient quantities of
merchandise, if the quality of service provided by such vendors falls below a
satisfactory standard or if the Company's level of returns exceeds its
expectations, the Company's business, results of operations and financial
condition will be materially adversely affected.
14. Reliance on Other Third Parties. In addition to its merchandise
vendors, the Company's operations will depend on a number of third parties. The
Company will have limited control over these third parties and will probably
have no long-term relationships with any of them. The Company does not own a
gateway onto the Internet, but instead now and presumably always will rely on an
Internet service provider to connect the Company's Web sites to the Internet.
The Company also will rely on a variety of technology that it will license from
third parties. The loss of or inability of the Company to maintain or obtain
upgrades to any of these technology licenses could result in delays, which would
materially adversely affect the Company's business, results of operations and
financial condition, until equivalent technology could be identified, licensed
or developed and integrated. Furthermore, the Company will depend on hardware
suppliers for prompt delivery, installation and service of servers and other
equipment used to deliver the Company's products and services. If the Company is
unable to maintain satisfactory relationships with such third parties on
acceptable commercial terms, or the quality of products and services provided by
such third parties falls below a satisfactory standard, the Company's business,
results of operations and financial condition will be materially adversely
affected. In addition, the Company will also depend upon Web browsers for access
to the products, services and advertising offered by it.
15. Protection of Intellectual Property. The development of the
Company's brands depends to a significant degree on the protection of its
trademarks and trade names. The Company has registered the "JVWeb", "Dad & me",
and "familylifestyle" trademarks in the United States and claims common law
trade name rights in these and other names. Nonetheless, there can be no
assurance that the Company will be able to secure significant protection for
these trademarks. Current and future competitors of the Company or others may
adopt product or service names similar to the Company's trademarks, thereby
impeding the Company's ability to build brand identity and possibly leading to
customer confusion. The inability of the Company to protect its trademarks and
trade names might have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, the Company may in
the future receive notices from third parties claiming infringement by aspects
of the Company's businesses. While the Company is not currently subject to any
such claim, any future claim, with or without merit, could result in significant
litigation costs and diversion of resources, including the attention of
management, and require the Company to enter into royalty and licensing
agreements, which could have a material adverse effect on the Company's
business, results of operations and financial condition. In the future, the
Company may also need to file lawsuits to enforce the Company's intellectual
property rights, to protect the Company's trade secrets, or to determine the
validity and scope of the proprietary rights of others. Such litigation, whether
successful or unsuccessful, could result in substantial costs and diversion of
resources, which could have a material adverse effect on the Company's business,
results of operations and financial condition.
16. Regulatory Concerns. The Company is not currently subject to direct
regulation by any government agency in the United States, other than regulations
applicable to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Internet. Due to
the increasing popularity and use of the Internet, a number of laws and
regulations may be adopted with respect to the Internet, covering issues such as
user privacy, pricing and characteristics and quality of products and services.
Such legislation could dampen the growth in use of the Web generally and
decrease the acceptance of the Web as a communications and commercial medium,
and could thereby have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, several
telecommunications carriers are seeking to have telecommunications over the Web
regulated by the Federal Communications Commission (the "FCC") in the same
manner as other telecommunications services. For example, America's Carriers
Telecommunications Association has filed a petition with the FCC for this
purpose. In addition, because the growing popularity and use of the Web has
burdened the existing telecommunications infrastructure and many areas with high
Web use have begun to experience interruptions in phone service, local telephone
carriers, such as Pacific Bell, have petitioned the FCC to regulate Internet
service providers and online service providers in a manner similar to long
distance telephone carriers and to impose access fees on Internet service
providers and online service providers. If either of these petitions is granted,
or the relief sought therein is otherwise granted, the costs of communicating on
the Web could increase substantially, potentially slowing the growth in use of
the Web, which could in turn decrease the demand for the products, services and
advertising offered by the Company. Any new legislation or regulation or the
application of existing laws and regulations to the Internet could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, as the Company's products and services will be
available and sold over the Internet in multiple states and foreign countries,
and as the Company will sell to numerous consumers resident in such states and
foreign countries, such a jurisdiction may claim that the Company is required to
qualify to do business as a foreign entity in such jurisdiction. The Company is
qualified to do business in only two states, and failure by the Company to
qualify to do business as a foreign entity in a jurisdiction where it is
required to do so could subject the Company to taxes and penalties for the
failure to qualify. Any application of laws or regulations of a jurisdiction in
which the Company is not currently qualified could have a material adverse
effect on the Company's business, results of operations and financial condition.
17. Other Potential Liability. Because materials may be downloaded from
the Company's Web sites and may be subsequently distributed to others, there is
a possibility that claims could be asserted against the Company on a variety of
legal theories (including defamation, negligence and copyright and trademark
infringement) depending on the nature and content of such materials. For
example, the Company could be liable for libel for any defamatory information it
provided about a person, for any losses incurred by a person in reliance on
incorrect information negligently provided by the Company and for copyright and
trademark infringement resulting from information provided by the Company.
Moreover, the Company expects that it will enter into agreements with third
parties whereby the Company may provide links to such third parties' Web sites.
A claimant might successfully argue that by providing such links, the Company is
liable for wrongful actions by such third parties through such Web sites, such
as defamation, negligence and copyright and trademark infringement, as well as
losses resulting from the products and services sold by the third party.
Although the Company carries general liability insurance, the Company's
insurance may not cover potential claims of this type or may not be adequate to
indemnify the Company for all liability that may be imposed. Any imposition of
liability or legal defense expenses that are not covered by insurance or is in
excess of insurance coverage could have a material adverse effect on the
Company's business, operating results and financial condition.
18. Indemnification of Officers and Directors for Securities
Liabilities. The Bylaws of the Company provide that the Company shall indemnify
any director, officer, agent and/or employee as to those liabilities and on
those terms and conditions as are specified in the General Corporation Law of
Delaware. Further, the Company may purchase and maintain insurance on behalf of
any such persons whether or not the Company would have the power to indemnify
such person against the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from such
officers, directors, agents and employees for losses incurred by the Company as
a result of their actions. Further, the Commission takes the position that
indemnification is against the public policy as expressed in the Act, and is,
therefore, unenforceable.
19. Competition. The electronic commerce market, particularly on the
Internet, is new, rapidly evolving and intensely competitive, and the Company
expects competition to intensify in the future. Certain current competitors have
established, and certain other current competitors (as well as future
competitors) may in the future establish, cooperative relationships among
themselves or directly with vendors to obtain exclusive or semi-exclusive
sources of merchandise. Accordingly, new competitors or alliances among
competitors and vendors may emerge and rapidly acquire market share. Increased
competition may result in reduced operating margins, loss of market share and a
diminished brand franchise, any one of which could materially adversely affect
the Company's business, results of operations and financial condition. Many of
the Company's current and potential competitors have and will have significantly
greater financial, technical, marketing and other resources than the Company. As
a result, they may be able to secure merchandise from vendors on more favorable
terms than the Company, and they may be able to respond more quickly to changes
in customer preferences or to devote greater resources to the development,
promotion and sale of their merchandise than the Company can.
20. Management of Potential Growth. The Company expects to expand its
operations rapidly and significantly. This rapid growth is expected to place a
significant strain on the Company's management, operational and financial
resources. In order to manage the expected growth of its operations, the Company
will be required to expand existing operations (particularly with respect to
customer service and merchandising); to improve on a timely basis existing and
implement new operational, financial and inventory systems, procedures and
controls, including improvement of its financial and other internal management
systems; and to train, manage and expand its employee base. Further, the
Company's management will be required to maintain relationships with various
merchandise vendors, freight companies, warehouse operators, other Web sites and
services, Internet service providers and other third parties and to maintain
control over the strategic direction of the Company in a rapidly changing
environment. If the Company is unable to manage growth effectively, the
Company's business, results of operations and financial condition will be
materially adversely affected.
21. Integration of Potential Acquisitions. As part of its business
strategy, the Company expects to acquire complementary companies, products,
services or technologies. There can be no assurance that the Company will be
able to identify additional suitable acquisition candidates or that the Company
will be able to acquire such candidates on acceptable terms. In addition, the
successful implementation of this strategy depends on the Company's ability to
identify suitable acquisition candidates, acquire such companies on acceptable
terms and integrate their operations successfully with those of the Company. Any
such transactions would be accompanied by the risks commonly encountered in such
transactions. Such risks include, among other things, the difficulty of
assimilating the operations and personnel of the acquired companies; the
potential disruption of the Company's ongoing business; the inability of
management to maximize the financial and strategic position of the Company
through the successful incorporation of acquired businesses and technologies;
additional expenses associated with amortization of acquired intangible assets;
the maintenance of uniform standards, controls, procedures and policies; the
impairment of relationships with employees, customers, vendors and advertisers
as a result of any integration of new management personnel; and the potential
unknown liabilities associated with acquired businesses. There can be no
assurance that the Company would be successful in overcoming these risks or any
other problems encountered in connection with such acquisitions. Due to all of
the foregoing, the Company's pursuit of an overall acquisition strategy or any
future acquisition may have a material adverse effect on the Company's business,
results of operations, financial condition and cash flows. Although the Company
does not expect to use cash for acquisition consideration, to the extent the
Company chooses to do so in the future, the Company may be required to obtain
additional financing, and there can be no assurance that such financing will be
available on favorable terms, if at all. In addition, if the Company issues
stock to complete any future acquisitions, existing stockholders will experience
further ownership dilution.
22. Reliance Upon Directors and Officers and Limited Management
Resources. The Company substantially depends upon the efforts and skills of Greg
J. Micek, a director and the President of the Company. The loss of the services
of Mr. Micek, or the inability of him to devote sufficient attention to the
operations of the Company, would have a materially adverse effect on the
Company's operations. The Company does not maintain key man life insurance on
Mr. Micek. In addition, there can be no assurance that the current level of
management is sufficient to perform all responsibilities necessary or beneficial
for management to perform. The Company's success in attracting additional
qualified personnel will depend on many factors, including its ability to
provide them with competitive compensation arrangements, equity participation
and other benefits. There is no assurance that the Company will be successful in
attracting highly qualified individuals in key management positions.
23. Lack of Relevant Experience by Management. The Company expects that
its management will generally have little or no direct experience in the
management or operation of the types of businesses represented by the products
and services that the Company will offer by means of Web sites, either directly
or through joint ventures. In the case of joint ventures, the Company expects
that it joint venture partners will have a requisite level of experience, but
there can be no assurance that the Company's management will be familiar with
the joint venture's proposed business enough to ascertain this. Management's
lack of experience may make the Company more vulnerable than others to certain
risks, and it may also cause the Company to be more vulnerable to business risks
associated with errors in judgement that could have been prevented by more
experienced management. As a result, management's lack of previous experience
could have a material adverse effect on the future operations and prospects of
the Company.
24. Control, Cumulative Voting, and Preemptive Rights. After completion
of the Distribution, Greg Micek, a director and the President of the Company,
will own approximately 92.54% of the outstanding shares of the Common Stock.
Cumulative voting in the election of Directors is not provided for. Accordingly,
the holder or holders of a majority of the shares of Common Stock, present in
person or by proxy, will be able to elect all of the Company's Board of
Directors after completion of the Distribution. There are no preemptive rights
in connection with the Common Stock. Thus, stockholders may be diluted in their
percentage ownership of the Company in the event additional shares are issued by
the Company in the future.
25. Dependence of Warrant Holders on Maintenance of Current
Registration Statement; Possible Loss of Value of Warrants. In order for warrant
holders to exercise the Warrants there must be a current registration statement
(or an exemption therefrom) in effect with the Commission and with the various
state securities authorities in the states where warrant holders reside. The
Company has undertaken to use its best efforts to keep (and intends to keep) the
registration statement effective with respect to the Warrants for as long as the
Warrants remain exercisable. However, maintenance of an effective registration
statement will subject the Company to substantial continuing expenses for legal
and accounting fees, and there can be no assurance that the Company will be able
to maintain a current registration statement through the period during which the
Warrants remain exercisable. The Warrants may not be exercisable and may be
deprived of value by the Company's inability to maintain an effective
registration statement (or an exemption therefrom) with respect to the
underlying shares or by the non-qualification of the underlying shares in the
jurisdiction of such holder's residence. See "DESCRIPTION OF CAPITAL STOCK
- -Warrants".
26. Potential Adverse Effect of Redemption of Warrants. Each Warrant
comprising a class of Warrants may be redeemed by the Company at a price of $.01
per Warrant after the Warrants comprising such class have traded above certain
stipulated levels for certain stipulated periods of time. Redemption of the
Warrants could force the warrant holders to exercise the Warrants at a time when
it may be disadvantageous for the holders to do so or to sell the Warrants at
their then current market price when the holders might otherwise wish to hold
the Warrants for possible appreciation. Any holders who do not exercise warrants
prior to their expiration or redemption, as the case may be, will forfeit the
right to purchase the shares of Common Stock underlying the Warrants. See
"DESCRIPTION OF CAPITAL STOCK -- Warrants".
27. Preferred Stock. The Company's Certificate of Incorporation
authorized the issuance of up to 10,000,000 shares of Preferred Stock, par value
$.01 per share, of which none were issued as of _______________________ _____,
1997. The authorized Preferred Stock constitutes what is commonly referred to as
"blank check" preferred stock. This type of preferred stock allows the Board of
Directors from time to time to divide the Preferred Stock into series, to
designate each series, to fix and determine separately for each series any one
or more relative rights and preferences and to issue shares of any series
without further stockholder approval. One of the effects of the existence of
authorized but unissued shares of preferred stock authorized in series may be to
enable the Company's Board of Directors to render it more difficult, or to
discourage an attempt, to gain control of the Company by means of a merger,
tender offer at a control premium price, proxy contest or otherwise and protect
the continuity of or entrench the Company's management, which concomitantly may
have a potentially adverse effect on the market price of the Common Stock.
28. Absence of Prior Trading Market. There has not been any established
public market for the trading of the shares of Common Stock or any of the
Warrants. Subject to the sponsorship of a market maker, shares of Common Stock
and (once issued) the Class A Warrants will be traded in the over-the-counter
market on the OTC Electronic Bulletin Board. The Company expects that the Class
B Warrants and the Class C Warrants will be traded in the over-the-counter
market on the OTC Electronic Bulletin Board at the time that they are issued.
There can be no assurance as to the prices at which the shares of Common Stock
and (once issued) any of the Warrants will trade. Until the shares of Common
Stock and the Warrants comprising the Distribution are fully distributed, a
large number of the Class B Warrants and Class C Warrants have been issued, and
orderly markets develop and even thereafter, the prices of such securities may
fluctuate significantly. Prices for shares of Common Stock and the Warrants will
be determined in the marketplace and may be influenced by many factors,
including the depth and liquidity of the markets for shares of Common Stock and
the Warrants, investor perception of the Company and the industry in which the
Company participates and general economic and market conditions.
29. Potential Future Sales Pursuant to Rule 144. Presently, 6.7 million
shares of Common Stock are issued and outstanding, all of which are "restricted
securities" as that term is defined in Rule 144 promulgated under the Act. The
250,000 shares of Common Stock being registered in connection with the
Distribution should become generally freely tradeable as a result thereof. As to
the remaining 6.45 million restricted shares, Rule 144 (as amended effective
April 29, 1997) provides in general that a person (or persons whose shares are
aggregated) who has satisfied a one-year holding period, may sell within any
three month period, an amount which does not exceed the greater of 1% of the
then outstanding shares of Common Stock or the average weekly trading volume
during the four calendar weeks prior to such sale. Rule 144 (as amended
effective April 29, 1997) also permits the sale of shares, under certain
circumstances, without any quantity limitation, by persons who are not
affiliates of the Company and who have beneficially owned the shares for a
minimum period of two years. Hence, the possible sale of these restricted shares
may, in the future dilute an investor's percentage of freely tradeable shares
and may have a depressive effect on the price of the Company's securities and
such sales, if substantial, might also adversely effect the Company's ability to
raise additional equity capital. See "DESCRIPTION OF CAPITAL STOCK - Shares
Eligible for Future Sale."
30. Risk of Potential to Dilution Future Share Issuances. The Company
is registering an aggregate of 5,000,000 shares of Common Stock to be offered by
the Company on a continuous or delayed basis in the future in connection with
anticipated business combination transactions. The issuance of such shares and
the consideration to be received therefor will be entirely within the discretion
of the Company's Board of Directors. Although the Board of Directors intends to
utilize its reasonable business judgment to fulfill its fiduciary obligations to
the Company's then existing stockholders in connection with any such issuance,
future issuance of additional shares could cause immediate and substantial
dilution to the net tangible book value of those shares of Common Stock that are
issued and outstanding immediately prior to such transaction. Any future
decrease in the net tangible book value of such issued and outstanding shares
could have a material effect on the market value of the shares.
31. Risks Relating to Low-Priced Stocks. If the trading price of the
Common Stock or any of the Warrants were to start and remain below $5.00 per
share, trading in the Common Stock and such Warrants would be subject to the
requirements of certain rules promulgated under the Exchange Act which require
additional disclosure by broker-dealers in connection with any trades generally
involving any non-NASDAQ equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. Such rules require the delivery,
prior to any penny stock transaction, of a disclosure schedule explaining the
penny stock market and the risks associated therewith, and impose various sales
practice requirements on broker-dealers who sell penny stocks to persons other
than established customers and accredited investors (generally institutions).
For these types of transactions, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. The additional burdens imposed
upon broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in the Common Stock or the Warrants affected, which could
severely limit the market liquidity of the Common Stock and such Warrants.
32. No Dividends. The holders of the Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors out of
funds legally available therefore. To date, the Company has not paid any cash
dividends. The Board of Directors does not intend to declare any dividends in
the foreseeable future, but instead intends to retain all earnings, if any, for
use in the Company's business operations. If the Company obtains additional
financing, restrictions are likely to be placed on the Company's ability to
declare any dividends. See "DIVIDEND POLICY" and "DESCRIPTION OF CAPITAL STOCK."
33. No Specific Use of Proceeds. The Company has not designated any
specific use for the proceeds realized from the exercise of the Warrants. The
Company expects to use such proceeds for general corporate purposes, including
working capital. Accordingly, management will have significant flexibility in
applying such proceeds. The failure of management to apply such funds
effectively could have a material adverse effect on the Company's business,
results of operations and financial condition.
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN, THE SHARES COVERED
BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. STOCKHOLDERS SHOULD BE AWARE
OF THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS.
<PAGE>
BUSINESS
INTRODUCTION
JVWeb, Inc. (the "Company") was incorporated on October 28, 1997 under
the laws of the State of Delaware. The Company was formed for purposes of
pursuing electronic commerce opportunities.
Electronic commerce opportunities are expected to arise in several
different ways. First, the Company expects to offer products, services and
advertising by means of sites on the World Wide Web (the "Web") of the Internet.
The Company is currently developing a Web site to offer already identified
products, and the Company expects to develop additional Web sites in the future
to offer products and services yet to be identified and to provide content (also
yet to be identified) and advertising in connection therewith. Although the
Company may offer products, services and advertising directly (such as in the
case of the initial Web site now being developed), the Company believes that it
is much more likely to offer products, services and advertising through joint
ventures with established businesses. In the case of joint ventures, the Company
expects to contribute technical expertise and (in certain instances) financial
assistance in developing the joint ventures' Web sites, while the joint venture
partners will be responsible for furnishing the joint ventures' products or
services, the content for the joint ventures' Web sites, and the related
business expertise. In addition, the Company expects to acquire other companies
to be identified in the future. Acquisition candidates are expected to include
emerging electronic commerce companies, traditional companies with good
prospects for significant electronic commerce, and Internet service companies
capable of enhancing the Company's Internet resources.
The address of the Company is 5444 Westheimer, Suite 2080, Houston,
Texas 77056, and its telephone number is 713/622-9287. The Company's Web site
currently under construction is located at http://www.jvweb.com. Information
contained in the Company's Web site shall not be deemed to be a part of this
Prospectus. Unless the context indicates otherwise, the term "Company" shall
include JVWeb, Inc., the joint ventures in which it becomes a venturer, and its
future subsidiaries.
INDUSTRY BACKGROUND
The Internet is an increasingly significant global medium for
communications, content and online commerce. International Data Corporation
("IDC") estimates that the number of Web users grew to approximately 35 million
by the end of 1996 and will grow to approximately 163 million by 2000. Growth in
Internet usage has been fueled by a number of factors, including the large and
growing installed base of personal computers in the workplace and home, advances
in the performance and speed of personal computers and modems, improvements in
network infrastructure, easier and cheaper access to the Internet and increased
awareness of the Internet among businesses and consumers.
The increasing functionality, accessibility and overall usage of the
Internet and online services have made them an attractive commercial medium. The
Internet and other online services are evolving into a unique sales and
marketing channel, just as retail stores, mail-order catalogs and television
shopping have done. In theory, electronic retailers have virtually unlimited
electronic shelf space and can offer customers a vast selection through
efficient searches and retrieval interfaces. Moreover, electronic retailers can
interact directly with customers by frequently adjusting their featured
selections, editorial insights, shopping interfaces, pricing and visual
presentations. Beyond the benefits of selection, purchasing is more convenient
than shopping in a physical retail store because electronic shopping can be done
24 hours a day and does not require a trip to a store. Web sites can present
advertising and marketing materials in new and compelling fashions, display
products and services in electronic catalogs, offer products and services for
sale electronically, process transactions and fulfill orders, provide customers
with rapid and accurate responses to their questions, and gather customer
feedback efficiently. The minimal cost to develop and maintain a Web site, the
ability to reach and serve a large and global group of customers electronically
from a central location, and the potential for personalized low-cost customer
interaction, provide additional economic benefits for electronic retailers.
Unlike traditional retail channels, electronic retailers do not have the
burdensome costs of managing and maintaining expensive retail real estate and a
significant retail store infrastructure or the continuous printing and mailing
costs of catalog marketing. Furthermore, electronic retailers are generally able
to conduct their businesses with fewer employee than traditional retailers.
Because of these advantages over traditional retailers, electronic retailers
have the potential to build large, global customer bases quickly and to achieve
superior economic returns over the long term. An increasingly broad base of
products and services is successfully being sold electronically, including
computers, travel services, brokerage services, automobiles, music and books.
IDC estimates that the total value of goods and services purchased over the Web
grew from $318 million in 1995, to an annualized run rate of $5.4 billion in
December 1996, and will increase to $95 billion in 2000. If these estimates
become a reality, the migration from traditional shopping to electronic shopping
will effect dramatic changes in retailing as it has heretofore been conducted.
In addition to the offering of products and services through electronic
commerce, the Internet has created a new medium for disseminating content, such
as the content historically delivered by newspapers, magazines and journals.
Electronic dissemination of content offers numerous advantages over historical
mediums of content dissemination. First, the content can be provided to
consumers more quickly, as the delays required by printing and delivery are
avoided. For example, a magazine that ordinarily is mailed for delivery on a
particular day can be made available electronically as soon as the magazine is
otherwise ready for print, at least one day before anticipated delivery. In
addition, content can be updated on a real time basis so that only current (and
no outdated) content appears. Moreover, the electronic content can be linked
instantaneously to related content of interest. While newspapers, magazines and
journals can offer only still-shot photography, electronic commerce can offer
moving and even live pictures much akin to television. Equally (if not most)
important, electronic content can be distributed at a much lower cost compared
to historical mediums because electronic dissemination does not involve printing
and delivery costs. The new medium of content dissemination provided by the
Internet has in turn lead to new forms of advertising, especially banner
advertisements that appear as Web sites are displayed. As the presence on the
Web of suppliers of content and advertising increases, the new forms of
advertising such as the banner advertisements should increase in prominence as
well, thus creating additional revenue opportunities.
Although businesses are pursuing electronic commerce rapidly and at
increasing rates, the basic differences of electronic commerce from historical
commerce require companies to take fundamentally new approaches. A number of
Internet professional services firms have emerged to assist businesses with the
development and implementation of their electronic commerce strategies. However,
these firms tend to be small and focused on a particular aspect of electronic
commerce, apparently lacking the necessary depth and integration of strategic,
technical and creative skills to meet all the electronic commerce needs of a
business. After analyzing the very fragmented Internet service industry,
management has concluded that:
1. Most traditional advertising and marketing agencies have
neither a proven track record of success in the area of
electronic commerce and lack the extensive technical skills
(such as application development, and legacy system and
database integration) required to solve increasingly complex
electronic commerce problems.
2. Most vendors of computer and technology products and services
lack the creative and marketing skills required to build
audiences and deliver unique and compelling content, and are
further constrained by their need to recommend their
proprietary brands.
3. Internet access service providers, whose core strength is in
providing Internet access and site hosting, typically lack
both the necessary creative and application development
skills.
Management believes that to provide fully competent Internet services, a service
provider must possesses a full range and integration of strategic, technical and
creative skills required for electronic commerce.
Businesses seeking to realize the benefits provided by electronic
commerce face a formidable series of challenges presented by the need to link
business and marketing strategies, new and rapidly changing technologies and
continuously updated content. The establishment and maintenance of a Web site to
pursue electronic commerce requires significant technical expertise in a number
of areas, such as electronic commerce systems, security and privacy
technologies, application and database programming, mainframe and legacy
integration technologies and advanced user interface and multimedia production.
Marketing expertise in a number of areas (including the development of
audiences, greater search engine presence, and broader ranges of links to the
site) is also required. Few businesses (especially small, emerging and mid-sized
businesses) appear to have the time, money, and strategic, technical and
creative skills to implement an electronic commerce strategy on their own. In
addition, management believes that the novelty, complexity and rapid development
of electronic commerce has left many businesses (especially small, emerging and
mid-sized businesses) bewildered and reluctant to act, despite a strongly felt
need to become involved in electronic commerce.
Furthermore, the Company believes that most firms providing services to
develop and implement electronic commerce strategies charge on a flat-fee or
time and materials basis. Under these pricing approaches, the service firm
profits from providing the services regardless of whether or not the client
business profits from the services provided. Accordingly, the interests of the
client and the service provider are not aligned because the client bears the
entire loss of a failed electronic commerce strategy while the service provider
bears none of this risk. Management believes that these pricing approaches
engender a suspicion that the service provider may not be candidly assessing a
client's electronic commerce potential, lest the service provider dissuade the
prospective client and miss an opportunity for a fee. While a business
contemplating an electronic commerce strategy may be concerned about missing a
business opportunity that may be necessary to bolster or preserve the business'
competitive posture, the business is equally concerned about avoiding a
worthless investment in money, time and business readjustment. Management
believes that flat-fee and time and materials pricing approaches further inhibit
businesses' willingness to undertake electronic commerce strategies.
Overall the Company believes that electronic commerce presents
excellent business opportunities for the foreseeable future. Because of the
relative novelty of electronic commerce, the Company believes that the market
for electronic commerce is fairly wide-open, although market leadership has
already been established in a number of respects. Nonetheless, plenty of
opportunities still exist, especially with regard to small, emerging and
mid-sized businesses. The Company believes that customer unfamiliarity and the
fragmented state of the electronic commerce market creates an opportunity for a
company with fully integrated strategic, technical and creative Internet skills
that can assist businesses while sharing the risk imposed by electronic commerce
strategies. Prior to the present, the number of consumers with Internet access
was probably too small for small, emerging and mid-sized businesses (the
Company's target prospects) to participate successfully in electronic commerce.
The Company believes that the present represents an excellent time to enter into
new markets created by electronic commerce at a time when entry is easier and
market position can be better established than it may be if entry were attempted
further into the future.
THE JVWEB SOLUTION
The Company was founded to seek out and capitalize on business
opportunities presented by electronic commerce. The Company believes that the
anticipated migration from traditional shopping to electronic shopping, and the
anticipated increase in the electronic dissemination of content, will present
for the foreseeable future excellent business opportunities to sell products and
services that are now either not available at all or are available only to a
limited extent in electronic commerce, and to offer new forms of advertising
made available by the Internet. While the Company may pursue some of these
opportunities on its own, the Company expects that it will pursue most of these
opportunities with joint venture partners who have established businesses,
products and services. The Company intends to offer to prospective joint venture
partners technical Internet expertise (and in certain instances financial
assistance) for an ownership interest in the resulting electronic business, in
lieu of an up-front payment of cash. The Company believes that, because of the
strongly perceived need to be engaged in electronic commerce and the hesitancy
of many established businesses to pursue electronic commerce on their own (due
to their unfamiliarity with electronic commerce and the unique way of
approaching it and the concern about bearing a substantial loss from a failed
electronic commerce strategy), the Company should have for the foreseeable
future an ample array of joint venture prospects. The Company also intends to
develop a full, integrated ensemble of strategic, technical and creative skills
required for electronic commerce. Currently, the Company relies on third party
vendors to provide these skills. However, the Company intends actively to seek
acquisitions to give these skills to the Company internally.
Key components of the Company's solution to the question of
capitalizing on the anticipated growth in electronic commerce, the migration of
traditional shopping to electronic shopping, and the increase in the electronic
dissemination of content, include:
Identification and Selection of Electronic Commerce Opportunities.
Although the number of businesses engaging in electronic commerce by means of
Web sites is growing rapidly, the number of businesses that have not yet
engaged, and the number of products and services that have not been offered and
content not made available, in electronic commerce remain very large. The
Company intends to maintain an active program of locating electronic commerce
opportunities, and to select only those opportunities that present the greatest
likelihood of success.
Joint Ventures. Although the Company expects to undertake some
electronic commerce opportunities alone, the Company believes that it will
undertake most electronic commerce opportunities through joint ventures with
established, profitable businesses whose products, services or content (in most
cases) are not currently being offered electronically. The Company would furnish
expertise in electronic commerce (and in certain instances financial assistance)
for an equity interest in the resulting electronic business, in lieu of an
up-front payment of cash. Because of the Company's willingness to enter into
such an arrangement, the Company expects to be an attractive joint venture
partner for many established business seeking to become engaged in electronic
commerce. This willingness will allow selected businesses to enter into
electronic commerce with minimal financial investment and risk, while providing
the Company with a substantial potential return for its services and financial
contributions. The Company's limited experience thus far indicates that for the
foreseeable future the Company will have an ample array of joint venture
prospects.
Electronic Store Economics. By pursuing electronic opportunities as the
Company expects, the Company will in effect become an electronic retailer.
Electronic retailers enjoy meaningful structural economic advantages relative to
traditional retailers. They enjoy significantly improved inventory turnover,
avoid investment in expensive retail real estate and realize reduce personnel
requirements. Further, electronic retailers serve a global market through
centralized operations, allowing their investments in Web sites, content,
marketing and technology to be leveraged over a relatively large sales base.
Beyond the benefits of selection, purchasing products and services from an
electronic retailer is more convenient than shopping in a physical retail store
because the electronic retailer is open 24 hours a day and shopping does not
require a trip to a store. Products can be shipped directly to the customer's
home or office. The Company believes that customers may buy more products and
services because they have more hours to shop and can act immediately on a
purchase impulse. Because an electronic retailer has a global reach, it can
deliver an extremely broad selection to customers in rural, international or
other locations that cannot support traditional retailers offering comparable
products and services. Web sites may include not only the content and
applications dealing directly with products and services and their purchase, but
also stimulating content to inform and entertain customers while shopping, thus
encouraging the shopper to return for more visits and to make more purchases.
Over time, the Company can accumulate substantial preference and behavioral
information that will allow it to customize targeted sales efforts and to
provide value-added services to its customers.
Content Opportunities. The Company also expects to pursue opportunities
created by the relatively new ability to disseminate content electronically.
Many businesses that disseminate content (such as newspapers, magazines and
journals) continue to use historical delivery methods, primarily print.
Electronic dissemination of content offers numerous advantages over historical
methods of content dissemination, such as quicker delivery, more up-to-date
content, more flexible presentation using such techniques as live video, audio
and links to related content, and much lower costs of production. Electronic
content dissemination has lead to new forms of advertising, such as banner
advertisements. In addition, providing content electronically on a limited,
sample basis is expected to increase sales of the underlying hardcopy content.
The Company intends to seek joint ventures with existing content providers to
provide their content electronically to increase subscription and advertising
revenues.
Acquisitions. The Company intends actively to seek acquisitions to
develop a full, integrated ensemble of strategic, technical and creative skills
required for electronic commerce. Currently, the Company relies on third party
vendors to provide these skills. However, the Company foresees great benefits by
being able to provide these skills internally. While a small number of companies
providing integrated Internet skills are already well-established and growing,
management believes that the market for integrated Internet services is
currently underserved.
STRATEGY
The Company's objective is to take advantages of electronic commerce
opportunities. The Company plans to attain this goal through the following key
strategies:
Electronic Commerce Opportunities. The Company intends to seek
attractive electronic commerce opportunities for it to undertake on its own or
through joint ventures with established businesses. The Company intends to
maintain a program of actively seeking electronic commerce opportunities and
selecting only those opportunities that present the greatest likelihood for
success. The Company's success will depend on its ability to identify and
successful pursue electronic commerce opportunities as they arise.
Create Customer Loyalty by Delivering a Compelling Value Proposition.
In connection with the Company's commerce-driven opportunities, the Company's
goal is to deliver to the Company's customers the benefits of electronic
commerce and by maintaining relentless customer focus. The Company will strive
to offer its customers compelling value through innovative use of technology,
broad selection, high-quality content, a high level of customer service,
competitive pricing and personalized services. In addition, the Company will
seek to offer its customers a high-quality shopping experience through
informative and entertaining content, as well as simple and efficient navigation
capabilities.
Build Strong Brand Recognition. The Company's strategy is to develop,
promote, advertise and increase the brand equity and visibility of its products,
services and advertising through excellent service and a variety of marketing
and promotional techniques, including advertising on other Web sites and other
media, conducting an ongoing public relations campaign and developing business
alliances and partnerships.
Create a Superior Economic Model. Because the Company will not be
burdened by the costs or legacy of physical store networks, related personnel,
and printing and delivering of content, the Company believes it will have an
inherent economic advantage relative to traditional retailers and providers of
content. The Company's goal is to capitalize on this advantage by aggressively
driving revenue growth to achieve economies of scale and by incorporating
technological advances throughout its Web sites.
Maintain Technology Focus and Expertise. A state-of-the-art interactive
commerce platform is necessary to enhance the Company's service offering,
leverage the unique characteristics of retailing and electronic content
delivery, and enable a superior economic model. The Company will be committed to
developing, acquiring and implementing technology-driven enhancements to its Web
sites and transaction-processing systems. Among other technology objectives, the
Company intends to provide increasingly valuable personalized service programs,
make user interfaces as intuitive, engaging and fast as possible and
continuously improve the efficiency of its fulfillment activities.
Pursue Incremental Revenue Opportunities. The Company intends to
leverage its brands, electronic commerce experience, operating infrastructures
and customer bases to broaden its presence and develop additional revenue
opportunities. In addition, the Company will consider developing incremental
revenue opportunities through affiliated or related Web sites, related product
areas, geographic expansion or acquisition of complementary businesses, products
or technologies. Finally, the Company's customer demographic and substantial
site traffic create a meaningful opportunity for advertising sales, the sale of
demographic information and the sale of links to other sites to be featured on
the Company's sites.
Strengthen Electronic Commerce Abilities. The Company intends to
continue to build a critical mass of strategic, technical and creative talent
primarily through acquisitions in order to strengthen its electronic commerce
abilities. The Company intends to continue efforts to identify, review and
integrate the latest electronic commerce technologies and accumulating and
deploying the best demonstrated practices for developing and implementing
electronic commerce strategies.
Develop Additional Strategic Relationships. The Company has developed a
number of strategic relationships with advertisement agencies, web developers,
site content managers, site hosts and other persons whose services are necessary
to develop and implement an electronic commerce strategy. While the Company
intends to develop the ability to render these services internally, the Company
also intends to continue developing strategic relationships so that the Company
can have adequate access to such services for the foreseeable future. The
Company expects that it may ultimately acquire some of the firms with which it
establishes strategic relationships.
Attract and Retain Exceptional Employees. The Company believes that
versatile and experienced employees provide significant advantages in the
rapidly evolving market in which it will compete. The Company is committed to
building a talented employee base and to attracting an experienced management
team.
OPPORTUNITY SELECTION
Management believes that opportunities in electronic commerce are
either commerce-driven or content-driven. Commerce-driven opportunities involve
the sale of products and services through electronic mediums, such as electronic
stores. Content-driven opportunities involve the provision of content (such as
that historically provided by newspapers, magazines and journals) through
electronic mediums, the attraction of consumers to such content, and the
offering of advertising (and even products and services) in connection with the
provision of such content. The Company expects to pursue both commerce-driven or
content-driven opportunities.
Currently the Company learns of all its electronic commerce
opportunities through word-of-mouth referrals. For the present, the Company has
been able to learn of a sufficient number of electronic commerce opportunities
by this means. However, in the future as the Company grows, the Company intends
to advertise for joint venture prospects primarily through the Internet, once
regulatory constraints have been complied with. Moreover, the Company may engage
investment bankers, brokers and other intermediaries to locate these prospects
as well.
Once a joint venture prospect is presented, a thorough study will be
undertaken of the prospect's strategic market position, business requirements
and existing systems and capabilities, to determine the likelihood that the
prospect's business will succeed in electronic commerce. After the study, the
Company's site management team (composed of the site administrator, web
marketing consultant, financial controller and project manager) accepts or
rejects the prospect. This decision is based on a number of factors, such as the
prospect's historical or prospective ability to fulfill orders, the lack of a
clearly perceived electronic commerce strategy, the lack of perceived electronic
market interest and the need for an initial budget too high to warrant the
related risk. Currently, the Company intends to charge a $2,500 application fee
to defer the costs of screening a prospect. If the Company decides not to pursue
a joint venture with the prospect, the Company will develop a basic Web site for
the prospect in consideration of the application fee.
If a prospect is accepted, the Company enters into negotiations with
the prospect to formalize an on-going joint venture relationship. The Company
expects that the joint ventures it forms will assume the form of corporations or
limited liability companies organized in Delaware (a favorable state for
corporations), Texas (the state in which the Company is headquartered), or
another favorable jurisdiction. The Company expects that it will own between 20%
to 80% of the outstanding equity interests in each joint venture depending on
the relative contributions of the venturers. The documentation governing the
joint venture will delineate the respective responsibilities of the Company and
its joint venture partner. In the case of the Company, these responsibilities
are expected to include the contribution of necessary strategic, technical and
creative skills and (in certain instances) financial assistance in developing
the joint venture's Web site. (For the present, the Company will act as the
coordinating consultant and will utilize third party vendors in providing the
foregoing skills; however, the Company intends to acquire these skills
internally, primarily through acquisitions.) The joint venture partner's
responsibilities will include the furnishing of the joint ventures' products or
services, the content for the joint ventures' Web sites, and the related
business expertise. The Company expects that it and its joint venture partner
will have management authority with respect to the respective areas for which
they have responsibility. The capital contributions of the venturers should be
fairly minimal, and will be worked out on a case-by-case basis. The Company
expects that as the joint ventures with commerce-driven Web sites receive
revenues, such revenues will be first used to reimburse the joint venture
partner for the costs of providing the joint venture's product or services, then
such revenues will be used to pay other joint venture expenses, and then the
remainder will be distributed to the venturers in accordance with their
percentage ownership. A similar scheme will be used for joint ventures with
content-driven Web sites, except that the joint ventures' revenues are expected
to result from additional advertising and additional subscription to the
underlying hardcopy publication resulting from the Web sites. The Company
expects that the documentation governing the joint venture will include a
buy-sell arrangement whereby either the Company or its joint venture partner may
terminate its relationship with the other by setting the price and terms of the
purchase of one of the venturer's interest and allowing the other venturer to
elect to sell to or buy out the venturer setting the price and terms for such
price and upon such terms. The Company also expects that the terms of the joint
ventures will be renewable on an annual basis and the documentation governing
the joint venture will provide for the sale of the joint venture's business upon
dissolution either to a third party, or to the Company or its joint venture
partner at an appraised price.
WEB SITES
The proper development and implementation of a Web site for a business
involves a number of steps. First, a thorough study is undertaken to determine
the likelihood that the business will succeed in electronic commerce. Once the
study determines that the business is likely to succeed in electronic commerce,
a strategy for developing a Web site is developed by a team composed of the
business principals, advertising agency, web developer and content site manager.
A domain name is agreed upon and obtained. The Web site is then "story boarded"
or laid out conceptually and graphically. A web developer develops the structure
of the Web site, including electronic commerce systems; host integration;
implementation of third-party applications and security technologies; and
integration of hardware, software and Internet access products. A compelling
user interface is created to attract and hold the attention of the target
audience while conforming to brand images and marketing campaigns. A
relationship with a third-party vendor is established to provide secure,
state-of-the-art, high-availability Web site hosting and integrated services for
e-mail and secure electronic commerce. Once operational, a Web site requires
ongoing support services for content maintenance, site administration, technical
problems, assistance with the hosting environment, and software support. As the
Web site nears completion, electronic marketing objectives are developed to
establish and increase Web site traffic, strengthen brand awareness and generate
sales leads. Electronic media planning and purchasing, and electronic public
relations is undertaken. This is followed by efforts to optimize the Web site's
search engine presence, increase site access through hyperlink recruitment and
disseminate key messages to Internet newsgroups, mailing lists and forums.
Typically a Web site starts as a basic site costing several thousand dollars. It
can then become increasingly more complex through the addition of more Web
pages, links and commercial capability. Ultimately, an extremely complex Web
site can cost several million dollars.
ELECTRONIC RETAIL STORES
Many, if not most, of the Company's commerce-driven Web sites are
expected to assume the form of an electronic retail store. Customers enter an
electronic retail store through a Web site and, in addition to ordering products
and services, can conduct targeted searches, browse from among highlighted
selections, read content provided, register for personalized services,
participate in promotions and check order status.
Browsing. As a customer proceeds through the store, he or she
encounters graphic images of featured products and services. Clicking with the
mouse on any of these images pulls up more information about the featured
product and service, as well as a button which, if clicked on, adds the product
or service to the customer's order. The Company's electronic stores are expected
to offer visitors a variety of highlighted subject areas and special features.
To enhance the shopping experience and increase sales, the Company are expected
to feature various products and services on a rotating basis throughout the
store. These images of featured products and services appear one or two at a
time, in addition to whatever material the customer specifically requested.
Ordering. To purchase a product or service, customers simply click on a
button to add the product or service to their virtual shopping baskets.
Customers can add and subtract products and services from their shopping baskets
as they browse, prior to making a final purchase decision, just as in a physical
store. To execute orders, customers click on the buy button and are prompted to
supply shipping and credit card details, either by e-mail, fax or telephone.
This information will be stored on a secure server and need not be provided
again by repeat customers. The personal password allows repeat customers to
automatically access their previously provided shipping and credit card
information. The Company's system will automatically confirm each order by
e-mail to the customer shortly after the order is placed and advises customers
by e-mail shortly after orders are shipped.
Availability and Fulfillment. The Company does not expect to carry very
much inventory but will rely almost exclusively on its joint venture partners
and third party vendors for fulfillment of orders. Orders will be received by
the Company's site administrator, who will then notify and direct the related
joint venture partner or third party vendor to fulfill the order. Most of the
Company's products are expected to be available for immediate shipment, while
others are available for shipment within 48 to 72 hours. Customers will be
permitted to select from a variety of delivery options, including overnight and
various international shipping options, as well as gift-wrapping services. The
Company will use e-mail to notify customers of order status under various
conditions. The Company will seek to provide rapid and reliable fulfillment of
customer orders.
Content. The Company's electronic retail stores are expected to offer
numerous forms of content to entertain and engage shoppers, enhance the
customer's shopping experience and encourage purchases. These forms will include
articles by experts on subjects in which visitors to the Company's Web sites are
expected to be interested, chat rooms in which visitors can communicate with
each other and with selected persons in whom visitors are expected to be
interested, and contests in which visitors have a chance to win a prize.
Electronic Community. By creating an electronic community, the Company
hopes to provide customers with an inviting and familiar experience that will
encourage them to return frequently to the Company's Web sites and to interact
with other users, and that will promote loyalty and repeat purchase. In addition
to the content of the Web sites, the Company intends to establish chat rooms in
which visitors to the Web sites, who presumably will have something in common
with each other, can communicate with each other in real time. Experts and
authors of the content featured on the Company's Web sites are expected to
participate in these chat rooms, thus giving visitors the opportunity to engage
in a dialogue and acquire information in which they are interested.
Customer Service and Personalized Services. The Company believes that
its ability to establish and maintain long-term relationships with its customers
and encourage repeat visits and purchases depends, in part, on the strength of
its customer support and service operations and staff. Furthermore, the Company
values frequent communication with and feedback from its customers in order to
continually improve its electronic stores and its services. The Company will
offer e-mail addresses to enable customers to request information and to
encourage feedback and suggestions. The Company will maintain a team of customer
support and service personnel for handling general customer inquiries, answering
customer questions about the ordering process, and investigating the status of
orders, shipments and payments. The Company will also offer a toll-free line for
customers who are reluctant to enter their credit card numbers through the Web
site. The Company will automate certain of the tools used by its customer
support and service staff, and the Company intends to pursue actively on-going
enhancements to and automation of its customer support and service systems and
operations. The Company currently expects to notify its customers electronically
by e-mail as orders are received and shipped. The Company also expects to notify
its customers by e-mail of products, services and other matters in which they
may be interested. The Company also expects to notify its customers
electronically by e-mail on a regular basis as to promotions the Company is then
running.
Collaborative Filtering. The Company intends to add a collaborative
filtering service to its personalized service offerings in the future. The
collaborative filtering service will function as an expert reviewer that
develops a relationship with customers, helping them to find products and
services they may like based on their preferences.
SOLE CURRENT PROJECT
Although the Company has several Web sites under consideration, the
Company's only Web site currently under development is www.dadandme.com. This
wholly-owned Web site of the Company is dedicated to fortifying and enhancing
fatherhood and offering products sold under the "Dad & me" logo. The concept
originated from a series of children books written by Greg J. Micek, a director
and the President of the Company. This Web site will feature content and
products addressed specifically to fathering issues. Initial products will
number approximately 20 and are expected to include T-shirt, sweatshirts, polo
shirts, pen and pencil sets, books, mugs and picture frames. This Web site has
been story boarded, its domain name obtained, a logo has been selected, and the
initial content has been written. Remaining work includes the building of the
electronic store and the taking of pictures of the initial products to be sold.
The www.dadandme.com Web site will feature articles on parenting and a chat room
in which visitors can communicate with each other and with an authority on
children. This Web site is expected to be operational in early January 1998. The
Company intends to use www.dadandme.com as a test site for future Web sites to
be developed by the Company. Several other Web sites currently under
consideration are expected to commence full-scale development after
www.dadandme.com has been operational for several months. The Company expects
that www.dadandme.com will eventually be link with another Web site,
www.familylifestyle.com, a Web site expected (through links) to serve as a hub
for a series of commercial sites dedicated to family issues and products.
ACQUISITIONS
The Company intends to pursue an active acquisition program in an
effort to foster the Company's growth over and above the growth that can be
achieved internally. The Company believes that there are a number of potential
acquisition candidates that satisfy its acquisition objectives. The Company is
currently discussing on a non-binding basis the acquisitions of several
companies. There is no assurance that any acquisitions will result from these
discussions. Acquisition candidates are expected to include emerging electronic
commerce companies, traditional companies with good prospects for significant
electronic commerce, and Internet service companies capable of enhancing the
Company's Internet resources. Some of these may include the Company's joint
venture partners and third party vendors.
Management will be dedicated to identifying potential acquisition
candidates. The Company may in the future retain the services of investment
bankers, brokers and other intermediaries to assist in identifying potential
acquisition candidates. Management will also engage in negotiations and due
diligence activities with each acquisition candidate to explore whether it meets
the Company's operating strategy, and will work to complete the acquisition of
suitable candidates. The Company will stress to each acquisition candidate the
advantages of merging with the Company, including the benefits of being part of
an organization committed to growth. Following the closing of each acquisition,
the Company intends to move rapidly to integrate the acquired company into the
Company's operations.
The Company has not developed, nor does it currently intend to develop,
a valuation model and a standardized transaction structure it will use on a
consistent basis for its anticipated acquisitions. Instead, the Company
anticipates considering each acquisition on a case-by-case basis. However, the
Company expects that the purchase price for acquisition candidate will be based
on quantitative factors, including historical revenues, profitability, financial
condition and contract backlog, and the Company's qualitative evaluation of the
candidate's management team, operational compatibility and customer base.
Nonetheless, the Company expects to acquire suitable candidates through mergers
in exchange for shares of Common Stock, and 5,000,000 shares of Common Stock are
being registered in this connection and for this purpose.
The acquisitions are expected to be accounted for using the
pooling-of-interests method of accounting. However, some acquisitions may be
accounted for using the purchase method of accounting. Under this method of
accounting, for each acquisition, a portion of the purchase price would be
allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed based on their respective fair values on the acquisition
date. This portion would include both (i) amounts allocated to in-process
technology and immediately charged to operations and (ii) amounts allocated to
completed technology and amortized on a straight-line basis over the estimated
useful life of the technology of six months. The portion of the purchase price
in excess of tangible and identifiable intangible assets and liabilities assumed
would be allocated to goodwill and amortized on a straight-line basis over the
estimated period of benefit, which ranges from one to two years. The results of
operations of the acquired entity would be consolidated with those of the
Company as of the date the Company acquires effective control of the acquired
entity, which generally would occur prior to the formal legal closing of the
transaction and the physical exchange of acquisition consideration. In addition,
the Company may grant stock options to employees of an acquired company to
provide them with an incentive to contribute to the success of the Company's
overall organization. As a result of both the purchase accounting adjustments
and charges for the stock options just described, the Company may incur
significant non-cash expenses related to its acquisitions.
The successful implementation of the Company's acquisition strategy
depends on the Company's ability to identify suitable acquisition candidates,
acquire such companies on acceptable terms and integrate their operations
successfully with those of the Company. There can be no assurance that the
Company will be able to do so. Moreover, in pursuing acquisitions the Company
may compete with companies with similar acquisition strategies. Most of these
competitors will be larger and have greater financial and other resources than
the Company. Competition for these acquisition targets could also result in
increased prices for acquisition targets and a diminished pool of companies
available for acquisition. Acquisitions also involve a number of other risks,
including adverse effects on the Company's reported operating results from
increases in goodwill amortization, acquired in-process technology, stock
compensation expense and increased compensation expenses resulting from newly
hired employees, the diversion of management attention, risks associated with
the subsequent integration of acquired businesses, potential disputes with the
sellers of one or more acquired entities and the failure to retain key acquired
personnel. Client satisfaction or performance problems with an acquired firm
could also have a material adverse impact on the reputation of the Company as a
whole, and any acquired company could significantly fail to meet the Company's
expectations. Due to all of the foregoing, the Company's pursuit of an overall
acquisition strategy or any individual completed, pending or future acquisition
may have a material adverse effect on the Company's business, results of
operations, financial condition and cash flows. If the Company issues Common
Stock to complete future acquisitions as it expects to, there will be ownership
dilution to existing stockholders. In addition, to the extent the Company
chooses to pay cash consideration in such acquisitions, the Company may be
required to obtain additional financing and there can be no assurance that such
financing will be available on favorable terms, if at all.
INTELLECTUAL PROPERTY
The Company regards its service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to its success, and relies
on trademark law, trade secret protection and confidentiality and/or license
agreements with its employees, customers, partners and others to protect its
proprietary rights. The Company pursues the registration of its trademarks and
service marks in the U.S. and internationally, and has applied for the
registration of certain of its trademarks and service marks. Effective
trademark, service mark, and trade secret protection may not be available in
every country in which the Company's products and services are made available
electronically. The Company may license to third parties in the future certain
of its proprietary rights, such as trademarks. While the Company will attempt to
ensure that the quality of its brands are maintained by such licensees, there
can be no assurance that such licensees will not take actions that might
materially adversely affect the value of the Company's proprietary rights or
reputation, which could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations. There can be
no assurance that the steps taken by the Company to protect its proprietary
rights will be adequate or that third parties will not infringe or
misappropriate the Company's trademarks, trade dress and similar proprietary
rights. In addition, there can be no assurance that other parties will not
assert infringement claims against the Company. The Company may be subject to
legal proceedings and claims from time to time in the ordinary course of its
business, including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties by the Company and its licensees.
Such claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources.
MARKET AND MARKETING
The Company's objective is to take advantages of electronic commerce
opportunities. The Company's marketing will be focused on developing a flow of
potential electronic commerce opportunities for the Company's consideration, and
developing sales of the products, services and advertising offered through the
electronic commerce opportunities selected by the Company.
Currently, the Company learns of all of its potential electronic
commerce opportunities through word-of-mouth referrals. In the future, the
Company intends to advertise for electronic commerce opportunities on the
Internet once regulatory constraints have been complied with, and the Company
may engage intermediaries and brokers to locate these prospects as well. One way
or the other, the Company intends to maintain an active program of locating
electronic commerce opportunities.
With respect to the Company's products and services offered through Web
sites, the Company's marketing strategies will be designed to strengthen its
brand names, increase customer traffic to its Web sites, build strong customer
loyalty, maximize repeat purchases and develop incremental revenue
opportunities. The Company intends to build customer loyalty by creatively
applying technology to deliver personalized programs and service, as well as
creative and flexible merchandising. The Company will be able to provide
increasingly targeted and customized services by using the extensive customer
preference and behavioral data obtained as a result of its experience. The
Internet allows rapid and effective experimentation and analysis, instant user
feedback and efficient "redecorating of the store for each and every customer,"
all of which the Company intends to incorporate in its merchandising. In
contrast to traditional direct-marketing efforts, the Company's personalized
notification services will send customers highly customized notices at
customers' request. By offering customers a compelling and personalized value
proposition, the Company will seek to increase the number of visitors that make
a purchase, to encourage repeat visits and purchases and to extend customer
retention. Loyal, satisfied customers also generate word-of-mouth advertising
and awareness, and are able to reach thousands of other customers and potential
customers because of the reach of electronic commerce
The Company will employ a variety of media, program and product
development, business development and promotional activities to achieve these
goals. The Company intends to place advertisements on various Web sites. These
advertisements usually take the form of banners that encourage readers to click
through directly to the Company's Web sites. The Company also intends to enter
into co-marketing agreement pursuant to which links to the Company's Web sites
will be featured on other, non-Company Web sites. The Company also intends to
engage in a coordinated program of print advertising in specialized and general
circulation newspapers and magazines. In the future it may begin advertising in
other media. This activity will be undertaken with the hope of the Company being
featured in a wide variety of television shows, articles and radio programs and
widely-read portions of the Internet, such as portions included on Netscape and
Yahoo!
TECHNOLOGY
The Company has implemented a broad array of site management, customer
interaction, transaction-processing and fulfillment services and systems using
commercially available, licensed technologies. The Company's current strategy is
to license commercially available technology whenever possible rather than seek
internally developed solutions.
The Company will use a set of applications for accepting and validating
customer orders, organizing, placing and managing orders with vendors, receiving
product and assigning it to customer orders, and managing shipment of products
and services to customers based on various ordering criteria. These applications
will also manage the process of accepting, authorizing and charging customer
credit cards. In addition, the Company's systems will allow it to maintain
ongoing automated e-mail communications with customers throughout the ordering
process at a negligible incremental cost. These systems will automate many
routine communications entirely, facilitate management of customer e-mail
inquiries and allow customers to (on a self-service basis) check order status,
change their e-mail address or password, and check subscriptions to personal
notification services.
A group of systems administrators and network managers will monitor and
operate the Company's Web sites, network operations and transaction-processing
systems. The continued uninterrupted operation of the Company's Web sites and
transaction-processing systems is essential to its businesses, and the site
operations staff is expected to ensure, to the greatest extent possible, the
reliability of the Company's Web sites and transaction-processing systems.
COMPETITION
The electronic commerce market is new, rapidly evolving and intensely
competitive, the Company expects such competition to intensify in the future.
Barriers to entry are minimal, and current and new competitors can launch new
Web sites at a relatively low cost. The Company expects that it will encounter
fierce competition with regard to any product or service that it offers in the
future. Competitive pressures created by any current or future competitors could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations. The Company believes that the principal
competitive factors in its markets will be brand recognition, selection,
personalized services, convenience, price, accessibility, customer service,
quality of editorial and other site content and reliability and speed of
fulfillment. The Company expects that most of its current and potential
competitors will have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing and other
resources than the Company. In addition, electronic retailers may be acquired
by, receive investments from or enter into other commercial relationships with
larger, well-established and well-financed companies as use of the Internet and
electronic commerce increases. Certain of the Company's competitors may be able
to secure merchandise from vendors on more favorable terms, devote greater
resources to marketing and promotional campaigns, adopt more aggressive pricing
or inventory availability policies and devote substantially more resources to
their Web sites and systems development than the Company. Increased competition
may result in reduced operating margins, loss of market share and a diminished
brand franchise. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on its
business, prospects, financial condition and results of operations. New
technologies and the expansion of existing technologies may increase the
competitive pressures on the Company. In addition, companies that control access
to transactions through network access or Web browsers could promote the
Company's competitors or charge the Company a substantial fee for inclusion.
EMPLOYEES
The Company currently has two employees. Neither of these employees are
covered by a collective bargaining agreement and relations with them were
considered to be good. The Company expects that it may have as many as five
employees within the next year, excluding employees of acquired businesses.
Although the competition for employees is fairly intense, the Company does not
now foresee problems in hiring additional qualified employees to meet its labor
needs.
FACILITIES
The Company currently leases a small amount of office space for its
corporate offices on a month-to-month basis. The Company also owns the
intellectual property rights in its domain names and Web sites. The Company does
not own any significant tangible property.
LEGAL PROCEEDINGS
Since the date of its organization through the date of this Prospectus,
the Company has not been involved in any legal proceedings. There can be no
assurance, however, that the Company will not in the future be involved in
litigation incidental to the conduct of its business.
<PAGE>
MANAGEMENT
Directors and Executive Officers.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Positions
<S> <C> <C>
Greg J. Micek 43 Director, President
Lewis E. Ball 66 Director
Dudley R. Anderson 51 Treasurer & Secretary
</TABLE>
Greg J. Micek has served as a Director and President of the Company
since inception. Since 1983, Mr. Micek has been a principal of The Micek Group,
a business consulting firm. In this connection, from June 1996 to June 1997 he
served as President and Chief Executive Officer of HyperDynamics Corporation
(formerly RAM-Z Enterprises, Inc.), a publicly traded company focusing on
technology acquisitions. In addition, from 1992 to 1994 Mr. Micek served as the
Project Manager for the City of Austin's Small Contractor Support Network, and
from 1991 to 1992, he served as a business reorganization consultant for Parker
Brothers, Inc. Mr. Micek received a Bachelor of Arts and a Doctorate of
Jurisprudence from Creighton University.
Lewis E. Ball has served as a director of the Company since November
15, 1997. He has been a financial consultant to a number of companies since
1993. From June 1996 to January 1997, Mr. Ball served as the Chief Financial
Officer of HyperDynamics Corporation (formerly RAM-Z Enterprises, Inc.). Mr.
Ball has many years of industry experience as a Chief Financial Officer and
Director of several major public companies, including Stewart & Stevenson
Services, Inc. and Richmond Tank Car Company (from 1983 to 1993). He is a
Certified Public Accountant and a Certified Management Accountant. Mr. Ball
earned a Bachelor of Business Administration in Finance from the University of
Texas at Austin, followed by post-graduate studies in accounting at the
University of Houston.
Dudley R. Anderson has served as the Treasurer and Secretary of the
Company since December 17, 1997. Since 1996, he has been a principal of Draco,
Ltd., a company providing strategic merger and acquisition services to public
and private companies in the energy, telecommunications and Internet industries.
From 1994 to 1996, Mr. Anderson was General Manager of Dunn International Inc.
From 1991 to 1994, he served as Executive Vice President of Serv-Tech, Inc. Mr.
Anderson received a Bachelor of Arts and a Master of Business Administration
from the University of Connecticut.
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
The Company does not expect to pay any executive officer in the current
fiscal year total annual salary and bonus exceeding $100,000.
The Company has entered into an employment agreement (the "Employment
Agreement") with Greg J. Micek, a Director and the President of the Company. The
Employment Agreement has a term of three years and will expire in accordance
with its terms in November 2000. Mr. Micek is also entitled to participate in
any and all employee benefit plans hereafter established for the employees of
the Company. The Employment Agreement contains a covenant not to compete barring
Mr. Micek from engaging in the electronic commerce business anywhere in the
world for one year after the termination of the Employment Agreement by the
Company with cause or by Mr. Micek without cause. In addition to the Employment
Agreement, the Company has entered into a stock option agreement (the "Micek
Option Agreement") with Mr. Micek. The option agreement grants to Mr. Micek
options to purchase 500,000 shares of Common Stock at a per-share purchase price
of $5.00, 500,000 shares at a per-share purchase price of $7.50, and 1,500,000
shares at a per-share purchase price of $10.00. The options have a term of five
years. In addition to the preceding, in connection with the organization of the
Company, the Company issued to Mr. Micek 6.2 million shares of Common Stock in
consideration of payment of $62,000.
The Company has entered into a stock option agreement (the "Anderson
Option Agreement") with Dudley R. Anderson, the Treasurer and Secretary of the
Company. The Anderson Option Agreement provides that, for providing consulting
services to the Company, the Company shall issue to Mr. Anderson options to
purchase shares of Common Stock at a purchase price of $.10 per share on any day
on which Mr. Anderson provides consulting services to the Company. The number of
shares with respect to which Mr. Anderson will be issued options will depend on
the number of hours of consulting services that he provides on any particular
day. Mr. Anderson will be issued an option to purchase 250 shares (on any day on
which he consults for up to four hours), 500 shares (on any day on which he
consults for more than four hours and up to eight hours), 750 shares (on any day
on which he consults for more than eight hours and up to ten hours), and 1,000
(on any day on which he consults for more than ten hours). Each option issued
under the Anderson Option Agreement will have a term of five years after the
date it is issued. As of December 22, 1997, Mr. Anderson had been issued under
the Anderson Option Agreement options to purchase 13,000 shares of Common Stock.
Neither the Anderson Option Agreement nor any other agreement between the
Company and Mr. Anderson imposes a covenant not to compete upon Mr. Anderson.
As a finder's fee for making the introductions leading to the
investment of LS Capital in the Company and for a payment of $.01 per share, the
Company issued to Lewis E. Ball, a director of the Company, 100,000 shares of
Common Stock.
The authorized number of directors of the Company is presently fixed at
two. Each director serves for a term of one year that expires at the following
annual stockholders' meeting. Each officer serves at the pleasure of the Board
of Directors and until a successor has been qualified and appointed. Currently,
directors of the Company receive no remuneration for their services as such, but
the Company will reimburse the directors for any expenses incurred in attending
any directors meeting. There are no family relationships, or other arrangements
or understandings between or among any of the directors, executive officers or
other person pursuant to which such person was selected to serve as a director
or officer.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of _________________ _____, 1998
information regarding the beneficial ownership of Common Stock (i) by each
person who is known by the Company to own beneficially more than 5% of the
outstanding Common Stock; (ii) by each director; and (iii) by all directors and
officers as a group. <TABLE> <CAPTION>
Beneficial Ownership Beneficial Ownership
Name and Address of Prior to Distribution(1) After Distribution(1)
Beneficial Owner Number Percent Number Percent
- ----------------- --------------------------------- ------------------------
<S> <C> <C> <C> <C>
Greg J. Micek 6,200,000 92.54% 6,200,000 92.54%
5444 Westheimer, Suite 2080
Houston, Texas 77056
LS Capital Corporation 500,000 7.46% 250,000 3.73%
15915 Katy Freeway, Suite 250
Houston, Texas 77094
All directors and officers
as a group (one person) 6,200,000 92.54% 6,200,000 92.54%
</TABLE>
(1) Includes shares Stock beneficially owned pursuant to options and warrants
exercisable within 60 days after the date of this Prospectus.
THE DISTRIBUTION
Reasons for the Distribution.
LS Capital's primary business is the mineral exploration and extraction
industry. However, the Board of Directors of LS Capital believes that electronic
commerce may present an excellent investment and diversification opportunity for
LS Capital and its stockholders. Accordingly, LS Capital has acquired 500,000
shares of Common Stock and 1,000,000 Class A Warrants.
The Boards of Directors of the Company and LS Capital recognize that
publicly traded companies have certain advantages in comparision to privately
traded companies because of federal and state securities laws and certain market
realities. First, the stock of publicly traded (once properly registered) can be
offered to any person. Moreover, once purchased, the purchaser legally can sell
the stock immediately or at any time thereafter to any person whom the purchaser
chooses. In addition, for many publicly traded stocks, an active trading market
develops for the stock, making the stock fairly liquid and marketable. Because
of these advantages, publicly traded stock generally commands appreciably higher
values than privately traded or restricted stock in comparable companies. The
advantages of publicly traded stock increases a corporation's ability to raise
funds easier and in larger amounts. These advantages also give a corporation the
flexibility to use such publicly traded stock (instead of cash or debt) to
acquire companies. Sellers of companies may prefer to receive stock rather than
cash because they can do so without recognizing gain on the sale under the
federal tax code. However, they may refuse to accept privately traded or
restricted stock because of its illiquidity or unmarketability when they will
readily accept publicly trade stock because of its liquidity and marketability.
Moreover, publicly traded stock permits a corporation to establish more
attractive management and employee incentive plans to motivate management and
employee to perform at their highest level.
In addition, LS Capital has hired a consultant to evaluate the best
structure to manage LS Capital's proposed business activities and maximize value
for its stockholders. LS Capital has not received the report from the consultant
but LS Capital has been advised that such report may include a recommendation
that LS Capital convert to closed-end non-diversified investment holding company
status. In view of this possible recommendation and the other advantages of the
Company's being a publicly traded corporation, LS Capital has decided to
undertake the Distribution. LS Capital is currently undertaking another
distribution and expects to make additional distributions (similar to the
Distribution) of stock in other of its subsidiaries. After the Distribution, LS
Capital will retain 250,000 shares of Common Stock, thus continuing its
ownership interest in the Company at a reduced level, and LS Capital
stockholders will be free to either retain or sell their own Common Stock as
they individually choose.
For the reasons stated above, the LS Capital Board of Directors
believes that the Distribution is in the best interest of LS Capital. In
reaching its conclusions, the LS Capital Board of Directors has determined that
the Distribution is fair, from a financial point of view, to the holders of
shares of LS Capital common stock, although the Board of Directors has not
sought the opinion of any financial advisor to such effect.
Manner of Effecting the Distribution.
The Distribution consists of an aggregate of 250,000 shares of Common
Stock and 1,000,000 Class A Warrants. In connection with the Distribution, each
stockholder of LS Capital owning at least 25 shares of LS Capital common stock
will receive one share of Common Stock and four Class A Warrants for each 25
shares of LS Capital common stock owned on the Record Date. Fractional shares of
Common Stock will not be issued. Instead, LS Capital stockholders owning fewer
than 25 shares of LS Capital common stock on the Record Date will receive, in
lieu of any share of Common Stock, a cash dividend of $.01 per share of LS
Capital common stock owned on the Record Date. In addition, any LS Capital
stockholder receiving Common Stock and otherwise entitled to a fractional share
of Common Stock shall receive, in lieu of any fractional share of Common Stock,
a cash dividend of $.01 per share of LS Capital common stock otherwise causing
the fractional share, up to an aggregate dividend of $.24. Certificates
representing the number of shares of Common Stock and number of Class A Warrants
to which LS Capital stockholders are entitled, and checks representing payment
of cash dividends in lieu thereof, are being delivered to LS Capital
stockholders simultaneously with this Prospectus. The shares of Common Stock
will be fully paid and nonassessable. The holders thereof will not be entitled
to preemptive rights nor cumulative voting rights. See "DESCRIPTION OF CAPITAL
STOCK." No holder of LS Capital common stock will be required to pay any cash or
other consideration for the shares of Common Stock or Class A Warrants received
in the Distribution or to surrender or exchange shares of LS Capital common
stock in order to receive shares of Common Stock or Class A Warrants.
The Distribution will result in approximately 3.73% of the outstanding
shares of Common Stock being distributed to holders of LS Capital common stock
on an undiluted basis. If all of the Class A Warrants being distributed are
exercised, the number of shares of the Common Stock being distributed (after
taking into account the exercises of the Class A Warrants) would equal
approximately 16.23% of shares of Common Stock outstanding after the exercises
of the Class A Warrants (assuming no additional shares of Common Stock are
hereafter issued). If all of the Warrants are exercised (including the Class A
Warrants being distributed and the Class B Warrants and the Class C Warrants
that will be issued thereafter), the total of shares of the Common Stock being
distributed (after taking into account the exercises of the Warrants) would
equal approximately 44.87% of shares of Common Stock outstanding after the
exercises of the Warrants (assuming no additional shares of Common Stock are
hereafter issued).
Shares of Common Stock and the Class A Warrants distributed to LS
Capital stockholders in connection with the Distribution generally will be
freely transferable. Such shares and warrants are expected to be traded in the
over-the-counter market, and thus may be purchased and sold through the usual
investment channels, including securities broker/dealers. Subject to the
sponsorship of a market maker, shares of Common Stock and the Class A Warrants
are expected to be traded on the OTC Electronic Bulletin Board. Notwithstanding
the above, shares of Common Stock and the Class A Warrants received in
connection with the Distribution by persons who are deemed "affiliates" of the
Company under the Act will be subject to certain restrictions. Persons who may
be deemed to be affiliates of the Company after the Distribution generally
include individuals or entities that control, are controlled by, or are under
common control with the Company and may include the directors and principal
executive officers of the Company as well as any principal stockholder of the
Company. Persons who are affiliates of the Company will be permitted to sell
their shares of Common Stock only pursuant to an effective registration
statement under the Act or an exemption from the registration requirements of
the Act, such as the exemptions afforded by Section 4(2) of the Act and Rule 144
thereunder.
In connection with the Distribution, each of Paul J. Montle, Kent E.
Lovelace, Jr. and Roger W. Cope, each a director and significant stockholder of
LS Capital, entered into an agreement with the Company whereby they agreed he
would not sell any shares of Common Stock received in connection with the
Distribution until twelve weeks after public trading has commenced in the Common
Stock, or thereafter sell in any three-month period more than 10,000 shares of
Common Stock received in connection with the Distribution.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither the Company nor LS Capital has obtained a private letter ruling
from the Internal Revenue Service nor an opinion of tax counsel with respect to
possible federal income tax consequences of the Distribution. However, the
Company and LS Capital are generally aware of the taxability of a corporate
distribution of property pro rata to its stockholders.
Distributions by corporations to their stockholders may be taxable. In
general, where the distribution is made out of the earnings and profits of the
corporation, the amount received is taxable as ordinary income. Where
distributions are made in excess of the corporation's earnings and profits, the
recipient is normally not taxed to the extent of its basis in the stock.
Distributions in excess of earnings and profits and basis are normally taxed as
if the stockholder had sold his stock.
As of September 30, 1997, LS Capital had no accumulated earnings and
profits. Therefore, distributions of shares of Common Stock to LS Capital
stockholders are not taxable as ordinary income. The amount of such distribution
is the fair market value of the Common Stock on the date of distribution. In
this case, valuation of Common Stock is not easily possible, given the limited
operating history of the Company. There has been no attempt to place a value on
the Common Stock by the management of the Company or of LS Capital, and such
valuation is the responsibility of each LS Capital stockholder who receives
Company stock, and his or her own tax advisor. However, in the opinion of
Company management, such valuation might be reasonably placed at $.0448 per
Company share as of the date of this registration statement. This valuation is
based on the Company's estimated fair market value as a publicly registered
company with no significant assets or operating history.
If an individual LS Capital stockholder agrees with this estimate, the
tax consequences to him are that if the adjusted tax basis of his LS Capital
shares is in excess of $.0018 per share (each share of Common Stock is
distributed for every 15 LS Capital shares), then such Common Stock distribution
to him should be considered a "non-taxable return of capital." Such $.0018 per
share should then be deducted from such stockholder's LS Capital per share tax
basis and $.0448 per share will be the new cost basis of his or her Company
stockholdings.
For domestic corporations which hold LS Capital common stock, the
amount of the Distribution for purposes of determining dividend income, return
of capital, or capital gain will be the lesser of (i) the fair market value of
the Common Stock at the date of the Distribution, or $.0448 per share if such
corporate stockholder accepts the Company's valuation methodology, or (ii) its
adjusted per share basis of its investment in LS Capital common stock. A
domestic corporation's basis in LS Capital common stock will also be the lesser
of the foregoing amounts.
STATE AND LOCAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION WILL VARY
FROM JURISDICTION TO JURISDICTION. STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN
TAX ADVISORS TO DETERMINE APPLICABLE TAX CONSEQUENCES OF THE ISSUANCE AND
DISPOSITION OF THE SHARES BEING DISTRIBUTED.
<PAGE>
Receipt of Shares.
The receipt of shares of Common Stock will result in a taxable capital
gain to LS Capital stockholders to the extent that such fair value of Company
Stock exceeds their tax basis in LS Capital common stock at the time of
issuance.
Sale of Shares.
A LS Capital stockholder whose shares of Common Stock are sold will
realize capital gain or loss measured by the difference between the amount
realized and the stockholder's tax basis in such shares.
Holding Period.
The holding period of the shares of Common Stock received in connection
with the Distribution is measured from the date that the shares are distributed
to LS Capital stockholders.
Other Tax Consequences.
There may be other federal, state, local or foreign tax considerations
(including potential withholding requirements) applicable to the circumstances
of particular LS Capital stockholders who should consult with their own tax
advisors to determine the applicable tax consequences of the issuance and
disposition of the shares of Common Stock being distributed.
OTHER SECURITIES BEING REGISTERED
In addition to the shares comprising the Distribution, the Company is
registering with the Commission, and this Prospectus covers, an additional
5,000,000 shares of Common Stock in order to facilitate the Company's ability to
pursue other mineral exploration and extraction opportunities. It is anticipated
that this will enable the Company to issue registered stock in connection with
any one or more acquisitions of assets or mergers with existing businesses. The
Company has not identified any acquisitions that it currently intends to pursue.
The issuance of such shares and the consideration to be received
therefor will be entirely within the discretion of the Company's Board of
Directors. Although the Board of Directors intends to utilize its reasonable
business judgment and to fulfill its fiduciary obligations to the Company's then
existing stockholders in connection with any issuance, it is possible that the
future issuance of additional shares could cause immediate and substantial
dilution to the net tangible book value of those shares of the Common Stock that
are issued and outstanding immediately prior to such transaction. Any future
decrease in the net tangible book value of the Company's issued and outstanding
shares could have a material adverse effect on the market value of the shares.
Moreover, the Company is also registering 2,000,000 Class B Warrants
entitling the holders thereof to acquire an aggregate of 2,000,000 shares of
Common Stock at a per-share price of $2.00. The Class B Warrants will be issued
to the holders of the Class A Warrants upon exercise of the Class A Warrants at
rate of two Class B Warrants for each Class A Warrant exercised, without the
payment of any additional consideration. In addition, the Company is also
registering 2,000,000 Class C Warrants entitling the holders thereof to acquire
an aggregate of 2,000,000 shares of Common Stock at a per-share price of $5.00.
The Class C Warrants will be issued to the holders of the Class B Warrants upon
exercise of the Class B Warrants at rate of one Class C Warrant for each Class B
Warrant exercised, without the payment of any additional consideration.
OTHER MATTERS
The Distribution is not being made in any states or other jurisdictions
in which it in unlawful to do so. The Company may delay the commencement of the
Distribution in certain states or other jurisdictions in order to comply with
the securities law requirements of such states or other jurisdictions. It is not
anticipated that there will be any changes in the terms of the Distribution. The
Company may, if it so determines in its sole discretion, decline to make
modifications to the terms of the Distribution requested by certain states or
other jurisdictions, in which event LS Capital stockholders resident in such
states or other jurisdictions will not be eligible to participate in the
Distribution.
DESCRIPTION OF CAPITAL STOCK
Capital Stock.
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, $.01 par value per share and 10,000,000 shares of Preferred Stock,
$.01 par value per share.
Securities Being Offered.
The securities offered hereby consist of units of one share of the
Company's Common Stock and four redeemable Class A Warrants. The Common Stock
and the Class A Warrants comprising the units are detachable and separately
transferable immediately following the date of this Prospectus. Prior to this
offering, there has been no public market for the Common Stock or Class A
Warrants.
Common Stock.
The authorized Common Stock of the Company consists of 50,000,000
shares, par value $0.01 per share. As of the date of this Prospectus, 6,700,000
shares of Common Stock were outstanding. All of the shares of Common Stock are
validly issued, fully paid and nonassessable. Holders of record of Common Stock
will be entitled to receive dividends when and if declared by the Board of
Directors out of funds of the Company legally available therefor. In the event
of any liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or otherwise, after payment of provision for payment of the
debts and other liabilities of the Company, including the liquidation preference
of all classes of preferred stock of the Company, each holder of Common Stock
will be entitled to receive his pro rata portion of the remaining net assets of
the Company, if any. Each share of Common stock has one vote, and there are no
preemptive, subscription, conversion or redemption rights. Shares of Common
Stock do not have cumulative voting rights, which means that the holders of a
majority of the shares voting for the election of directors can elect all of the
directors.
Warrants.
The Warrants are comprised of Class A Warrants, Class B Warrants and
Class C Warrants. The Class A Warrants are being issued in connection with the
Distribution, the Class B Warrants will be issued in connection with the
exercise of the Class A Warrants, and the Class C Warrants will be issued in
connection with the exercise of the Class B Warrants. The Class A Warrants, the
Class B Warrants and the Class C Warrants feature identical rights other than as
indicated herein. The Warrants will be issued in registered form under a warrant
agreement (the "Warrant Agreement") between the Company and American Stock
Transfer & Trust Company as warrant agent (the "Warrant Agent"). The following
summary of the provisions of the Warrants is qualified in its entirety by
reference to the Warrant Agreement, a copy of which is filed as an exhibit to
the registration statement of which this Prospectus is a part.
Each Warrant will be separately transferable and will entitle the
registered holder thereof to purchase one share of Common Stock, subject to
adjustment as described below. A Class A Warrant may be exercised for a period
of three years after the Registration Statement of which this Prospectus is a
part becomes effective. A Class B Warrant and a Class C Warrant may be exercised
for a period of three years after it is issued. Subject to adjustment as
described below, the purchase price for shares of Common Stock acquired pursuant
to exercises of the Warrants shall be $1.00 per share in the case of the Class A
Warrants, $2.00 per share in the case of the Class B Warrants, and $5.00 per
share in the case of the Class C Warrants. The exercise price and the number of
shares of Common Stock issuable upon the exercise of each Warrant are subject to
adjustment in the event of a stock dividend, recapitalization, merger,
consolidation or certain other events.
Any or all of the Warrants may be redeemed by the Company at a price of
$.01 per Warrant, upon the giving of not less than 30 days' nor more than 60
days' written notice at any time after the date of this Prospectus, provided
that (depending on the market in which the Common Stock is traded) the closing
bid price, closing sales price or average of the closing bid and closing ask
prices has been at least $1.25 (in the case of a Class A Warrant), $2.35 (in the
case of a Class B Warrant) and $5.50 (in the case of a Class C Warrant), on each
of the ten (10) consecutive trading days ending on the third (3rd) day prior to
the day on which the redemption notice is given. The right to purchase the
Common Stock represented by the Warrants so called for redemption will be
forfeited unless the Warrants are exercised prior to the date specified in the
foregoing notice of redemption.
A holder may exercise Warrants by surrendering the certificate
evidencing the Warrants to the Warrant Agent, together with the form of election
to purchase on the reverse side of such certificate properly completed and
executed and the payment of the exercise price and any transfer tax. Upon
exercise of a Class A Warrant, the exercising holder shall be issued two Class B
Warrants without the payment of any additional consideration, and upon exercise
of a Class B Warrant, the exercising holder shall be issued one Class C Warrant
also without the payment of any additional consideration. Warrant holders will
not have any voting or other rights as stockholders of the Company unless and
until some Warrants are exercised and shares issued pursuant thereto. If fewer
than all of the warrants evidenced by a warrant certificate are exercised, a new
certificate will be issued for the remaining number of warrants. Holders of the
Warrants may sell the Warrants if a market exists rather than exercise them.
However, there can be no assurance that a market will develop or continue as to
the Warrants.
For a holder to exercise a Warrant, there must be a current
registration statement on file with the Commission and various state securities
commissions. The Company will be required to file post-effective amendments to
the registration statement when events require such amendments. While it is the
Company's intention to file post-effective amendments when necessary, there is
no assurance that the registration statement will be kept effective. If the
registration statement is not kept current for any reason, the Warrants will not
be exercisable, and holders thereof may be deprived of value. Moreover, if the
shares of Common Stock underlying the Warrants are not registered or qualified
for sale in the state in which a Warrant holder resides, such holder might not
be permitted to exercise the Warrants. If the Company is unable to qualify the
Common Stock underlying the Warrants for sale in certain states, holders of the
Warrants in those states will have no choice but to either sell the Warrants or
allow them to expire.
For the life of the Warrants, the holders thereof are given the
opportunity, at nominal cost, to profit from a rise in the market price of the
Common Stock of the Company. The exercise of the Warrants will result in the
dilution of the then book value of the Common Stock of the Company held by the
public investors and would result in a dilution of their percentage ownership of
the Company. The terms upon which the Company may obtain additional capital may
be adversely affected through the period that the Warrants remain exercisable.
The holders of these Warrants may be expected to exercise them at a time when
the Company would, in all likelihood, be able to obtain equity capital on terms
more favorable than those provided for by the Warrants.
The Company has authorized and reserved for issuance a number of
underlying shares of Common Stock sufficient to provide for the exercise of the
Warrants. When issued, each share of Common Stock will be fully paid and
nonassessable.
Preferred Stock.
The Company's Certificate of Incorporation authorizes the issuance of
up to 10,000,000 shares of the Company's $0.01 par value preferred stock (the
"Preferred Stock"). As of the date of this Prospectus, no shares of Preferred
Stock were outstanding. The Preferred Stock constitutes what is commonly
referred to as "blank check" preferred stock. "Blank check" preferred stock
allows the Board of Directors, from time to time, to divide the Preferred Stock
into series, to designate each series, to issue shares of any series, and to fix
and determine separately for each series any one or more of the following
relative rights and preferences: (i) the rate of dividends; (ii) the price at
and the terms and conditions on which shares may be redeemed; (iii) the amount
payable upon shares in the event of involuntary liquidation; (iv) the amount
payable upon shares in the event of voluntary liquidation; (v) sinking fund
provisions for the redemption or purchase of shares; (vi) the terms and
conditions pursuant to which shares may be converted if the shares of any series
are issued with the privilege of conversion; and (vii) voting rights. Dividends
on shares of Preferred Stock, when and as declared by the Board of Directors out
of any funds legally available therefor, may be cumulative and may have a
preference over Common Stock as to the payment of such dividends. The provisions
of a particular series, as designated by the Board of Directors, may include
restrictions on the ability of the Company to purchase shares of Common Stock or
to redeem a particular series of Preferred Stock. Depending upon the voting
rights granted to any series of Preferred Stock, issuance thereof could result
in a reduction in the power of the holders of Common Stock. In the event of any
dissolution, liquidation or winding up of the Company, whether voluntary or
involuntary, the holders of each series of the then outstanding Preferred Stock
may be entitled to receive, prior to the distribution of any assets or funds to
the holders of the Common Stock, a liquidation preference established by the
Board of Directors, together with all accumulated and unpaid dividends.
Depending upon the consideration paid for Preferred Stock, the liquidation
preference of Preferred Stock and other matters, the issuance of Preferred Stock
could result in a reduction in the assets available for distribution to the
holders of the Common Stock in the event of liquidation of the Company. Holders
of Preferred Stock will not have preemptive rights to acquire any additional
securities issued by the Company. Once a series has been designated and shares
of the series are outstanding, the rights of holders of that series may not be
modified adversely except by a vote of at least a majority of the outstanding
shares constituting such series.
One of the effects of the existence of authorized but unissued shares
of Common Stock or Preferred Stock may be to enable the Board of Directors of
the Company to render it more difficult or to discourage an attempt to obtain
control of the Company by means of a merger, tender offer at a control premium
price, proxy contest or otherwise and thereby protect the continuity of or
entrench the Company's management, which concomitantly may have a potentially
adverse effect on the market price of the Common Stock. If in the due exercise
of its fiduciary obligations, for example, the Board of Directors were to
determine that a takeover proposal were not in the best interests of the
Company, such shares could be issued by he Board of Directors without
stockholder approval in one or more private placements or other transactions
that might prevent or render more difficult or make more costly the completion
of any attempted takeover transaction by diluting voting or other rights of the
proposed acquirer or insurgent stockholder group, by creating a substantial
voting block in institutional or other hands that might support the position of
the incumbent Board of Directors, by effecting an acquisition that might
complicate or preclude the takeover, or otherwise.
Delaware Legislation.
The Company is a Delaware corporation and consequently is subject to
certain anti-takeover provisions of the Delaware General Corporation Law (the
"Delaware Law"). The business combination provision contained in Section 203 of
the Delaware Law ("Section 203") defines an interested stockholder of a
corporation as any person that (i) owns, directly or indirectly, or has the
right to acquire, fifteen percent (15%) or more of the outstanding voting stock
of the corporation or (ii) is an affiliate or associate of the corporation and
was the owner of fifteen percent (15%) or more of the outstanding voting stock
of the corporation at any time within the three-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder; and the affiliates and the associates of such person.
Under Section 203, a Delaware corporation may not engage in any business
combination with any interested stockholder for a period of three years
following the date such stockholder became an interested stockholder, unless (i)
prior to such date the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, or (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at lease eighty-five percent (85%) of the voting
stock of the corporation outstanding at the time the transaction commenced
(excluding, for determining the number of shares outstanding, (a) shares owned
by persons who are directors and officers and (b) employee stock plans, in
certain instances), or (iii) on or subsequent to such date the business
combination is approved by the board of directors and authorized at an annual or
special meeting of the stockholders by at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding voting stock that is not owned by the interested
stockholder. The restrictions imposed by Section 203 will not apply to a
corporation if (i) the corporation's original certificate of incorporation
contains a provision expressly electing not be governed by this section or (ii)
the corporation, by the action of its stockholders holding a majority of
outstanding stock, adopts an amendment to its certificate of incorporation or
by-laws expressly electing not be governed by Section 203 (such amendment will
not be effective until 12 months after adoption and shall not apply to any
business combination between such corporation and any person who became an
interested stockholder of such corporation on or prior to such adoption).
The Company has not elected out of Section 203, and the restrictions
imposed by Section 203 apply to the Company. Section 203 could, under certain
circumstances, make it more difficult for a third party to gain control of the
Company.
Shares Eligible for Future Sale.
Prior to the Distribution, there has been no public market for the
Common Stock. Sales of a substantial amount of Common Stock in the public
market, or the perception that such sales may occur, could adversely affect the
market price of the Common Stock prevailing from time to time in the public
market and could impair the Company's ability to raise additional capital
through the sale of its equity securities in the future.
Upon completion of the Distribution, the Company will have issued and
outstanding 6,700,000 shares of Common Stock, approximately 6,450,000 of which
are believed to be "restricted" or "control" shares for purposes of the Act.
"Restricted" shares are those acquired from the Company or an "affiliate" other
than in a public offering, while "control" shares are those held by affiliates
of the Company regardless as to how they were acquired. The vast majority of
these restricted and control shares of Common Stock are believed eligible for
sale under Rule 144 (as amended effective April 29, 1997) subject to the volume
limitations of Rule 144.
In general, under Rule 144 (as amended effective April 29, 1997), one
year must have elapsed since the later of the date of acquisition of restricted
shares from the Company or any affiliate of the Company. No time needs to have
lapsed in order to sell control shares. Once the restricted or control shares
may be sold under Rule 144, the holder is entitled to sell within any
three-month period such number of restricted or control shares that does not
exceed the greater of 1% of the then outstanding shares or the average weekly
trading volume of shares during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain restrictions on the manner of selling, notice
requirements and the availability of current public information about the
Company. Under Rule 144 (as amended effective April 29, 1997), if two years have
elapsed since the holder acquired restricted shares from the Company or from any
affiliate of the Company, and the holder is deemed not to have been an affiliate
of the Company at any time during the 90 days preceding a sale, such person will
be entitled to sell such Common Stock in the public market under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.
In connection with the Distribution, each of Paul J. Montle, Kent E.
Lovelace, Jr. and Roger W. Cope, each a director and significant stockholder of
LS Capital, entered into an agreement with the Company whereby they agreed he
would not sell any shares of Common Stock received in connection with the
Distribution until twelve weeks after public trading has commenced in the Common
Stock, or thereafter sell in any three-month period more than 10,000 shares of
Common Stock received in connection with the Distribution.
In addition to the preceding, this Prospectus covers an additional
5,000,000 shares of Common Stock, which the Company may use in connection with
future business combination transactions.
DIVIDEND POLICY
The Company has paid no cash dividends on its Common Stock, and the
Company presently intents to retain earnings to finance the expansion of its
business. Payment of future dividends, if any, will be at the discretion of the
Board of Directors after taking into account various factors, including the
Company's financial condition, results of operations, current and anticipated
cash needs and plans for expansion.
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Distribution.
Moreover, the Company will not receive any proceeds when it issues any of the
other 5,000,000 shares of Common Stock covered by this Prospectus. However, such
other shares are intended be used for business combination transactions pursuant
to which the Company will acquire direct or indirect ownership of assets and
properties. The Company will receive all proceeds from the exercise of the
Warrants. Such proceeds are expected to be used for general corporate purposes.
MANAGEMENT'S PLAN OF OPERATION
The Company has sufficient cash on hand to satisfy its obligations for
the next twelve months. The Company does not anticipate having to raise
additional capital to satisfy is cash obligations within the next twelve months.
The Company does not anticipate performing any research and development
in the next twelve months, other than that which is performed in the normal
course of business as it develops its electronic commerce capabilities.
The is no expected purchases or sales of any plant or significant
equipment.
The Company does not anticipate any significant changes in its number
of employees, other than through any possible acquisitions.
EXPERTS
The financial statements and schedules of JVWeb, Inc. as of November
10, 1997 and for the period from October 28, 1997 (inception) through November
10, 1997 have been included herein and in the registration statement in reliance
upon the report of Malone & Bailey, PLLC, independent certified public
accountants, included herein, and upon the authority of said firm as experts in
accounting and auditing.
JVWEB INC.
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditor's Report F-1
Balance Sheet as of November 10, 1997 F-2
Income Statement for the period from October 28, 1997
(date of inception) through November 10, 1997 F-3
Statement of Stockholders' Equity for the period from
October 28, 1997 (date of inception) through November 10, 1997 F-4
Statement of Cash Flows for the period form October 28, 1997 (date of inception)
through November 10, 1997 F-5
Notes to Financial Statements F-6
21
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
JV Web, Inc.
Houston, Texas
We have audited the accompanying balance sheet of JV Web, Inc., a Delaware
corporation, as of November 10, 1997, and the related statements of income,
stockholders' equity, and cash flows for the period from inception (October 28,
1997) to November 10, 1997. 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 from 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 JV Web, Inc., as of November
10, 1997, and the results of its operations and its cash flows for the initial
period then ended in conformity with generally accepted accounting principles.
MALONE & BAILEY, PLLC
December 3, 1997
<PAGE>
JV WEB, INC.
(A Development Stage Company)
Balance Sheet
As of November 10, 1997
Cash $ 50,000
========
Contingent Liabilities -
Stockholders' Equity
Preferred Stock, $.01 par, 10,000,000 shares
authorized, no shares issued or outstanding -
Common stock, $.01 par, 50,000,000 shares authorized,
6,200,000 shares issued and outstanding $ 62,000
Paid in capital 5,249
Accumulated deficit during the development stage (17,249)
-------
Total stockholders' equity 50,000
-------
Total liabilities and stockholders' equity $ 50,000
========
See notes to financial statements.
F-2
<PAGE>
JV WEB, INC.
(A Development Stage Company)
Income Statement
Period from October 28, 1997 (Date of Inception)
Through November 10, 1997
REVENUES -
EXPENSES
General and administrative $ 17,249
--------
Net deficit accumulated during the development stage $ 17,249
========
See notes to financial statements.
F-3
<PAGE>
JV WEB, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
Period from October 28, 1997 (Date of Inception)
Through November 10, 1997
<TABLE>
<CAPTION>
Accumulated
Deficit
During the
Common Stock Paid in Development
Shares Amount Capital Stage Totals
<S> <C> <C> <C> <C> <C>
Shares issued at inception:
to founding shareholder,
for cash 6,200,000 $62,000 $ 5,249 $ 67,249
Net deficit $(17,249) (17,249)
--------- ------- ------- -------- -------
6,200,000 $62,000 $ 5,249 $(17,249) $ 50,000
========= ======= ======= ======== ========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
JV WEB, INC.
(A Development Stage Company)
Statement of Cash Flows
Period from October 28, 1997 (Date of Inception)
Through November 10, 1997
CASH FLOW FROM OPERATIONS
Net deficit $(17,249)
--------
NET CASH USED BY OPERATING ACTIVITIES (17,249)
-------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 67,249
------
NET INCREASE IN CASH 50,000
------
CASH ON NOVEMBER 10, 1997 $50,000
=======
See notes to financial statements.
F-5
<PAGE>
JV WEB, INC.
Notes to Financial Statements.
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations. JV Web, Inc. ("Company") was formed October 28, 1997 as a
Delaware corporation. The Company was formed to market and develop internet
sites as commercial sales outlets.
NOTE B - DEVELOPMENT STAGE OPERATIONS
The founding shareholder contributed $67,249 cash for the initial common stock
issued. There is a pending agreement between the Company and LS Capital
Corporation ("LS Capital") whereas LS Capital will purchase 500,000 shares and
warrants to purchase 1,000,000 shares at $1 per share for $5,000 cash pursuant
to an Agreement signed as of November 10, 1997, but not yet consummated. The
Agreement calls for LS Capital to spin off 250,000 shares of these 500,000
shares of the Company's stock and all of the 1,000,000 warrants to the LS
Capital shareholders as an in-kind dividend, to occur soon.
NOTE C - CONTINGENT LIABILITIES
The Company has agreed to pay $20,000 plus out-of-pocket expenses for the legal
work associated with the pending spin-off to LS Capital shareholders. In
addition, the Company has agreed to issue options for 250,000 shares each to two
consultants. These options are to be issued and vested over the next 24 months,
with an exercise price of $.10 per share. As of December 3, 1997, 30,000 options
have been earned and issued.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION ......................................................................................... 4
PROSPECTUS SUMMARY ............................................................................................. 5
RISK FACTORS.................................................................................................... 8
BUSINESS........................................................................................................ 21
MANAGEMENT ..................................................................................................... 38
EXECUTIVE COMPENSATION.......................................................................................... 38
PRINCIPAL STOCKHOLDERS.......................................................................................... 39
THE DISTRIBUTION................................................................................................ 39
CERTAIN FEDERAL INCOME TAX CONSEQUENCES......................................................................... 41
OTHER SECURITIES BEING REGISTERED............................................................................... 43
OTHER MATTERS................................................................................................... 44
DESCRIPTION OF CAPITAL STOCK.................................................................................... 44
DIVIDEND POLICY................................................................................................. 49
USE OF PROCEEDS................................................................................................. 50
MANAGEMENT'S PLAN OF OPERATION.................................................................................. 50
EXPERTS......................................................................................................... 50
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that, to the fullest
extent authorized by the Delaware Law, the Company shall indemnify each person
who was or is made a party or is threatened to be made a party to or is involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding") because he is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against all expenses, liabilities and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and reasonably incurred
or suffered by him in connection with such Proceeding.
Under Section 145 of the Delaware Law, a corporation may indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed Proceeding (other than an action by or in the right of the
corporation) if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In the case of an action brought by or in the
right of the corporation, the corporation may indemnify a director, officer,
employee or agent of the corporation against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of any threatened, pending or completed action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that a
court determines upon application that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
The Company's Certificate of Incorporation also provides that expenses
incurred by a person in his capacity as director of the Company in defending a
Proceeding may be paid by the Company in advance of the final disposition of
such Proceeding as authorized by the Board of Directors of the Company in
advance of the final disposition of such Proceeding as authorized by the Board
of Directors of the Company upon receipt of an undertaking by or on behalf of
such person to repay such amounts unless it is ultimately determined that such
person is entitled to be indemnified by the Company pursuant to the Delaware
Law. Under Section 145 of the Delaware Law, a corporation must indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees) actually and reasonably incurred in by him in
connection with the defense of a Proceeding if he has been successful on the
merits or otherwise in the defense thereof.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Company of its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for breach of a director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware Law for the willful or negligent unlawful payment of dividends,
stock purchase or stock redemption or (iv) for any transaction from which a
director derived an improper personal benefit.
The Company intends to attempt to procure directors' and officers'
liability insurance which insures against liabilities that directors and
officers of the Company may incur in such capacities.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses set forth below, will be borne by the Company.
Item Amount
SEC Registration Fee .........................................$5,900.00
Blue Sky Filing Fees and Expenses.............................$5,000.00
Legal Fees and Expenses..............................................*
Accounting Fees and Expenses ........................................*
Miscellaneous........................................................*
Total ........................................................$
* This figure will be supplied in an amendment to the registration statement.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation of the Company, the Company issued to
Greg J. Micek, a director and the President of the Company, 6.2 million shares
of the Company's common stock (the "Common Stock"), in consideration of $62,000.
Because Mr. Micek is a director and President of the Company, the issuance of
Common Stock to him is claimed to be exempt pursuant Section 4(2) of the Act.
Moreover, pursuant to an agreement between the Company and Mr. Micek, the
Company granted to Mr. Micek options to purchase 500,000 shares of Common Stock
at a per-share purchase price of $5.00, 500,000 shares at a per-share purchase
price of $7.50, and 1,500,000 shares at a per-share purchase price of $10.00.
The options have a term of five years. The issuances of the options is claimed,
and the issuances of the underlying Common Stock will be claimed, to be exempt
pursuant to Section 4(2) of the Act under the Act for the reasons given above.
As a finder's fee for making the introductions leading to the
investment of LS Capital Corporation ("LS Capital") in the Company and for a
payment of $.01 per share, the Company issued to Lewis E. Ball, a director of
the Company, 100,000 shares of Common Stock. Because Mr. Ball is a director, the
issuance of Common Stock to him is claimed to be exempt pursuant Section 4(2) of
the Act.
Pursuant to an agreement between the Company and LS Capital dated
November _____, 1997, the Company issued to LS Capital 500,000 shares of Common
Stock, in consideration of $5,000.00. This issuance is claimed to be exempt
pursuant to Regulation D under the Act.
Pursuant to an agreement between the Company and Dudley R. Anderson,
the Treasurer and Secretary of the Company, the Company agreed to issue options
to purchase shares of Common Stock at a purchase price of $.10 per share on any
day on which Mr. Anderson provides consulting services to the Company. The
number of shares with respect to which Mr. Anderson will be issued options will
depend on the number of hours of consulting services that he provides on any
particular day. Mr. Anderson will be issued an option to purchase 250 shares (on
any day on which he consults for up to four hours), 500 shares (on any day on
which he consults for more than four hours and up to eight hours), 750 shares
(on any day on which he consults for more than eight hours and up to ten hours),
and 1,000 (on any day on which he consults for more than ten hours). As of
December 22, 1997, Mr. Anderson had been issued under his agreement options to
purchase 13,000 shares of Common Stock. The exact number of shares of Common
Stock with respect to which options will be issued to Mr. Anderson can not now
be determined. The issuances of the options is claimed, and the issuances of the
underlying Common Stock will be claimed, to be exempt pursuant to Section 4(2)
of the Act and Regulation D under the Act.
Pursuant to an agreement between the Company and Kevin Dotson, a
consultant to the Company, the Company agreed to issue options to purchase
shares of Common Stock on the same terms as the option agreement entered into
with Mr. Anderson, including the $.10 per-share purchase price. As of December
22, 1997, Mr. Dotson had been issued under his agreement options to purchase
27,500 shares of Common Stock. The exact number of shares of Common Stock with
respect to which options will be issued to Mr. Dotson can not now be determined.
The issuances of the options is claimed, and the issuances of the underlying
Common Stock will be claimed, to be exempt pursuant to Regulation D under the
Act.
Pursuant to an agreement between the Company and G-2 Advertising, a
consultant to the Company, the Company agreed to issue options to purchase
shares of Common Stock at a purchase price of $.25 per share at a rate of 100
shares for each hour that G-2 Advertising provides consulting services to the
Company in excess of a monthly retainer amount, which is initially is
__________________________________. As of December 22, 1997, G-2 Advertising had
been issued under its agreement options to purchase 3,000 shares of Common
Stock. The exact number of shares of Common Stock with respect to which options
will be issued to G-2 Advertising can not now be determined. The issuances of
the options is claimed, and the issuances of the underlying Common Stock will be
claimed, to be exempt pursuant to Regulation D under the Act.
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
3.01 Certificate of Incorporation of the Company
3.02 Bylaws of the Company
4.01 Specimen Common Stock Certificate
4.02 Warrant Agreement dated December 15, 1997 between the
Company and American Stock Transfer & Trust Company.
5.01 Opinion and Consent of Randall W. Heinrich, Of Counsel to
Gillis & Slogar, as to the legality of securities being registered, to be filed by amendment.
10.01 Agreement dated November 15, 1997 between the Company and LS Capital Corporation.
10.02 Employment Agreement dated December 1, 1997 by and between the Company
and Greg J. Micek.
10.03 Stock Option Agreement dated December 1, 1997 executed by the Company in
favor of Greg J. Micek.
10.04 Stock Option Agreement dated December 17, 1997 executed by the Company in
favor of Dudley R. Anderson.
10.05 Stock Option Agreement dated December 1, 1997 executed by the Company in
favor of Kevin Dotson.
21.01 Subsidiaries of Registrant.
23.01 Consent of Malone & Bailey, PLLC
23.02 Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, contained in Exhibit 5.01.
25.1 Power of Attorney (included on the signature page hereto).
27 Financial Data Schedule
</TABLE>
ITEM 28. UNDERTAKINGS
A. The undersigned Registrant will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to include any
prospectus required by section 10(a)(3) of the Securities Act, reflect in the
prospectus any facts or events which, individually or together, represent a
fundamental change in the information in the registration statement, and include
any additional or changed material information on the plan of distribution.
(2) For the purpose of determining any liability under the Securities
Act, treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of such securities at that time to be the
initial bona fide offering thereof.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
B. (1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
(2) In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the small
business issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirement for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas on December 29, 1997.
JVWEB INC.
By: /s/ Greg J. Micek
Greg J. Micek
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Greg J. Micek Director and President December 29, 1997
Greg J. Micek (Principal Executive Officer
and Principal Financial Officer)
/s/ Lewis E. Ball Director December 29, 1997
Lewis E. Ball
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C>
3.01 Certificate of Incorporation of the Company
3.02 Bylaws of the Company
4.01 Specimen Common Stock Certificate
4.02 Warrant Agreement dated December 15, 1997 between the
Company and American Stock Transfer & Trust Company.
5.01 Opinion and Consent of Randall W. Heinrich, Of Counsel to
Gillis & Slogar, as to the legality of securities being
registered, to be filed by amendment.
10.01 Agreement dated November 15, 1997 between the Company
and LS Capital Corporation.
10.02 Employment Agreement dated December 1, 1997 by and between the Company
and Greg J. Micek.
10.03 Stock Option Agreement dated December 1, 1997 executed by the Company in
favor of Greg J. Micek.
10.04 Stock Option Agreement dated December 17, 1997 executed by the Company in
favor of Dudley R. Anderson.
10.05 Stock Option Agreement dated December 1, 1997 executed by the Company in
favor of Kevin Dotson.
21.01 Subsidiaries of Registrant.
23.01 Consent of Malone & Bailey, PLLC
23.02 Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar,
contained in Exhibit 5.01.
25.1 Power of Attorney (included on the signature page hereto).
27 Financial Data Schedule
</TABLE>
EXHIBIT 3.01 - CERTIFICATE OF INCORPORATION OF THE COMPANY
CERTIFICATE OF INCORPORATION
OF
JVWEB, INC.
First: The name of the Corporation is JVWeb, INC.
Second: The name and address of the registered agent for service of
process on the Corporation in the State of Delaware is Corporation Service
Company, 1013 Center Road, New Castle County, Wilmington, Delaware 19805.
Third: The nature of the business, objects and purposes to be
transacted, promoted or carried on by the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
Fourth: The total number of shares of capital stock which the
Corporation shall have authority to issue is Sixty Million (60,000,000), divided
into Fifty Million (50,000,000) shares of Common Stock of the par value of one
cent ($0.01) per share and Ten Million (10,000,000) shares of Preferred Stock of
the par value of one cent ($0.01) per share.
A. No holder of Common Stock or Preferred Stock of the
Corporation shall have any pre-emptive, preferential, or other right to purchase
or subscribe for any shares of the unissued stock of the Corporation or of any
stock of the Corporation to be issued by reason of any increase of the
authorized capital stock of the Corporation or of the number of its shares, or
of any warrants, options, or bonds, certificates of indebtedness, debentures, or
other securities convertible into or carrying options or warrants to purchase
stock of the Corporation or of any stock of the Corporation purchased by it or
its nominee or nominees or other securities held in the treasury of the
Corporation, whether issued or sold for cash or other consideration or as a
dividend or otherwise, other than such rights, if any, as the Board of Directors
in its discretion from time to time may grant and at such price as the Board of
Directors in its discretion may fix.
B. The holders of Common Stock shall have the right to one
vote per share on all questions to the exclusion of all other classes of stock,
except as by law expressly provided or as otherwise herein expressly provided
with respect to the holders of any other class or classes of stock.
C. The Board of Directors is authorized, subject to
limitations prescribed by law, by resolution or resolutions to provide for the
issuance of shares of Preferred Stock in series, and by filing a certificate
pursuant to the General Corporation Law of Delaware, to establish from time to
time the number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof. The authority of
the Board with respect to each series shall include, but not be limited to,
determination of the following:
(1) The number of shares constituting that series and the
distinctive designation of that series;
(2) The dividend rights and dividend rate on the shares of
that series, whether dividends shall be cumulative, and, if so, from
which date or dates, and the relative rights of priority, if any, of
payment of dividends on shares of that series;
(3) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
(4) Whether that series shall have conversion or exchange
privileges, and, if so, the terms and conditions of such conversion or
exchange including provision for adjustment of the conversion or
exchange rate in such events as the Board of Directors shall determine;
(5) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in cash on redemption,
which amount may vary under different conditions and at different
redemption dates;
(6) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(7) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of
shares of that series;
(8) Any other relative rights, preferences and limitations of
that series; or
(9) Any or all of the foregoing terms.
D. Except where otherwise set forth in the resolution or
resolutions adopted by the Board of Directors of the Corporation providing for
the issue of any series of Preferred Stock created thereby, the number of shares
comprising such series may be increased or decreased (but not below the number
of shares then outstanding) from time to time by like action of the Board of
Directors of the Corporation. Should the number of shares of any series be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to adoption of the resolution originally fixing the number of
shares of such series.
E. Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or otherwise),
purchased or otherwise acquired by the Corporation, or which, if convertible or
exchangeable, have been converted into or exchanged for shares of stock of any
other class or classes, shall have the status of authorized and unissued shares
of Preferred Stock and may be reissued as a part of the series of which they
were originally a part or may be reclassified or reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors or as part of any other series of Preferred Stock, all
subject to the conditions or restrictions adopted by the Board of Directors of
the Corporation providing for the issue of any series of Preferred Stock and to
any filing required by law.
Fifth: The Corporation is to have perpetual existence.
Sixth: The number of directors constituting the initial Board of
Directors is one, and the name and address of the person who is to serve as
director until the first annual meeting of the stockholders or until his
successor is elected and qualify are:
Name Mailing Address
Greg J. Micek 5444 Westheimer, Suite 2080
Houston, Texas 77056
Seventh: In furtherance and not in limitation of the powers
conferred by the General Corporation Law of Delaware, the Board of Directors is
expressly authorized:
(1) To make, alter or repeal the by-laws of the Corporation.
(2) To authorize and cause to be executed mortgages and liens
upon the real and personal property of the Corporation.
(3) To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was created.
(4) By a majority of the whole Board of Directors, to
designate one or more committees, each committee to consist of two or
more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution
or in the by-laws of the Corporation, shall have and may exercise the
powers of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided,
however, the by-laws may provide that in the absence or
disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at
the meeting in the place of any such absent or disqualified member.
(5) When and as authorized by the affirmative vote of the
holders of a majority of the stock issued and outstanding having voting
power given at a stockholders' meeting duly called upon such notice as
is required by the General Corporation Law of Delaware, or when
authorized by the written consent of the holders of a majority of the
voting stock issued and outstanding, to sell, lease or exchange all or
substantially all the property and assets of the Corporation, including
its goodwill and its corporate franchises, upon such terms and
conditions and for such consideration, which may consist in whole or in
part of money or property including securities of any other corporation
or corporations, as the Board of Directors shall deem expedient and for
the best interests of the Corporation.
Eighth: To the fullest extent permitted by the General Corporation Law
of Delaware as the same exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
Ninth: This Corporation shall, to the maximum extent permitted from
time to time under the law of the State of Delaware, indemnify and upon request
shall advance expenses to any person who is or was a party or is threatened to
be made a party to any threatened, pending or completed action, suit, proceeding
or claim, whether civil, criminal, administrative or investigative, by reason of
the fact that such person is or was or has agreed to be a director or officer of
this Corporation or any of its direct or indirect subsidiaries or while such a
director or officer is or was serving at the request of this Corporation as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, against expenses (including attorney's fees
and expenses), judgments, fines, penalties and amounts paid in settlement
incurred in connection with the investigation, preparation to defend or defense
of such action, suit, proceeding or claim; provided, however, that the foregoing
shall not require this Corporation to indemnify or advance expenses to any
person in connection with any action, suit, proceeding, claim or counterclaim
initiated by or on behalf of such person. Such indemnification shall not be
exclusive or other indemnification rights arising under any bylaws, agreement,
vote of directors or stockholders or otherwise and shall inure to the benefit of
the heirs and legal representatives of such person. Any person seeking
indemnification under this Article Ninth shall be deemed to have met the
standard of conduct required for such indemnification unless the contrary shall
be established.
Tenth: In connection with the exercise of its judgement in determining
what is in the best interest of the Corporation and of the stockholders, when
evaluating a Business Combination, the Board of Directors of the Corporation is
hereby expressly authorized to consider, in addition to the adequacy of the
consideration to be paid in connection with such transaction, the following
factors and any other factors which it deems relevant, including, without
limitation: (i) the long term interests of the Corporation's stockholders,
including, among other factors, the consideration being offered in relation to
(a) the then current market price of the Corporation's equity securities and the
historical range of such prices, (b) the then current value of the Corporation
in a freely negotiated transaction, and (c) the Board of Directors' then
estimate of the future value of the Corporation as an independent entity; (ii)
the economic, social and legal effects on the Corporation and its subsidiaries,
including, among other factors, such effects on the Corporation's employees,
customers, suppliers and the communities in which they operate or are located;
(iii) the business and financial condition and earnings prospects of the
acquiring person or persons, including, but not limited to, debt service and
other existing financial obligations, financial obligations to be incurred in
connection with the acquisition, and other likely financial obligations of the
acquiring person or persons, and the possible effect of such conditions upon the
Corporation, its subsidiaries, and the other elements of the communities in
which the Corporation and its subsidiaries operate or are located; and (iv) the
competence, experience and integrity of the acquiring person or person, and its
or their management. For purposes of this Article Tenth, "Business Combination"
is defined as (a) a tender or exchange offer for any equity securities of the
Corporation, (b) a proposal to merge or consolidate the Corporation with another
company, (c) a proposal to purchase or otherwise acquired all or substantially
all of the properties and assets of the Corporation, or (d) a proposal to engage
in any other similar form of combination with the Corporation.
Eleventh: Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the General Corporation Law of
Delaware) outside the State of Delaware at such place or places as may be
designated from time to time by the Boards of Directors or in the by- laws of
the Corporation. Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
Twelfth: Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, the meeting and vote of stockholders may be dispensed with and such
action may be taken with the written consent of stockholders having not less
than the minimum percentage of the vote required by the General Corporation Law
of Delaware for the proposed corporate action, provided that prompt notice shall
be given to all stockholders of the taking of corporate action without a meeting
and by less than unanimous consent.
Thirteenth: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receive or receivers appointed for this Corporation under the
provisions of Section 291 of the General Corporation Law of Delaware or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provision of Section 279 of the General
Corporation Law of Delaware, order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
Fourteenth: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the General Corporation Law of Delaware,
and all rights conferred upon stockholders herein are granted subject to this
reservation.
Fifteenth: The name and mailing address of the incorporator are:
Name Mailing Address
Randall W. Heinrich 1000 Louisiana, Suite 6905
Houston, Texas 77002
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 28th day of October, 1997.
----------------------------------
Randall W. Heinrich,
Incorporator
EXHIBIT 3.02 - BYLAWS OF THE COMPANY
BYLAWS
OF
JVWEB, INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing
stock in the corporation shall be signed by, or in the name of, the corporation
by (a) the Chairman or Vice-Chairman of the Board of Directors, if any, or by
the President or a Vice President and (b) by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the corporation. Any or
all the signatures on any such certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more
than one class of stock or more than one series of any class of stock, and
whenever the corporation shall issue any shares of its stock as partly paid
stock, the certificates representing shares of any such class or series or of
any such partly paid stock shall set forth thereon the statements prescribed by
the General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by it,
alleged to have been lost, stolen, or destroyed, and the Board of Directors may
require the owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by
the General Corporation Law, the Board of Directors of the corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of the stock of the corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any uncertificated shares, the
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
<PAGE>
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall
not be required to, issue fractions of a share. If the corporation does not
issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder to receive a full
share upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share or an uncertificated fractional share shall,
but scrip or warrants shall not unless otherwise provided therein, entitle the
holder to exercise voting rights, to receive dividends thereon, and to
participate in any of the assets of the corporation in the event of liquidation.
The Board of Directors may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing the full shares or uncertificated full shares before a specified
date, or subject to the conditions that the shares for which scrip or warrants
are exchangeable may be sold by the corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
transfers or registration of transfers of shares of stock of the corporation
shall be made only on the stock ledger of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and, in the case of shares represented by
certificates, on surrender of the certificate or certificates for such shares of
stock properly endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting. In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining the stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by the General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by the General Corporation Law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action. In
order that the corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
shares of stock when the corporation is authorized to issue only one class of
shares of stock, and said reference is also intended to include any outstanding
share or shares of stock and any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the certificate of
incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the certificate of incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder; provided, however, that no
such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the certificate of incorporation,
except as any provision of law may otherwise require.
7. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at
the time fixed, from time to time, by the directors, provided, that the first
annual meeting shall be held on a date within thirteen months after the
organization of the corporation, and each successive annual meeting shall be
held on a date within thirteen months after the date of the preceding annual
meeting. A special meeting shall be held on the date and at the time fixed by
the directors.
- PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of Delaware, as the directors may, from
time to time, fix. Whenever the directors shall fail to fix such place, the
meeting shall be held at the registered office of the corporation in the State
of Delaware.
-CALL. Annual meetings and special meetings may be called by
the directors or by any officer instructed by the directors to call the meeting.
Special meetings must also be called upon the instruction of one or more
stockholders holding singly or collectively at least 20% of the outstanding
common stock in the corporation.
-NOTICE OR WAIVER OF NOTICE. Written notice of all meetings
shall be given, stating the place, date, and hour of the meeting and stating the
place within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting -- the Chairman of the Board, if any, the Vice-Chairman of
the Board, if any, the President, a Vice-President, or, if none of the foregoing
is in office and present and acting, by a chairman to be chosen by the
stockholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the Chairman of the meeting shall appoint
a secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize
another person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may,
but need not, appoint one or more inspectors of election to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspectors at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots, or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots, or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question, or matter determined by him
or them and execute a certificate of any fact found by him or them. Except as
otherwise required by subsection (e) of Section 231 of the General Corporation
Law, the provisions of that Section shall not apply to the corporation.
- QUORUM. The holders of a majority of the outstanding shares
of stock shall constitute a quorum at a meeting of stockholders for the
transaction of any business. The stockholders present may adjourn the meeting
despite the absence of a quorum.
- VOTING. Each share of stock shall entitle the holders
thereof to one vote. Directors shall be elected by a plurality of the votes of
the shares present in person or represented by proxy at the meeting and entitled
to vote on the election of directors. Any other action shall be authorized by a
majority of the votes cast except where the General Corporation Law prescribes a
different percentage of votes and/or a different exercise of voting power, and
except as may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
9. STOCKHOLDER PROPOSALS. At an annual or a special meeting of
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual or
special meeting business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Chairman of the Board,
the President, or the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Chairman of the Board, the President,
or the Board of Directors, or (c) otherwise properly brought before the meeting
by a stockholder.
No proposal by a stockholder shall be presented at an annual or a
special meeting of stockholders unless such stockholder shall provide the Board
of Directors or the Secretary of the corporation with timely written notice of
intention to present a proposal for action at the forthcoming meeting of
stockholders, which notice shall include (a) the name and address of such
stockholder, (b) the number of voting securities he or she holds of record and
which he or she holds beneficially, (c) the text of the proposal to be presented
at the meeting, (d) a statement in support of the proposal, and (e) any material
interest of the stockholder in such proposal. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation, not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the fifth (5th) day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure was made. Any stockholder may make any other proposal at an annual or
special meeting of stockholders and the same may be discussed and considered,
but unless stated in writing and filed with the Board of Directors or the
Secretary prior to the date set forth above, no action with respect to such
proposal shall be taken at such meeting and such proposal shall be laid over for
action at an adjourned, special, or annual meeting of the stockholders taking
place no earlier than 60 days after such meeting.
This provision shall not prevent the consideration and approval or
disapproval at an annual meeting of reports of officers, directors, and
committees; but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as provided in these Bylaws.
Notwithstanding anything in the Bylaws to the contrary, no business shall be
conducted at any annual or special meeting except in accordance with the
procedures set forth in this these Bylaws. The chairman of the annual meeting
shall, if the facts warrant, determine and declare to the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of these Bylaws, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted.
Notwithstanding any other provision of these Bylaws, the corporation
shall be under no obligation to include any stockholder proposal in its proxy
statement materials or otherwise present any such proposal to stockholders at a
special or annual meeting of stockholders if the Board of Directors reasonably
believes the proponents thereof have not complied with Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder, and the corporation shall not be required to include in
its proxy statement material to stockholders any stockholder proposal not
required to be included in its proxy material to stockholders in accordance with
such Act, rules, or regulations.
10. NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the procedures of these Bylaws shall be eligible for election as
directors. Subject to the rights of holders of any class or series of stock
having a preference over the common stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or by any stockholder entitled to vote in the election of directors generally
who complies with the notice procedures set forth in this these Bylaws. Any
stockholder entitled to vote in the election of directors generally may nominate
one or more persons for election as a director at a meeting only if timely
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by U.S. mail, first
class postage prepaid, return receipt requested, to the Secretary of the
corporation.
To be timely, a stockholder's notice shall be delivered to or mailed
and received at the principal executive offices of the corporation not less than
60 days nor more than 90 days prior to the meeting; provided, however, that in
the event that less than 70 days' notice or prior public disclosure of the date
of the meeting is give or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the fifth
(5th) day following the day on which such notice of the date of the meeting was
<PAGE>
mailed or such public disclosure was made. Each such notice shall set forth: (a)
the name and address of the stockholder who intends to make the nomination, (b)
the name, age, business address, and home address of the person or persons to be
nominated; (c) the principal occupation of the person or persons nominated; (d)
a representation that the stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting and intends to appear at the meeting to nominate the
person or persons specified in the notice; (e) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (f) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the rules of the Securities and
Exchange Commission, had the nominee been nominated, or intended to be
nominated, by the Board of Directors; and (g) the consent of each nominee to
serve as a director of the corporation if so elected. At the request of the
Board of Directors any person nominated by the Board of Directors for election
as a Director shall furnish to the Secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee.
No person shall be eligible for election as a Director of the
corporation unless nominated in accordance with the procedures set forth in
these Bylaws. The chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, a citizen of the United States, or resident of the State of
Delaware. The initial Board of Directors shall consist of one person. Thereafter
the number of directors constituting the whole board shall be the number
determined by the Board of Directors, provided, however, that at least one
director is always required. Subject to the foregoing limitation and except for
the first Board of Directors, such number may be fixed from time to time by
action of the stockholders or of the directors, or, if the number is not fixed,
the number shall be three. The number of directors may be increased or decreased
by action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the
members thereof shall have been named in the certificate of incorporation, shall
be elected
<PAGE>
22
by the incorporator or incorporators and shall hold office until the first
annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancies in the Board of Directors, including unfilled
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall
fix, except that the first meeting of a newly elected Board shall be held as
soon after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or
without the State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may be called by or
at the direction of the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the directors need be specified in any written
waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the whole
Board. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any
committee designated by the Board, may participate in a meeting of the Board, or
any such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any
and if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the President,
if present and acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided
by the General Corporation Law, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
8. COMPENSATION. Unless otherwise restricted by the
certificate of incorporation, the Board of Directors shall have the authority to
fix the compensation of directors. No provision of these Bylaws shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
9. RELIANCE. Each director and each member of any committee
designated by the Board of Directors shall, in the performance of his duties, be
fully protected in relying in good faith upon the books of account or reports
made to the corporation by any of its officers, or by an independent certified
public accountant, or by an appraiser selected with reasonable care by the Board
of Directors or by any such committee, or in relying in good faith upon other
records of the corporation.
ARTICLE III
OFFICERS
1. OFFICES AND QUALIFICATIONS. The officers of the corporation
shall consist of a President, a Secretary, a Treasurer, and, if deemed
necessary, expedient, or desirable by the Board of Directors, a Chairman of the
Board, a Vice-Chairman of the Board, an Executive Vice-President, one or more
other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers with such titles as the resolution of the
Board of Directors choosing them shall designate. Except as may otherwise be
provided in the resolution of the Board of Directors choosing him, no officer
other than the Chairman or Vice-Chairman of the Board, if any, need be a
director. Any number of offices may be held by the same person, as the directors
may determine.
2. TERM. Unless otherwise provided in the resolution choosing
him, each officer shall be chosen for a term which shall continue until the
meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor shall have been chosen and qualified. Any
officer may resign at any time upon written notice to the corporation. Any
officer may be removed, with or without cause, by the Board of Directors. Any
vacancy in any office may be filled by the Board of Directors.
3. COMPENSATION. The salaries of all officers and agents of
the corporation shall be fixed by the Board of Directors or pursuant to its
direction; no officer shall be prevented from receiving such salary by reason of
his also being a director.
4. AUTHORITY AND DUTIES. All officers of the corporation shall
have such authority and perform such duties in the management and operation of
the corporation as shall be prescribed in the resolutions of the Board of
Directors designating and choosing such officers and prescribing their authority
and duties, and shall have such additional authority and duties as are incident
to their office except to the extent that such resolutions may be inconsistent
therewith. In addition to the preceding, the officers of the corporation shall
have the following authority and duties:
- CHAIRMAN OF THE BOARD. The Chairman of the Board (if such
office is created by the Board) shall preside at all meetings of the Board of
Directors or of the stockholders of the corporation. In the Chairman's absence,
such duties shall be attended to by the Vice Chairman of the Board (if any, but
if there is more than one, the Vice Chairman who is senior in terms of time as
such) or (if there is no Vice Chairman) by the President. The Chairman shall
formulate and submit to the Board of Directors or the executive committee (if
any) matters of general policy of the corporation and shall perform such other
duties as usually appertain to the office or as may be prescribed by the Board
of Directors or the executive committee.
- VICE CHAIRMEN OF THE BOARD. In the absence of the Chairman
of the Board, or in the event of his inability or refusal to act, the Vice
Chairman (if any, but if there is more than one, the Vice Chairman who is senior
in terms of time as such) shall perform the duties and exercise the powers of
the Chairman of the Board, and when acting shall have all the powers of and be
subject to all the restriction upon the Chairman of the Board. In the absence of
the Chairman of the Board, such Vice Chairman shall preside at all meetings of
the Board of Directors or of the stockholders of the corporation. In the
Chairman's and Vice Chairmen's absence, such duties shall be attended to by the
President. The Vice Chairmen shall perform such other duties, and shall have
such other powers, as from time to time may be assigned to them by the Board of
Directors or the executive committee (if any).
- PRESIDENT. The President shall be the chief executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general manage, supervise and control the properties,
business and affairs of the corporation with all such powers as may be
reasonably incident to such responsibilities. Unless the Board of Directors
otherwise determines, the President shall have the authority to agree upon and
execute all leases, contracts, evidences of indebtedness and other obligations
in the name of the corporation. In the absence of the Chairman of the Board, the
President shall preside at all meetings of the Stockholders and (should he be a
director) of the Board of Directors. He may also preside at any such meeting
attended by the Chairman of the Board if he is so designated by the Chairman. He
shall have the power to appoint and remove subordinate officers, agents and
employees, except those elected or appointed by the Board of Directors. The
President shall keep the Board of Directors and the Executive Committee fully
informed and shall consult them concerning the business of the corporation. He
may sign with the Secretary or any other officer of the corporation thereunto
authorized by the Board of Directors, certificates for shares of the corporation
and any deeds, bonds, mortgages, contracts, checks, notes, drafts or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof has been expressly delegated by
these by-laws or by the Board of Directors to some other officer or agent of the
corporation, or shall be required by law to be otherwise executed. He shall
vote, or give a proxy to any other officer of the corporation to vote all shares
of stock of any other corporation standing in the name of the corporation and
shall exercise any and all rights and powers which this corporation may possess
by reason of its ownership of securities in such other corporation and in
general he shall perform all other duties normally incident to the office of
President and such other duties, and shall have such other powers, as may be
prescribed by the stockholders, the Board of Directors or the Executive
Committee (if any) from time to time.
- VICE PRESIDENTS. In the absence of the President, or in the
event of his inability or refusal to act, the Executive Vice President (or in
the event there shall be no Vice President designated Executive Vice President,
any Vice President designated by the Board) shall perform the duties and
exercise the powers of the President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the President. In the
absence of a designation by the Board of Directors of a Vice President to
perform the duties of the President, or in the event of his absence or inability
or refusal to act, the Vice President who is present and who is senior in terms
of time as a Vice President of the corporation shall so act. Any Vice President
may sign, with the Secretary or Assistant Secretary, certificates for shares of
the corporation. The Vice Presidents shall perform such other duties, and shall
have such other powers, as from time to time may be assigned to them by the
President, the Board of Directors or the executive committee (if any).
- SECRETARY. The Secretary shall (a) keep the minutes of the
meetings of the stockholders, the Board of Directors and committees of
directors; (b) see that all notices are duly given in accordance with the
provisions of these by-laws and as required by law; (c) be custodian of the
corporate records and of the seal of the corporation, and see that the seal of
the corporation or a facsimile thereof is affixed to all certificates for shares
prior to the issue thereof and to all documents, the execution of which on
behalf of the corporation under its seal is duly authorized in accordance with
the provisions of these by-laws and attest the affixation of the seal of the
corporation thereto; (d) keep or cause to be kept a register of the post office
address of each stockholder which shall be furnished by such stockholder; (e)
sign with the President, or an Executive Vice President or Vice President,
certificates for shares of the corporation, the issue of which shall have been
authorized by resolution of the Board of Directors; (f) have general charge of
the stock transfer books of the corporation, which may be kept (subject to any
provision contained in the General Corporation Law) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors; and (g) in general, perform all duties normally incident to
the office of Secretary and such other duties, and shall have such other powers,
as from time to time may be assigned to him by the President, the Board of
Directors or the executive committee (if any).
- TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. He
shall (a) have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for moneys due and
payable to the corporation from any source whatsoever and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of these
Bylaws; (b) prepare, or cause to be prepared, for submission at each regular
meeting of the Board of Directors, at each annual meeting of the stockholders,
and at such other times as may be required by the Board of Directors, the
President or the executive committee (if any), a statement of financial
condition of the corporation in such detail as may be required; and (c) in
general, perform all the duties incident to the office of Treasurer and such
other duties, and shall have such other powers, as from time to time may be
assigned to him by the President, the Board of Directors or the executive
committee (if any).
- ASSISTANT SECRETARY OR TREASURER. The Assistant Secretaries
and Assistant Treasurers shall, in general, perform such duties and have such
powers as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President, the Board of Directors or the Executive
Committee. The Assistant Secretaries and Assistant Treasurers shall, in the
absence or inability or refusal to act of the Secretary or Treasurer,
respectively, perform all functions and duties which such absent officers may
delegate, but such delegation shall not relieve the absent officer from the
responsibilities and liabilities of his office. The Assistant Secretaries may
sign, with the President or a Vice President, certificates for shares of the
corporation, the issue of which shall have been authorized by a resolution of
the Board of Directors. The Assistant Treasurers shall respectively, if required
by the Board of Directors, give bonds for the faithful discharge of their duties
in such sums and with such sureties as the Board of Directors shall determine.
ARTICLE IV
INDEMNIFICATION
1. INDEMIFICATION. This corporation shall, to the maximum
extent permitted from time to time under the law of the State of Delaware,
indemnify and upon request shall advance expenses to any person who is or was a
party or is threatened to be made a party to any threatened, pending or
completed action, suit, proceeding or claim, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was or has agreed to be a director or officer of this corporation or any of its
direct or indirect subsidiaries or while such a director or officer is or was
serving at the request of this corporation as a director, officer, partner,
trustee, employee or agent of any corporation, partnership, joint venture, trust
or other enterprise, including service with respect to employee benefit plans,
against expenses (including attorney's fees and expenses), judgments, fines,
penalties and amounts paid in settlement incurred in connection with the
investigation, preparation to defend or defense of such action, suit, proceeding
or claim; provided, however, that the foregoing shall not require this
corporation to indemnify or advance expenses to any person in connection with
any action, suit, proceeding, claim or counterclaim initiated by or on behalf of
such person. Such indemnification shall not be exclusive of other
indemnification rights arising under any bylaws, agreement, vote of directors or
stockholders or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person. Any person seeking indemnification under this
Article IV shall be deemed to have met the standard of conduct required for such
indemnification unless the contrary shall be established.
2. INSURANCE. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article IV of the by-laws.
3. DEFINITIONS. For purposes of this Article IV, reference to
the "corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence has continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article IV with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
For purposes of this Article IV, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article IV.
ARTICLE V
DIVIDENDS
1. DECLARATION. Dividends upon the capital stock of the
corporation, subject to applicable provisions of the certificate of
incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, pursuant to applicable law. Dividends may be paid in cash,
in property or in shares of capital stock, subject to applicable provisions of
the certificate of incorporation.
2. RESERVE. 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 Board of Directors from time to time, in its absolute discretion,
shall think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of 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 VI
CORPORATE SEAL
The corporate seal shall be in such form as the Board of
Directors shall prescribe.
<PAGE>
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall
be subject to change, by the Board of Directors.
ARTICLE VIII
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation
and the provisions of the General Corporation Law, the power to amend, alter, or
repeal these Bylaws and to adopt new Bylaws may be exercised by the Board of
Directors or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true, and
correct copy of the Bylaws of JVWeb, Inc., a Delaware corporation, as in effect
on the date hereof.
Dated: October 29, 1997
/s/ Greg J. Micek
Secretary of JVWeb, Inc.
(SEAL)
EXHIBIT 4.01 - Specimen Common Stock Certificate
[SPECIMEN STOCK CERTIFICATE]
EXHIBIT 4.02 - Warrant Agreement dated December 15, 1997 between the Company and
American Stock Transfer & Trust Company.
AGREEMENT
THIS AGREEMENT made as of this 15th day of December, 1997, between
JVWEB, INC., a Delaware corporation with offices at 5444 Westheimer, Suite 2080,
Houston, Texas 77056 (the "Company"), and AMERICAN STOCK TRANSFER & TRUST
COMPANY, with offices at 40 Wall Street, New York, New York 10005(the "Warrant
Agent").
Introduction
The Company has determined to issue and deliver up to 1,000,000 common
stock purchase warrants (the "Class A Warrants") evidencing the right of the
holders thereof to purchase an aggregate of 1,000,000 shares of common stock,
$0.01 par value of the Company (the "Common Stock"), which Class A Warrants are
to be issued and delivered as part of units (the "Units") to be registered
pursuant to a registration statement No. 333-__________________ (the
"Registration Statement") filed with the Securities and Exchange Commission. In
connection with the creation of the Class A Warrants, the Company has decide to
create 2,000,000 common stock purchase warrants (the "Class B Warrants")
evidencing the right of the holders thereof to purchase an aggregate of
2,000,000 shares of Common Stock, which Class B Warrants are to be registered
pursuant to the Registration Statement and which Class B Warrants are to be
issued to the holders of the Class A Warrants upon exercise of the Class A
Warrants at rate of two Class B Warrants for each Class A Warrant exercised. In
connection with the creation of the Class B Warrants, the Company has decide to
create 2,000,000 common stock purchase warrants (the "Class C Warrants")
evidencing the right of the holders thereof to purchase an aggregate of
2,000,000 shares of Common Stock, which Class C Warrants are to be registered
pursuant to the Registration Statement and which Class C Warrants are to be
issued to the holders of the Class B Warrants upon exercise of the Class B
Warrants at rate of one Class C Warrant for each Class B Warrant exercised. The
Class A Warrants, the Class B Warrants and the Class C Warrants are hereinafter
referred to as the "Warrants". The Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance, registration, transfer, exchange, redemption and exercise of
the Warrants. The Company desires to provide for the form and provisions of the
Warrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the Company, the
Warrant Agent, and the holders of the Warrants.
All acts and things have been done and performed which are necessary to
make the Warrants, when executed on behalf of the Company and countersigned by
or on behalf of the Warrant Agent, as provided herein, the valid, binding and
legal obligation of the Company, and to authorize the execution and delivery of
this Agreement.
Agreement
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
<PAGE>
ARTICLE I
Appointment of Warrant Agent
The Company hereby appoints the Warrant Agent to act as agent for the
Company for the Warrants, and the Warrant Agent hereby accepts such appointment
and agrees to perform the same in accordance with the terms and conditions set
forth in this Agreement.
ARTICLE II
Warrants, Form of Warrants, Execution,
Countersignature and Registration of Warrants
2.01. Form of Warrant. Each Warrant shall be issued in registered form
only, shall be in substantially the form of Exhibit A hereto (in the case of a
Class A Warrant), Exhibit B hereto (in the case of a Class B Warrant) or Exhibit
C hereto (in the case of a Class C Warrant), shall be signed by, or bear the
facsimile signature of, the President or any Vice President and by the Secretary
of the Company and shall bear a facsimile of the Company's seal (a certificate
representing a Warrant, whether in the form of Exhibit A, Exhibit B or Exhibit
C, is referred to hereinafter as a "Warrant Certificate"). A Warrant Certificate
may also bear such letters, marks of identification, legends, designations,
summaries and endorsements as the Company may believe appropriate and as are not
inconsistent with this Agreement, or in any particular case as may be required
in the opinion of counsel to the Company. In the event the person whose
facsimile signature has been placed upon any Warrant Certificate shall have
ceased to be President or Secretary of the Company before such Warrant
Certificate is issued, it may be issued with the same effect as if she had not
ceased to be such at the date of issuance. No Warrant Certificate may be
exercised until it has been countersigned by the Warrant Agent as provided in
Section 2.03 hereof.
2.02. Warrant Valid Only If Countersigned. Unless and until manually
countersigned by the Warrant Agent and dated the date of countersignature
pursuant to this Agreement, a Warrant Certificate shall be invalid and of no
effect.
2.03. Countersignature. The Warrant Agent shall countersign a Warrant
Certificate only (i) if the Warrant Certificate is to be issued in exchange or
substitution for one or more previously countersigned Warrant Certificates, as
hereinafter provided, (ii) upon the exercise of one or more Warrants, as
hereinafter provided, or (iii) if the Company instructs the Warrant Agent to do
so.
2.04. Registration.
2.04.1 The Warrant Agent shall maintain books (the "Warrant Register")
for the registration of original issuance and the registration of transfer of
the Warrant Certificates. Upon the initial issuance of any Warrant Certificates,
the Warrant Agent shall issue and register such Warrant Certificates in the
names of the respective holders thereof in such denominations and otherwise in
accordance with instructions delivered to the Warrant Agent by the Company (in
the case of the Class A Warrants), or in accordance with the terms hereof (in
the cases of the Class B Warrants and the Class C Warrants).
2.04.2 Prior to due presentment for registration of transfer of any
Warrant Certificate, the Company and the Warrant Agent may deem and treat the
person in whose name such Warrant Certificate shall be registered upon the
Warrant Register (the "Holder" or the "registered holder") as the absolute owner
of such Warrant Certificate and of each Warrant represented thereby
(notwithstanding any notation of ownership or other writing on the Warrant
Certificate made by anyone other than the Company or the Warrant Agent) for the
purpose of any exercise thereof, and for all other purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary
and shall not be required to recognize any equitable or other claim to or
interest in such Warrant Certificate on the part of any other person, and shall
not be liable for any registration or transfer of Warrant Certificates which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with such knowledge of such facts that its participation therein amounts to bad
faith.
2.05. Detachability of Warrants. The Warrant Agent understands that the
Class A Warrants are being issued as part of Units together with shares of the
Company's Common Stock and that the shares of Common Stock and the Class A
Warrants are immediately detachable and may be traded separately. The Warrant
Agent further understands that the Class B Warrants and the Class C Warrants
shall also in all cases be traded separately.
ARTICLE III
Term and Exercise of Warrants
3.01. Warrant Price. Each Warrant Certificate shall, when signed by the
proper officers of the Company and countersigned and dated by the Warrant Agent,
entitle the registered holder thereof, subject to the provisions of such Warrant
Certificate and of this Warrant Agreement, to purchase from the Company up to
the number of shares (the "Warrant Shares") of Common Stock stated therein, at
the price of $1.00 per share in the case of the Class A Warrants, at the price
of $2.00 per share in the case of the Class B Warrants, and at the price of
$5.00 per share in the case of the Class C Warrants, subject in all cases to the
adjustments provided in Article IV hereof. The term "Warrant Price" as used in
this Agreement refers to the price per share at which Common Stock may be
purchased at the time a Warrant is exercised, reflecting all appropriate
adjustments made in accordance with Article IV hereof.
3.02. Duration of Warrants. A Class A Warrant may be exercised only
during the period (the "Class A Warrant Exercise Period") commencing on the
effective date (the "Effective Date") of the Registration Statement, and ending
at 5:00 p.m. New York City time on the date which is the earlier of (i) the
third anniversary of the Effective Date, or (ii) the date fixed for redemption
of such Class A Warrant as provided in Article VI of this Agreement (in each
such case, the "Class A Warrant Expiration Date"). A Class B Warrant may be
exercised only during the period commencing on the date such Class B Warrant is
issued (the "Class B Warrant Issuance Date"), and ending at 5:00 p.m. New York
City time on the date which is the earlier of (i) the third anniversary of the
Class B Warrant Issuance Date, or (ii) the date fixed for redemption of such
Class B Warrant as provided in Article VI of this Agreement (in each such case,
the "Class B Warrant Expiration Date"). A Class C Warrant may be exercised only
during the period commencing on the date such Class C Warrant is issued (the
"Class C Warrant Issuance Date"), and ending at 5:00 p.m. New York City time on
the date which is the earlier of (i) the third anniversary of the Class C
Warrant Issuance Date, or (ii) the date fixed for redemption of such Class C
Warrant as provided in Article VI of this Agreement (in each such case, the
"Class C Warrant Expiration Date"). (The Class A Warrant Expiration Date, the
Class B Warrant Expiration Date, and the Class C Warrant Expiration Date are
referred to hereinafter collectively as the "Expiration Date"). Each Warrant not
exercised on or before the applicable Expiration Date shall become void, and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease at the close of business on the Expiration Date. The Company in its sole
discretion may extend the duration of any Warrant by extending the applicable
Expiration Date upon written notice to the holder thereof.
3.03. Exercise of Warrants.
3.03.1 A Warrant Certificate, when countersigned by the Warrant Agent,
may be exercised by the registered holder thereof by surrendering it, at the
office of the Warrant Agent, or at the office of its successor as Warrant Agent,
in the Borough of Manhattan, City and State of New York, with the subscription
form, as set forth in the Warrant Certificate and in substantially the form of
Exhibit D hereto, duly executed with signature guaranteed by an eligible
guarantor institution. These institutions (commercial banks, member firms of a
national securities exchange, savings and loans and thrifts) qualify as long as
the guarantor is a member of The Securities Transfer Agent Medallion Program or
any other industry recognized program and by paying in full, in lawful money of
the United States, in cash, certified check or bank draft payable to the
Company, the Warrant Price for each full share of Common Stock as to which the
Warrant is exercised and any and all applicable taxes due in connection with the
exercise of the Warrant, the exchange of the Warrant for the Common Stock, and
the issuance of the Common Stock.
3.03.2 As soon as practicable after the exercise of any Warrant, the
Company shall issue to the registered holder of such Warrant a certificate or
certificates for the number of full shares of Common Stock to which he is
entitled, registered in such name or names as may be directed by him, and if
such Warrant shall not have been exercised in full, a new countersigned Warrant
for the number of shares as to which such Warrant shall not have been exercised.
In addition, as soon as practicable after the exercise of any Class A Warrant,
the Company shall issue to the registered holder of such Warrant a Warrant
Certificate representing two Class B Warrants for each Class A Warrant
exercised, registered in such name or names as may be directed by him, and an
appropriate entry shall be made in the Warrant Register. Moreover, as soon as
practicable after the exercise of any Class B Warrant, the Company shall issue
to the registered holder of such Warrant a Warrant Certificate representing one
Class C Warrant for each Class B Warrant exercised, registered in such name or
names as may be directed by him, and an appropriate entry shall be made in the
Warrant Register.
3.03.3 All shares of Common Stock issued upon the proper exercise of a
Warrant in conformity with this Warrant Agreement shall be validly issued.
3.03.4 Each person in whose name any such certificate for shares of
Common Stock is issued shall for all purposes be deemed to have become the
holder of record of such shares on the date on which the Warrant was surrendered
and payment of the Warrant Price was made, irrespective of the date of delivery
of such certificate, except that, if the date of such surrender and payment is a
date when the stock transfer books of the Company are closed, such person shall
be deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open.
3.04. Disposition of Proceeds. Upon the exercise of any Warrant, the
Warrant Agent shall promptly forward all funds received by it for the purchase
of Warrant Shares to the Company.
ARTICLE IV
Adjustments
4.01. Stock Dividends--Split-Ups. If after the date hereof the number
of outstanding shares of Common Stock is increased by a stock dividend payable
in shares of Common Stock or by a split-up of shares of Common Stock or other
similar event, or the number of outstanding shares of Common Stock is decreased
by a consolidation, combination or reclassification of shares of Common Stock,
reverse stock split or other similar event, then, on the date following the date
fixed for the determination of holders of Common Stock entitled to receive such
stock dividend, or whom are affected by such split-up, consolidation,
combination, reclassification or other similar event, the Warrant Price in
effect immediately after the record date of such dividend or distribution or the
effective date of any such subdivision, combination or reclassification shall be
proportionately adjusted so that the Holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number of shares which, if such
Warrant had been exercised prior to any such event, the registered holder would
have owned upon such exercise and would have been entitled to receive by virtue
of such event. Such adjustment shall be made successively whenever any such
event specified above shall occur.
4.02. Adjustment to Number of Shares. Upon each adjustment of the
Warrant Price pursuant to Section 4.01, each Warrant shall thereupon evidence
the right to purchase that number of shares of Common Stock (calculated to the
nearest hundredth of a share) obtained by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment upon exercise of
the Warrant by the Warrant Price in effect immediately prior to such adjustment
and dividing the product so obtained by the Warrant Price in effect immediately
after such adjustment.
4.03. Reorganization, etc. If after the date hereof any capital
reorganization or reclassification (other than pursuant to Section 4.01 hereof)
of the Common Stock of the Company, or consolidation or merger of the Company
with another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock or the conversion or
exchange of such outstanding shares into shares of other stock or other
securities or property), or the sale of all or substantially all of its assets
to another corporation or other similar event shall be effected, then, as a
condition of such reorganization, reclassification, consolidation, merger, or
sale, lawful and fair provision shall be made whereby the Warrant holders shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions specified in the Warrants and in lieu of the shares of
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented thereby, such shares of stock,
securities, or assets as may be issuable or payable with respect to or in
exchange for the number of shares of Common Stock purchasable and receivable
upon the exercise of the Warrants had such exercise occurred in full prior to
such reorganization, reclassification, consolidation, merger, or sale. In such
event appropriate provision shall be made with respect to the rights and
interests of the Warrant Holders to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant Price
and of the number of shares purchasable upon the exercise of the Warrants) shall
thereafter be applicable, as nearly as may be in relation to any share of stock,
securities, or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger, or sale unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume by written instrument executed and delivered to the Warrant
Agent the obligation to deliver to the Warrant Holders such shares of stock,
securities, or assets as, in accordance with the foregoing provision, such
Holders may be entitled to purchase. In the event of sale or conveyance or other
transfer of all or substantially all of the assets of the Company as a part of a
plan for total liquidation of the Company, all rights to exercise any Warrant
shall terminate 30 days after the Company gives notice to each Holder that such
sale or conveyance or other transfer has been consummated.
4.04. Notices of Changes in Warrant. Upon every adjustment of the
Warrant Price or the number of shares issuable on exercise of a Warrant, the
Company shall give notice thereof to the Warrant Agent, which notice shall state
the Warrant Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares purchasable at such price upon the exercise of a
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. The Company shall promptly cause a
similar notice to be mailed to each Holder of Warrants. Upon the occurrence of
any event above specified in this Article IV, the Company shall give notice to
the Warrant Agent and each Holder of the record date for such dividend,
distribution, or subscription rights, or the effective date of such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Such notice shall also specify the date as
of which the holders of Common Stock of record shall participate in such
dividend, distribution, or subscription rights, or shall be entitled to exchange
their Common Stock for stock, securities, or other assets deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Failure to give such notice, or any defect
therein shall not affect the legality or validity of such event.
4.05. No Fractional Shares. Notwithstanding any provision contained in
this Agreement to the contrary, the Company shall not issue fractional shares
upon exercise of Warrants. If, by reason of any adjustment made pursuant to this
Article IV, the holder of any Warrant would be entitled, upon the exercise of
such Warrant, to receive a fractional interest in a share, the Company shall,
upon such exercise, purchase such fractional interest for an amount in cash
equal to the current market value of such fractional interest, determined as
follows:
4.05.1. If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange, the current value
shall be the last reported sale price regular way of the Common Stock on such
exchange. If the Common Stock is not listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange but is listed for
trading on the NASDAQ Automated Quotation System, the current value shall be the
closing bid quotation on NASDAQ on the last business day prior to the date of
exercise of the Warrant.
4.05.2. If the Common Stock is not listed or admitted as above
described, the current value shall be the mean of the last reported bid and
asked prices reported by first, the OTC Bulletin Board, or if the Common Stock
is not listed or admitted for trading on the OTC Bulletin Board, second, the
National Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of the Warrant.
4.05.3. If the Common Stock is not so listed or admitted as above
described and bid and asked prices are not so last reported, the current value
shall be an amount determined in such reasonable manner as may be prescribed by
the Board of Directors of the Company.
4.06. Form of Warrant. The form of Warrant need not be changed because
of any adjustment pursuant to this Article IV or Article IX hereof, and Warrants
issued after such adjustment may state the same Warrant Price and the same
number of shares as is stated in the Warrants initially issued pursuant to this
Agreement. However, the Company may at any time in its sole discretion make any
change in the form of Warrant that the Company may believe appropriate and that
does not affect the substance thereof, and any Warrant thereafter issued or
countersigned, whether in exchange or substitution for an outstanding Warrant or
otherwise, may be in the form as so changed.
4.07. Limitations. No adjustment of the Warrant Price shall be made as
a result of or in connection with (i) the issuance of Common Stock pursuant to
options, warrants, and stock purchase agreements outstanding or in effect on the
date hereof, (ii) the issuance of Common Stock in connection with the conversion
of any other securities of the Company currently issued and outstanding or
hereafter issued, or (iii) any other circumstances other than those set forth in
Section 4.01 hereof.
<PAGE>
ARTICLE V
Transfer and Exchange of Warrants
5.01. Registration Procedure. The Warrant Certificates shall be
transferable only on the books of the Company maintained at the principal office
of the Warrant Agent in New York, New York upon delivery thereof duly endorsed
by the registered holder or to his order, or duly authorized attorney or
representative, accompanied by proper evidence of succession, assignment or
authority to transfer, which endorsement shall be guaranteed by a member firm of
a national securities exchange, a commercial bank (not a savings bank or a
savings and loan association) or trust company located in the United States or a
member of the NASD. In all cases of transfer by an attorney-in-fact, the
original power of attorney, duly approved, or a copy thereof, duly certified, by
such attorney-in-fact, shall be deposited and remain with the Warrant Agent. In
case of transfer of executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Warrant Agent
in its discretion. Upon any such transfer, a new Warrant Certificate
representing an equal aggregate number of Warrants so transferred shall be
issued, a new Warrant Certificate representing the balance of the Warrants not
so transferred shall be issued, and the original Warrant Certificate which is
the subject of such transfers shall be canceled by the Warrant Agent. The
Warrant Certificate so canceled shall be delivered by the Warrant Agent to the
Company upon request.
5.02. Cancellation and Surrender. Warrant Certificates may be
surrendered to the Warrant Agent together with a request for exchange, and
thereupon the Warrant Agent shall issue in exchange therefor one or more new
Warrant Certificates as requested by the registered holder of the Warrants so
surrendered, representing an equal aggregate number of Warrants. In the event
that a Warrant Certificate surrendered for transfer bears a restrictive legend,
the Warrant Agent shall not cancel such Warrant Certificate and issue a new
Warrant Certificate in exchange therefor until the Warrant Agent has received an
opinion of counsel for the Company stating that such transfer may be made and
indicating whether the new Warrants must also bear a restrictive legend. The
Warrant Agent shall not be required to effect any registration of transfer or
exchange which will result in the issuance of a Warrant Certificate for a
fraction of a Warrant.
5.02.1. No service charge shall be made for any exchange or
registration of transfer of Warrants.
5.02.2. The Warrant Agent is hereby authorized to countersign and to
deliver, in accordance with the terms of this Agreement, the Warrant
Certificates required to be issued pursuant to the provisions hereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purpose.
<PAGE>
ARTICLE VI
Redemption
6.01. Redemption. Any Warrant may be redeemed prior to its Expiration
Date, at the option of the Company, as a whole at any time or in part from time
to time, by lot, in any proportion as the Company in its sole discretion shall
determine, at the office of the Warrant Agent, upon notice as below provided, at
the price of $.01 per Warrant (the "Warrant Redemption Price"), provided, (i)
the closing bid quotation of the Common Stock as quoted by the National
Association of Securities Dealers Automated Quotation System; (ii) the last
reported sale price, regular way, or if no such reported sale has occurred on
any such day, the average of the closing bid and asked prices, regular way, on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, or (iii) if not so quoted or reported, the average of
the bid and asked prices as furnished by two members of the NASD selected for
that purpose, in any such case, has been at least $1.25 (in the case of a Class
A Warrant), $2.35 (in the case of a Class B Warrant) and $5.50 (in the case of a
Class C Warrant), on each of the ten (10) consecutive trading days ending on the
third (3rd) day prior to the day on which notice is given (the "Closing Price").
6.02. Date Fixed for, and Notice of, Redemption. In the event the
Company shall elect to redeem all or any part of the Warrants, the Company shall
fix a date for the redemption (the "Redemption Date") not more than sixty (60)
days and not less than thirty (30) days following the date upon which notice is
given to the registered holders of the Warrants to be redeemed, at their
respective addresses then appearing on the registration books. Nothing herein
shall limit the rights of registered holders to exercise the Warrants in
accordance with Article III of this Agreement at any time prior to the date
fixed for redemption. Written notice by first class mail shall be given by the
Company to all Holders of Warrant Certificates to be redeemed not more than
sixty (60) days and not less than thirty (30) days prior to the Redemption Date.
Each such notice of redemption will specify the Redemption Date and the
Redemption Price. The notice will state that payment of the Redemption Price
will be made by the Warrant Agent upon presentation and surrender of the Warrant
Certificates representing such Warrants to the Warrant Agent at its principal
office, and will also state that the right to exercise the Warrants will
terminate at 5:00 p.m., New York City time, on the Redemption Date. Failure to
mail the notice of redemption to any Holder or any defect therein, however,
shall not affect the validity of the redemption of the remaining Warrants. The
Company will also make prompt public announcement of such redemption by news
release.
6.03. Payment of Redemption Price. On or prior to the opening of
business on the Redemption Date (as defined in Section 6.01 hereof), the Company
shall deposit with the Warrant Agent funds in form satisfactory to the Warrant
Agent sufficient to purchase all the Warrants which are to be redeemed. Payment
of the Redemption Price shall be made by the Warrant Agent upon presentation and
surrender of the Warrant Certificates representing such Warrants to the Warrant
Agent at its principal office.
<PAGE>
ARTICLE VII
Other Provisions Relating to
Rights of Holders of Warrants
7.01. No Rights as Stockholder Conferred by Warrants. A Warrant does
not entitle the registered holder thereof to any of the rights of a stockholder
of the Company, including, without limitation, the right to receive dividends or
other distributions, exercise any preemptive rights to vote or to consent or to
receive notice as shareholders in respect of the meetings of shareholders or the
election of directors of the Company or any other matter.
7.02. Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant is
lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on
such terms as to indemnity or otherwise as the Company may in its discretion
impose (which shall, in the case of a mutilated Warrant Certificate, include the
surrender thereof), issue a new Warrant Certificate of like denomination, tenor,
and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such new
Warrant Certificate shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated, or destroyed
Warrant shall be at any time enforceable by anyone.
7.03. Reservation of Common Stock. The Company shall at all times
reserve and keep available a number of its authorized but unissued shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants covered by this Agreement.
7.04 Registration of Common Stock. Prior to the commencement of the
Class A Warrant Exercise Period, the Company shall have the Registration
Statement on file with the Securities and Exchange Commission for the
registration of the Common Stock issuable upon exercise of the Warrants, and
shall use good faith efforts with due diligence to maintain such Registration
Statement current, until the expiration of the Warrants in accordance with the
provisions of this Agreement, whether by filing an appropriate post-effective
amendment thereto or otherwise.
ARTICLE VIII
Concerning the Warrant Agent and Other Matters
8.01. Payment of Taxes. The Company will from time to time pay on or
before the due date therefor, all taxes and charges that may be imposed upon the
Company or the Warrant Agent in respect of the issuance or delivery of shares of
Common Stock upon the exercise of Warrants, but the Company shall not be
obligated to pay any transfer taxes in respect of the Warrants or such shares.
<PAGE>
8.02. Resignation, Consolidation, or Merger of Warrant Agent.
8.02.1. The Warrant Agent, or any successor to it hereafter appointed,
may resign its duties and be discharged from all further duties and liabilities
hereunder after giving sixty (60) days' notice to the Company. If the office of
the Warrant Agent becomes vacant by resignation or incapacity to act or
otherwise, the Company shall appoint in writing a successor Warrant Agent in
place of the Warrant Agent. If the Company shall fail to make such appointment
within a period of thirty (30) days after receiving notification of such
resignation or incapacity by the Warrant Agent or by the holder of a Warrant
(who shall, with such notice, submit his Warrant for inspection by the Company),
then the holder of any Warrant may apply to the Supreme Court of the State of
New York for the County of New York for the appointment of a successor Warrant
Agent.
8.02.2. Any successor Warrant Agent, whether appointed by the Company
or by such court, shall be a corporation organized and existing under the laws
of the State of New York, in good standing and having its principal office in
the Borough of Manhattan, City and State of New York, and authorized under such
laws to exercise corporate trust powers and subject to supervision or
examination by Federal or state authority. After appointment, any successor
Warrant Agent shall be vested with all the authority, powers, rights,
immunities, duties, and obligations of its predecessor Warrant Agent with like
effect as if originally named as Warrant Agent hereunder, without any further
act or deed. The predecessor Warrant Agent shall execute and deliver, at the
expense of the Company, an instrument transferring to such successor Warrant
Agent all the authority, powers, and rights of such predecessor Warrant Agent
hereunder and the successor Warrant Agent shall execute and deliver an
instrument accepting the same. Upon request of any successor Warrant Agent, the
Company and the predecessor Warrant Agent shall make, execute, acknowledge, and
deliver any and all instruments in writing in order to more fully and
effectually vest in and confirm to such successor Warrant Agent all such
authority, powers, rights, immunities, duties, and obligations.
8.02.3. In the event a successor Warrant Agent shall be appointed, the
Company shall give notice thereof to the predecessor Warrant Agent and the
Transfer Agent for the Common Stock not later than the effective date of any
such appointment.
8.02.4. Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party may be the
successor Warrant Agent under this Agreement upon delivery to the Company of an
agreement whereby such successor shall assume all obligations of the Warrant
Agent hereunder.
8.03. Fees and Expenses of Warrant Agent.
8.03.1 The Company shall pay the Warrant Agent reasonable remuneration
for its services as such Warrant Agent hereunder and will promptly reimburse the
Warrant Agent for all expenditures that the Warrant Agent may reasonably incur
in the execution of its duties hereunder.
8.03.2 The Company agrees to perform, execute, acknowledge, and deliver
or cause to be performed, executed, acknowledged, and delivered all such further
and other acts, instruments, and assurances as may reasonably be required by the
Warrant Agent for the carrying out or performing of the provisions of this
Agreement.
8.04. Liability of Warrant Agent.
8.04.1 Whenever in the performance of its duties under this Agreement
the Warrant Agent shall believe it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a statement signed by the President of the Company and delivered
to the Warrant Agent. The Warrant Agent may rely upon such statement for any
action taken or suffered in good faith by it pursuant to the provisions of this
Agreement.
8.04.2 The Warrant Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct. The Company agrees to indemnify the
Warrant Agent and save it harmless against any and all liabilities, including
judgments, costs and reasonable counsel fees, for anything done or omitted by
the Warrant Agent in the execution of this Agreement except as a result of the
Warrant Agent's negligence, willful misconduct, or bad faith.
8.04.3 The Warrant Agent shall have no responsibility with respect to
the validity of this Agreement or with respect to the validity or execution of
any Warrant (except its countersignature thereof), nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant. The Warrant Agent shall not be responsible to make
any adjustments required under the provisions of Article IV or responsible for
the manner, method, or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment, nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Warrant or as to whether any shares of Common Stock
will when issued be validly issued and fully paid and nonassessable.
8.05. Acceptance of Agency. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform the same upon the terms and
conditions herein set forth and among other things, shall account promptly to
the Company with respect to Warrants exercised and concurrently account for, and
remit to the Company, all moneys received by the Warrant Agent for the purchase
of shares of the Company's Common Stock through the exercise of Warrants.
8.06. Purchase of Warrants by the Company. The Company shall have the
right, except as limited by law, other agreement or herein, to purchase or
otherwise acquire Warrants at such times, in such manner and for such
consideration as it may believe appropriate.
ARTICLE IX
Miscellaneous Provisions
9.01. Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Warrant Agent shall bind and inure to
the benefit of their respective successors and permitted assigns.
9.02. Notices. Any notice, statement or demand or other communication
authorized or permitted by this Agreement shall be in writing and signed and
shall be deemed given or made as and when sent by registered or certified mail,
postage prepaid addressed to the parties at their above addresses or such other
address as a party may hereafter specify in the manner for the giving of notice
herein.
9.03. Applicable Law: Amendment. The validity, interpretation, and
performance of this Agreement and of the Warrants shall be governed in all
respects by the laws of the State of New York, without regard to its conflicts
of laws principles. This Agreement and the Warrants may be amended only in
writing. The Warrant Agent may, without the consent or concurrence of any
Holder, by supplemental agreement or otherwise, join with the Company in making
any changes or corrections in this Agreement that they shall reasonably believe
(i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained; (ii) add to the covenants and agreements of the Company or the
Warrant Agent in this Agreement such further covenants and agreements thereafter
to be observed, or (iii) result in the surrender of any right or power reserved
to or conferred upon the Company or the Warrant Agent in this Agreement, but
which changes or corrections do not or will not adversely affect, alter or
change the rights, privileges or immunities of the Holders of Warrant
Certificates.
9.04. Persons having rights under this Agreement. Nothing in this
Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the parties hereto and the registered holders
of the Warrants any right, remedy, or claim under or by reasons of this
Agreement or of any covenant, condition, stipulation, promise, or agreement
hereof. All covenants, conditions, stipulations, promises, and agreements
contained in this Agreement shall be for the sole and exclusive benefit of the
parties hereto and their successors and assigns and of the registered holder of
the Warrants.
9.05. Examination of Warrant Agreement. A copy of this Agreement shall
be available at all reasonable times at the office of the Warrant Agent in the
Borough of Manhattan, City and State of New York, for inspection by the
registered holder of any Warrant. The Warrant Agent may require any such holder
to submit his Warrant for inspection by it.
9.06. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
9.07. Effect of Headings. The Article and Section headings herein are
for convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto under their respective corporate seals as of the day and year
first above written.
JVWEB, INC.
By: /s/Greg J.Micek
Greg J. Micek, President
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Herbert J. Lemmer
Herbert J. Lemmer, Vice
President
<PAGE>
34
Exhibit A
[FORM OF CLASS A WARRANT CERTIFICATE]
No.
CERTIFICATE FOR _____________ CLASS A WARRANTS
NOT EXERCISABLE BEFORE 9:30 A.M., NEW
YORK CITY TIME, ON _______________ _____, 1997 OR
AFTER 5:00 P.M., NEW YORK CITY TIME, ON
_______________ _____, 2000
JVWEB, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that __________________________________________________
or registered assigns is the registered holder (the "Registered Holder") of the
number of Class A Warrants set forth above, each of which represents the right
to purchase one fully paid and nonassessable share of Common Stock, par value
$.01 per share (the "Common Stock"), of JVWeb, Inc., a Delaware corporation (the
"Company"), at the initial exercise price (the "Warrant Price") of $1.00 at any
time after the shares of Common Stock issuable upon exercise of the Warrants
evidenced hereby have been registered under the Securities Act of 1933, as
amended, or such other action as may be required by Federal or state law
relating to the issuance or distribution of securities shall have been taken,
but not after the Expiration Date hereinafter referred to, by surrendering this
Warrant Certificate, with the form of election to purchase set forth hereon duly
executed with signatures guaranteed as provided below, at the office maintained
pursuant to the Warrant Agreement hereinafter referred to for that purpose by
American Stock Transfer & Trust Company, or its successor as warrant agent (any
such warrant agent being herein called the "Warrant Agent"), and by paying in
full the Warrant Price, plus transfer taxes, if any. Payment of the Warrant
Price shall be made in United States currency, by certified check or money order
payable to the order of the Company.
Upon certain events provided for in the Warrant Agreement, the Warrant
Price and the number of shares of Common Stock issuable upon the exercise of
each Warrant are required to be adjusted.
The Warrants, or any portion thereof, are subject to call for
redemption by the Company at a call price of $0.01 per Warrant, upon no more
than sixty (60) days and no less than thirty (30) days notice to the Registered
Holders, provided that the "Closing Price" (as defined in the Warrant Agreement)
per share of the Common Stock shall have been greater than or equal to $1.25 for
a period of 10 consecutive trading days ending on the third day prior to the
date that the notice of such call (the "Call Notice") is given by the Company to
the Warrant Agent and subject to certain other conditions.
No Warrant may be exercised after 5:00 P.M., New York City time, on
the expiration date (the "Expiration Date") which will be the earlier of (i)
_______________ _____, 2000 or (ii) the close of business on the Redemption
Date. After the Expiration Date, all Warrants evidenced hereby shall thereafter
become void.
Prior to the Expiration Date, subject to any applicable laws, rules,
or regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate in accordance with
the terms of the Warrant Agreement hereinafter referred to, the Registered
Holder shall be entitled to transfer this Warrant Certificate in whole or in
part upon surrender of this Warrant Certificate at the office of the Warrant
Agent maintained for that purpose with the form of assignment set forth hereon
duly executed, with signatures guaranteed by a member firm of a national
securities exchange, a commercial bank (not a savings bank or a savings and loan
association) or a trust company located in the United States, a member of the
National Association of Securities Dealers, Inc., or other eligible guarantor
institution which is a participant in a signature guarantee program (as such
terms are defined in Reg. 240.17Ad-15 under the Securities Exchange Act of 1934,
as amended) acceptable to the Warrant Agent. Upon any such transfer, a new
Warrant Certificate or Warrant Certificates representing the same aggregate
number of Warrants will be issued in accordance with instructions in the form of
assignment.
Upon the exercise of less than all of the Warrants evidenced by this
Warrant Certificate, there shall be issued to the Registered Holder a new
Warrant Certificate in respect of the Warrants not exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled
to exchange this Warrant Certificate, with or without other Warrant
Certificates, for another Warrant Certificate or Warrant Certificates for the
same aggregate number of Warrants, upon surrender of this Warrant Certificate at
the office maintained for such purpose by the Warrant Agent.
No fractional shares will be issued upon the exercise of Warrants. As
to any final fraction of a share which the registered holder of one or more
Warrant Certificates, the rights under which are exercised in the same
transaction, would otherwise be entitled to purchase upon such exercise, the
Company shall pay the cash value thereof determined as provided in the Warrant
Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement between the Company and the Warrant Agent (the "Warrant
Agreement") and is subject to the terms and provisions contained in said Warrant
Agreement, to all of which terms and provisions the Registered Holder consents
by acceptance hereof.
This Warrant Certificate shall not entitle the Registered Holder to
any of the rights of a stockholder of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, or
to attend or receive any notice of meetings of stockholders or any other
proceedings of the Company.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its facsimile corporate seal.
JVWEB, INC.
By: ________________________________
Greg J. Micek, President
[SEAL] Attest:
------------------------------------
Greg J. Micek, Secretary
Countersigned: AMERICAN STOCK TRANSFER
& TRUST COMPANY, as Warrant Agent
Dated: By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE>
Exhibit B
[FORM OF CLASS B WARRANT CERTIFICATE]
No.
CERTIFICATE FOR _____________ CLASS B WARRANTS
DATED: _______________________ ______, ___________
NOT EXERCISABLE AFTER 5:00 P.M.,
NEW YORK CITY TIME, ON
THE THIRD ANNUAL ANNIVERSARY OF
THE DATE OF THIS CERTIFICATE
JVWEB, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that __________________________________________________
or registered assigns is the registered holder (the "Registered Holder") of the
number of Class B Warrants set forth above, each of which represents the right
to purchase one fully paid and nonassessable share of Common Stock, par value
$.01 per share (the "Common Stock"), of JVWeb, Inc., a Delaware corporation (the
"Company"), at the initial exercise price (the "Warrant Price") of $2.00 at any
time after this Warrant Certificate has been issued, but not after the
Expiration Date hereinafter referred to, by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon duly
executed with signatures guaranteed as provided below, at the office maintained
pursuant to the Warrant Agreement hereinafter referred to for that purpose by
American Stock Transfer & Trust Company, or its successor as warrant agent (any
such warrant agent being herein called the "Warrant Agent"), and by paying in
full the Warrant Price, plus transfer taxes, if any. Payment of the Warrant
Price shall be made in United States currency, by certified check or money order
payable to the order of the Company.
Upon certain events provided for in the Warrant Agreement, the Warrant
Price and the number of shares of Common Stock issuable upon the exercise of
each Warrant are required to be adjusted.
The Warrants, or any portion thereof, are subject to call for
redemption by the Company at a call price of $0.01 per Warrant, upon no more
than sixty (60) days and no less than thirty (30) days notice to the Registered
Holders, provided that the "Closing Price" (as defined in the Warrant Agreement)
per share of the Common Stock shall have been greater than or equal to $2.35 for
a period of 10 consecutive trading days ending on the third day prior to the
date that the notice of such call (the "Call Notice") is given by the Company to
the Warrant Agent and subject to certain other conditions.
No Warrant may be exercised after 5:00 P.M., New York City time, on
the expiration date (the "Expiration Date") which will be the earlier of (i) the
third annual anniversary of the date of this certificate or (ii) the close of
business on the Redemption Date. After the Expiration Date, all Warrants
evidenced hereby shall thereafter become void.
Prior to the Expiration Date, subject to any applicable laws, rules,
or regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate in accordance with
the terms of the Warrant Agreement hereinafter referred to, the Registered
Holder shall be entitled to transfer this Warrant Certificate in whole or in
part upon surrender of this Warrant Certificate at the office of the Warrant
Agent maintained for that purpose with the form of assignment set forth hereon
duly executed, with signatures guaranteed by a member firm of a national
securities exchange, a commercial bank (not a savings bank or a savings and loan
association) or a trust company located in the United States, a member of the
National Association of Securities Dealers, Inc., or other eligible guarantor
institution which is a participant in a signature guarantee program (as such
terms are defined in Reg. 240.17Ad-15 under the Securities Exchange Act of 1934,
as amended) acceptable to the Warrant Agent. Upon any such transfer, a new
Warrant Certificate or Warrant Certificates representing the same aggregate
number of Warrants will be issued in accordance with instructions in the form of
assignment.
Upon the exercise of less than all of the Warrants evidenced by this
Warrant Certificate, there shall be issued to the Registered Holder a new
Warrant Certificate in respect of the Warrants not exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled
to exchange this Warrant Certificate, with or without other Warrant
Certificates, for another Warrant Certificate or Warrant Certificates for the
same aggregate number of Warrants, upon surrender of this Warrant Certificate at
the office maintained for such purpose by the Warrant Agent.
No fractional shares will be issued upon the exercise of Warrants. As
to any final fraction of a share which the registered holder of one or more
Warrant Certificates, the rights under which are exercised in the same
transaction, would otherwise be entitled to purchase upon such exercise, the
Company shall pay the cash value thereof determined as provided in the Warrant
Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement between the Company and the Warrant Agent (the "Warrant
Agreement") and is subject to the terms and provisions contained in said Warrant
Agreement, to all of which terms and provisions the Registered Holder consents
by acceptance hereof.
This Warrant Certificate shall not entitle the Registered Holder to
any of the rights of a stockholder of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, or
to attend or receive any notice of meetings of stockholders or any other
proceedings of the Company.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its facsimile corporate seal.
JVWEB, INC.
By: ________________________________
Greg J. Micek, President
[SEAL] Attest:
---------------------------
Greg J. Micek, Secretary
Countersigned: AMERICAN STOCK TRANSFER
& TRUST COMPANY, as Warrant Agent
Dated: By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE>
Exhibit C
[FORM OF CLASS C WARRANT CERTIFICATE]
No.
CERTIFICATE FOR _____________ CLASS C WARRANTS
DATED: _______________________ ______, ___________
NOT EXERCISABLE AFTER 5:00 P.M.,
NEW YORK CITY TIME, ON
THE THIRD ANNUAL ANNIVERSARY OF
THE DATE OF THIS CERTIFICATE
JVWEB, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that __________________________________________________
or registered assigns is the registered holder (the "Registered Holder") of the
number of Class C Warrants set forth above, each of which represents the right
to purchase one fully paid and nonassessable share of Common Stock, par value
$.01 per share (the "Common Stock"), of JVWeb, Inc., a Delaware corporation (the
"Company"), at the initial exercise price (the "Warrant Price") of $5.00 at any
time after this Warrant Certificate has been issued, but not after the
Expiration Date hereinafter referred to, by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon duly
executed with signatures guaranteed as provided below, at the office maintained
pursuant to the Warrant Agreement hereinafter referred to for that purpose by
American Stock Transfer & Trust Company, or its successor as warrant agent (any
such warrant agent being herein called the "Warrant Agent"), and by paying in
full the Warrant Price, plus transfer taxes, if any. Payment of the Warrant
Price shall be made in United States currency, by certified check or money order
payable to the order of the Company.
Upon certain events provided for in the Warrant Agreement, the Warrant
Price and the number of shares of Common Stock issuable upon the exercise of
each Warrant are required to be adjusted.
The Warrants, or any portion thereof, are subject to call for
redemption by the Company at a call price of $0.01 per Warrant, upon no more
than sixty (60) days and no less than thirty (30) days notice to the Registered
Holders, provided that the "Closing Price" (as defined in the Warrant Agreement)
per share of the Common Stock shall have been greater than or equal to $5.50 for
a period of 10 consecutive trading days ending on the third day prior to the
date that the notice of such call (the "Call Notice") is given by the Company to
the Warrant Agent and subject to certain other conditions.
No Warrant may be exercised after 5:00 P.M., New York City time, on
the expiration date (the "Expiration Date") which will be the earlier of (i) the
third annual anniversary of the date of this certificate or (ii) the close of
business on the Redemption Date. After the Expiration Date, all Warrants
evidenced hereby shall thereafter become void.
Prior to the Expiration Date, subject to any applicable laws, rules,
or regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate in accordance with
the terms of the Warrant Agreement hereinafter referred to, the Registered
Holder shall be entitled to transfer this Warrant Certificate in whole or in
part upon surrender of this Warrant Certificate at the office of the Warrant
Agent maintained for that purpose with the form of assignment set forth hereon
duly executed, with signatures guaranteed by a member firm of a national
securities exchange, a commercial bank (not a savings bank or a savings and loan
association) or a trust company located in the United States, a member of the
National Association of Securities Dealers, Inc., or other eligible guarantor
institution which is a participant in a signature guarantee program (as such
terms are defined in Reg. 240.17Ad-15 under the Securities Exchange Act of 1934,
as amended) acceptable to the Warrant Agent. Upon any such transfer, a new
Warrant Certificate or Warrant Certificates representing the same aggregate
number of Warrants will be issued in accordance with instructions in the form of
assignment.
Upon the exercise of less than all of the Warrants evidenced by this
Warrant Certificate, there shall be issued to the Registered Holder a new
Warrant Certificate in respect of the Warrants not exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled
to exchange this Warrant Certificate, with or without other Warrant
Certificates, for another Warrant Certificate or Warrant Certificates for the
same aggregate number of Warrants, upon surrender of this Warrant Certificate at
the office maintained for such purpose by the Warrant Agent.
No fractional shares will be issued upon the exercise of Warrants. As
to any final fraction of a share which the registered holder of one or more
Warrant Certificates, the rights under which are exercised in the same
transaction, would otherwise be entitled to purchase upon such exercise, the
Company shall pay the cash value thereof determined as provided in the Warrant
Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement between the Company and the Warrant Agent (the "Warrant
Agreement") and is subject to the terms and provisions contained in said Warrant
Agreement, to all of which terms and provisions the Registered Holder consents
by acceptance hereof.
This Warrant Certificate shall not entitle the Registered Holder to
any of the rights of a stockholder of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, or
to attend or receive any notice of meetings of stockholders or any other
proceedings of the Company.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its facsimile corporate seal.
JVWEB, INC.
By: _______________________
Greg J. Micek, President
[SEAL] Attest:
---------------------------
Greg J. Micek, Secretary
Countersigned: AMERICAN STOCK TRANSFER
& TRUST COMPANY, as Warrant Agent
Dated: By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE>
Exhibit D
[FORM OF]
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise __________________
of the Warrants represented by this Warrant Certificate and to purchase the
shares of Common Stock issuable upon the exercise of said Warrants, and requests
that certificates for such shares be issued and delivered as follows:
ISSUE TO: ____________________________________________________________________
(NAME)
- ------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- ------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER TAX IDENTIFICATION NUMBER)
DELIVER TO: ________________________________________________________________
(NAME)
at ____________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrants hereby exercised is less than all the Warrants
represented by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full Warrants not exercised be
issued and delivered as set forth below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$__________________ by certified check or money order payable in United States
currency to the order of the Company.
Dated _________________________ ______, _____________
Name of Warrant Holder: ________________________________________________________
Address: ______________________________________________________________________
Signature: _____________________________________________________________________
<PAGE>
[FORM OF]
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants set forth below:
Name of Assignee: ______________________________________________________________
Address: ______________________________________________________________________
No. of Warrants: _______________________________________________________________
and does hereby irrevocably constitute and appoint
____________________________________ Attorney to make such transfer on the books
of JVWeb, Inc. maintained for that purpose, with full power of substitution in
the premises.
Dated: __________________________ _____, ____________.
Signature: ____________________________________________________________________
SIGNATURE(S) GUARANTEED
By: ___________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (Banks, Stock Brokers, Savings and Loan Associations, and
Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.
Signature:__________________________
NOTICE: The signature(s) on
this assignment must
correspond with the name(s)
as written upon the face of
the Certificate, in every
particular, without
alteration or enlargement
or any change whatever.
EXHIBIT 10.01 - Agreement dated November 15, 1997 between the Company and LS
Capital Corporation.
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this
the 15th day of November, 1997 by and between (a) JVWeb, Inc. a Delaware
corporation (the "Company"), and (b) LS Capital Corporation, a Delaware
corporation ("LS Capital").
Recitals:
WHEREAS, the Company desires to issue and sell to LS Capital units
("Units") comprised of shares of common stock in the Company ("Common Stock")
and warrants to purchase shares of Common Stock, and LS Capital desires to
receive and purchase Units, in each cases upon the terms, provisions and
conditions set forth herein;
WHEREAS, in connection with the issuance and sale of the Units, the
Company and LS Capital intend that the Company will register with the United
States Securities and Exchange Commission (the "Commission") an in-kind dividend
(the "Dividend") to the stockholders of LS Capital consisting a portion of the
Units being issued and sold to LS Capital pursuant hereto; and
WHEREAS, the Company and LS Capital desire to set forth in writing the
terms, provisions and conditions pertaining to the sale and issuance of Units to
LS Capital and pertaining to the Dividend;
Agreement:
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, $10.00 and other good and valuable consideration (the receipt, adequacy
and sufficiency of which are hereby acknowledged by each of the parties hereto),
each of the Company and LS Capital hereby agrees as follows:
1. General Representations and Warranties.
(a) LS Capital hereby represents and warrants to the Company that LS
Capital has been duly organized, is validly existing and is in good standing in
the jurisdiction in which it was incorporated; LS Capital has full right, power
and authority to execute and deliver this Agreement and all other agreements,
documents and instruments to be executed in connection herewith and perform LS
Capital's obligation hereunder and thereunder; the execution and delivery by LS
Capital of this Agreement and all other agreements, documents and instruments to
be executed by LS Capital in connection herewith have been authorized by all
necessary corporate action by LS Capital; when this Agreement and all other
agreements, documents and instruments to be executed by LS Capital in connection
herewith are executed by LS Capital and delivered to the Company, this Agreement
and such other agreements, documents and instruments will constitute the valid
and binding agreements of LS Capital enforceable against LS Capital in
accordance with their respective terms; neither the execution and delivery of
this Agreement or any other agreements, documents and instruments to be executed
in connection herewith nor the consummation of the transactions contemplated
hereby or thereby will (i) violate, conflict with or result in the breach or
termination of, or otherwise give any other contracting party the right to
terminate, or constitute a default (by way of substitution, novation or
otherwise) under the terms of, any contract to which LS Capital is a party or by
which LS Capital is bound or by which any of the assets of LS Capital is bound
or affected, (ii) violate any judgment against, or binding upon, LS Capital or
upon the assets of LS Capital, (iii) result in the creation of any lien, charge
or encumbrance upon any assets of LS Capital pursuant to the terms of any such
contract, or (iv) violate any provision in the charter documents, bylaws or any
other agreement affecting the governance and control of LS Capital; there are no
actions, suits, claims or legal, administrative or arbitration proceedings or
investigations pending or threatened against, involving or affecting any of the
assets of LS Capital, this Agreement, or the transactions contemplated hereby
(other than as described in LS Capital's filings with the Commission), and there
are no outstanding orders, writs, injunctions or decrees of any court,
governmental agency or arbitration tribunal against, involving or affecting any
assets of LS Capital, this Agreement, or the transactions contemplated hereby;
no consent or approval from any person on the part of LS Capital is required in
connection with the execution and delivery of this Agreement other than board of
director approval of LS Capital, which has already been obtained; and the
representations and warranties made immediately above and elsewhere herein are
material to the Company and are being relied upon by the Company in connection
with its decision to issue and sell Units to LS Capital pursuant to Section 2 of
this Agreement.
(b) The Company hereby represents and warrants to LS Capital that (in
all cases, upon the Company's organization) the Company has full right, power
and authority to execute and deliver this Agreement and all other agreements,
documents and instruments to be executed by the Company in connection herewith
(including, without limitation, the Warrant Agreement, as defined herein) and
perform the Company's obligation hereunder and thereunder; the Company will be
duly organized, validly existing and in good standing in the jurisdiction in
which the Company will be incorporated; the authorized capital stock of the
Company consists of 50 million shares of Common Stock, 6.2 million of which were
issued and outstanding as of the date hereof, and 10 million shares of preferred
stock, none of which were issued and outstanding as of the date hereof; Greg
Micek owns all 6.2 million shares of the outstanding Common Stock; the execution
and delivery by the Company of this Agreement and all other agreements,
documents and instruments to be executed by the Company in connection herewith
(including, without limitation, the Warrant Agreement) will be authorized by all
necessary corporate action; when this Agreement and all other agreements,
documents and instruments to be executed by the Company in connection herewith
(including, without limitation, the Warrant Agreement) are executed by the
Company and delivered to LS Capital, this Agreement and such other agreements,
documents and instruments will constitute the valid and binding agreements of
the Company enforceable against the Company in accordance with their respective
terms; neither the execution and delivery of this Agreement or any other
agreements, documents and instruments to be executed in connection herewith
(including, without limitation, the Warrant Agreement) nor the consummation of
the transactions contemplated hereby or thereby will (i) violate, conflict with
or result in the breach or termination of, or otherwise give any other
contracting party the right to terminate, or constitute a default (by way of
substitution, novation or otherwise) under the terms of, any contract to which
the Company is a party or by which the Company is bound or by which any of the
assets of the Company is bound or affected, (ii) violate any judgment against,
or binding upon, the Company or upon the Company's assets, (iii) result in the
creation of any lien, charge or encumbrance upon any of the Company's assets
pursuant to the terms of any such contract, or (iv) violate any provision in the
charter documents, bylaws or any other agreement affecting the governance and
control of it; there are no actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending or threatened against,
involving or affecting any of the Company's assets, this Agreement, or the
transactions contemplated hereby, and there are no outstanding orders, writs,
injunctions or decrees of any court, governmental agency or arbitration tribunal
against, involving or affecting any of the Company's assets, this Agreement, or
the transactions contemplated hereby; no consent or approval from any person is
required on the party of the Company in connection with the execution and
delivery of this Agreement other than board of director approval, which will be
obtained upon organization; the shares of Common Stock to be issued to LS
Capital pursuant to this Agreement shall be duly authorized, validly issued,
fully paid and non-assessable at the time that they are issued; and the
representations and warranties made immediately above and elsewhere herein are
material to LS Capital and are being relied upon by LS Capital in connection
with LS Capital's decision to purchase Units pursuant to Section 2 of this
Agreement.
2. Sale and Purchase of Units.
(a) Each Unit shall consist of one share of Common Stock and two
separately assignable (i.e. "detachable") "First Tier Warrants." In addition to
the other rights pertaining thereto, the exercise of each First Tier Warrant
shall entitled the holder thereof to receive, without the payment of any
additional amount, two "Second Tier Warrants." In addition to the other rights
pertaining thereto, the exercise of each Second Tier Warrant shall entitled the
holder thereof to receive, without the payment of any additional amount, one
"Third Tier Warrant." First Tier Warrants, Second Tier Warrants and Third Tier
Warrants are referred to hereinafter collectively as the "Warrants." Each
Warrant shall entitle the holder thereof to purchase one share of Common Stock
at any time within three years after the date it is issued at a purchase price
of $1.00 (in the case of the First Tier Warrants), $2.00 (in the case of the
Second Tier Warrants) and $5.00 (in the case of the Third Tier Warrants). Each
Warrant shall be redeemable at any time after the Common Stock has had, for 10
consecutive trading days, a per-share closing price above $1.25 (in the case of
the First Tier Warrants), $2.35 (in the case of the Second Tier Warrants) and
$5.50 (in the case of the Third Tier Warrants). The redemption price shall be
$.01 per Warrant. The Company and LS Capital expect that the Warrants will
eventually be in a registered, book-entry form.
(b) On the execution of this Agreement, LS Capital paid to the Company
the aggregate amount of $5,000.00, the receipt of which the Company hereby
acknowledges. In consideration of the payment of the foregoing amount, the
Company delivered to LS Capital a stock certificate representing 500,000 shares
of Common Stock and a warrant agreement (the Warrant Agreement"), a copy of
which is attached hereto, creating 1,000,000 First Tier Warrants. LS Capital
hereby acknowledges preparation and execution of such stock certificate and the
Warrant Agreement and its agreement that the Company shall hold such stock
certificate and the Warrant Agreement pending completion of the Dividend. LS
Capital hereby agrees that, promptly after the Company enters into an agreement
with a transfer agent with regard to the creation of the Warrants in a
registered, book-entry form, the Warrant Agreement shall be cancelled, and thus
the underlying First Tier Warrants created thereby, and in connection therewith
LS Capital shall be issued 1,000,000 First Tier Warrants in a registered,
book-entry form.
3. Securities Representations and Warranties. LS Capital hereby
represents and warrants to the Company that it is familiar with the business and
financial condition, properties, operations and prospects of the Company, it has
been given full access to all material information concerning the condition,
properties, operations and prospects of the Company, it has had an opportunity
to ask such questions of, and to receive such information from, the Company as
it has desired and to obtain any additional information necessary to verify the
accuracy of the information and data received, and it is satisfied that there is
no material information concerning the condition, properties, operations and
prospects of the Company, of which it is unaware; LS Capital has such knowledge,
skill and experience in business, financial and investment matters so that it is
capable of evaluating the merits and risks of an acquisition of its shares of
Common Stock; LS Capital has reviewed its financial condition and commitments
and that, based on such review, it is satisfied that it (a) has adequate means
of providing for contingencies, (b) has no present or contemplated future need
to dispose of all or any of its shares of Common Stock to satisfy existing or
contemplated undertakings, needs or indebtedness, (c) is capable of bearing the
economic risk of the ownership of the shares of Common Stock to be issued to it
for the indefinite future, and (d) has assets or sources of income which, taken
together, are more than sufficient so that it could bear the loss of the entire
value of the shares of Common Stock being issued to it; LS Capital is acquiring
its shares of Common Stock solely for its own beneficial account, for investment
purposes, and not with a view to, or for resale in connection with, any
distribution of its shares of Common Stock; LS Capital understands that its
shares of Common Stock have not been registered under the Securities Act of 1933
(the "Act") or any state securities laws and therefore its shares of Common
Stock are "restricted" under such laws until such time as they are registered;
and LS Capital has not offered or sold any portion of its shares of Common Stock
and has no present intention of reselling or otherwise disposing of any portion
of its shares of Common Stock either currently or after the passage of a fixed
or determinable period of time or upon the occurrence or non-occurrence of any
predetermined event or circumstance (other than the registration thereof).
4. Securities Registration. Within six months after the date of this
Agreement, the Company shall file a registration statement to register the
Dividend with the Commission. The Dividend shall consist of 250,000 of the
shares of Common Stock issued and sold to LS Capital pursuant hereto and all
1,000,000 of the First Tier Warrants issued and sold to LS Capital pursuant
hereto. In the event of such registration, the Company shall use its best
efforts to qualify such shares of Common Stock and First Tier Warrants under the
securities laws for each state for which an exemption is not available and
qualification is required, unless the cost and expense of such qualification
outweighs the benefit of qualification. In connection with any registration
undertaken pursuant to this Section 4, LS Capital shall use reasonable efforts
to cooperate with the Company and will furnish to the Company and in writing
such information, as shall be reasonably necessary in order to assure compliance
with federal and applicable state securities laws pertaining to disclosure and
otherwise, with respect to the Dividend. The Company shall pay all registration
expenses in connection with any registration undertaken pursuant to this Section
4.
5. Spin-Off. As soon as possible after the registration statement filed
in connection with any registration undertaken pursuant to Section 5 above is
declared effective, LS Capital shall declare and effect the Dividend to its
stockholders. In this connection, LS Capital shall deliver to each of its
stockholders receiving the registered shares of Common Stock an stock
certificate representing the shares of Common Stock that such stockholder is to
receive (unlegended except to the extent necessary to implement the agreements
described in Section 6 below) and a notification that such stockholder now owns
the number of First Tier Warrants that such stockholder is to receive, as well
as a copy of the prospectus comprising part of the registration statement
declared effective during the course of any registration undertaken pursuant to
Section 4.
6. Lock-Up Agreement. In connection with the execution of this
Agreement, Paul J. Montle, Kent E. Lovelace, Jr. and Roger W. Cope (each a
significant stockholder of LS Capital) entered into a certain agreement, a copy
of which is attached hereto as an exhibit, in which they agreed would not sell
any Common Stock received by them in connection with the Dividend until four
weeks after public trading commenced in the Common Stock and then they (as a
group) would not sell in any three-month period a number of shares exceeding the
average weekly reported volume of trading in the Common Stock for the four weeks
most recently completed at the time at which any sale is being contemplated.
7. Exclusivity Agreement. In connection with the execution of this
Agreement, Greg Micek entered into a certain agreement, a copy of which is
attached hereto as an exhibit, in which he agreed that he would not engage in
the electronic commerce business except by and through the Company for two years
after the date of this Agreement.
8. Termination. If the registration statement under which shares of
Common Stock are registered pursuant to Section 4 is not declared effective
within six months after the date of this Agreement through no breach of this
Agreement by the Company, or if the Company elects to terminate this Agreement
(which may be done so by giving written notice to LS Capital), this Agreement
shall, except as hereafter provided, become null and void, the parties hereto
shall be relieved of any further duties, obligations and responsibilities with
respect to this Agreement, and the parties shall cooperate in good faith in
unwinding all actions taken in reliance on this Agreement. Notwithstanding the
preceding, the following actions shall occur upon the termination of this
Agreement pursuant to the preceding:
(a) All stock certificates representing the 500,000 shares of Common
Stock issued and sold to LS Capital pursuant to this Agreement, as well as the
Warrant Agreement, shall be cancelled;
(b) The Company shall repay to LS Capital the $5,000.00 paid for its
Units; and
(c) The agreement described in Section 7 and the indemnification
provisions of Section 9 shall remain in full force and effect for two years
after the date of termination.
Notwithstanding anything else contained herein, upon the termination of
this Agreement by the election of the Company, LS Capital shall the option to
purchase 100,000 shares of Common Stock by allowing the Company to retain the
initial $5,000 payment made pursuant to Section 2 above and by remitting an
additional $5,000 payment, whereupon the Company shall deliver to LS Capital a
stock certificate issued in the name of LS Capital representing 100,000 shares
of Common Stock.
9. General Indemnification.
(a) All representations and warranties made herein by a party hereto shall
survive all transactions provided for or contemplated herein, including, without
limitation, the issuance and sale of Units to LS Capital, the Dividend and the
termination of this Agreement.
(b) The Company shall protect, indemnify and hold LS Capital, and its
officers, directors, shareholders, attorneys, accountants, employees,
affiliates, successors and assigns, harmless from any and all demands, claims,
actions, causes of actions, lawsuits, proceedings, judgments, losses, damages,
injuries, liabilities, obligations, expenses and costs (including costs of
litigation and attorneys' fees), arising from any breach of any agreement,
representation or warranty made by the Company in this Agreement.
(c) LS Capital shall protect, indemnify and hold the Company, and its
officers, directors, shareholders, attorneys, accountants, employees,
affiliates, successors and assigns, harmless from any and all demands, claims,
actions, causes of actions, lawsuits, proceedings, judgments, losses, damages,
injuries, liabilities, obligations, expenses and costs (including costs of
litigation and attorneys' fees), arising from any breach of any agreement,
representation or warranty made by LS Capital in this Agreement.
10. Securities Indemnification.
(a) The Company shall protect, indemnify and hold LS Capital, and its
officers, directors, shareholders, attorneys, accountants, employees,
affiliates, successors and assigns, harmless from any and all demands, claims,
actions, causes of actions, lawsuits, proceedings, investigations, judgments,
losses, damages, injuries, liabilities, obligations, expenses and costs
(including costs of litigation and attorneys' fees), arising out of or based
upon (a) any untrue statement or alleged untrue statement of any material fact
contained in or incorporated by reference into the registration statement under
which the shares of Common Stock are registered pursuant to Section 4, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, (b) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (c) any material violation by the Company of any rule
or regulation promulgated under Act applicable to the Company and relating to
action or inaction by the Company in connection with any such registration;
provided, however, that the Company will not be liable in the case of (a) and
(b) above if and to the extent that the event otherwise giving rise to
indemnification arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in conformity with
information furnished by a person otherwise entitled to indemnification in
writing specifically for use in the registration statement or prospectus or
information contained in a writing that has been expressly approved or deemed
approved by a person otherwise entitled to indemnification.
(b) LS Capital shall protect, indemnify and hold the Company and its
officers, directors, shareholders, attorneys, accountants, employees,
affiliates, successors and assigns, harmless from any and all demands, claims,
actions, causes of actions, lawsuits, proceedings, investigations, judgments,
losses, damages, injuries, liabilities, obligations, expenses and costs
(including costs of litigation and attorneys' fees), arising out of or based
upon (a) any untrue statement or alleged untrue statement of any material fact
contained in or incorporated by reference into the registration statement under
which shares of Common Stock are registered pursuant to Section 4, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, (b) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (c) any material violation by LS Capital of any rule
or regulation promulgated under the Act applicable to LS Capital and relating to
action or inaction by LS Capital in connection with any such registration;
provided, however, that LS Capital shall be liable in the case of (a) and (b)
above only if and to the extent that the event giving rise to indemnification
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in conformity with information furnished by
LS Capital in writing specifically for use in the registration statement or
prospectus or information contained in a writing that has been expressly
approved or deemed approved by LS Capital.
(c) Promptly after receipt by an indemnified party under this Section 10
of notice of the threat or commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
hereunder, notify each such indemnifying party in writing thereof, but the
omission so to notify an indemnifying party shall not relieve it from any
liability which it may have to any indemnified party to the extent that the
indemnifying party is not prejudice as a result thereof. In case any such action
shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so elected; provided,
however, that, if the defendants in any such action include both an indemnified
party and an indemnifying party and the related indemnified party shall have
reasonably concluded that there may be reasonable defenses available to it which
are different from or additional to those available to the indemnifying party or
if the interests of the indemnified party reasonably may be believed to conflict
with the interests of the indemnifying party, the indemnified party shall have
the right to select separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred. No indemnifying party
will be subject to any liability for any settlement made without consent which
shall not be unreasonably withheld. No indemnifying party will consent to the
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim or
litigation.
11. General.
(a) THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS VALIDITY,
INTERPRETATION, PERFORMANCE, AND ENFORCEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(b) Any controversy arising out of or relating to this Agreement or any
modification or extension thereof, including any claims for breach, for damages,
and/or for recision or reformation, shall be settled by binding arbitration in
Harris County, Texas according to the rules and regulations of the American
Arbitration Association, Commercial Arbitration Rules.
(c) This Agreement contains the entire understanding among the parties
hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements, or conditions,
express or implied, oral or written, except as herein contained. This Agreement
may not be modified or amended other than by an agreement in writing signed by
all parties affected.
(d) The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
The section headings in this Agreement are for convenience only; they form no
part of this Agreement and shall not affect its interpretation.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together constitute one and
the same instrument.
(f) The parties hereto hereby agree that time is of the essence for all
purposes of this Agreement.
(g) Any notices to be given hereunder by any party to the other parties
may be effected either by personal delivery in writing, or by mail, registered
or certified, postage prepaid with return receipt requested, addressed to the
one or more parties to be notified at the addresses set forth beneath such
parties' respective signatures below.
(h) All obligations of the Company and all agreements made herein for
the benefit of the Company shall become effective immediately upon the formation
and organization of the Company. The person signing this Agreement on behalf of
the Company shall use reasonable efforts to cause the Company to be formed. Upon
the formation of the Company, such person shall have no further obligations or
liability pertaining to the Company or this Agreement except as is expressly
agreed to by such person in writing.
IN WITNESS WHEREOF, the parties hereto have signed their names hereto
as of the first date written above.
JVWEB, INC. LS CAPITAL CORPORATION
a Delaware corporation a Delaware corporation
By: /s/ Greg J. Micek By /s/Paul J. Montle
Greg Micek, Paul J. Montle,
President Chief Executive Officer
Address: 5444 Westheimer, Suite 2080 Address: 15915 Katy Freeway
Houston, Texas 77056 Suite 250
Houston, Texas 77056
<PAGE>
Exhibit
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this
the 15th day of November, 1997 by and between (a) JVWeb, Inc., a Delaware
corporation (the "Company"), and (b) Paul J. Montle ("Montle"), Kent E.
Lovelace, Jr. ("Lovelace") and Roger W. Cope ("Cope"), each a stockholder of
LS Capital Corporation, a Delaware corporation ("LS Capital"). Montle,
Lovelace and Cope are referred to hereinafter separately as a "Shareholder"
and collectively as the "Shareholders."
Recitals:
WHEREAS, the Company has entered into an agreement with LS Capital,
whereby the Company will to issue and sell to LS Capital units ("Units")
comprised of shares of common stock in the Company ("Common Stock") and warrants
to purchase shares of Common Stock, and whereby the Company will register with
the United States Securities and Exchange Commission an in-kind dividend (the
"Dividend") to the stockholders of LS Capital consisting a portion of the Units
being issued and sold to LS Capital pursuant hereto; and
WHEREAS, as a condition to the Company's entering into the agreement
described in the preceding recital, the Company required the Shareholders to
enter into this Agreement;
Agreement:
NOW, THEREFORE, in consideration of the Company's agreement to enter
into the agreement described in the first recital set forth above, $10.00 and
other good and valuable consideration (the receipt, adequacy and sufficiency of
which are hereby acknowledged by each Shareholder), each Shareholder hereby
agrees that such Shareholder shall not, without the prior express written
consent of the Company, (a) sell any shares of Common Stock received in
connection with the Dividend until twelve weeks after public trading has
commenced in the Common Stock, or (b) thereafter sell in any three-month period
more than 10,000 shares of Common Stock received in connection with the
Dividend. Each Shareholder hereby agrees that all stock certificates
representing shares of Common Stock received by him in connection with the
Dividend shall bear a restrictive legend in order to implement the restrictions
imposed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have signed their names hereto
as of the first date written above.
JVWEB, INC.,
a Delaware corporation
By: /s/ Greg Micek /s/ Paul J. Montle
Greg Micek, President Paul J. Montle
/s/ Kent E. Lovelace, Jr. /s/ Roger W. Cope
Kent E. Lovelace, Jr. Roger W. Cope
<PAGE>
EXHIBIT
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this
the 15th day of November, 1997 by and between (a) Greg Micek ("Micek"), and (b)
LS Capital Corporation, a Delaware corporation ("LS Capital").
Recitals:
WHEREAS, LS Capital has entered into an agreement with JVWeb, Inc., a
Delaware corporation (the "Company"), whereby the Company will to issue and sell
to LS Capital units ("Units") comprised of shares of common stock in the Company
("Common Stock") and warrants to purchase shares of Common Stock, and whereby
the Company will register with the United States Securities and Exchange
Commission an in-kind dividend to the stockholders of LS Capital consisting a
portion of the Units being issued and sold to LS Capital pursuant hereto; and
WHEREAS, as a condition to the LS Capital's entering into the agreement
described in the preceding recital, LS Capital required Micek to enter into this
Agreement;
Agreement:
NOW, THEREFORE, in consideration of LS Capital's agreement to enter
into the agreement described in the first recital set forth above, $10.00 and
other good and valuable consideration (the receipt, adequacy and sufficiency of
which are hereby acknowledged by Micek), Micek hereby agrees that he shall not
engage in the electronic commerce business anywhere in the world, except by and
through the Company, for two years after the date of this Agreement. Micek
hereby specifically acknowledges and agrees that the temporal and other
restrictions contained in this Agreement are reasonable and necessary to protect
the rights of LS Capital under the agreement described in the first recital set
forth above and its investment in the Company, and that the enforcement of the
provisions of this Agreement will not work an undue hardship on him. Micek
further agrees that in the event either the length of time or any other
restriction, or portion thereof, set forth in this Agreement is held to be
overly restrictive and unenforceable in any court proceeding, the court may
reduce or modify such restrictions to those which it deems reasonable and
enforceable under the circumstances and the parties agree that the restrictions
of this Agreement will remain in full force and effect as reduced or modified.
Micek further agrees and acknowledges that LS Capital does not have an adequate
remedy at law for the breach or threatened breach by him of the covenants
contained in this Agreement, and Micek therefore specifically agrees that LS
Capital, in addition to other remedies which may be available to it hereunder,
may file a suit in equity to enjoin Micek from such breach or threatened breach.
Micek further agrees, in the event that any provision of this Agreement is held
to be invalid or against public policy, the remaining provisions of this
Agreement and the remainder of this Agreement shall not be affected thereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed their names hereto
as of the first date written above.
LS CAPITAL CORPORATION
a Delaware corporation
By:/s/ Paul J. Montle /s/ Greg Micek
Paul J. Montle Greg Micek
President
EXHIBIT 10.02 - Employment Agreement dated December 1, 1997 by and between the
Company and Greg J. Micek.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective as of the _____ day of _________________________, 1997 by and between
Greg J. Micek (referred to hereinafter as "Employee"), and JVWeb, Inc., a
Delaware corporation (referred to hereinafter as "Employer").
RECITALS:
WHEREAS, Employer desires to employ Employee, and Employee desires to be
employed by Employer; and
WHEREAS, Employer and Employee desire to set forth the terms and conditions
of Employee's employment with Employer;
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth and for other good and valuable consideration,
the receipt, adequacy and sufficiency of which are hereby acknowledged by each
of Employer and Employee, each of Employer and Employee hereby agrees as
follows:
l. Employment. Employer hereby employs Employee, and Employee hereby
accepts such employment, subject in both cases to the terms, provisions and
conditions hereinafter stated.
2. Title of Employee. Employee shall have the title of President of
the Company.
3. Duties of Employee. Employee shall have the customary
responsibilities of a President of a company. In addition to the preceding,
Employee shall perform all duties as from time to time may be assigned to
Employee by the Board of Directors of Employer.
4. Time Devoted and Exclusivity. Employee shall devote a sufficient
amount of Employee's business time and attention to performing Employee's duties
hereunder. Employee shall be permitted to engage in other business activities
but only to the extent that the activity does not compete with the business of
Employer and does not interfere with Employee's duties hereunder.
5. Standard of Performance. In providing Employee's duties hereunder,
Employee shall use reasonable, and Employee's best, efforts, and shall perform
such duties in a competent, professional and good workman-like manner of the
highest caliber.
6. Place of Performance. Employee shall be based in Houston, Texas or
surrounding area, but shall undertake such travel at the direction of the Board
of Directors of Employer as he believes necessary or advisable for Employee to
perform Employee's duties hereunder.
<PAGE>
7. Compensation and Benefits.
(a) Base Salary. As compensation for services rendered hereunder,
Employee shall be paid an annual salary of $60,000. Such salary shall be paid in
accordance with Employer's payroll policies in effect from time to time.
(b) Employee shall be entitled to participate in all plans that
Employer establishes for the benefit of its employees; provided, however,
Employee shall be entitled to participate in such plans only at the time
Employee meets the eligibility criteria established for the plan and shall
receive benefits thereunder based on the terms of the plan. Employee's
eligibility and benefit level shall be determined separately for each plan and
all determinations shall be made by the parties charged with responsibility for
such determinations in the plan. Employer is under no obligation to establish
any plan or plans to provide benefits for its employees, and this Section 7(b)
shall not be interpreted to require the establishment of any benefit plan. The
terms of any benefit plans existing, established, or provided hereafter do not
constitute a part of this Agreement and are not incorporated herein for any
purpose.
8. Expense Reimbursement. Employer shall reimburse Employee, from time
to time, for all business expenses with respect to which Employer has given
prior written authorization for Employee to incur. To the extent that Employer
has given general prior written authorization for Employee to incur expenses but
has not given the specifics pertaining thereto, then in order for Employee to be
reimbursed for such expenses, such expenses shall be actual, reasonable and
necessary business expenses incurred by Employee on behalf of Employer, and
Employee must present to Employer documentary evidence, such as a receipt or a
paid bill, that states sufficient information to establish the amount, date,
place, and the essential character of the expenditure for each such expenditure.
No expenditure will be reimbursed pursuant hereto unless the expense is verified
as provided above and approved by the Board of Directors of Employer or such
person designated by the Board of Directors of Employer.
9. Term. Subject to Section 10 below, the term of this Agreement shall
begin on the date hereof and shall continue for three years thereafter.
10. Termination.
(a) For Cause. Employer may, at its election, terminate
Employee's employment at any time for just cause, which shall include, without
any limitations thereon, the following: (i) Employee shall have failed or
refused to faithfully, diligently and competently perform the duties assigned to
Employee under this Agreement or otherwise to have breached any term or
provision contained herein; (ii) Employee shall be disabled or otherwise unable
for whatever reason to fully perform Employee's duties hereunder for 60
consecutive days or for more than 120 days in any twelve-month period; (iii)
Employee shall be guilty of fraud, dishonesty, or similar acts of misconduct; or
(iv) Employee shall be finally convicted of a felony or a misdemeanor involving
moral turpitude. At any time after the occurrence of an event permitting
Employer to terminate Employee's employment pursuant to this Section 10(a),
Employer may elect for termination of Employee's employment by notifying
Employee as to Employer's election to terminate, and thereupon Employee's
employment with Employer will terminate on the date specified in the notice or
(if no date is specified) upon the delivery of the notice. Notwithstanding the
preceding, upon any an event permitting Employer to terminate Employee's
employment pursuant to this Section 10(a) and in lieu of terminating Employee's
employment, Employer may, with or without notice to Employee, suspend the
performance of Employer's obligations under this Agreement (including, without
limitation, Employer's obligations under Section 7), and while such an event has
occurred and has not been cured, (x) Employer shall not be obligated to fulfill,
but shall be relieved of, Employer's obligations under this Agreement
(including, without limitation, Employer's obligations under Section 7), (y)
such obligations shall not accrue, and (z) Employee shall forfeit all rights and
remedies with respect thereto. Notwithstanding anything else contained herein,
if Employer suspends any of its obligations to Employee pursuant to the
preceding sentence, Employer may thereafter elect to terminate Employee's
employment in accordance with the other provisions of this Section 10(a).
(b) Automatic. The term of this Agreement shall automatically
terminate upon Employee's death.
(c) Effect. Upon termination of this Agreement, all rights and
obligations under this Agreement shall cease except for the rights and
obligations under Section 10, 11, 12 and 13 of this Agreement and the rights and
obligations under Section 7 of this Agreement to the extent Employee had not
been compensated for services performed prior to termination (Employee's salary
to be pro rated for the portion of the pay period prior to termination).
11. Noncompetition Agreement. For a period of one year after the
termination of this Agreement by Employer with cause or Employee without cause,
Employee shall not, directly or indirectly, acting alone or as a member of a
partnership, or as an officer, director, shareholder, employee, consultant, or
representative of any corporation or in any other capacity with any other
business entity, engage in the electronic commerce business anywhere in the
world. Employee hereby specifically acknowledges and agrees that the temporal
and other restrictions contained in this Section 11 are reasonable and necessary
to protect Employer, and that the enforcement of the provisions of this Section
11 will not work an undue hardship on him. Employee further agrees that in the
event either the length of time or any other restriction or portion thereof set
forth in this Section 11 is held to be overly restrictive and unenforceable in
any court proceeding, the court may reduce or modify such restrictions to those
which it deems reasonable and enforceable under the circumstances, and the
parties agree that the restrictions of this Section 11 will remain in full force
and effect as reduced or modified. Employee further agrees and acknowledges that
Employer does not have an adequate remedy at law for the breach or threatened
breach by him of the covenants contained in this Section 11, and Employee
therefore specifically agrees that Employer, in addition to other remedies which
may be available to it hereunder, may file a suit in equity to enjoin Employee
from such breach or threatened breach. Employee further agrees, in the event
that any provision of this Section 11 is held to be invalid or against public
policy, the remaining provisions of this Section 11 and the remainder of this
Agreement shall not be affected thereby. Notwithstanding anything else contained
herein, Employee shall be permitted to own any amount of stock in Employer and
up to five percent of the publicly-traded securities, registered under Section
12 or 15(d) of the Securities Exchange Act of 1934, of any other company engaged
in electronic commerce.
12. Confidentiality. Employee hereby recognizes and acknowledges that
Employee may receive information from, or may develop information on the behalf
of, Employer pertaining to Employer and its business that is confidential and
proprietary. All such information is referred to hereinafter as the
"Information". Employee hereby agrees to maintain on a confidential basis all
Information, and Employee agrees that Employee shall not, without the prior
express written consent of Employer, use for Employee's or anyone else's benefit
or disclose to any other person any Information, except in connection with
Employee's work on behalf of Employer. Employee hereby acknowledges that, as
between Employer and Employee, Employer has the complete, sole and full right,
title and interest in and to the Information, and that Employee has no rights,
expressed or implied, with respect to the foregoing other than those expressly
provided for to the contrary in a writing signed by both Employer and Employee.
Employee further agrees that Employee shall, immediately upon Employer's
request, return to Employer all written Information and all writings regarding
oral Information whether such writings were authorized or not. Employee hereby
agrees that the confidentiality agreement provided for hereby shall last with
respect to any Information for five years after such Information is disclosed by
Employer to Employee or developed by Employee on behalf of Employer, as the case
may be.
13. Property of Employer. Employee agrees that, upon the expiration or
termination of Employee's employment with Employer, Employee will immediately
surrender to Employer all property, equipment, funds, lists, books, records, and
other materials of Employer or any affiliate thereof in the possession of or
provided to Employee.
14. Law Governing. THIS AGREEMENT HAS BEEN ENTERED INTO IN THE STATE OF
TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS.
15. Notices. Any notice or request herein required or permitted to be
given to any party hereunder shall be given in writing and shall be personally
delivered or sent to such party by prepaid mail at the address set forth below
the signature of such party hereto or at such other address as such party may
designate by written communication to the other party to this Agreement. Each
notice given in accordance with this paragraph shall be deemed to have been
given, if personally delivered, on the date personally delivered, or, if mailed,
on the third day following the day on which it is deposited in the United States
mail, certified or registered mail, return receipt requested, with postage
prepaid.
16. Headings. The headings of the paragraphs of this Agreement have
been inserted for convenience of reference only and shall in no way restrict or
modify any of the terms or provisions hereof.
17. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part of this Agreement and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a 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.
18. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, whether written or
oral, relating to the subject matter hereof.
19. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of each party hereto and his, her or its respective
successors, heirs, assigns, and legal representatives, but neither this
Agreement nor any rights hereunder may be assigned by any party hereto without
the consent in writing of the other party.
20. Remedies. No remedy conferred by any of the specific provisions of
this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
IN WITNESS WHEREOF, the undersigned have set their hands hereunto as of
the first date written above.
"EMPLOYER"
JVWEB, INC.
By /s/ Greg J. Micek
Greg J. Micek, President
Address:
5444 Westheimer, Suite 2080
Houston, Texas 77056
"EMPLOYEE"
/s/Greg J. Micek
Greg J. Micek, individually
Address:
5444 Westheimer, Suite 2080
Houston, Texas 77056
EXHIBIT 10.03 - Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of Greg J. Micek.
STOCK OPTION AGREEMENT BETWEEN
JVWEB, INC. AND GREG J. MICEK
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made effective the
_____ day of _________________, 1997, between JVWEB, INC., a Delaware
corporation (the "Company"), and GREG J. MICEK, a director and the President of
the Company ("Optionee").
RECITALS:
A. The Company has retained Optionee as a director and the
President of the Company.
B. In order to provide incentives to Optionee in such capacities, the
Company has determined to grant to Optionee the right to acquire certain shares
of the Company's common stock with par value of $0.01 per share (hereinafter
called "Common Stock"), all as provided more fully hereinafter, all subject to
the terms, provisions and conditions of this Agreement.
WITNESSETH:
1. Grant of Stock Option; Purchase Price; Expiration Date. The Company
hereby grants to Optionee the right to purchase 2,500,000 shares of Common
Stock, pursuant to the terms, provisions and conditions of this Agreement (the
shares of Common Stock pursuant to which Optionee shall acquire the right to
purchase are referred to hereinafter as the "Option Shares"). The number of
Option Shares shall be group into three batches. The number of and the per-share
purchase price for the Option Shares comprising each batch are set forth in the
table immediately below: <TABLE> <CAPTION>
Number of Shares Per-Share Purchase Price
<S> <C> <C>
500,000 Shares $ 5.00
500,000 Shares $ 7.50
1,500,000 Shares $10.00
</TABLE>
The option granted hereunder shall expire five years after the date of this
Agreement. In the event of Optionee's death prior to the otherwise applicable
expiration date, the options created by this Agreement shall be exercisable for
one year after Optionee's death by the legal representative of the estate of
Optionee or the person(s) who acquires the rights of Optionee hereunder by
bequest or inheritance as a result of the death of Optionee.
2. Exercise. Subject to the limitations contained herein, Optionee may
exercise an option created pursuant to this Agreement at any time after it
becomes effective. If Optionee or Optionee's successor fails to exercise any
option created under this Agreement on or before the expiration date provided
for herein with respect to such option, such option shall expire on such
expiration date and be of no further force and effect. The option to purchase
granted hereunder shall be exercised by giving written notice to the Company in
compliance with this Agreement. Such notice shall state the number of Option
Shares with respect to which the option is being exercised and shall specify a
date which shall not be less than fifteen (15) nor more than thirty (30) days
after the date of such notice, as the date on which the Option Shares will be
taken up and payment made therefor in cash, certified or bank cashier's check,
or the equivalent, at the principal office of the Company. If any law or
regulation requires the Company to take any action with respect to the Option
Shares specified in such notice, then the date of the delivery of such Option
Shares against payment therefor shall be extended for the period necessary to
take such action. In the event of any failure to take up and pay for the number
of Option Shares specified in such notice on the date set forth therein, as the
same may be extended as provided above, such exercise of this option may be
terminated by the Company with respect to such number of Option Shares not taken
and paid for. Each exercise of an option pursuant to this Agreement shall be
deemed to be an exercise with respect to the option or options having the
earliest expiration date.
3. Adjustments.
(a) If the outstanding shares of the Common Stock shall be subdivided
into a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the per share purchase price of the Option Shares in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If the outstanding shares of Common Stock shall be
combined into a smaller number of shares, the per share purchase price of the
Option Shares in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the per share purchase
price of the Option Shares, the number of Option Shares purchasable upon the
exercise of the Option shall be changed to the number determined by dividing (i)
an amount equal to the number of shares issuable upon the exercise of the Option
immediately prior to such adjustment, multiplied by the per share purchase price
of the Option Shares in effect immediately prior to such adjustment, by (ii) the
per share purchase price of the Option Shares in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or reclassification
of the Common Stock (other than a change in par value or a subdivision or
combination as provided for in subsection (a) immediately above), or any
consolidation or merger of the Company with or into another corporation, or a
transfer of all or substantially all of the assets of the Company, or the
payment of a liquidating distribution then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution,
lawful provision shall be made so that Optionee shall have the right thereafter
to receive upon the exercise hereof (to the extent, if any, still exercisable)
the kind and amount of shares of stock or other securities or property which
Optionee would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger, sale or liquidating
distribution, as the case may be, Optionee had held the number of shares of
Common Stock which were then purchasable upon the exercise of the Option. In any
such case, appropriate adjustment (as reasonably determined by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of Optionee
such that the provisions set forth in this Section 3 (including provisions with
respect to adjustment of the per share purchase price of the Option Shares)
shall thereafter be applicable, as nearly as is reasonably practicable, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of the Option.
4. Shares Reserved. The Company will, at all times during the term of
this Agreement, reserve and keep available such number of its common shares as
will be sufficient to satisfy the requirements of this Agreement and will pay
all fees and expenses necessarily incurred by the Company in connection with the
issuance of such shares.
5. Restriction on Issuance of Shares; Legends. The Company will not be
obligated to sell any Option Shares hereunder unless the Option Shares are at
the time exempt from registration under the Securities Act of 1933, as amended,
and applicable state securities laws. Optionee shall make such investment
representations to the Company and shall consent to the imposition of such
legends on the stock certificates as are necessary, in the opinion of the
Company's counsel, to secure to the Company an appropriate exemption from
applicable securities laws.
6. Successors. This Agreement will be binding upon any successor of the
Company.
7. No Rights as Shareholder. Optionee shall have no rights as a
shareholder by reason of this Agreement and shall have only those rights
expressly conferred by this Agreement.
8. Nontransferability. This option will not be transferable other than
by will or the laws of descent or distribution or pursuant to a qualified
domestic relations order as defined in the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder, and during the lifetime of Optionee the option
may be exercised only by Optionee. More particularly (but without limiting the
generality of the foregoing), the option may not be assigned, transferred,
pledged or hypothecated in any way, may not be assignable by operation of law,
and may not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the option, will be null and void and without
effect.
9. Withholding Taxes. Upon exercise of any portion of this option and
notice from the Company to Optionee, Optionee shall pay to the Company the
amount of withholding income tax required to be withheld by the Company from
compensation to Optionee and in turn paid by the Company to the U.S. Internal
Revenue Service.
10. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if
delivered or mailed, first class, with postage prepaid, to:
<PAGE>
if to the Company, addressed to:
JVWeb, Inc.
5444 Westheimer, Suite 2080
Houston, Texas 77056
Attention: Mr. Greg J. Micek; and
if to Optionee, addressed to the address for notice set
forth beneath Optionee's signature below;
or to such other address for notice as either party shall hereafter notify the
other party in writing, from time to time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
"COMPANY"
JVWEB, INC.
By: ______________________________________
Greg J. Micek, President
"OPTIONEE"
------------------------------
Greg J. Micek, Individually
Address for Optionee:
-------------------------------
-------------------------------
EXHIBIT 10.04 - Stock Option Agreement dated December 17, 1997 executed by the
Company in favor of Dudley R. Anderson.
STOCK OPTION AGREEMENT BETWEEN
JVWEB, INC. AND DUDLEY R. ANDERSON
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made effective the
_____ day of _________________, 1997, between JVWEB, INC., a Delaware
corporation (the "Company"), and DUDLEY R. ANDERSON, a consultant to the Company
("Optionee").
RECITALS:
A. The Company has retained Optionee as a consultant to provide
consulting services to assist in the conduct of the Company's business (such
services are referred to hereinafter as the "Consulting Services").
B. In order to provide incentives for the furnishing of Consulting
Services by Optionee, the Company has determined to grant to Optionee the right
to acquire certain shares of the Company's common stock with par value of $0.01
per share (hereinafter called "Common Stock"), all as provided more fully
hereinafter, all subject to the terms, provisions and conditions of this
Agreement.
WITNESSETH:
1. Grant of Stock Option; Expiration Date. The Company shall grant to
Optionee the right to purchase shares of Common Stock, pursuant to the terms,
provisions and conditions of this Agreement (the shares of Common Stock pursuant
to which Optionee shall acquire the right to purchase are referred to
hereinafter as the "Option Shares"). For any day on which Optionee provides
Consulting Services to the Company, Optionee shall receive an option with
respect to the number of Option Shares set forth in the table below depending on
the number of hours of Consulting Services that Optionee provides to the Company
on such day as indicated in the table below:
Number of Hours of Number of
Consulting Services Provided Option Shares Received
(a) Up to four hours 250 Option Shares
(b) More than four hours 500 Option Shares
and up to eight hours
(c) More than eight hours 750 Option Shares
and up to ten hours
(d) More than ten hours 1,000 Option Shares
At the end of each month, Optionee shall notify the Company in writing
as to the number of hours (on a day-by-day basis) of Consulting Services
provided by Optionee to the Company during such month. After the Company's
review of Optionee's written notification, the Company and Optionee shall enter
the number of Option Shares awarded for such month on Schedule I hereto. The
option granted hereunder with respect to any Option Shares awarded hereunder
shall become effective on the entry of the award on Schedule I hereto with
respect to such Option Shares and shall expire five years after the last day of
the month with respect to which such Option Shares were awarded. In the event of
Optionee's death prior to the otherwise applicable expiration date, the options
created by this Agreement shall be exercisable for one year after Optionee's
death by the legal representative of the estate of Optionee or the person(s) who
acquires the rights of Optionee hereunder by bequest or inheritance as a result
of the death of Optionee.
2. Purchase Price. The purchase price of the Option Shares covered by
this Agreement shall be $.10 per share.
3. Exercise. Subject to the limitations contained herein, Optionee may
exercise an an option created pursuant to this Agreement at any time after it
becomes effective. If Optionee or Optionee's successor fails to exercise any
option created under this Agreement on or before the expiration date provided
for herein with respect to such option, such option shall expire on such
expiration date and be of no further force and effect. The option to purchase
granted hereunder shall be exercised by giving written notice to the Company in
compliance with this Agreement. Such notice shall state the number of Option
Shares with respect to which the option is being exercised and shall specify a
date which shall not be less than three (3) nor more than thirty (30) days after
the date of such notice, as the date on which the Option Shares will be taken up
and payment made therefor in cash, certified or bank cashier's check, or the
equivalent, at the principal office of the Company. If any law or regulation
requires the Company to take any action with respect to the Option Shares
specified in such notice, then the date of the delivery of such Option Shares
against payment therefor shall be extended for the period necessary to take such
action. In the event of any failure to take up and pay for the number of Option
Shares specified in such notice on the date set forth therein, as the same may
be extended as provided above, such exercise of this option may be terminated by
the Company with respect to such number of Option Shares not taken and paid for.
Each exercise of an option pursuant to this Agreement shall be deemed to be an
exercise with respect to the option or options having the earliest expiration
date.
4. Adjustments.
(a) If the outstanding shares of the Common Stock shall be subdivided
into a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the per share purchase price of the Option Shares in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the per share purchase price of the Option Shares in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the per share purchase price of the Option
Shares, the number of Option Shares purchasable upon the exercise of the Option
shall be changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of the Option immediately prior to
such adjustment, multiplied by the per share purchase price of the Option Shares
in effect immediately prior to such adjustment, by (ii) the per share purchase
price of the Option Shares in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or reclassification
of the Common Stock (other than a change in par value or a subdivision or
combination as provided for in subsection (a) immediately above), or any
consolidation or merger of the Company with or into another corporation, or a
transfer of all or substantially all of the assets of the Company, or the
payment of a liquidating distribution then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution,
lawful provision shall be made so that Optionee shall have the right thereafter
to receive upon the exercise hereof (to the extent, if any, still exercisable)
the kind and amount of shares of stock or other securities or property which
Optionee would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger, sale or liquidating
distribution, as the case may be, Optionee had held the number of shares of
Common Stock which were then purchasable upon the exercise of the Option. In any
such case, appropriate adjustment (as reasonably determined by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of Optionee
such that the provisions set forth in this Section 4 (including provisions with
respect to adjustment of the per share purchase price of the Option Shares)
shall thereafter be applicable, as nearly as is reasonably practicable, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of the Option.
5. Shares Reserved. The Company will, at all times during the term of
this Agreement, reserve and keep available such number of its common shares as
will be sufficient to satisfy the requirements of this Agreement and will pay
all fees and expenses necessarily incurred by the Company in connection with the
issuance of such shares.
6. Restriction on Issuance of Shares; Legends. The Company will not be
obligated to sell any Option Shares hereunder unless the Option Shares are at
the time exempt from registration under the Securities Act of 1933, as amended,
and applicable state securities laws. Optionee shall make such investment
representations to the Company and shall consent to the imposition of such
legends on the stock certificates as are necessary, in the opinion of the
Company's counsel, to secure to the Company an appropriate exemption from
applicable securities laws. The Company shall give to Optionee such piggy-back
registration rights as the Company and Optionee are able to agree upon in
advance; provided, however, no such rights shall be given with respect to the
initial Registration Statement on Form SB-2 that the Company proposes to file
with the U.S. Securities and Exchange Commission.
7. Successors. This Agreement will be binding upon any successor of the
Company.
8. No Rights as Shareholder. Optionee shall have no rights as a
shareholder by reason of this Agreement and shall have only those rights
expressly conferred by this Agreement.
9. Nontransferability. This option will not be transferable other than
by will or the laws of descent or distribution or pursuant to a qualified
domestic relations order as defined in the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder, and during the lifetime of Optionee the option
may be exercised only by Optionee. More particularly (but without limiting the
generality of the foregoing), the option may not be assigned, transferred,
pledged or hypothecated in any way, may not be assignable by operation of law,
and may not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the option, will be null and void and without
effect.
10. Withholding Taxes. Upon exercise of any portion of this option and
notice from the Company to Optionee, Optionee shall pay to the Company the
amount of withholding income tax (if any) required to be withheld by the Company
from compensation to Optionee and in turn paid by the Company to the U.S.
Internal Revenue Service.
11. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if
delivered or mailed, first class, with postage prepaid, to:
if to the Company, addressed to:
JVWeb, Inc.
5444 Westheimer, Suite 2080
Houston, Texas 77056
Attention: Mr. Greg J. Micek; and
if to Optionee, addressed to the address for notice set
forth beneath Optionee's signature below;
or to such other address for notice as either party shall hereafter notify the
other party in writing, from time to time.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
"COMPANY"
JVWEB, INC.
By:/s/ Greg J. Micek
Greg J. Micek, President
"OPTIONEE"
/s/Dudley R. Anderson
Dudley R. Anderson
Address for Optionee:
---------------------------
---------------------------
<PAGE>
5
SCHEDULE I
Awards of Option Shares
<TABLE>
<CAPTION>
Number of Option Initials of
Month/Year Shares Awarded Officer of Company Optionee's Initials
<S> <C> <C> <C>
Date of 13,000
Execution
</TABLE>
EXHIBIT 10.05 - Stock Option Agreement dated December 1, 1997 executed by the
Company in favor of Kevin Dotson.
5
STOCK OPTION AGREEMENT BETWEEN
JVWEB, INC. AND KEVIN DOTSON
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made effective the
_____ day of _________________, 1997, between JVWEB, INC., a Delaware
corporation (the "Company"), and KEVIN DOTSON, a consultant to the Company
("Optionee").
RECITALS:
A. The Company has retained Optionee as a consultant to provide
consulting services to assist in the conduct of the Company's business (such
services are referred to hereinafter as the "Consulting Services").
B. In order to provide incentives for the furnishing of Consulting
Services by Optionee, the Company has determined to grant to Optionee the right
to acquire certain shares of the Company's common stock with par value of $0.01
per share (hereinafter called "Common Stock"), all as provided more fully
hereinafter, all subject to the terms, provisions and conditions of this
Agreement.
WITNESSETH:
1. Grant of Stock Option; Expiration Date. The Company shall grant to
Optionee the right to purchase shares of Common Stock, pursuant to the terms,
provisions and conditions of this Agreement (the shares of Common Stock pursuant
to which Optionee shall acquire the right to purchase are referred to
hereinafter as the "Option Shares"). For any day on which Optionee provides
Consulting Services to the Company, Optionee shall receive an option with
respect to the number of Option Shares set forth in the table below depending on
the number of hours of Consulting Services that Optionee provides to the Company
on such day as indicated in the table below:
Number of Hours of Number of
Consulting Services Provided Option Shares Received
(a) Up to four hours 250 Option Shares
(b) More than four hours 500 Option Shares
and up to eight hours
(c) More than eight hours 750 Option Shares
and up to ten hours
(d) More than ten hours 1,000 Option Shares
At the end of each month, Optionee shall notify the Company in writing
as to the number of hours (on a day-by-day basis) of Consulting Services
provided by Optionee to the Company during such month. After the Company's
review of Optionee's written notification, the Company and Optionee shall enter
the number of Option Shares awarded for such month on Schedule I hereto. The
option granted hereunder with respect to any Option Shares awarded hereunder
shall become effective on the entry of the award on Schedule I hereto with
respect to such Option Shares and shall expire five years after the last day of
the month with respect to which such Option Shares were awarded. In the event of
Optionee's death prior to the otherwise applicable expiration date, the options
created by this Agreement shall be exercisable for one year after Optionee's
death by the legal representative of the estate of Optionee or the person(s) who
acquires the rights of Optionee hereunder by bequest or inheritance as a result
of the death of Optionee.
2. Purchase Price. The purchase price of the Option Shares covered by
this Agreement shall be $.10 per share.
3. Exercise. Subject to the limitations contained herein, Optionee may
exercise an an option created pursuant to this Agreement at any time after it
becomes effective. If Optionee or Optionee's successor fails to exercise any
option created under this Agreement on or before the expiration date provided
for herein with respect to such option, such option shall expire on such
expiration date and be of no further force and effect. The option to purchase
granted hereunder shall be exercised by giving written notice to the Company in
compliance with this Agreement. Such notice shall state the number of Option
Shares with respect to which the option is being exercised and shall specify a
date which shall not be less than three (3) nor more than thirty (30) days after
the date of such notice, as the date on which the Option Shares will be taken up
and payment made therefor in cash, certified or bank cashier's check, or the
equivalent, at the principal office of the Company. If any law or regulation
requires the Company to take any action with respect to the Option Shares
specified in such notice, then the date of the delivery of such Option Shares
against payment therefor shall be extended for the period necessary to take such
action. In the event of any failure to take up and pay for the number of Option
Shares specified in such notice on the date set forth therein, as the same may
be extended as provided above, such exercise of this option may be terminated by
the Company with respect to such number of Option Shares not taken and paid for.
Each exercise of an option pursuant to this Agreement shall be deemed to be an
exercise with respect to the option or options having the earliest expiration
date.
4. Adjustments.
(a) If the outstanding shares of the Common Stock shall be subdivided
into a greater number of shares or a dividend in Common Stock shall be paid in
respect of Common Stock, the per share purchase price of the Option Shares in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the per share purchase price of the Option Shares in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the per share purchase price of the Option
Shares, the number of Option Shares purchasable upon the exercise of the Option
shall be changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of the Option immediately prior to
such adjustment, multiplied by the per share purchase price of the Option Shares
in effect immediately prior to such adjustment, by (ii) the per share purchase
price of the Option Shares in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or reclassification
of the Common Stock (other than a change in par value or a subdivision or
combination as provided for in subsection (a) immediately above), or any
consolidation or merger of the Company with or into another corporation, or a
transfer of all or substantially all of the assets of the Company, or the
payment of a liquidating distribution then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution,
lawful provision shall be made so that Optionee shall have the right thereafter
to receive upon the exercise hereof (to the extent, if any, still exercisable)
the kind and amount of shares of stock or other securities or property which
Optionee would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger, sale or liquidating
distribution, as the case may be, Optionee had held the number of shares of
Common Stock which were then purchasable upon the exercise of the Option. In any
such case, appropriate adjustment (as reasonably determined by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of Optionee
such that the provisions set forth in this Section 4 (including provisions with
respect to adjustment of the per share purchase price of the Option Shares)
shall thereafter be applicable, as nearly as is reasonably practicable, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of the Option.
5. Shares Reserved. The Company will, at all times during the term of
this Agreement, reserve and keep available such number of its common shares as
will be sufficient to satisfy the requirements of this Agreement and will pay
all fees and expenses necessarily incurred by the Company in connection with the
issuance of such shares.
6. Restriction on Issuance of Shares; Legends. The Company will not be
obligated to sell any Option Shares hereunder unless the Option Shares are at
the time exempt from registration under the Securities Act of 1933, as amended,
and applicable state securities laws. Optionee shall make such investment
representations to the Company and shall consent to the imposition of such
legends on the stock certificates as are necessary, in the opinion of the
Company's counsel, to secure to the Company an appropriate exemption from
applicable securities laws. The Company shall give to Optionee such piggy-back
registration rights as the Company and Optionee are able to agree upon in
advance; provided, however, no such rights shall be given with respect to the
initial Registration Statement on Form SB-2 that the Company proposes to file
with the U.S. Securities and Exchange Commission.
7. Successors. This Agreement will be binding upon any successor of the
Company.
8. No Rights as Shareholder. Optionee shall have no rights as a
shareholder by reason of this Agreement and shall have only those rights
expressly conferred by this Agreement.
9. Nontransferability. This option will not be transferable other than
by will or the laws of descent or distribution or pursuant to a qualified
domestic relations order as defined in the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder, and during the lifetime of Optionee the option
may be exercised only by Optionee. More particularly (but without limiting the
generality of the foregoing), the option may not be assigned, transferred,
pledged or hypothecated in any way, may not be assignable by operation of law,
and may not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the option, will be null and void and without
effect.
10. Withholding Taxes. Upon exercise of any portion of this option and
notice from the Company to Optionee, Optionee shall pay to the Company the
amount of withholding income tax (if any) required to be withheld by the Company
from compensation to Optionee and in turn paid by the Company to the U.S.
Internal Revenue Service.
11. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if
delivered or mailed, first class, with postage prepaid, to:
if to the Company, addressed to:
JVWeb, Inc.
5444 Westheimer, Suite 2080
Houston, Texas 77056
Attention: Mr. Greg J. Micek; and
if to Optionee, addressed to the address for notice set
forth beneath Optionee's signature below;
or to such other address for notice as either party shall hereafter notify the
other party in writing, from time to time.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
"COMPANY"
JVWEB, INC.
By: /s/Greg J. Micek
Greg J. Micek, President
"OPTIONEE"
/s/Kevin Dotson
Kevin Dotson
Address for Optionee:
---------------------------
---------------------------
<PAGE>
SCHEDULE I
Awards of Option Shares
<TABLE>
<CAPTION>
Number of Option Initials of
Month/Year Shares Awarded Officer of Company Optionee's Initials
<S> <C> <C> <C>
Date of 27,500
Execution
</TABLE>
EXHIBIT 21.1 - Subsidiaries of Registrant.
NONE
EXHIBIT 23.01 - Consent of Malone & Bailey, PLLC
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of JV Web, Inc. on Form
SB-2 of our report dated December 3, 1997, appearing in the Prospectus, which is
part of this Registration Sttement.
MALONE & BAILEY
December 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001051902
<NAME> JVWEB, INC..
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> OCT-28-1997
<PERIOD-END> NOV-10-1997
<EXCHANGE-RATE> 1
<CASH> 50000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 50000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 62000
<OTHER-SE> (12000)
<TOTAL-LIABILITY-AND-EQUITY> 50000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (17249)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17249)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17249)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
