AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 5, 1999
File No. 333-51933
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
POST-EFFECTIVE AMENDMENT NO. 3
to
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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PTN MEDIA, INC.
(Name of small business issuer in its charter)
Delaware 7371 38-3399098
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
313 North First St., Suite 8B, Ann Arbor, Michigan 48104 (734) 327-0579
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(Address and telephone number of principal executive offices)
313 North First St., Suite 8B, Ann Arbor, Michigan 48104
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(Address of principal place of business or intended principal place of business)
Peter Klamka, President
PTN Media, Inc.
313 North First St., Suite 8B, Ann Arbor, Michigan 48104 (734) 327-0579
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(Name, address and telephone number of agent for service)
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Copies to:
David N. Feldman, Esq.
Law Offices of David N. Feldman
36 West 44th Street, Suite 1201
New York, New York 10036
(212) 869-7000
Fax: (212) 997-4242
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ____
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ] ____
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C>
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Registered Amount to Offering Price Per Aggregate Amount of
be Registered Share Offering Price(1) Registration Fee
- ----------------------------------------------- ------------------- -------------------- ------------------- -------------------
Common Stock,
par value $.001 per share................... 400,000 Shares $5.00 $2,000,000 $ 590
</TABLE>
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
ii
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PTN MEDIA, INC.
400,000 SHARES OF COMMON STOCK
PROSPECTUS SUPPLEMENT
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FEBRUARY 5, 1999
This Prospectus Supplement to Registration Statement on Form SB-2 of PTN
Media, Inc., a Delaware corporation (the "Company") includes certain amended
information contained in the Company's Registration Statement, as well as in
the Company's Prospectus dated September 18, 1998 ("Prospectus").
This Prospectus Supplement must be affixed to the Prospectus upon any
delivery to an offeree of the Shares.
Loans from President; Use of Proceeds
Amending and restating a portion of the Prospectus and several prior
supplements, in April 1998, Peter Klamka, the Company's Chairman, President and
Chief Executive Officer, provided the Company with a revolving credit line with
a maximum of $500,000 available (the "Klamka Credit Line"). In September 1998,
the Board of Directors of the Company authorized an increase in this line to
$610,000, and in November and December 1998, further increases to $1,000,000
were authorized. As of November 23, 1998 , December 3, 1998, and at all times
until the date of this Prospectus Supplement, borrowings outstanding under the
Klamka Credit Line aggregated $542,500. Monies loaned were used to make certain
payments to Niki Taylor's company, to provide a payment required under the
Company's Calendar Agreement with Claudia Schiffer, and for working capital.
Loans drawn on the Klamka Credit Line bear interest at a rate of 9% per
annum from the date they are made to the Company and are payable by May 2001,
provided, however, that if the Company raises aggregate gross proceeds in this
Offering of at least $1,500,000, the entire outstanding amount of the Klamka
Credit Line and accrued interest will be repaid from the proceeds of this
Offering.
Additional amounts of approximately $200,000 received by the Company in
October and November 1998, which were previously erroneously characterized as
loans made by the Company's President, were, in fact, proceeds received by the
Company from investors in prior closings of this Offering. See Prior
Closings of Offering below. This correction in the characterization of the
proceeds provided to the Company accounts for the reduction in the outstanding
amount of the Klamka Credit Line in this Supplement to the Prospectus.
As a result of the foregoing and other matters described in previous
supplements, as well as the fact that the Offering terminated by its terms as of
January 31, 1999, with the Company having received total subscriptions for the
purchase of 136,700 Shares for an aggregate purchase price of $683,500, $353,500
of which were closed previously (see Prior Closings of Offering below), the Use
of Proceeds section on page 18 of the Prospectus is hereby amended to provide as
follows:
Net proceeds previously received by the Company of $309,600 (after
deduction of Offering expenses of approximately $17,000 for the payment of legal
fees and printing of Prospectuses and selling commissions) was allocated as
follows: (i) Licensing fees payable to Ms. Schiffer pursuant to the terms of the
Schiffer License Agreement (defined hereafter) - $145,000; (ii) Fees payable to
Ms. Schiffer pursuant to the terms of the Calendar Agreement - $75,000; (iii)
Software development expenses paid to the developer of the Claudia
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Schiffer calendar - $50,000; (iv) Web site design expenses paid to a third
party web designer in connection with the Claudia Schiffer web site - $30,000;
(v) Photographs for Claudia Schiffer calendar - $4,000; (vi) Public relations
and advertising - $3,000(1); (vii) Press release relating to Claudia Schiffer
calendar - $2,000; and (viii) Working capital - $600.
In the event that the Company accepts subscriptions with respect to all of
the proceeds currently being held in escrow, net proceeds from the final closing
of the Offering (assuming the payment of selling commissions of $42,700(2)
($9,700 of which relates to sales previously closed for which commissions remain
due and payable)) and estimated Offering expenses of approximately $76,000
payable by the Company, will be approximately $211,300. The Company intends to
allocate these net proceeds as follows: (i) Licensing Fees Payable to Ms.
Schiffer -$155,000(3); (ii) Repayment of indebtedness - $0(4); (iv) Return of
certain funds previously accepted from investors in this Offering - $55,000(5);
and (vi) Working Capital - $1,300(6).
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1 Includes amounts payable to a public relations firm, which the Company
has retained, and expenses relating to print and/or electronic
advertising. See "Business - Sources of Revenue -- Advertising" and " -
Marketing and Promotion -- Public Relations."
2 Assumes payment of selling commissions of a maximum of 10% on the
$330,000 of gross proceeds held in escrow upon release to the Company
at the final closing. In the event that the Company is not required to
pay selling commissions with respect to any of the sales attributable
to such proceeds, or at a lesser percentage rate, then the additional
amounts received by the Company will be allocated to working capital.
3 The Company is currently in default of the terms of the Schiffer
License Agreement with Claudia Schiffer, in connection with which the
Company has previously advanced a total of $145,000. The terms of the
Schiffer License Agreement require the payment of an additional
$155,000 to Ms. Schiffer, the obligations of which are also contained
in a promissory note from the Company to Ms. Schiffer. This amount,
which was due and payable as of January 23, 1999, is expected to be
paid from the proceeds of this Offering. The Company also previously
advanced an aggregate of $134,000 to a company controlled by well-known
model, Tyra Banks, pursuant to a license agreement and an agreement for
the sale of calendars and electronic planners. Ms. Banks has claimed
that the Company breached these agreements and has refused to perform
under either agreement. Ms. Banks' company has filed a demand for
arbitration against the Company for additional amounts allegedly owed
under these agreements, in an approximate sum of $153,000, as a result
of the Company's failure to pay such amount by September 15, 1998. If
the Company agrees to settle any potential claims or is required to pay
any additional amounts to Ms. Banks' company, there will not be
sufficient funds available from this Offering to make such payments. In
the event that the Company does not raise additional funds, in a timely
manner, or have cash available from operations, or otherwise, with
which to make such payments, the Company would be required to either
substantially reduce or terminate its operations. See "Management's
Plan of Operations - Cash Requirements" and "Business - Web Sites."
Also see "Payment to Claudia Schiffer; Issuance of Additional Shares of
Common Stock" below.
4 Does not reflect the Company's repayment of $56,250, plus interest at
the rate of 8% per annum, to four individuals pursuant to promissory
notes which were due and payable in July 1998. Although the Company had
intended to pay the principal and interest on this outstanding
indebtedness from the proceeds of this Offering, the Company will not
have raised sufficient net proceeds from investors to repay this
indebtedness, with respect to which the Company has been in default
since July 1998. There can be no assurance that one or more of the
individuals holding such promissory notes will not declare the Company
in default thereunder, and require the Company to immediately pay the
entire amount of principal and interest outstanding. Also does not
reflect the Company's repayment of outstanding loans, in an aggregate
principal amount of $542,500, to Peter Klamka, the Company's Chairman,
President and Chief Executive Officer, upon the consummation of this
Offering, since such indebtedness is not due until the earlier of (i)
the date that the Company has raised an aggregate of not less than
$1,500,000 in one or more public offerings of any of its securities or
(ii) May 2001. Upon the final closing, the Company will not have raised
proceeds in this Offering of greater than $658,000.
5 Reflects the return of subscriptions to two investors who participated
in prior closings of this Offering. These funds are being refunded by
the Company, as a result of their having been accepted from investors
in states in which this Offering was not registered.
2
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Cash Requirements
Even if the Company receives the entire amount of net proceeds currently
available upon the final closing of this Offering, the Company, after the
payment of all outstanding expenses, will not have any cash available. As a
result, the Company will be required to seek additional financing immediately.
The Company may determine, depending on the opportunities available to it, to
seek additional equity or debt financing to fund the cost of its operations.
There can be no assurance that additional financing will be available to the
Company on commercially reasonable terms, or at all. In the event that the
Company is unable to raise additional funds shortly after the final closing of
this Offering, the Company, in all likelihood, would be required to terminate
its operations.
Loans to President
One hundred fifty thousand dollars of the Klamka Credit Line was provided
to Mr. Klamka by personal loans made to him by persons who were introduced to
Mr. Klamka by a person whom the Company believes to have been a principal (the
"CPA Principal") of CPA Advisors Network, Inc. ("CPA"), one of the Selling
Agents in this Offering. The Company has been advised that the CPA Principal may
have misrepresented to the persons lending funds to Mr. Klamka that such loans
would, either directly or indirectly, entitle such lenders to receive securities
of the Company. In addition, Mr. Klamka also paid the sum of $15,000 to a
company, which the Company believes to have been an affiliate of CPA, in
connection with the introduction of such lenders to Mr. Klamka.
Prior Closings of Offering; Rescission Rights
The Company has accepted and closed on subscriptions to purchase 70,700
shares of Common Stock in this Offering for an aggregate purchase price of
$353,500 as follows:
In October 1998, the Company accepted and closed on subscriptions from
eight investors in an aggregate gross amount of $127,000. This represents the
purchase of a total of 25,400 shares of Common Stock in this Offering. Pursuant
to the terms of the relevant Agency Agreements, certain Selling Agents were
entitled to selling commissions in an aggregate amount of $7,950 in connection
with such sales. The Company has not, as of the date of this Prospectus
Supplement, paid any of such commissions.
In November 1998, the Company accepted and closed on a subscription from
one investor in the gross amount of $30,000. This represents the purchase of
6,000 shares of Common Stock in this Offering. No selling commissions were paid
in connection with this sale. Pursuant to the terms of the relevant Agency
Agreement, a Selling Agent was entitled to selling commissions in the amount of
$300 in connection with such sales. The Company has not, as of the date of this
Prospectus Supplement, paid any of such commissions.
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6 The Company may use a portion of the proceeds allocated to working
capital to pay salaries of non-executive employees.
3
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In December 1998, the Company accepted and closed on subscriptions from
four investors (including one of whom also purchased shares in October) in an
aggregate gross amount of $177,500. This represents the purchase of a total of
35,500 shares of Common Stock in this Offering. Pursuant to the terms of the
relevant Agency Agreement, a Selling Agent was entitled to selling commissions
in the aggregate amount of $1,450 in connection with such sales. The Company has
not, as of the date of this Prospectus Supplement, paid any of such commissions.
On January 8, 1999, the Company accepted and closed on a subscription from
one investor in the amount of $19,000. This represents the purchase of a total
of 3,800 shares of Common Stock in this Offering. The Company paid a total of
$1,900 in selling commissions to a Selling Agent in connection with such sales.
As a result of certain material changes in the information provided in the
Prospectus, since the prior closings of this Offering, the Company has agreed to
provide prior investors in this Offering with copies of this Prospectus
Supplement and all prior supplements to the Prospectus dated September 18, 1998,
and the right to receive a refund of the amounts that each of them invested in
the Company. In the event that all of the prior investors elect to receive a
refund of their investment, the Company would be required to make payments of
approximately $298,500 to such investors. In addition, the Company has agreed to
refund a total of $55,000 to two investors who participated in prior closings,
since such investors were located in states in which this Offering was not
registered. If any of such prior investors elect to have their investments
refunded, the Company will not have sufficient funds to make refunds to any of
such electing investors, and unless the Company is able to raise such funds from
other sources, or reach an alternative agreement with such investors, without
substantial delay, the Company would be required to either reduce or terminate
its operations entirely.
Resignation of Directors
On February 1, 1999, Deborah M. Schneider and Lila Lazarus resigned as
directors of the Company. As of the date of such resignations, Peter Klamka
remains as the sole director of the Company.
Payment to Claudia Schiffer; Issuance of Additional Shares of Common Stock
In November and December 1998, the Company paid Ms. Schiffer an aggregate
of $145,000 pursuant to the terms of a Web Site License Agreement with Ms.
Schiffer (the "Schiffer License Agreement"). Prior to and at the time of such
payment, Ms. Schiffer refused to deliver an executed copy of the Schiffer
License Agreement to the Company, until the payment of an additional $155,000 to
her, pursuant to the terms of such agreement. This additional payment was due
under the terms of the Schiffer License Agreement on or before December 23,
1998. As a result of negotiations with Ms. Schiffer, the Company was able to
extend the date of payment of such additional $155,000 to January 23, 1999, by
issuing to Ms. Schiffer a promissory note in the principal sum of $155,000.
Additionally, in December, the Company agreed to issue to Ms. Schiffer an
additional 50,000 shares of the Company's Common Stock, so that Ms. Schiffer
would be entitled to receive a total of 269,682 shares of Common Stock or
approximately 7% of the outstanding shares of Common Stock of the Company
(assuming all shares offered hereby are sold). The Company is currently in
default with respect to the payment of such promissory note. In the event that
the Company does not pay the entire amount due under such promissory note, on or
prior to February 28, 1999, the Company believes that Ms. Schiffer will declare
the Company in default under the Schiffer License Agreement and will terminate
any obligations she may have to the Company thereunder, although there can be no
assurance that she will not terminate such agreement sooner. In addition,
although the Company has not received any indication that she will, Ms. Schiffer
may also terminate the Calendar Agreement, as a result of the Company's default
under the Schiffer License Agreement. The termination of either or both of said
agreements by Ms. Schiffer would have a material adverse effect on the Company's
business and operations.
Arbitration filed by Tyra Banks
On December 8, 1998, attorneys for Tyra Banks and Bankable, Inc., an entity
controlled by Ms. Banks, made a Demand for Arbitration against the Company under
the Commercial Arbitration Rules of the American Arbitration Association. Ms.
Banks' attorneys alleged that the Company failed to make timely payments of
money due upon the execution the Web Site License Agreement and Calendar
Agreement between Ms. Banks
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and the Company ("Agreements"), and refused to return photographs, pictures,
prints, negatives and images of Ms. Banks. Ms. Banks is seeking the amount of
$153,000, plus interest, allegedly owed to her, to have the Company not use her
name, picture and likeness, and to have all images of Ms. Banks, in any form,
returned to her. She also is seeking damages for injury to her public
reputation, lost royalties and the cost of attorney's fees. On January 15, 1999,
the Company, through its attorneys, filed an Answer and Counterclaim to Ms.
Banks' Demand for Arbitration. The Company raised several defenses to Ms. Banks'
claims and claimed a breach by Ms. Banks and Bankable of the Web Site Agreement.
The Company is seeking the amount of $100,000, plus additional damages, relating
to the advance payment made by the Company to Bankable, Inc. A preliminary
administrative conference was held on January 19, 1999, and the Company's
attorneys believe that a hearing will be scheduled for March. Both parties have
also expressed an interest in resolving this matter through mediation.
Mediation would run concurrently with the arbitration process, prior to the
arbitration hearing. The Company intends to vigorously defend itself in this
arbitration, and believes that it has meritorious defenses. Nonetheless, there
can be no assurance that the Company will be successful in this arbitration, and
an unfavorable settlement or result in this matter could have a material adverse
effect on the Company.
Change in Escrow Account
The Company has closed the escrow account at University Bank and has opened
a new escrow account at American Stock Transfer & Trust Co., pursuant to the
Escrow Agreement attached as Exhibit 10.12 to Post-Effective Amendment No. 3 to
the Registration Statement of which this forms a part (the "Escrow Agreement").
The Escrow Agreement provides that through the duration of this Offering,
Hornblower & Weeks, Inc. ("Hornblower") possesses the authority, along with the
Company, to accept or reject subscriptions and to determine the type and manner
of closings that will occur. Subscribers are now instructed to make subscription
checks out to American Stock Transfer & Trust Co., as escrow agent. In addition,
subscribers using placement agents other than Hornblower, risk that in the event
of oversubscription, Hornblower may favor its investors over those from other
placement agents, and could reject non-Hornblower subscriptions.
The Escrow Agreement provides that in the event that the escrow agent
still possesses funds within 14 days of the termination of the Offering, and no
closing on such funds has occurred, the escrow agent will return all funds to
investors. The parties have agreed to extend this period of time so that the
final closing may be held any time on or before February 26, 1999.
Lycos Agreement
In an agreement executed on November 16, 1998, Lycos, Inc. agreed to
provide the Company with $600,000 worth of advertising banner impressions
consisting of complete page views with a Claudia Schiffer advertising banner and
link to www.claudiaschiffer.com on the Lycos network. The banner advertising and
link to the Company's web site were made available to the Company commencing on
December 15, 1998 and will continue to be available until December 15, 1999.
These impressions will only be used to promote www.claudiaschiffer.com, and
Lycos has also agreed to include at least $200,000 worth of these advertisements
on its web site lycos.com. Advertising content and placement are subject to
approval by both parties on the Lycos network, with banners rotated as often as
the Company desires. Lycos is currently running banner advertisements for www.
claudiaschiffer.com and will commence links to the Company's web site as soon as
the site is up. In exchange for the services to be provided by Lycos, the
Company will provide Lycos with a link on the Claudia Schiffer web site, placed
at the Company's discretion. Ms. Schiffer has the right to terminate the
agreement at any time. This agreement is a barter arrangement for advertising,
does not involve any monetary payments and can be renewed by mutual agreement of
both parties.
5
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Ann
Arbor, Michigan on February 4, 1999.
PTN MEDIA, INC.
By: /s/ Peter Klamka
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Peter Klamka, Chairman,
President and Chief Exec. Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Name Title Date
/s/ Peter Klamka Chairman, President, Chief February 4, 1999
- ---------------- Executive Officer and Secretary
Peter Klamka (Principal Executive Officer and
Principal Financial and Accounting
Officer)
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Exhibit
Number Description
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1.1* Form of Placement Agent Agreement
1.2* Engagement Agreement with Hornblower & Weeks, Inc.
2.1* Plan of Merger between PTN Media, Inc. and Interactive Entertainment
Studio, Inc., dated as of February 25, 1998.
3.1* Certificate of Incorporation of PTN Media, Inc. dated as of January 13,
1998.
3.2* By-Laws of PTN Media, Inc.
4.1* Specimen Common Stock Certificate
4.2* Specimen 1997 Warrant Certificate
4.3* Specimen 1998 Warrant Certificate
5.1* Opinion of the Law Offices of David Feldman
10.1* Web Site License Agreement between Niki, Inc. and Interactive
Entertainment Studio, Inc. dated as of June 1, 1997
10.2* Website License Agreement between Ty Girl, Inc. and Interactive
Entertainment Studio, Inc. dated as of January 1, 1998
10.3* License Agreement between Ty Girl, Inc. and Interactive Entertainment
Studio, Inc. dated as of January 1, 1998
10.4* Lease Agreement dated as of February 27, 1998, between First Miller
Limited Partnership and PTN Media, Inc.
10.5* Website Design Services Agreement between zoecom, Inc. and Interactive
Entertainment Studio, Inc. dated as of December 20, 1996
10.6* Letter of Intent between Cdnow, Inc. and Interactive Entertainment
Studio, Inc. dated as of September 8, 1997
10.7* Agreement for Fashion House Flowers & Gifts Service between PC Flowers
and Gifts, Inc. and Interactive Entertainment Studio, Inc. dated as
of September 9, 1997
10.8* Standard Publicists Guild Agency - Client Agreement between the
Angellotti Company and PTN Media, Inc. dated as of April 15, 1998
10.9* PTN Media, Inc. 1998 Stock Option Plan
10.10* Form of Subscription Agreement for Shares in this Offering
10.11* Revolving Promissory Note issued by PTN Media, Inc. to Peter Klamka
dated April 1, 1998, in the maximum principal sum of $500,000
10.12 Escrow Agreement between American Stock Transfer & Trust Co.,
Hornblower & Weeks, Inc. and PTN Media, Inc.
11.1* Computation of per share earnings
23.1* Consent of Lazar Levine & Felix LLP
23.2* Consent of the Law Offices of David Feldman (included in Exhibit 5.1)
24.1* Power of Attorney (included in Part II of the Registration Statement)
27.1* Financial Data Schedule
*Previously filed.
<PAGE>
EXHIBIT 10.12
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of this 9th day of December, 1998 by and among
PTN Media, Inc., a Delaware Corporation (the "Corporation"), HORNBLOWER & WEEKS,
INC., a Georgia Corporation ("HORNBLOWER"), and AMERICAN STOCK TRANSFER & TRUST
COMPANY, a New York Corporation (the "Agent").
WITNESSETH :
WHEREAS, the Corporation is offering 400,000 shares of common stock
(the "Offering"), pursuant to a Prospectus dated September 18, 1998 as amended
or supplemented from time to time (the "Prospectus") in accordance with the
registration provisions of the Securities Act of 1933;
WHEREAS, the Prospectus provides that:
a. The Offering will commence immediately and will continue until the
earlier to occur of (i) the sale of all the Offering or (ii) January 31, 1999
(the "Offering Period):
b. When Hornblower & Weeks, Inc. and the Corporation agree, the
Corporation will conduct a closing (the "Closing") on the sale of such Shares.
Subsequent closings may be held at the discretion of the Corporation with
respect to additional sales of Shares up to the Maximum Offering during the
Offering Period, any of which Closings may be held up to fourteen (14) days
thereafter;
c. Tendered subscriptions for all Shares shall be subject to
acceptance by the Corporation, which subscriptions may be rejected in the sole
discretion of the Corporation and Hornblower acting in good faith, or for any
other reason in the sole discretion of either the Corporation or Hornblower;
and
d. Proceeds from the sale of the Shares shall be held in escrow by the
Agent pending a Closing on the Shares, and disbursed upon such Closing; and if
no such Closing is conducted, then such funds shall be returned to the
subscribers, without interest to the extent obtained by the Corporation, after
the termination of the Offering Period (the "Termination Date").
NOW, THEREFORE, in consideration of the mutual promises herein
contained and intending to be legally bound, the parties hereby agree as
follows:
1. Appointment of Agent. The Corporation hereby appoints American Stock Transfer
& Trust Company of New York as escrow agent in accordance with the terms and
condition set forth herein, and the Agent hereby accepts such appointment.
2. Delivery of Subscription Proceeds. All checks, drafts, or other instruments
received from subscribers for the Shares will be delivered by the Corporation to
the Agent, made payable to "American Stock Transfer & Trust Company", Special
Account Re: PTN Media, Inc., as to each subscriber, his name, address, social
security number or employer identification number, number of Shares subscribed
for, and the amount paid in connection with such subscription. The Agent is
hereby empowered on behalf of the Corporation to endorse and collect all checks,
drafts, or other instruments received on account of subscriptions for Shares.
<PAGE>
3. Agent to Hold and Disburse Funds. The Agent will hold and disburse all funds
received by it pursuant to the terms of this Escrow Agreement, as follows;
3.1 In the event that prior to the Termination Date the Agent has received funds
(and such funds are cleared within fourteen (14) days of the Termination Date)
and Hornblower and the Corporation determine to hold a closing, on the date of
such Closing (the "Closing Date"), pursuant to written instructions signed by
the Corporation and Hornblower; pay to the Corporation, and/or to any other
person designated in such instruction, the proceeds received by the Agent from
the sale of such Shares provided that the Corporation's counsel has confirmed in
writing that a closing has taken place and that all conditions relating to the
release of the funds have been met. Prior to the Termination Date, if the Agent
receives any funds from the sale of Shares, it will promptly, upon written
instructions signed by the Corporation and Hornblower, pay to the Corporation,
and/or to any other person designated in such instruction, the proceeds received
by the Agent from the sale of such Shares
3.2 All funds received by the Agent pursuant to the terms of this Escrow
Agreement may be held in a bank money market account.
3.3 In the event that by the Termination Date the Agent still possesses funds
(and such funds are cleared within fourteen (14) days of the Termination Date),
and no closing on such funds has occurred, then the Agent shall, within 15
business days of the Termination date, return to the subscribers for the Shares
the respective amounts which such subscribers have paid, without interest.
3.4 If no written instructions are received by the Agent from the Corporation
and Hornblower relative to the admission of one or more subscribers to the
Corporation within 14 days of the Termination Date, the Agent will return all
subscriber funds to the subscribers, for which no written instructions were
received, without interest.
3.5 If the Corporation or Hornblower reject any subscription for which the Agent
has already collected funds, the Agent shall, within two (2) business days,
issue a refund check to the rejected subscriber pursuant to written instructions
signed by the Corporation and Hornblower. If the Corporation or Hornblower
rejects any subscription for which the Agent has not yet received collected
funds but has submitted the subscriber's check for collection, the Agent shall
within two (2) business days, issue a check in the amount of the subscriber's
check to the rejected subscriber after the Agent has cleared such funds. If the
Agent has not yet submitted a rejected subscriber's check for collection, the
Agent shall promptly remit the subscriber's check directly to the subscriber.
4. Exculpation and Indemnification of Agent:
4.1 The Agent shall have no duties or responsibilities other than those
expressly set forth herein. The Agent shall have no duty to enforce any
obligation of any person to make any payment or delivery, or to direct or cause
any payment or delivery to be made, or to enforce any obligation of any person
to perform any other act. The Agent shall be under no liability to the other
parties hereto or to anyone else by reason of any failure on the part of any
party hereto or any maker, guarantor, endorser or other signatory of any
document or any other person to perform such person's obligations under such
document. Except for amendments to this Agreement referred to below, and except
for instructions given to the Agent by the Corporation relating to the escrow
deposit under this Agreement, the Agent shall not be obligated to recognize any
agreement between any and all of the persons referred to herein, notwithstanding
that references thereto may be made herein and whether or not its has knowledge
thereof.
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4.2 The Agent shall not be liable to the Corporation or to anyone else for any
action taken or omitted by it, or any action suffered by it to be taken or
omitted, in good faith and in the exercise of its own best judgment. The Agent
may rely conclusively and shall be protected in acting upon any order, notice,
demand, certificate, opinion or advice of counsel (including counsel chosen by
the Agent), statement, instrument, report or other paper or document (not only
as to its due execution and the validity and effectiveness of its provisions,
but also as to the truth and acceptability of any information therein
contained), which is believed by the Agent to be genuine and to be signed or
presented by the proper person or persons. The Agent shall not be bound by any
notice or demand, or any waiver, modification, termination or rescission of this
Agreement or any of the terms thereof, unless evidenced by a writing delivered
to the Agent signed by the proper party and, if the duties or rights of the
Agent are affected, unless it shall give its prior written consent thereto.
4.3 The Agent shall not be responsible for the sufficiency or accuracy of the
form of, or the execution, validity, value or genuineness of, any document or
property received, held or delivered by it hereunder, or of any signature or
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Agent be responsible or liable to the other
parties hereto or to anyone else in any respect on account of the identity,
authority or rights of the persons executing or delivering or purporting to
execute or deliver any document or property of this Agreement. The Agent shall
have no responsibility with respect of the use or application of any funds or
other property paid or delivered by the Agent pursuant to the provisions hereof.
The Agent shall not be liable to the Corporation or to anyone else for any loss
which may be incurred by reason of any investment of any monies which it holds
hereunder provided the Agent has complied with the provisions of Section 3.2
hereunder.
4.4 The Agent shall have the right to assume in the absence of written notice to
the contrary from the proper person or persons that a fact or an event by reason
of which an action would or might be taken by the Agent does not exist or has
not occurred, without any action suffered by it to be taken or omitted, in good
faith and in the exercise of its own best judgment, in reliance upon such
assumption.
4.5 The Agent will be indemnified and held harmless by the Corporation from and
against any and all expenses, including reasonable counsel fees and
disbursements, or loss claim, or in connection with any claim or demand, which
in any way, directly or indirectly arises out of or relates to this Agreement,
the services of the Agent hereunder, the monies or other property held by it
hereunder.
4.6 For the purposes hereof, the term "expense or loss" shall include all
amounts paid or payable to satisfy any claim, demand or liability, or in
settlement of any claim, demand, action, suit or proceeding settled with express
written consent of Agent, and all costs and expenses, including, but not limited
to, reasonable counsel fees and disbursements, paid or incurred in
investigating, or defending against any such claim, demand, action, suit or
proceeding.
5. Termination of Agreement and Resignation of Agent.
5.1 The Escrow Agreement shall terminate on the final disposition of the monies
and property held in escrow hereunder, provided that the rights of the Agent and
the obligations of the other parties hereto under Sections 4 and 7 shall survive
the termination hereof.
5.2 The Agent may resign at any time and be discharged from its duties as Agent
hereunder by giving the Corporation at least thirty (30) days written notice
thereof. As soon as practicable after its resignation, the Agent shall turn over
to a successor escrow agent appointed by the Corporation all monies and property
held hereunder (less such amount as the Agent is entitled to retain pursuant to
Section 7) upon presentation of the document appointing the new escrow agent and
its acceptance thereof. If no new Agent is so appointed within
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the sixty (60)day period following such notice of resignation, the Agent
may deposit the aforesaid monies and property with any court it deems
appropriate.
6. Form of Payments by Agent.
6.1 Any payments by the Agent to subscribers or to persons other than the
Corporation pursuant to the terms of this Agreement shall be made by check,
payable to the order of each respective subscriber or other person.
6.2 All amounts referred to herein are expressed in United States Dollars and
all payments by the Agent shall be made in such dollars.
7. Compensation of Agent. For services rendered, the Agent shall receive as
compensation all interest income earned on the funds received pursuant to this
Agreement. The Agent shall also be entitled to reimbursement from the
Corporation for all expenses paid or incurred by it in the administration of its
duties hereunder, including, but not limited to, all counsel, advisors' and
Agents' fees and disbursements and all reasonable taxes or other governmental
charges. It is anticipated that such disbursements shall not exceed $500 barring
any unforeseen circumstances.
8. Notices. All notices, requests, demands and other communications provided for
herein shall be in writing, shall be delivered by hand or by first-class mail,
shall be deemed given when received and shall be addressed to the parties hereto
at their respective addresses listed below or to such other persons or addressed
as the relevant party shall designate as to itself from time to time in writing
delivered in like manner.
If to the Corporation:
PTN Media, Inc.
313 North First Street
Suite 8B
Ann Arbor, MI 48103
Attention: Mr. Peter Klamka
If to the Agent:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attention: Michael Karfunkle
Tel.#: 212-936-5100
Fax.#: 718-236-4588
If to Hornblower:
Hornblower & Weeks, Inc.
110 Wall Street, 21st Floor
New York, New York 10005
Attention: Eric Ellenhorn
Tel.#: 212-361-2266
Fax.#: 212-361-2273
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9. Further Assurances. From time to time on and after the date hereof, the
Corporation shall deliver or cause to be delivered to the Agent such further
documents and instruments and shall do and cause to be done such further acts as
the Agent shall reasonably request (it being understood that the Agent shall
have no obligation to make any such requests) to carry out more effectively the
provisions and purposes of this Agreement, to evidence compliance herewith or to
assure itself that it is protected in acting hereunder.
10. Consent to Service of Process: The Corporation hereby irrevocably consents
to the jurisdiction of the courts of the State of New York and of any federal
court located in such State in connection with any action, suit or other
proceeding arising out of or relating to this Agreement or any action taken or
omitted hereunder, and waives personal service of any summons, complaint or
other process and agrees that the service thereof may be made by certified or
registered mail directed to the Corporation at its address for purposes of
notices hereunder.
11. Miscellaneous.
11.1 If for any reason the escrow deposit is not received by the Agent as
contemplated herein, the Corporation shall reimburse the Agent for all expenses,
including reasonable counsel fees and disbursements paid or incurred by it in
making preparations for providing the services contemplated hereby in an amount
not to exceed $500.
11.2 This Agreement shall be construed without regard to any presumption or
other rule requiring construction against the party causing such instrument to
be drafted. The terms "hereby", "hereto", "hereunder", and any similar terms, as
used in this Agreement refer to the Agreement in its entirety and not only to
the particular portion of this Agreement where term is used. The word "person"
shall mean any natural person, partnership, Corporation, government and any
other form of business or legal entity. All words or terms used in this
Agreement, regardless of the number or gender in which they are used, shall be
deemed to include any other number and any other gender as the context may
require. This Agreement shall not be admissible in evidence to construe the
provisions of any prior agreements. The rule of ejusdem generis shall not be
applicable herein to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
11.3 This Agreement and the rights and obligations hereunder of the Corporation
may be assigned by the Corporation only to a successor to the Corporation's
entire business. This Agreement and the rights and obligations hereunder of the
Agent may be assigned by the Agent only to a successor to its entire business.
This Agreement shall be binding upon and inure to the benefit of each party's
respective successors, heirs and permitted assigns. No other person shall
acquire or have any rights under or by virtue of this Agreement. This Agreement
may not be changed orally or modified, amended or supplemented without an
express written agreement executed by the Agent, the Corporation and Hornblower.
This Agreement is intended to be for the sole benefit of the parties hereto, and
(subject to the provisions of this Section 11.3) their respective successors,
heirs and assigns, and none of the provisions of this Agreement are intended to
be, nor shall they be construed to be, for the benefit of any third person.
11.4 This Agreement Shall be governed by and construed in accordance with the
internal laws of the State of New York. The representations and warranties
contained in this Agreement shall survive the executive and delivery hereof and
any investigations made by any party. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect any of the
terms hereof.
12. Executions in Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which
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shall together constitute one of the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signature of all the parties reflected hereon as the
signatures.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on
the day and year first above written.
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/ Herbert J. Lemmer
---------------------
Name: Herbert J. Lemmer
Title: Vice President
PTN MEDIA, INC.
By: /s/ Peter Klamka
----------------
Name: Mr. Peter Klamka
Title: President
HORNBLOWER & WEEKS, INCORPORATED
By: /s/ Eric Ellenhorn
------------------
Name: Eric Ellenhorn
Title: Chief Executive Officer
