<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1999
REGISTRATION NO. 333-69881
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NUMBER 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
MININGCO.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
DELAWARE 7379 13-4034015
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
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220 EAST 42ND STREET, 24(TH) FLOOR
NEW YORK, NEW YORK 10017
(212) 849-2000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------
MR. SCOTT P. KURNIT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MININGCO.COM, INC.
220 EAST 42ND STREET, 24(TH) FLOOR
NEW YORK, NEW YORK 10017
(212) 849-2000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------
Copies to:
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<S> <C>
ALEXANDER D. LYNCH, ESQ. JULIE M. ALLEN, ESQ.
ALAN P. BLAUSTEIN, ESQ. O'SULLIVAN GRAEV & KARABELL, LLP
BROBECK, PHLEGER & HARRISON LLP 30 ROCKEFELLER PLAZA
1633 BROADWAY, 47(TH) FLOOR NEW YORK, NEW YORK 10112
NEW YORK, NEW YORK 10019 (212) 408-2400
(212) 581-1600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /________________________
If 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,
check the following box. / /
------------------------
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 SECTION 8(A), MAY
DETERMINE.
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<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 17, 1999
PROSPECTUS
3,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------
This is an initial public offering of our common stock. We are selling all of
the 3,000,000 shares offered under this prospectus. We anticipate that the
initial public offering price will be between $12.00 and $14.00 per share.
There is currently no public market for the shares. Our common stock has been
approved for quotation on the Nasdaq National Market under the symbol "MINE."
At the same time as we sell the shares offered by this prospectus, we will sell
shares of our common stock to Comcast Interactive Investments, Inc. for
$2,500,000 at a price per share equal to 93% of the initial public offering
price. Since these shares will be sold in a private placement, Comcast will not
be able to immediately resell the shares in the public market. See "Concurrent
Placement."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 TO READ ABOUT RISKS THAT YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PER
SHARE TOTAL
-------------------- --------------------
<S> <C> <C>
Public offering price................................................ $ $
Underwriting discounts and commissions............................... $ $
Concurrent placement price........................................... $ $
Total proceeds, before expenses, to us from this offering and the
concurrent placement............................................... $ $
</TABLE>
------------------------
The underwriters may purchase up to an additional 450,000 shares from us at the
initial public offering price less the underwriting discount to cover
over-allotments.
------------------------
BEAR, STEARNS & CO. INC.
VOLPE BROWN WHELAN & COMPANY
WIT CAPITAL CORPORATION
AS E-MANAGER-TM-
The date of this Prospectus is , 1999.
<PAGE>
[PICTURES OF THE MININGCO.COM HOME PAGE AND
VARIOUS OTHER PAGES WITHIN MININGCO.COM]
<PAGE>
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER MININGCO.COM, INC. NOR ANY UNDERWRITER HAS AUTHORIZED ANYONE
TO PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL INFORMATION. THIS
PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY
SALE OF THESE SECURITIES.
------------------------
TABLE OF CONTENTS
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PAGE
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Prospectus Summary............................. 1
Risk Factors................................... 5
Concurrent Placement........................... 13
Forward Looking Statements; Market Data........ 13
Use of Proceeds................................ 14
Dividend Policy................................ 14
Capitalization................................. 15
Dilution....................................... 16
Selected Financial Data........................ 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 19
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PAGE
---------
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Business....................................... 27
Management..................................... 41
Certain Transactions........................... 51
Principal Stockholders......................... 55
Description of Securities...................... 57
Shares Eligible for Future Sale................ 61
Underwriting................................... 63
Legal Matters.................................. 65
Experts........................................ 65
Where You Can Find Additonal Information....... 65
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS OF
INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS," BEFORE INVESTING
IN OUR COMMON STOCK.
OUR BUSINESS
MININGCO.COM is a leading Internet news, information and entertainment
service. Our service is a network of over 600 web sites, each of which focuses
on a specific topic and is managed by a knowledgeable human guide. Through these
GuideSites-TM-, the guides create and maintain Internet directories that include
approximately 400,000 pre-screened links to other web sites, which are
summarized by the guides, enabling users to quickly find relevant Internet
content. The GuideSite network also provides original high-quality content,
consisting primarily of text, that is created regularly by the guides on
thousands of subjects. Additionally, since our GuideSites focus on specific
topics, users with like interests can form communities by communicating with
each other directly or through the guides. We believe that our service offers an
enjoyable and efficient Internet experience for users across a broad range of
topics, creating highly targeted marketing opportunities for advertisers and for
businesses that market their products and services over the Internet. We believe
that over 4.6 million unique users visited MININGCO.COM in January 1999, making
MININGCO.COM the sixth largest news/ information/entertainment Internet property
in terms of audience reach and the 26th largest Internet property overall in
that month.
MININGCO.COM'S guides are located in over 40 states and 18 countries. We use
a work force of part-time independent contractors because we can draw upon a
broad experience base more cost-effectively than with a large internal editorial
staff. The guides complete a comprehensive 16-week training process and their
GuideSites are monitored for quality and consistency. We have exclusive online
rights to all of the guide-developed content. MININGCO.COM'S guides are
compensated based on the greater of a monthly guarantee or a percentage of
revenues generated by all of the GuideSites.
We believe that our network of GuideSites provides a highly targeted
Internet platform for advertisers and marketers over a broad range of consumer
and business categories. Advertisers and electronic commerce partners have
significant flexibility in determining the level of targeting that they want to
achieve on MININGCO.COM. For several of our electronic commerce partners, we
have developed promotions that integrate original content from MININGCO.COM with
our partners' offerings. We believe these promotions create an engaging
purchasing environment for users, while enhancing the value of our service as an
electronic commerce platform. Some of our recent advertisers and electronic
commerce partners include Bertelsmann Music Group, eBay, IBM, Lowestfare.com,
Microsoft Network, Netscape, Office Max and Qwest.
OUR STRATEGY
Our objective is to become a primary Internet destination and a leading
advertising and electronic commerce platform. We are focused on increasing the
number of users and page views on MININGCO.COM by:
- Building brand awareness through expanded online and offline marketing
campaigns;
- Broadening existing and developing new distribution and syndication
partnerships; and
- Expanding MININGCO.COM'S functions, features and content.
1
<PAGE>
We also intend to convert user traffic into revenues by:
- Broadening our base of advertisers and electronic commerce partners and
optimizing our advertising rates by leveraging the increasing flow of user
traffic in highly targeted sections within the GuideSite network; and
- Expanding our internal advertising sales force, which will enable us to
establish and maintain closer relationships with our advertisers,
advertising agencies and electronic commerce marketers, and reduce
advertising sales costs as a percentage of revenues.
CORPORATE INFORMATION
We were incorporated in New York on June 27, 1996 as General Internet Inc.
We reincorporated in Delaware in December 1998 as MiningCo.com, Inc. Our
principal executive offices are located at 220 East 42nd Street, 24th Floor, New
York, New York 10017. Our telephone number at that location is (212) 849-2000
and our e-mail address is [email protected]. INFORMATION CONTAINED ON OUR WEB
SITE DOES NOT CONSTITUTE PART OF THIS PROSPECTUS.
2
<PAGE>
THE OFFERING
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Common Stock Offered in this Offering.............. 3,000,000 shares
Common Stock Offered in the Concurrent Placement... 206,783 shares
Common Stock Outstanding After this Offering and
the Concurrent Placement......................... 11,551,829 shares
Use of Proceeds.................................... We intend to use the net proceeds of
this offering to execute our business
plan. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol............. MINE
</TABLE>
ADDITIONAL SHARES MAY BE ISSUED AFTER THIS OFFERING AND THE CONCURRENT PLACEMENT
UPON THE EXERCISE OF OPTIONS AND WARRANTS.
You should be aware that we are permitted, and in some cases obligated, to
issue shares of common stock in addition to the common stock to be outstanding
after this offering and the concurrent placement. If and when we issue these
shares, the percentage of common stock you own may be diluted. The following is
a summary of these additional shares of common stock:
- 2,125,054 shares issuable upon the exercise of options outstanding at a
weighted average exercise price of $5.83 per share, of which 881,158 are
exercisable, and 1,035,154 shares available for future option grants, of
which up to 200,000 options will be granted to the guides and will be
outstanding and immediately exercisable following this offering at a price
per share equal to the initial public offering price;
- 125,000 shares available for issuance to our employees who elect to buy
stock in the future under our employee stock purchase plan; and
- 65,860 shares issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $9.80 per share.
------------------------
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS:
- REFLECTS A 1.00 FOR 2.809 REVERSE STOCK SPLIT OF OUR COMMON STOCK THAT
WILL OCCUR BEFORE WE CLOSE THIS OFFERING AND THE CONCURRENT PLACEMENT
(THIS REVERSE STOCK SPLIT OF OUR COMMON STOCK WILL NOT IMPACT THE NUMBER
OF SHARES BEING OFFERED AND WILL NOT HAVE ANY IMPACT ON THE PURCHASERS OF
THE SHARES IN THIS OFFERING OR THE CONCURRENT PLACEMENT);
- REFLECTS THE AUTOMATIC CONVERSION OF ALL OUTSTANDING SHARES OF OUR
CONVERTIBLE PREFERRED STOCK INTO 6,139,640 SHARES OF OUR COMMON STOCK AT
THE SAME TIME AS THE CLOSING OF THIS OFFERING AND THE CONCURRENT
PLACEMENT;
- ASSUMES THE ISSUANCE OF 206,783 SHARES IN THE CONCURRENT PLACEMENT; AND
- ASSUMES THAT THE UNDERWRITERS DO NOT EXERCISE THEIR OPTION TO PURCHASE
ADDITIONAL SHARES AFTER THE CLOSING OF THIS OFFERING AND THE CONCURRENT
PLACEMENT.
------------------------
General Internet, GuideSite, Mining Co., The Mining Company and our logo are
our trademarks. Each other trademark, trade name or service mark appearing in
this prospectus belongs to its holder.
3
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth our summary financial data. This table does
not present all of our financial information. You should read this information
together with our financial statements and the notes to those statements
beginning on page F-1 of this prospectus and the information under "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The pro forma information reflects the automatic
conversion of all outstanding shares of our convertible preferred stock into
6,139,640 shares of our common stock and the automatic forgiveness and
cancellation of $337,100 in unsecured promissory notes payable, each of which
will occur upon the closing of this offering and the concurrent placement.
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27, 1996
(INCEPTION) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, ----------------------
1996 1997 1998
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<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues............................................................. $ -- $ 391 $ 3,722
Gross profit (loss).................................................. (91) (1,457) (267)
Loss from operations................................................. (2,381) (8,341) (14,892)
Net loss............................................................. (2,438) (8,640) (15,578)
Net loss attributable to common stockholders......................... (2,438) (8,640) (16,808)
Basic and diluted net loss per common share.......................... $ (1.20) $ (4.94) $ (9.71)
Weighted average shares outstanding used in basic and diluted net
loss per common share calculation.................................. 2,035,144 1,748,850 1,731,598
Pro forma basic and diluted net loss per common share................ $ (1.98)
Weighted average shares outstanding used in pro forma basic and
diluted net loss per common share.................................. 7,871,238
</TABLE>
The following table is a summary of our balance sheet data. The pro forma as
adjusted column reflects the sale of 3,000,000 shares of common stock in this
offering after deducting underwriting discounts and estimated offering expenses.
The pro forma as adjusted column also reflects the sale of $2,500,000 of common
stock in the concurrent placement. The pro forma as adjusted column assumes an
initial public offering price of $13.00 per share. Please see "Concurrent
Placement" and "Capitalization."
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ------------- --------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 10,644 $ 10,644 $ 48,014
Working capital...................................................... 4,231 4,231 41,601
Total assets......................................................... 15,658 15,658 53,028
Notes payable, excluding current portion............................. 621 284 284
Capital leases, excluding current installments....................... 149 149 149
Convertible preferred stock.......................................... 32,072 -- --
Total stockholders' (deficit) equity................................. (24,662) 7,747 45,117
</TABLE>
4
<PAGE>
RISK FACTORS
ANY INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER
WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION WOULD LIKELY SUFFER. IN
THIS CASE, THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE
ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.
BECAUSE WE HAVE ONLY BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME, THERE IS
LIMITED INFORMATION UPON WHICH YOU CAN EVALUATE OUR BUSINESS.
We were incorporated in June 1996 and launched MININGCO.COM in April 1997.
Accordingly, you can only evaluate our business based on our limited operating
history. As a young company, we face risks and uncertainties relating to our
ability to successfully implement our business plan. If we are unsuccessful in
addressing these risks and uncertainties, our business, results of operations
and financial condition will be materially adversely affected.
WE HAVE LOST MONEY EVERY QUARTER AND EVERY YEAR, AND WE EXPECT TO LOSE MONEY IN
THE FUTURE.
IF OUR REVENUES DO NOT INCREASE SUBSTANTIALLY, WE MAY NEVER BECOME
PROFITABLE. We have not generated enough revenues to exceed the substantial
amounts we have spent to create, launch and enhance MININGCO.COM and to grow our
business. Even if we do achieve profitability, we may not sustain or increase
profitability on a quarterly or annual basis in the future.
A PORTION OF OUR HISTORICAL REVENUES HAVE BEEN DERIVED FROM AN ARRANGEMENT
WITH CITIBANK N.A. AND FROM BARTER AGREEMENTS. In 1998, approximately 12% of our
revenues were derived from an advertising arrangement with Citibank, N.A., which
ended on December 31, 1998. In 1998, approximately 10% of our revenues were
derived from agreements where we traded advertisements on MININGCO.COM in
exchange for advertisements on other web sites without receiving any cash
payments. We expect that these barter revenues will continue to account for
approximately 10% of our revenues in the future.
OUR COSTS OF REVENUES COMBINED WITH OUR OPERATING EXPENSES HAVE EXCEEDED OUR
REVENUES FOR ALL QUARTERS. We have historically funded our operations by selling
our stock and not by generating income from our business. At December 31, 1998,
our accumulated deficit was $26.7 million. We expect to continue to lose money
for the foreseeable future because we plan to continue to incur significant
expenses.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY NEGATIVELY IMPACT OUR STOCK PRICE.
Our quarterly operating results may fluctuate significantly in the future
due to a variety of factors that could affect our revenues or our expenses in
any particular quarter. It is possible that in some future periods our results
of operations may be below the expectations of public market analysts and
investors. In this event, the price of our common stock is likely to fall.
You should not rely on our results of operations during any particular
quarter as an indication of our results for a full year or any other quarter.
Factors that may affect our quarterly results include:
- the demand for advertising on MININGCO.COM;
- the number of users on, and the frequency of their use of, MININGCO.COM
since our advertising revenues are typically based on user traffic;
- our ability to attract and retain advertisers and electronic commerce
partners;
- our ability to meet the minimum numbers of advertisements that we are
required to deliver to users by many of our advertising contracts, since
our failure to do this would result in our
5
<PAGE>
deferring recognition of the related revenues and would reduce our
available advertising inventory in subsequent periods;
- changes in rates paid for advertising on MININGCO.COM;
- the timing and amount of our costs related to advertising sales and
marketing efforts; and
- fees we may pay for distribution or content or other costs we may incur as
we expand our operations.
Our operating expenses are based on our expectations of our future revenues
and are relatively fixed in the short term. Given our limited operating history
and our difficulties in accurately estimating the user traffic historically
experienced on our website, user traffic on our website is difficult to forecast
accurately. Consequently, since revenues from Internet advertising will make up
a significant amount of our revenues for the foreseeable future, our revenues
are difficult to forecast accurately. In particular, we intend to expend
significant amounts to expand our internal advertising sales force and to build
brand awareness of MININGCO.COM. We may be unable to adjust spending quickly
enough to offset any unexpected revenue shortfall. If we have a shortfall in
revenues in relation to our expenses, or if our expenses precede increased
revenues, then our results of operations and financial condition would be
materially adversely affected.
SEASONAL FACTORS MAY AFFECT OUR QUARTERLY OPERATING RESULTS.
Seasonality of our user traffic on MININGCO.COM and our advertising revenues
may cause our total revenues to fluctuate. User traffic on web sites has
typically declined during the summer and year-end vacation and holiday periods.
We believe that advertising sales in traditional media, such as television and
radio, generally are lower in the first and third calendar quarters of each
year. Similar seasonal or other patterns may develop in our business.
WE WILL ONLY BE ABLE TO EXECUTE OUR BUSINESS PLAN IF INTERNET USAGE GROWS.
Our business would be adversely affected if Internet usage does not grow.
Internet usage may be inhibited for any of the following reasons:
- the Internet infrastructure may not be able to support the demands placed
on it, and its performance and reliability may decline as usage grows;
- security and authentication concerns with respect to the transmission over
the Internet of confidential information, such as credit card numbers, and
attempts by unauthorized computer users, so-called hackers, to penetrate
online security systems; and
- privacy concerns, including those related to the ability of web sites to
gather user information without the user's knowledge or consent.
WE WILL ONLY BE ABLE TO EXECUTE OUR BUSINESS PLAN IF INTERNET ADVERTISING
INCREASES.
OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD BE
MATERIALLY ADVERSELY AFFECTED IF THE INTERNET ADVERTISING MARKET DEVELOPS MORE
SLOWLY THAN WE EXPECT OR IF WE ARE UNSUCCESSFUL IN INCREASING OUR ADVERTISING
REVENUES. Revenues from Internet advertising will make up a significant amount
of our revenues for the foreseeable future. Since the Internet advertising
market is new and rapidly evolving, we cannot yet gauge its effectiveness as
compared to traditional advertising media.
THE ADOPTION OF INTERNET ADVERTISING, PARTICULARLY BY THOSE ENTITIES THAT
HAVE HISTORICALLY RELIED UPON TRADITIONAL MEDIA FOR ADVERTISING, REQUIRES THE
ACCEPTANCE OF A NEW WAY OF CONDUCTING BUSINESS, EXCHANGING INFORMATION AND
ADVERTISING PRODUCTS AND SERVICES. Advertisers that have traditionally relied
upon other advertising media may be reluctant to advertise on the Internet.
These businesses may find Internet
6
<PAGE>
advertising to be less effective than traditional advertising media for
promoting their products and services. Many potential advertising and electronic
commerce partners have little or no experience using the Internet for
advertising purposes. Consequently, they may allocate only limited portions of
their advertising budgets to Internet advertising.
ADVERTISERS AND ELECTRONIC COMMERCE MARKETERS MAY NOT ADVERTISE ON
MININGCO.COM OR MAY PAY LESS FOR ADVERTISING ON MININGCO.COM IF THEY DO NOT
BELIEVE THAT THEY CAN RELIABLY MEASURE THE EFFECTIVENESS OF INTERNET ADVERTISING
OR THE DEMOGRAPHICS OF THE USER VIEWING THEIR ADVERTISEMENTS. We use both
internal measurements and measurements provided to us by third parties. If these
third parties are unable to continue to provide these services, we would have to
perform them ourselves or obtain them from another provider. This could cause us
to incur additional costs or cause interruptions in our business while we are
replacing these services. In addition, we are implementing additional systems
designed to record demographic data on our users. If we do not implement these
systems successfully, we may not be able to accurately evaluate the demographic
characteristics of our users. Moreover, "filter" software programs that limit or
prevent advertising from being delivered to an Internet user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Internet advertising.
TO THE EXTENT THAT MINIMUM GUARANTEED IMPRESSION LEVELS ARE NOT MET, WE
DEFER RECOGNITION OF THE CORRESPONDING REVENUES UNTIL GUARANTEED IMPRESSION
LEVELS ARE ACHIEVED. Advertising based on impressions, or the number of times an
advertisement is delivered to users, comprises virtually all of our current
revenues. To the extent that minimum impression levels are not achieved for any
reason, we may be required to provide additional impressions after the contract
term, which would reduce our advertising inventory.
OUR REVENUES COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO ADAPT TO OTHER
INTERNET ADVERTISING PRICING MODELS IF THEY ARE ADOPTED. It is difficult to
predict which, if any, pricing models for Internet advertising will emerge as
the industry standard. This makes it difficult to project our future advertising
rates and revenues.
WE MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CUSTOMER DEMANDS
CONTINUE TO EVOLVE.
To be successful, we must adapt to rapidly changing Internet technologies by
continually enhancing MININGCO.COM and introducing new services to address our
customers' changing demands. We could incur substantial costs if we need to
modify our services or infrastructure in order to adapt to changes affecting
providers of Internet services. Our business, results of operations and
financial condition could be materially adversely affected if we incurred
significant costs to adapt, or cannot adapt, to these changes.
REGULATORY AND LEGAL UNCERTAINTIES COULD HARM OUR BUSINESS.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease the demand for our service,
increase our cost of doing business or otherwise have a material adverse effect
on our business, results of operations and financial condition. There is, and
will be, an increasing number of laws and regulations pertaining to the
Internet. These laws or regulations may relate to liability for information
retrieved from or transmitted over the Internet, online content regulation, user
privacy, taxation and the quality of products and services. Moreover, the
applicability to the Internet of existing laws governing intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment, personal privacy and other issues is uncertain and
developing. Please see "Business--Government Regulation and Legal
Uncertainties."
7
<PAGE>
WE MAY BE LIABLE FOR THE CONTENT WE MAKE AVAILABLE ON THE INTERNET.
We make content available on MININGCO.COM and on the web sites of our
advertisers and distribution partners. The availability of this content could
result in claims against us based on a variety of theories, including
defamation, obscenity, negligence, copyright or trademark infringement. Other
claims may be brought based on the nature, publication and distribution of our
content or based on errors or false or misleading information provided on
MININGCO.COM, including information deemed to constitute professional advice
such as legal, medical, financial or investment advice. We could also be exposed
to liability for third-party content accessed through MININGCO.COM'S links to
other websites or posted by users in chat rooms or bulletin boards offered on
the GuideSites. Our financial condition could be materially adversely affected
if we were found liable for information that we make available. Implementing
measures to reduce our exposure to this liability may require us to spend
substantial resources and limit the attractiveness of our service to users.
Please see "Business--Government Regulations and Legal Uncertainties."
THE DEVELOPMENT OF OUR BRAND IS ESSENTIAL TO OUR FUTURE SUCCESS.
If our brand marketing efforts are unsuccessful, our business, financial
condition and results of operations would be materially adversely affected. In
order to build our brand awareness, we must succeed in our brand marketing
efforts, provide high-quality services and increase user traffic on
MININGCO.COM. These efforts have required, and will continue to require,
significant expenses.
WE MUST INCREASE OUR INTERNAL ADVERTISING SALES FORCE TO SUPPORT OUR GROWTH.
Our business, results of operations and financial condition will be
materially adversely affected if we do not develop and maintain an effective
internal advertising sales force. On January 31, 1999, our internal advertising
sales force had nine members. We need to substantially increase our internal
advertising sales force in the near future to support our growth. Our ability to
increase our sales force involves a number of risks and uncertainties,
including:
- the competition we face in hiring and retaining advertising sales
personnel;
- our ability to integrate, train and motivate additional advertising sales
and advertising sales support personnel;
- our ability to manage a multi-location advertising sales organization; and
- the length of time it takes new advertising sales personnel to become
productive.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.
Competition could result in less user traffic to MININGCO.COM, price
reductions for our advertising inventory, reduced margins or loss of market
share, any of which would have a material adverse effect on our business,
results of operations and financial condition. We face intense competition for
users and for advertisers and electronic commerce marketers. We expect this
competition to increase because there are no substantial barriers to entry in
our market. Competition may also increase as a result of industry consolidation.
We may not be able to compete successfully.
We compete for users, advertisers and electronic commerce marketers with the
following:
- Internet retrieval companies, search engines and other Internet "portal"
companies (such as Excite, InfoSeek, Lycos and Yahoo!);
- online content web sites (such as C--net, ESPN.com and ZDNet.com);
- online community web sites (such as iVillage);
8
<PAGE>
- online personal homepage services (such as GeoCities and theglobe.com);
- publishers and distributors of television, radio and print (such as CBS,
Disney, NBC and Time Warner);
- general purpose consumer online services (such as America Online and
Microsoft Network); and
- web sites maintained by Internet service providers (such as AT&T Worldnet,
Earthlink and MindSpring).
Our ability to compete depends on many factors, many of which are outside of
our control. These factors include the quality of content provided by us and by
our competitors, the ease of use of services developed either by us or by our
competitors, the timing and market acceptance of new and enhanced services
developed either by us or by our competitors, and sales and marketing efforts by
us and our competitors.
Many of our existing competitors, as well as potential new competitors, have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
This may allow them to devote greater resources than we can to the development
and promotion of their services. These competitors may also engage in more
extensive research and development, adopt more aggressive pricing policies and
make more attractive offers to existing and potential employees, guides,
distribution partners, and advertisers and electronic commerce partners. Our
competitors may develop services that are equal or superior to MININGCO.COM or
that achieve greater market acceptance than MININGCO.COM. In addition, current
and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their services to address the needs of advertisers and electronic commerce
marketers. As a result, it is possible that new competitors may emerge and
rapidly acquire significant market share.
WE WOULD BE UNABLE TO PROVIDE CONTENT WITHOUT THE EFFORTS OF OUR NETWORK OF
GUIDES.
Our business, results of operations and financial condition would be
materially adversely affected if our guides fail to provide us with adequate
content or if we fail to successfully replace former guides on a timely basis.
We are substantially dependent on our network of guides for providing in-depth,
high-quality, up-to-date content that covers thousands of subjects. Our guides
may not continue to provide us with a sufficient amount of high-quality content
covering a broad enough range of subjects. Furthermore, any number of guides may
discontinue their relationship with us. In addition, since the guides are
independent contractors, we have less control over the content production
process than if the guides were our employees.
WE COULD INCUR SIGNIFICANT WITHHOLDING TAXES AND EMPLOYEE BENEFITS EXPENSES IF
THE GUIDES WERE DEEMED TO BE OUR EMPLOYEES RATHER THAN INDEPENDENT
CONTRACTORS.
One or more jurisdictions or taxing authorities, including the Internal
Revenue Service, may seek to treat the guides as our employees rather than
independent contractors. As a result, they may seek to impose taxes, interest or
penalties on us. In addition, employees are generally entitled to healthcare and
other benefits that are typically unavailable to independent contractors. Since
we believe that the guides are independent contractors, we would vigorously
oppose any claim to the contrary. However, our efforts to do so might not be
successful. We have not estimated the minimum quantitative effect that these
taxes or employee benefit costs would have on us if the guides were deemed to be
employees. Our business, results of operations and financial condition would be
materially adversely affected if these claims are made and we do not prevail or
if we are required to treat the guides as employees for tax or employee benefit
purposes or otherwise. Please see "Business--Government Regulation and Legal
Uncertainties."
9
<PAGE>
WE DEPEND ON RELATIONSHIPS WITH THIRD PARTIES.
Our business, results of operations and financial condition could be
materially adversely affected if we do not establish and maintain distribution
relationships on commercially reasonable terms or if any of our distribution
relationships do not result in increased user traffic on MININGCO.COM. A portion
of the users who come to MININGCO.COM come from third-party web sites with which
we have non-exclusive, short-term distribution relationships. Since these web
sites may not attract significant numbers of users themselves, MININGCO.COM may
not receive a significant number of additional users from these relationships.
Moreover, we may have to pay significant fees to establish additional
relationships or maintain existing relationships in the future.
In the future, we may also enter into agreements with advertisers,
electronic commerce marketers or other third-party web sites that require us to
exclusively feature these parties in certain sections or on certain pages of
MININGCO.COM. These exclusivity agreements may limit our ability to enter into
other advertising or sponsorship agreements or other strategic relationships.
Many companies we may pursue for strategic relationships also offer competing
services. As a result, these competitors may be reluctant to enter into
strategic relationships with us.
WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH.
In order to execute our business plan, we must grow significantly. This
growth will place a significant strain on our personnel, management systems and
resources. If we do not manage growth effectively, our business, results of
operations and financial condition would be materially adversely affected. We
expect that the number of our employees, including management-level employees,
will continue to increase for the foreseeable future. Some of our key employees
have recently been hired, including our Vice President--Marketing who was hired
in November 1998 and our Chief Financial Officer who was hired in January 1999.
These individuals do not have significant experience working with us or our
management team. In addition, we expect that the number of guides will continue
to increase as new GuideSites are established. We must continue to improve our
operational and financial systems and managerial controls and procedures, and we
will need to continue to expand, train and manage our workforce. We must also
maintain close coordination among our technical, accounting, finance, marketing,
sales and editorial organizations.
WE DEPEND ON OUR KEY PERSONNEL.
Our future success depends, in part, on the continued service of our key
management personnel, particularly Mr. Scott P. Kurnit, our President and Chief
Executive Officer, and Mr. William C. Day, our Chief Operating Officer. Although
we are the beneficiary of a key person life insurance policy on Mr. Kurnit's
life, the loss of his services, or the services of other key employees, would
have a material adverse effect on our business, results of operations and
financial condition. Our future success also depends on our ability to attract,
retain and motivate highly skilled employees. Competition for employees in our
industry is intense. We may be unable to attract, assimilate or retain other
highly qualified employees in the future. We have from time to time in the past
experienced, and we expect to continue to experience in the future, difficulty
in hiring and retaining highly skilled employees with appropriate
qualifications.
THE PERFORMANCE OF MININGCO.COM IS CRITICAL TO OUR BUSINESS AND TO OUR
REPUTATION.
Any system failure, including network, software or hardware failure, that
causes an interruption in our service or a decrease in responsiveness of
MININGCO.COM could result in reduced user traffic on MININGCO.COM and reduced
revenue. MININGCO.COM has in the past experienced slower response times and
interruptions in service for a variety of reasons. MININGCO.COM could also be
affected by computer viruses, electronic break-ins or other similar disruptions.
Our insurance policies have low coverage
10
<PAGE>
limits and therefore our insurance may not adequately compensate us for any
losses that may occur due to any interruptions in our service.
In January 1998, we entered into an Internet-hosting agreement with Frontier
Global Center ("Frontier") to maintain all of our production servers at
Frontier's Manhattan Data Center until February 1, 2000. Our operations depend
on Frontier's ability to protect its and our systems against damage from fire,
power loss, water damage, telecommunications failures, vandalism and other
malicious acts, and similar unexpected adverse events. Any disruption in the
Internet access provided by Frontier could have a material adverse effect on our
business, results of operations and financial condition.
Our users and our guides depend on Internet service providers, online
service providers and other web site operators for access to MININGCO.COM. Each
of these providers has experienced significant outages in the past, and could
experience outages, delays and other difficulties due to system failures
unrelated to our systems.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND WE MAY BE
LIABLE FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Third parties may infringe or misappropriate our patents, trademarks or
other proprietary rights, which could have a material adverse effect on our
business, results of operations or financial condition. While we enter into
confidentiality agreements with our material employees, guides, consultants and
strategic partners, and generally control access to and distribution of our
proprietary information, the steps we have taken to protect our proprietary
rights may not prevent misappropriation. In addition, we do not know whether we
will be able to defend our proprietary rights since the validity, enforceability
and scope of protection of proprietary rights in Internet-related industries is
uncertain and still evolving.
Third parties may assert infringement claims against us. From time to time
in the ordinary course of business we have been, and we expect to continue to
be, subject to claims of alleged infringement of the trademarks and other
intellectual property rights of third parties. These claims and any resultant
litigation, should it occur, could subject us to significant liability for
damages. In addition, even if we prevail, litigation could be time-consuming and
expensive to defend, and could result in the diversion of our time and
attention. Any claims from third parties may also result in limitations on our
ability to use the intellectual property subject to these claims unless we are
able to enter into agreements with the third parties making these claims.
WE WOULD LOSE REVENUES AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR MATERIAL
THIRD-PARTY SYSTEMS ARE NOT YEAR 2000 COMPLIANT.
We have not yet devised a Year 2000 contingency plan. The failure of our
internal systems, or any material third-party systems, to be Year 2000 compliant
would have a material adverse effect on our business, results of operations and
financial condition. Although we believe that each of our material systems is
Year 2000 compliant, we will not conduct an end-to-end system test until the
second quarter of 1999. Accordingly, we do not yet know whether our internal
system, as a whole, is Year 2000 compliant. We are also contacting our
third-party vendors, licensors and providers of hardware, software and services
regarding their Year 2000 readiness. Although Frontier has represented to us
that its internal systems are Year 2000 compliant, their failure to be compliant
would adversely affect our ability to deliver our service. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Impact of the Year 2000."
11
<PAGE>
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS AND WE MAY NOT BE ABLE TO OR OUR
ABILITY TO SECURE ADDITIONAL FINANCING.
We may need to raise additional funds in the future in order to fund more
aggressive brand promotion or more rapid expansion, to develop new or enhanced
services, to respond to competitive pressures or to make acquisitions. Any
required additional financing may not be available on terms favorable to us, or
at all. If adequate funds are not available on acceptable terms, we may be
unable to fund our expansion, successfully promote our brand, or take advantage
of acquisition opportunities, develop or enhance services, respond to
competitive pressures or take advantage of acquisition opportunities, any of
which could have a material adverse effect on our business, results of
operations and financial condition. If additional funds are raised by our
issuing equity securities, stockholders may experience dilution of their
ownership interest and the newly issued securities may have rights superior to
those of the common stock. If additional funds are raised by our issuing debt,
we may be subject to limitations on our operations, including limitations on the
payment of dividends. We currently anticipate that the net proceeds from this
offering and the concurrent placement, together with currently available funds,
will be sufficient to meet our anticipated needs for at least the next 12
months. Please see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT
OUR STOCK PRICE.
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of common stock in the market after this
offering, or the perception that these sales could occur. These sales also might
make it more difficult for us to sell equity securities in the future at a time
and at a price that we deem appropriate. Please see "Shares Eligible for Future
Sale."
AFTER THIS OFFERING AND THE CONCURRENT PLACEMENT, OUR OFFICERS AND DIRECTORS MAY
STILL CONTROL US.
Our executive officers and directors will, in the aggregate, beneficially
own approximately 38.3% of the common stock following this offering and the
concurrent placement. These stockholders may be able to exercise control over
all matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may also have the effect of delaying or preventing a change in
control of us, which could have a material adverse effect on our stock price.
Please see "Principal Stockholders."
OUR SHARES MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS.
The market for the stocks of Internet-related companies has experienced
extreme price and volume fluctuations. Following this offering, investor
interest in us may not lead to the development of an active or liquid trading
market. The market price of our common stock may be volatile, and may decline
below the initial public offering price. In the past, securities class action
litigation has often been instituted against a company following periods of
volatility in the market price of the company's securities. If instituted
against us, regardless of the outcome, litigation could result in substantial
costs and a diversion of our management's attention and resources and have a
material adverse effect on our business, results of operations and financial
condition.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price per share will significantly exceed the
net tangible book value per share. Accordingly, investors purchasing shares in
this offering will suffer immediate and substantial dilution of their
investment. Please see "Dilution."
12
<PAGE>
CONCURRENT PLACEMENT
On February 23, 1999, MiningCo and Comcast Interactive Investments, Inc.
entered into a common stock purchase agreement pursuant to which MiningCo has
agreed to sell to Comcast shares of common stock for a total of $2,500,000.
Comcast will purchase the shares at a price equal to 93% of the initial public
offering price per share. Since Comcast will purchase the shares directly from
MiningCo in a private placement, the underwriters will not receive any discount
or commission on the sale of these shares. The closing of this concurrent
placement is contingent on, and is scheduled to close simultaneously with, the
closing of this offering.
The shares being sold in the concurrent placement will not be registered for
immediate resale under the Securities Act. As a result, Comcast will not
immediately be able to sell its shares in the public market. However, Comcast
will become a party to MiningCo's amended and restated investors' rights
agreement. Pursuant to this agreement, Comcast will be able to have its shares
of common stock registered for resale under the Securities Act at various times
in the future. See "Description of Securities--Registration Rights" and "Shares
Eligible for Future Sale."
FORWARD LOOKING STATEMENTS; MARKET DATA
Many statements made in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere are
forward-looking statements that are not based on historical facts. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements, including those
discussed under "Risk Factors."
This prospectus contains market data related to MiningCo and the Internet.
This market data includes projections that are based on a number of assumptions.
The assumptions include that:
- no catastrophic failure of the Internet will occur;
- the number of people online and the total number of hours spent online
will increase significantly over the next five years;
- the value of online advertising dollars spent per online user hour will
increase;
- the download speed of content will increase dramatically; and
- Internet security and privacy concerns will be adequately addressed.
If any one or more of the foregoing assumptions turns out to be incorrect,
actual results may differ from the projections based on these assumptions. The
failure of these markets to grow at these projected rates may have a material
adverse effect on MiningCo's business, results of operations and financial
condition, and the market price of MiningCo's common stock.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to MiningCo from the sale of the shares offered by this
prospectus and in the concurrent placement, after deducting underwriting
discounts and the estimated offering expenses payable by MiningCo, are estimated
to be approximately $37.4 million ($42.8 million if the underwriters'
over-allotment option is exercised in full), assuming an initial public offering
price of $13.00 per share. The principal purposes of this offering are to obtain
additional capital, to create a public market for the common stock and to
facilitate future access by MiningCo to public securities markets.
MiningCo intends to use the net proceeds of this offering and the concurrent
placement to execute its business plan. As part of this plan, MiningCo expects
to increase its sales and marketing efforts and hire additional internal
advertising sales personnel. In addition, MiningCo expects to use a portion of
the proceeds to fund its capital expenditures. MiningCo estimates that its
capital expenditures will be approximately $4.0 million for 1999, which is
expected to be used for technical infrastructure improvements and for the
expansion of MiningCo's office space. While MiningCo may also use a portion of
the proceeds for acquisitions, MiningCo has no present understandings or
agreements relating to any acquisitions. Other than with respect to its expected
capital expenditures, MiningCo has not yet determined the amount of net proceeds
to be used specifically for any of the other foregoing purposes. Accordingly,
management will have significant flexibility in applying a significant portion
of the net proceeds of this offering and the concurrent placement. Pending any
such use, as described above, MiningCo intends to invest the net proceeds in
interest-bearing instruments.
DIVIDEND POLICY
MiningCo has not declared or paid any cash dividends on its capital stock
since inception and does not expect to pay any cash dividends for the
foreseeable future. MiningCo currently intends to retain future earnings, if
any, to finance the expansion of its business.
14
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1998, the capitalization
of MiningCo:
- on an actual basis;
- on a pro forma basis to reflect the automatic conversion of all
outstanding shares of convertible preferred stock into 6,139,640 shares
of common stock and the automatic forgiveness and cancellation of
$337,100 in unsecured promissory notes upon the closing of this
offering and the concurrent placement; and
- on a pro forma as adjusted basis to give effect to the sale of
3,000,000 shares in this offering and 206,783 shares being sold in the
concurrent placement after deducting underwriting discounts and the
estimated offering costs payable by MiningCo, assuming an initial
public offering price of $13.00 per share.
This information should be read together with MiningCo's financial statements
and the notes relating to those statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............................................ $ 10,644 $ 10,644 $ 48,014
---------- ----------- -----------
---------- ----------- -----------
Notes payable, excluding current portion............................. $ 621 $ 284 $ 284
Obligations under capital leases, excluding current
installments....................................................... 149 149 149
Convertible preferred stock, $0.001 par value; 18,662,260 shares
authorized; 17,246,122 shares issued and outstanding actual; no
shares issued and outstanding pro forma or pro forma as adjusted... 32,072 -- --
Stockholders' (deficit) equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no
shares issued and outstanding actual, pro forma or pro forma as
adjusted......................................................... -- -- --
Common stock, $0.001 par value, 50,000,000 shares authorized;
2,202,558 shares issued and outstanding actual; 8,342,198 shares
issued and outstanding pro forma; and 11,548,981 shares issued
and outstanding pro forma as adjusted (1)........................ 2 8 12
Additional paid-in capital........................................... 3,231 35,634 73,000
Deferred compensation................................................ (1,239) (1,239) (1,239)
Accumulated deficit.................................................. (26,656) (26,656) (26,656)
---------- ----------- -----------
Total stockholders' (deficit) equity............................... (24,662) 7,747 45,117
---------- ----------- -----------
Total capitalization............................................. $ 8,180 $ 8,180 $ 45,550
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------------------
(1) MiningCo expects that there will be 11,551,829 shares of common stock
outstanding after this offering and the concurrent placement. This number
includes, in addition to the adjustments described above, 2,848 shares
issued upon option and warrant exercises that occurred after December 31,
1998. After the closing of this offering and the concurrent placement, no
shares of preferred stock will be issued or outstanding. See "Prospectus
Summary--Additional shares may be issued after this offering and the
concurrent placement upon the exercise of options and warrants."
15
<PAGE>
DILUTION
The pro forma net tangible book value of MiningCo as of December 31, 1998
was $7,178,100, or $0.86 per share. MiningCo's pro forma net tangible book value
per share is equal to the amount of MiningCo's total assets less intangible
assets less total liabilities, divided by the pro forma number of shares of
common stock outstanding as of December 31, 1998.
Assuming that MiningCo sells the 3,000,000 shares offered by this prospectus
at an initial public offering price of $13.00 per share and the 206,783 shares
being sold in the concurrent placement at a price of $12.09 per share (93% of
$13.00), after deducting the underwriting discounts and the estimated offering
expenses payable by MiningCo, the pro forma net tangible book value of MiningCo
as of December 31, 1998 would have been $44,548,100, or $3.86 per share. This
represents an immediate increase in pro forma net tangible book value of $3.00
per share to existing stockholders and an immediate dilution in pro forma net
tangible book value of $9.14 per share to investors purchasing shares in this
offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................... $ 13.00
Pro forma net tangible book value per share as of December 31, 1998... $ 0.86
Pro forma increase in net tangible book value per share attributable
to new investors.................................................... 3.00
---------
Pro forma net tangible book value per share after this offering and the
concurrent placement.................................................. 3.86
---------
Pro forma dilution per share to investors purchasing shares in this
offering.............................................................. $ 9.14
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1998, differences between existing stockholders and the new investors purchasing
shares in this offering and the concurrent placement in:
- the total number of shares of common stock purchased from MiningCo;
- the total consideration paid to MiningCo; and
- the average price per share paid by existing stockholders, by stockholders
purchasing shares in the concurrent placement and by new investors
purchasing shares in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 8,342,198 72.2% $ 33,494,762 44.7% $ 4.02
Investor in the concurrent placement......... 206,783 1.8 2,500,006 3.3 12.09
New investors in this offering............... 3,000,000 26.0 39,000,000 52.0 13.00
------------ --------- ------------- --------- ------
Total.................................... 11,548,981 100% $ 74,994,768 100% $ 6.49
------------ --------- ------------- --------- ------
------------ --------- ------------- --------- ------
</TABLE>
None of the foregoing tables or calculations assume that any options or
warrants outstanding as of December 31, 1998 will be exercised. If all
outstanding options and warrants were exercised on the date of the closing of
this offering, investors purchasing shares in this offering would suffer total
dilution of $8.68 per share. Please see "Prospectus Summary--Additional shares
may be issued after this offering and the concurrent placement upon the exercise
of options and warrants."
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read together with the
financial statements and the notes to those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The statement of operations data for the
period from June 27, 1996 (inception) through December 31, 1996 and for the
years ended December 31, 1997 and 1998, and the balance sheet data at December
31, 1997 and 1998 are derived from the audited financial statements of MiningCo
included elsewhere in this prospectus. The balance sheet data as of December 31,
1996 has been derived from audited financial statements of MiningCo not included
in this prospectus. Historical results are not necessarily indicative of the
results to be expected in the future.
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27, 1996
(INCEPTION) YEAR ENDED
TO DECEMBER 31,
DECEMBER 31, ----------------------
1996 1997 1998
------------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues............................................................... $ -- $ 391 $ 3,722
Cost of revenues....................................................... 91 1,848 3,989
------------- ---------- ----------
Gross profit (loss).................................................... (91) (1,457) (267)
Operating expenses:
Sales and marketing.................................................. 241 1,678 7,725
General and administrative........................................... 1,101 2,415 3,678
Product development.................................................. 948 2,791 2,771
Amortization of deferred compensation................................ -- -- 451
------------- ---------- ----------
Total operating expenses............................................... 2,290 6,884 14,625
------------- ---------- ----------
Loss from operations................................................... (2,381) (8,341) (14,892)
Other income (expense), net............................................ (57) (299) (686)
------------- ---------- ----------
Net loss............................................................... (2,438) (8,640) (15,578)
Cumulative dividends and accretion of convertible preferred stock to
liquidation value.................................................... -- -- (1,230)
------------- ---------- ----------
Net loss attributable to common stockholders........................... $ (2,438) $ (8,640) $ (16,808)
------------- ---------- ----------
------------- ---------- ----------
Basic and diluted net loss per common share............................ $ (1.20) $ (4.94) $ (9.71)
------------- ---------- ----------
------------- ---------- ----------
Weighted average shares outstanding used in basic and diluted net loss
per common share calculation......................................... 2,035,144 1,748,850 1,731,598
------------- ---------- ----------
------------- ---------- ----------
Pro forma basic and diluted net loss per common share.................. $ (1.98)
----------
----------
Weighted average shares outstanding used in pro forma basic and diluted
net loss per common share calculation................................ 7,871,238
----------
----------
</TABLE>
17
<PAGE>
The following balance sheet data is presented:
- on an actual basis;
- on a pro forma basis at December 31, 1998 to reflect the automatic
conversion of all outstanding shares of convertible preferred stock into
6,139,640 shares of common stock and the automatic forgiveness and
cancellation of $337,100 in unsecured promissory notes payable upon the
closing of this offering and the concurrent placement; and
- on a pro forma as adjusted basis at December 31, 1998 to give effect to
the sale of 3,000,000 shares in this offering and 206,783 shares being
sold in the concurrent placement after deducting underwriting discounts
and the estimated offering costs payable by MiningCo, assuming an initial
public offering price of $13.00 per share.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
DECEMBER 31, ------------------------
--------------------------------- PRO FORMA
1996 1997 1998 PRO FORMA AS ADJUSTED
--------- ---------- ---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 1,647 $ 303 $ 10,644 $ 10,644 $ 48,014
Working capital (deficit)............................ 1,195 (3,098) 4,231 4,231 41,601
Total assets......................................... 2,039 1,357 15,658 15,658 53,028
Convertible notes payable............................ -- 4,851 -- -- --
Notes payable, excluding current portion............. 3,972 3,630 621 284 284
Capital leases, excluding current installments....... -- 252 149 149 149
Convertible preferred stock.......................... -- -- 32,072 -- --
Total stockholders' (deficit) equity................. (2,425) (10,944) (24,662) 7,747 45,117
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF MININGCO SHOULD BE READ TOGETHER WITH THE FINANCIAL STATEMENTS AND
THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. PLEASE SEE "RISK FACTORS" AND "FORWARD LOOKING STATEMENTS; MARKET
DATA."
OVERVIEW
For the period from MiningCo's incorporation on June 27, 1996 through April
1997, MiningCo's operating activities related primarily to the initial
development of MININGCO.COM, recruitment of employees and guides, and the
establishment of MiningCo's organizational and technical infrastructure. Since
the launch of MININGCO.COM in April 1997, revenues and operating expenses have
increased as MiningCo enhanced its network of guides, expanded its editorial and
operating staff, improved MININGCO.COM's functions and features and promoted
MININGCO.COM to increase brand awareness. As part of its marketing efforts,
MiningCo has conducted online campaigns and, beginning in June 1998, an offline
campaign consisting of a national trade magazine print campaign, and outdoor and
radio advertisements in selected cities.
To date, substantially all of MiningCo's revenues have been derived from the
sale of advertisements on MININGCO.COM. These sales have been made both to
companies that advertise their products and services over the Internet and to
electronic commerce marketers. MiningCo expects to derive its revenue
principally from the sale of advertising on MININGCO.COM for the foreseeable
future. MiningCo currently offers advertisers and electronic commerce partners
numerous sizes and types of advertising placement, including banner
advertisements, button advertisements and text links. MiningCo also offers
sponsorship programs and other promotional opportunities to build brand
awareness and drive user traffic to an advertiser's or electronic commerce
partner's web site. To date, sales of advertisements on MININGCO.COM have been
generated primarily by MiningCo's internal advertising sales organization and,
to a lesser extent, by third-party advertising sales representatives. For the
year ended December 31, 1998, a third-party Internet advertising sales
representative organization accounted for approximately 21% of MiningCo's total
revenues. As of January 31, 1999, MiningCo had an internal advertising sales
organization consisting of nine professionals. MiningCo believes that it needs
to significantly increase the size of its internal advertising sales
organization to successfully execute its growth strategy and, accordingly,
MiningCo intends to hire additional advertising sales professionals. By doing
so, MiningCo believes it can reduce its advertising sales costs as a percentage
of revenues and develop and maintain closer relationships with advertisers and
electronic commerce marketers.
Revenues from advertising sales are recognized ratably in the period in
which the advertisement is displayed, provided that no significant MiningCo
obligations remain and collection of the resulting receivable is probable.
Payments received from advertisers prior to displaying their advertisements on
MININGCO.COM are recorded as deferred revenues and are recognized as revenues
ratably as the advertisements are displayed. Pursuant to its agreements with
advertisers, MiningCo generally guarantees a minimum number of impressions, or
times that an advertisement is delivered to users of MININGCO.COM, for a fixed
fee. To the extent these minimum guaranteed impression levels are not met,
MiningCo defers recognition of the corresponding revenues until the guaranteed
impression levels are achieved.
For the year ended December 31, 1998, approximately 10% of MiningCo's
revenues were generated by agreements where MiningCo traded advertisements on
MININGCO.COM in exchange for advertisements on third-party web sites without
receiving any cash payment. The corresponding expenses from these barter
arrangements, which equal the amount of the barter revenues from these
arrangements, are included as a component of cost of revenues.
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Advertisers on MININGCO.COM enter into short-term agreements, typically one
to three months in duration. MiningCo's agreements with its electronic commerce
partners are typically longer in duration, ranging from six months to two years
and, in particular cases, these agreements entitle MiningCo to a share of
revenues generated by sales of merchandise and services over a particular
threshold resulting from direct links from MININGCO.COM. Through December 31,
1998, MiningCo had not recognized any material revenues from these revenue
sharing agreements. Any revenues MiningCo derives from these revenue sharing
agreements will be recognized by MiningCo upon notification from its advertisers
and electronic commerce partners of sales attributable to MININGCO.COM.
Guides are currently compensated at an amount equal to the greater of a
monthly minimum guarantee or a percentage of net advertising revenues generated
by the entire GuideSite network, which is distributed among the guides based on
the user traffic on their respective GuideSites. For these purposes, net
advertising revenues has been defined as total advertising revenues received
less particular types of non-cash revenues, third-party advertising sales
representative organization fees and marketing costs. Guides are also currently
entitled to share a percentage of net transaction revenues and net syndication
revenues. In addition, management may distribute a semi-annual discretionary
bonus to guides. Guide compensation, including any compensation that may result
from the grant of stock options to the guides, is included as a component of
cost of revenues.
MiningCo has recorded deferred compensation expense of approximately
$1,716,900 for the year ended December 31, 1998 in connection with the grant of
stock options to employees and directors, representing the difference between
the deemed value of the common stock at the date of grant for accounting
purposes and the exercise price of the related options. This expense is
amortized over the vesting period, typically four years, of the applicable
options. MiningCo currently expects to amortize the following amounts of
deferred compensation expense annually: 1999--$332,000; 2000--$332,000;
2001--$332,000; and 2002--$242,900. However, $92,000 of the deferred
compensation expense will amortize upon the closing of this offering as a result
of an automatic acceleration clause contained within the original terms of the
option plan for a portion of the outstanding options. Amortization of deferred
compensation expense was $478,000 for the year ended December 31, 1998, of which
$27,000 is related to deferred compensation expense for the grant of options to
operations personnel, has been included in cost of revenues.
During January 1999, MiningCo entered into employment arrangements with two
employees. The employment arrangements provide for minimum salary levels, and
incentive compensation and severance benefits. MiningCo granted options to
purchase a total of 133,500 shares of common stock to the two employees. The
exercise price of the options is $4.21 per share. As a result, MiningCo expects
to record deferred compensation expense of approximately $1,173,000 in the first
quarter of 1999 relating to these options based on the difference between the
deemed fair value of the common stock for accounting purposes, in this case the
assumed initial public offering price of $13.00 per share, and $4.21 per share.
This deferred compensation expense will be amortized over the four-year vesting
period of the applicable options.
Upon the closing of this offering, Mining Co intends to grant fully vested,
non-qualified stock options to purchase up to 200,000 shares of common stock to
a substantial majority of its guides. The exercise price per share of these
options is expected to be the initial public offering price of the common stock
and the options are expected to have two year terms. Since the guides are
independent contractors, MiningCo expects to record compensation expense of up
to approximately $1.9 million representing the fair market value of the options
at the date of grant. The resulting compensation expense will be included in
cost of revenues in the quarter in which this offering is consummated.
RESULTS OF OPERATIONS
REVENUES. Revenues consist primarily of advertising revenues on
MININGCO.COM. MININGCO.COM was launched in April 1997. Revenues were $0 for the
period from June 27, 1996 (inception) to
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<PAGE>
December 31, 1996, $391,000 for the year ended December 31, 1997, which included
$73,000 of barter revenues, and $3.7 million for the year ended December 31,
1998, which included $366,000 of barter revenues. During the year ended December
31, 1998, 12% of MiningCo's revenues were derived from an advertising
arrangement with Citibank N.A., which ended on December 31, 1998. The
period-to-period growth in revenues was primarily attributable to an increase in
the number of advertisers and the number of advertisements delivered to users.
MiningCo anticipates that revenues from advertising will continue to account for
substantially all of MiningCo's revenues for the foreseeable future, and that
barter revenues will remain relatively constant as a percentage of Mining Co's
total revenues.
COST OF REVENUES. Since the launch of MININGCO.COM in April 1997, cost of
revenues has consisted primarily of guide compensation, third-party Internet
advertising sales organization fees, salaries of operations personnel, site
hosting and depreciation costs and barter advertising expenses. In 1996,
MiningCo's first year of operation, cost of revenues consisted of guide fees,
site hosting and depreciation costs incurred in connection with developing
MiningCo's service. Cost of revenues was $91,000 for the period from June 27,
1996 (inception) to December 31, 1996, $1.8 million for the year ended December
31, 1997 and $4.0 million for the year ended December 31, 1998. This
period-to-period growth in cost of revenues was primarily attributable to an
increase in the fees paid to guides, which increased by $1.1 million from 1996
to 1997 and an additional $1.0 million from 1997 to 1998, and in site hosting
and operations costs, which increased by $492,000 from 1996 to 1997 and an
additional $570,000 from 1997 to 1998, which was due to growth in user traffic
on MININGCO.COM. Commencing in June 1998, MiningCo engaged a third-party
Internet advertising sales representative organization to supplement its
internal advertising sales force in selling MININGCO.COM'S advertising inventory
in exchange for a service fee. Fees paid to the third-party Internet advertising
sales organization accounted for an increase of $233,000 in cost of revenues
from 1997 to 1998.
SALES AND MARKETING EXPENSES. Sales and marketing expenses consist
primarily of online and offline advertising costs, salaries and commissions of
internal sales and marketing personnel, public relations costs, payments to
third-party Internet companies to drive user traffic to MININGCO.COM and other
marketing expenses. In 1996, MiningCo did not dedicate meaningful funds to sales
and marketing as MININGCO.COM was not launched until April 1997. Sales and
marketing expenses were $241,000 for the period from June 27, 1996 (inception)
to December 31, 1996, $1.7 million for the year ended December 31, 1997 and $7.7
million for the year ended December 31, 1998. The period-to-period increase in
sales and marketing expenses from 1996 to 1997 was primarily attributable to the
initiation of MiningCo's online advertising and other promotional expenditures,
which increased by $916,000, as well as increased sales and marketing personnel
and related expenses, which increased by $512,000. The period-to-period increase
in sales and marketing expenses from 1997 to 1998 was primarily attributable to
the initiation of MiningCo's offline marketing and the expansion of online
advertising efforts, which accounted for an increase of $4.9 million, of which
$817,000 was expense related to third-party Internet companies to drive user
traffic to MININGCO.COM, as well as increased sales and marketing personnel and
related expenses, which increased by $329,000. Sales and marketing expenses in
absolute dollars have increased as a result of the continued development and
implementation of MiningCo's branding and marketing campaigns. MiningCo expects
that sales and marketing expenses will continue to increase in absolute dollars
for the foreseeable future as MiningCo increases expenditures for marketing,
promotion and branding, expands its internal advertising sales force and hires
additional marketing personnel.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of salaries and related costs for general corporate functions,
including finance, accounting, facilities and legal expenses, and fees for
professional services. General and administrative expenses were $1.1 million for
the period from June 27, 1996 (inception) to December 31, 1996, $2.4 million for
the year ended December 31, 1997 and $3.7 million for the year ended December
31, 1998. The absolute
21
<PAGE>
dollar increase in general and administrative expenses was primarily
attributable to increased salaries and related expenses associated with hiring
additional personnel, which increased by $694,000 from 1996 to 1997 and by
$622,000 from 1997 to 1998, and facility-related expenses, which increased by
$588,000 from 1996 to 1997 and by $622,000 from 1997 to 1998, to support the
growth of MiningCo's operations. MiningCo expects that it will incur additional
general and administrative expenses as it hires additional personnel and incurs
additional costs related to the growth of its business and its operation as a
public company, including directors' and officers' liability insurance of
approximately $175,000 per year, investor relations programs of approximately
$100,000 per year and professional service fees. Accordingly, MiningCo
anticipates that general and administrative expenses will continue to increase
in absolute dollars in future periods.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses include
personnel and consulting costs associated with the design, development and
testing of MININGCO.COM and MiningCo's systems and editorial personnel costs.
MiningCo expenses its product development costs as incurred. Product development
expenses were $948,000 for the period from June 27, 1996 (inception) to December
31, 1996, $2.8 million for the year ended December 31, 1997 and $2.8 million for
the year ended December 31, 1998. MiningCo launched its site in April, 1997. The
increase in absolute dollars in product development expenses from 1996 to 1997
was primarily attributable to increased staffing levels required to design,
develop and test modifications and improvements to MININGCO.COM. Product
development expenses remained constant from 1997 to 1998 due to nonrecurring
consulting fees associated with the pre-launch development of MININGCO.COM
incurred during the first six months of 1997, offset by an increase in staffing
levels in 1998 to support the growth and development of MININGCO.COM. MiningCo
believes that timely deployment of new and enhanced features and technology are
critical to attaining its strategic objectives. Accordingly, MiningCo intends to
continue recruiting and hiring experienced product development personnel and to
make additional investments in product development. MiningCo expects that
product development expenditures will increase in absolute dollars in future
periods.
AMORTIZATION OF DEFERRED COMPENSATION EXPENSE. MiningCo has recorded
deferred compensation expense of $1,716,900 during 1998, for the difference
between the exercise price and the deemed fair value of stock options granted by
MiningCo to employees, consisting of operational and non-operational personnel,
and directors. This amount is being amortized over the vesting periods of the
individual stock options, which are typically four years. During 1998,
amortization of these charges for non-operational personnel amounted to
$451,000. During 1998, amortization of these charges for operational personnel
was $27,000, which amount is included in cost of revenues.
OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
expense related to MiningCo's debt and capital lease obligations, net of income
from consulting activities and interest income from MiningCo's cash and cash
equivalents. Other income (expense), net was $(57,000) for the period from June
27, 1996 (inception) to December 31, 1996, $(299,000) for the year ended
December 31, 1997 and $(686,000) for the year ended December 31, 1998. The
change was primarily attributable to interest accrued on outstanding debt
obligations and amortization of debt discount. During 1997, MiningCo provided
consulting services to a major financial institution for an aggregate amount of
$450,000. Pursuant to its agreement with this financial institution, MiningCo
agreed to provide strategic assistance in creating, supporting and managing
customized web sites around which communities on specific areas of interest for
the financial institution's customers would be created. The term of the
agreement was from June 20, 1997 through December 15, 1997. Fees generated by
these services, net of expenses, have been recorded as other income, net of
which $350,000 was recorded for the year ended December 31, 1997. MiningCo did
not provide consulting services during 1998 and does not anticipate providing
consulting services in the future.
CUMULATIVE DIVIDENDS AND ACCRETION OF CONVERTIBLE PREFERRED
STOCK. Cumulative dividends on MiningCo's convertible preferred stock amounted
to $1,196,800 in 1998. In addition, MiningCo
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<PAGE>
accreted $33,700 of costs associated with the convertible preferred stock
issuances. Each share of convertible preferred stock was entitled to a
cumulative dividend at a rate of $0.135 per share per annum for the Series A
convertible preferred stock, $0.162 per share per annum for the Series B
convertible preferred stock and $0.176 per share per annum for the Series C
convertible preferred stock. Upon the closing of this offering, 3,346,715 shares
of Series A convertible preferred stock, 6,597,596 shares of Series B
convertible preferred stock and 7,301,811 shares of Series C convertible
preferred stock, representing all of the outstanding shares of convertible
preferred stock, shall automatically convert into 6,139,640 shares of common
stock.
QUARTERLY RESULTS OF OPERATIONS DATA
The following table sets forth unaudited quarterly statement of operations
data for each of the eight quarters ended December 31, 1998. In the opinion of
management, this data has been prepared substantially on the same basis as the
audited financial statements appearing elsewhere in this prospectus, and
includes all necessary adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of such data. The quarterly data
should be read together with the financial statements and the notes to those
statements appearing elsewhere in this prospectus. The results of operations for
any quarter are not necessarily indicative of the results of operations for any
future period.
MiningCo has a limited operating history upon which to evaluate its business
and to predict revenues and plan operating expenses. In order to be successful,
MiningCo must attract more user traffic to MININGCO.COM and generate significant
advertising revenues. MiningCo expects its quarterly operating results to vary
significantly in the future due to a variety of factors, many of which are
outside its control. Since MiningCo expects to be substantially dependent on
revenues from advertising for the foreseeable future, its quarterly revenues are
likely to be particularly affected by user traffic levels on MININGCO.COM.
MiningCo launched its service in April 1997 with a significant online marketing
campaign. As a result, MiningCo spent heavily on marketing in the second quarter
of 1997 to help support this launch. During the second half of 1997, MiningCo's
general and administrative expenses declined due to reductions in compensation
of MiningCo's officers. Following the completion of a private equity financing
in April 1998, MiningCo used a portion of the proceeds to begin its offline
marketing campaign. Please see "Risk Factors--Our quarterly operating results
may fluctuate."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1997 1997 1997 1998 1998 1998
----------- ----------- --------------- --------------- ----------- ----------- ---------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............ $ -- $ 46 $ 135 $ 210 $ 152 $ 396 $ 1,030
Cost of revenues.... 292 494 511 551 546 720 1,168
----------- ----------- ------- ------- ----------- ----------- -------
Gross profit
(loss)........ (292) (448) (376) (341) (394) (324) (138)
Operating expenses:
Sales and
marketing....... 359 847 239 233 301 1,042 2,297
General and
administrative... 729 631 563 492 581 715 1,005
Product
development..... 664 743 811 573 471 594 752
Amortization of
deferred
compensation.... -- -- -- -- 200 31 94
----------- ----------- ------- ------- ----------- ----------- -------
Total operating
expenses...... 1,752 2,221 1,613 1,298 1,553 2,382 4,148
----------- ----------- ------- ------- ----------- ----------- -------
Loss from
operations........ (2,044) (2,669) (1,989) (1,639) (1,947) (2,706) (4,286)
Other income
(expense), net.... (75) (120) (15) (89) (478) (93) (70)
----------- ----------- ------- ------- ----------- ----------- -------
Net loss............ $ (2,119) $ (2,789) $ (2,004) $ (1,728) $ (2,425) $ (2,799) $ (4,356)
----------- ----------- ------- ------- ----------- ----------- -------
----------- ----------- ------- ------- ----------- ----------- -------
<CAPTION>
<S> <C>
DECEMBER 31,
1998
------------
<S> <C>
Revenues............ $ 2,144
Cost of revenues.... 1,555
------------
Gross profit
(loss)........ 589
Operating expenses:
Sales and
marketing....... 4,085
General and
administrative... 1,377
Product
development..... 954
Amortization of
deferred
compensation.... 126
------------
Total operating
expenses...... 6,542
------------
Loss from
operations........ (5,953)
Other income
(expense), net.... (45)
------------
Net loss............ $ (5,998)
------------
------------
</TABLE>
23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, MiningCo has financed its operations primarily through the
private placement of equity securities and the incurrence of indebtedness. As of
December 31, 1998, MiningCo had $10.6 million in cash and cash equivalents.
To date, MiningCo has experienced negative cash flows from operating
activities. Net cash used in operating activities was $6.0 million for the year
ended December 31, 1997 and $9.8 million for the year ended December 31, 1998.
Net cash used in operating activities for these periods was primarily
attributable to MiningCo's net losses during these periods, adjusted for certain
non-cash items, and a higher level of accounts receivable resulting from an
increase in MiningCo's revenues, which was partially offset by increases in
accounts payable, accrued expenses and deferred revenues. For the year ended
December 31, 1998, the increase in net cash used in operating activities was
primarily attributable to MiningCo's net operating loss of $15.6 million offset
by an increase in accounts payable and accrued expenses.
Net cash used in investing activities was $148,000 for the year ended
December 31, 1997 and $2.9 million for the year ended December 31, 1998. All net
cash used in investing activities related to capital expenditures, primarily for
the acquisition of equipment.
Net cash provided by financing activities was $4.8 million for the year
ended December 31, 1997 and $23.1 million for the year ended December 31, 1998.
Net cash provided by financing activities in 1997 was primarily attributable to
net proceeds received by MiningCo from the issuance of notes payable. Net cash
provided by financing activities in 1998 was primarily attributable to net
proceeds from the issuances of loans payable and preferred stock and the
exercise of warrants by investors in December 1998, and, to a lesser extent,
borrowings under a secured credit facility related to equipment financing. At
December 31, 1998, there was no additional availability under this credit
facility and the balance outstanding was $437,500, of which $154,000 is due in
1999, $157,000 in 2000 and $126,500 in 2001. In January and February 1999,
MiningCo entered into a lease line of credit for $781,300 to finance capital
equipment, of which $232,200 is due in 1999, $268,800 in 2000, $273,300 in 2001
and $7,000 in 2002.
As of December 31, 1998, MiningCo's principal capital commitments consisted
of obligations outstanding under capital and operating leases. MiningCo has
spent approximately $3.4 million on capital expenditures since inception,
excluding capital lease agreements. MiningCo estimates that its capital
expenditures will be approximately $4.0 million for 1999. MiningCo currently
expects that its principal capital expenditures through 1999 will relate to
improvements to its technical infrastructure and expansion of MiningCo's office
space.
MiningCo's ability to generate significant revenues is uncertain. MiningCo
has incurred substantial costs to create, launch and enhance MININGCO.COM and to
grow its business. MiningCo incurred net losses of $2.4 million for the period
from June 27, 1996 (inception) to December 31, 1996, $8.6 million for the year
ended December 31, 1997 and $15.6 million for the year ended December 31, 1998.
At December 31, 1998, MiningCo had an accumulated deficit of $27.9 million.
MiningCo expects losses from operations and negative cash flow to continue for
the foreseeable future as a result of its expansion plans and its expectation
that its operating expenses, particularly sales and marketing expenses, will
increase significantly in the next several years. Although MiningCo has
experienced revenue growth in recent periods, MiningCo's revenues may not remain
at their current level or increase in the future. If MiningCo's revenues do not
increase substantially, MiningCo may not achieve profitability, which would have
a material adverse effect on MiningCo's business, results of operations and
financial condition. Even if MiningCo achieves profitability, it may not sustain
or increase profitability on a quarterly or annual basis in the future.
MiningCo currently anticipates that the net proceeds of this offering,
together with the net proceeds of the concurrent placement and available funds,
will be sufficient to meet its anticipated needs for at least the next 12
months. MiningCo may need to raise additional funds in the future in order to
24
<PAGE>
fund more aggressive brand promotion or more rapid expansion, to develop new or
enhanced services, to respond to competitive pressures or to make acquisitions.
Any required additional financing may not be available on terms favorable to
MiningCo, or at all. If adequate funds are not available or not available on
acceptable terms, MiningCo may be unable to fund its expansion, successfully
promote its brand, develop or enhance services, respond to competitive pressures
or take advantage of acquisition opportunities, which could have a material
adverse effect on MiningCo's business, results of operations and financial
condition. If additional funds are raised by the issuance of MiningCo's equity
securities, stockholders may experience dilution of their ownership interest and
those securities may have rights superior to those of the holders of the common
stock. If additional funds are raised by the issuance of debt by MiningCo,
MiningCo may be subject to certain limitations on its operations, including
limitations on the payment of dividends.
IMPACT OF THE YEAR 2000
Many currently installed computer systems and software products are coded to
accept or recognize only two-digit entries in the date code field. These systems
may recognize a date using "00" as the year 1900 rather than the year 2000. As a
result, computer systems and/or software used by many companies and governmental
agencies may need to be upgraded to comply with Year 2000 requirements or risk
system failure or miscalculations causing disruptions of normal business
activities.
MiningCo is exposed to the risk that the systems on which it depends to
conduct its operations are not Year 2000 compliant.
STATE OF READINESS. MiningCo has substantially completed the process of
determining the Year 2000 readiness of its information technology systems, which
includes the hardware and software necessary to provide and deliver
MININGCO.COM, and its non-information technology systems, including telephone
systems and other office equipment used internally. MiningCo's assessment plan
consists of the following steps:
- evaluating MiningCo's date dependent code, software and hardware and
evaluating external dependencies
- quality assurance testing of MiningCo's internally-developed proprietary
software and systems incorporated in MININGCO.COM
- contacting third-party vendors and licensors of material hardware,
software and services that are related to the delivery of MININGCO.COM
- contacting vendors of material non-information technology systems used by
MiningCo
- formulating repair or replacement requirements and implementing corrective
measures
- evaluating the need for, and preparing and implementing, if required, a
contingency plan
To date, MiningCo's assessment has determined the following:
- Internally developed software and systems have been checked for date
dependent code, and all material files and systems are Year 2000 compliant.
MiningCo believes that recently installed code is also Year 2000 compliant.
- MiningCo has been informed by vendors of material hardware and software
components of its information technology systems that the products used by
MiningCo are currently Year 2000 compliant.
- MiningCo's hosting service, Frontier Global Center, has certified that its
systems are Year 2000 compliant.
- Commercial software upon which MiningCo is dependent is either Year 2000
compliant or will be upgraded to be compliant in the normal course of
business through upgrades or installation of software patches.
- Substantially all hardware used in MiningCo's network operations and all
of the hardware used in its office operations has been certified as Year
2000 compliant by its vendors.
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<PAGE>
- MiningCo's telephone system, fax machines and mail systems have been
certified as Year 2000 compliant.
- MiningCo's landlords and third-party advertising sales representative and
servicing organizations have not yet provided MiningCo with information
regarding their Year 2000 compliance.
While MiningCo has assessed the Year 2000 readiness of each of its material
internal systems, it will not conduct an end-to-end system test until the second
quarter of 1999. Accordingly, MiningCo cannot yet assess whether its internal
system, as a whole, is Year 2000 compliant. In addition, MiningCo will continue
to attempt to obtain verification from all remaining distributors, suppliers and
vendors that their systems are Year 2000 compliant. MiningCo intends to complete
its assessment, and the replacement or remediation of any non-Year 2000
compliant technologies, by the end of the third quarter of 1999.
COSTS. MiningCo estimates that the total cost for its Year 2000 compliance
efforts will be approximately $250,000. Most of these expenses relate to the
operating costs associated with time spent by employees in Year 2000 compliance
matters. If MiningCo encounters unexpected difficulties, or if it is unable to
obtain compliance information from material third parties, it may need to spend
additional amounts to ensure that its systems are Year 2000 compliant.
RISKS. Although MiningCo has received compliance information from its
material third-party vendors, it has not received compliance information from
all of its third-party vendors. In addition, it is possible that MiningCo's
third-party vendors were mistaken in certifying that their systems are Year 2000
compliant. In addition, MiningCo will not conduct an end-to-end system test
until the second quarter of 1999. The failure of MiningCo to fix its internal
systems or to fix or replace material third-party software, hardware or services
on a timely basis could result in lost revenues, increased operating costs and
other business interruptions, any of which could have a material adverse effect
on MiningCo's business, results of operations and financial condition. Moreover,
the failure to adequately address Year 2000 compliance issues could result in
claims of mismanagement and related litigation, which would be costly and
time-consuming to defend.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside MiningCo's control will be Year 2000 compliant. The failure by those
entities to be Year 2000 compliant could result in a systemic failure beyond the
control of MiningCo, such as a prolonged Internet, telecommunications or
electrical failure, which could also prevent MiningCo from delivering
MININGCO.COM, decrease the use of the Internet or prevent users from accessing
MININGCO.COM, any of which would have a material adverse effect on MiningCo's
business, results of operations and financial condition.
CONTINGENCY PLAN. As discussed above, MiningCo is engaged in an ongoing
Year 2000 assessment and has developed no contingency plans to address the
worst-case scenario that might occur if technologies it is dependent upon
actually are not Year 2000 compliant. The results of MiningCo's Year 2000
simulation testing and the responses received from all third-party vendors and
service providers will be taken into account in determining the need for and
nature and extent of any contingency plans. MiningCo intends to develop any
required contingency plan by the end of the second quarter of 1999.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"), which provides guidance
for determining whether computer software is internal-use software and
accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. SOP 98-1
also provides guidance on capitalization of the costs incurred for computer
software developed or obtained for internal use. MiningCo does not expect the
adoption of SOP 98-1 to have a material effect on its capitalization policy.
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BUSINESS
OVERVIEW
MININGCO.COM is a leading Internet news, information and entertainment
service. Our service is a network of over 600 web sites, each of which focuses
on a specific topic and is managed by a knowledgeable human guide. Through these
GuideSites, MININGCO.COM provides annotated Internet directories that include
approximately 400,000 pre-screened links to other web sites, enabling users to
quickly find relevant Internet content. The GuideSite network also provides
original high-quality content that is created regularly by the guides on
thousands of subjects. Additionally, our GuideSites provide focused forums
around which organized and moderated online communities develop. We believe that
our service offers an enjoyable and efficient Internet experience for users
across a broad range of topics, creating highly targeted marketing opportunities
for advertisers and for businesses that market their products and services over
the Internet. We believe that over 4.6 million unique users visited MININGCO.COM
in January 1999, making MININGCO.COM the sixth largest news/information/
entertainment Internet property in terms of audience reach and the 26th largest
Internet property overall for that month.
INDUSTRY BACKGROUND
The Internet is a significant and rapidly growing global medium for
collecting and exchanging information, communicating, entertaining and
conducting business. The growth of this medium is being driven by the
development of compelling Internet content, increasing consumer awareness of the
Internet and inexpensive web access. MiningCo believes that the number of
Internet users worldwide exceeded 68 million in 1997 and will grow to over 319
million by 2002.
INTERNET ADVERTISING AND ELECTRONIC COMMERCE. Unlike most traditional
media, the Internet allows advertisers to target specific audiences while
tracking impression levels, user demographics and advertisement effectiveness.
MiningCo believes that online advertising revenues will grow from approximately
$940 million in 1997 to approximately $7.7 billion in 2002.
Since online purchases of goods and services can be less expensive and more
convenient than traditional transactions, the Internet is becoming a powerful
electronic commerce platform. MiningCo believes that as the volume of electronic
commerce transactions expands, retailers will offer a greater variety of
products and services over the Internet. MiningCo believes that the amount of
goods and services purchased in online consumer transactions will grow from
approximately $2.6 billion in 1997 to approximately $37.5 billion in 2002.
INTERNET NAVIGATION. The rapid growth in the amount of information
available on the Internet presents significant challenges for users seeking
specific information and resources. A number of tools have emerged to enable
users to find this information, including Internet directories and search
engines. Internet directories generally list web sites by specific topics of
interest and by their Internet address, thus enabling an interested user to go
directly to the listed site by clicking on the address. However, with the growth
of the amount of content available on the Internet, these directories have
become increasingly difficult to build and maintain with a high level of
quality. Search engines typically use software that searches the Internet to
capture, store and index web site information in order to retrieve web site
listings in response to a query. These software programs have a limited ability
to accurately determine the quality or relevance of the web sites being
referenced. MiningCo believes that, as the Internet grows, the ability of
traditional Internet directories and search engines to provide current and
relevant references is likely to diminish, making these services less useful.
CONTENT. A vast amount of content is being added to the Internet every day
and the quality of this content varies significantly. MiningCo believes that
higher quality Internet content is typically found
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on topic-specific sites, and is created by individuals who are knowledgeable
about their topics. Because these sites tend to be widely dispersed, users
generally must visit a number of unaffiliated sites in order to access
high-quality content on more than one topic. MiningCo believes that few Internet
services offer aggregated high-quality content across a wide range of topics.
COMMUNITY. Internet users often seek organized online communities where
they can interact with individuals who share similar interests and find related
information, products and services. MiningCo believes that few Internet services
provide a broad range of community features. For example, home page services
allow users to create their own web pages and interact with other users, but
often do not provide quality information, products and services. In addition,
home page services often lack paid individuals responsible for monitoring and
organizing the communities.
MiningCo believes that Internet users are seeking Internet navigation that
enables users to efficiently locate relevant information, original content
developed by knowledgeable authors on a broad range of topics and moderated and
organized online communities. In addition, MiningCo believes that Internet
advertisers and electronic commerce marketers are seeking a highly targeted
audience with a propensity to purchase goods and services online.
THE MININGCO.COM SOLUTION
MiningCo, through its network of knowledgeable and paid guides, offers
relevant, filtered Internet directories, high-quality original content on
thousands of subjects and hundreds of full-featured online communities. The
guides complete a comprehensive 16-week training process and are monitored for
quality and consistency. MiningCo believes that MININGCO.COM fosters brand
loyalty, repeat usage and increased duration of visits by providing an
enjoyable, efficient Internet experience. The breadth of the GuideSite network
and the focus of each GuideSite on MININGCO.COM provides advertisers and
electronic commerce marketers with highly targeted marketing opportunities
across numerous consumer and business categories.
ENHANCED INTERNET NAVIGATION SERVICE. MiningCo's network of over 600
GuideSites features annotated Internet directories that include approximately
400,000 links to other web sites. The guides regularly search the Internet to
find relevant content sites, or specific pages within a site, and evaluate their
quality and timeliness, saving the user from this time-consuming and often
frustrating task. In addition to pre-screening and selecting links, the guides
provide concise descriptions of the content on each link, enabling users to
quickly indentify relevant Internet content.
HIGH-QUALITY, AGGREGATED CONTENT. MiningCo's service provides original
content that is created by the guides on a regular basis. This content includes
features and newsletters. The aggregation of GuideSites allows users to find a
broad range of high-quality content within a single network. MiningCo has
exclusive online rights to all guide-developed content, which enables MiningCo
to increase both MININGCO.COM usage and related revenue opportunities. For
example, MiningCo is able to syndicate this content to other Internet services
to drive traffic to MININGCO.COM. Additionally, MiningCo can use this content to
create promotions for its electronic commerce partners that integrate this
content with content provided by the electronic commerce partner.
RICHER COMMUNITY EXPERIENCE. MiningCo believes that its GuideSites provide
focused forums around which online communities develop. Each GuideSite includes
a variety of community features that are moderated by the guides, including
bulletin boards, chat and events calendars, as well as quality information,
products and services. MiningCo believes that its knowledgeable and paid guides
maintain high-quality interaction and organization in their communities. Users
may also e-mail guides directly to seek information.
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TARGETED ADVERTISING AND ELECTRONIC COMMERCE. MiningCo believes that its
service provides advertisers and electronic commerce marketers with a broad
range of highly targeted marketing opportunities. MiningCo believes that, in
winter 1999, the percentage of MININGCO.COM users that purchased online was
higher than users of leading navigation sites in some of the largest electronic
commerce categories, including books, airline tickets/reservations, computer
hardware, general software, musical CDs/tapes, stocks and mutual funds, event
tickets, home banking software, flowers, Internet software and business
equipment.
THE MININGCO.COM STRATEGY
MiningCo's objective is to become a primary Internet destination and a
leading Internet advertising and electronic commerce platform. The key elements
of MiningCo's strategy include:
BUILDING BRAND AWARENESS. MiningCo believes that establishing brand
awareness is critical to attracting and retaining users, advertisers and
electronic commerce partners. In June 1998, MiningCo augmented its online
marketing efforts with the initiation of its first significant offline marketing
campaign. MiningCo intends to build its brand awareness and user traffic by
significantly expanding its marketing efforts, including both offline and online
marketing initiatives. MiningCo also intends to build brand awareness through
distribution and syndication partnerships.
INCREASING TRAFFIC THROUGH DISTRIBUTION AND SYNDICATION PARTNERSHIPS. In
addition to its marketing and brand building initiatives, MiningCo believes that
distribution and syndication partnerships are a valuable way to drive traffic to
MININGCO.COM. Through these partnerships, MiningCo provides content to a
partner's web site, and users can link to MININGCO.COM by clicking on this
content. MiningCo has formed partnerships with Internet service providers such
as AT&T Worldnet, BellSouth.net and Earthlink; content web sites such as CBS
SportsLine and Weather.com; search engines/Internet directories such as
GoTo.com, LookSmart, Metacrawler and Netscape Communications' NetSearch; and
broadband cable-related sites such as AMC American Pop, American Movie Classics,
Bravo, Court TV, Home Box Office, Independent Film Channel, LifetimeTV.com,
Romance Classics and Showtime. MiningCo also intends to enter into relationships
with companies that could provide channel or section content to MiningCo.
MiningCo intends to expand its existing distribution and syndication
partnerships and to develop relationships with additional partners in the
future.
INCREASING USAGE OF MININGCO.COM. MiningCo believes that expanding the
functions, features and content of MININGCO.COM, as well as increasing internal
cross-promotion between GuideSites, will increase user loyalty, repeat usage and
duration per visit. MiningCo plans to further develop its registration and
personalization processes and to introduce programs to convert users to members.
EXPANDING INTERNAL ADVERTISING SALES CAPABILITIES. MiningCo believes that a
strong internal advertising sales organization is essential to effectively
generate revenues from MININGCO.COM. As of January 31, 1999, MiningCo had an
internal advertising sales staff of nine professionals. To supplement the
efforts of its internal advertising sales staff, MiningCo uses third-party
advertising sales representatives to sell advertisements. MiningCo intends to
significantly increase the size of its internal sales staff in order to maintain
closer relationships with its advertisers and electronic commerce partners, to
optimize its advertising rates and to reduce advertising sales costs as a
percentage of revenues.
CONVERTING TRAFFIC INTO REVENUES. MiningCo's service is designed to offer a
highly targeted platform for advertisers and electronic commerce partners.
MiningCo intends to increase its advertising revenues by focusing on a number of
key strategies, including broadening its base of advertisers and electronic
commerce partners and optimizing its advertising rates by leveraging the
increasing flow of traffic in highly targeted sections within the GuideSite
network.
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MININGCO.COM
MiningCo's service is a scalable network of more than 600 GuideSites, each
of which focuses on a particular topic and is managed by a knowledgeable guide
who is paid by MiningCo. MiningCo's GuideSites are currently organized into the
following 18 channels and 105 sections:
ARTS/LITERATURE
Books/Authors
Performing Arts
Visual Arts/Design
Writing/Publishing
BUSINESS/CAREERS
Business
Industries/Professions
Job Searching
COMPUTING/TECHNOLOGY
Business/Industry
Games
Hardware
Multimedia
OS
Programming
Software
EDUCATION
Adult/Continuing Ed
Arts
College/University
History
Languages
Literature
Philosophy/Religion
Primary/Secondary Ed
Sciences--Life/Earth
Sciences--Physical/
Computer
Social Sciences
ENTERTAINMENT
Comedy
Movies
Music
Online
Radio
TV
FINANCE/INVESTING
GAMES
Electronic Games
Games--General
HEALTH/FITNESS
Alternative Medicine
Disabilities
Diseases/Conditions
Fitness/Wellness
Medicine
Mental Health
Women's Health
HOBBIES
Arts/Crafts
Collecting
Pastimes
HOME/FAMILY
Beauty/Fashion
Cars/Cycles
Drinks/Beverages
Food/Cooking
Gardening
Home
Parenting
Pets
Relationships
INTERNET/ONLINE
Business/Industry
Communication
Design
Development/
Programming
Security
Sites/Services
KIDS/TEENS
Arts
Computers/Internet
Kids/Teens Connecting
Entertainment
Games
For Grownups
For Teens
Hobbies/Interests
Home/Family
News/Current Events
Homework
Sports/Fitness For Teens
LOCAL
California US
Canada
Great Plains US
Hawaii US
Midatlantic US
Midwest US
Mountain US
New England US
Pacific Northwest US
Southeast US
Southwest US
NEWS/MEDIA
Media
News/Weather
SHOPPING
SOCIETY/CULTURE
Beliefs/Folklore
Cultures--Americas
Cultures--World
Government/Politics
Groups/Subcultures
Issues/Causes
Religion
Sexuality
SPORTS
Fishing/Hunting
Individual/Spectator
Motor Sports
Recreation
Sports-General
Team/Spectator
Water Sports
Winter Sports
TRAVEL
Asia/Pacific/Mideast
Europe
Latin America/Caribbean
Resources
US/Canada
Vacations
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MiningCo has developed a template for consistent presentation of each
GuideSite's navigational features, content and community tools. This template
includes:
- a welcome page that promotes various aspects of a GuideSite, including the
guide's latest featured article;
- the name, e-mail address and photograph of the guide managing the
GuideSite;
- an Internet directory that provides annotated links to the guide's
selected third-party Internet content;
- an archive of the guide's original content features;
- a guide-created e-mail newsletter to allow GuideSite users to stay in
touch with developments on the GuideSite and the GuideSite's topic;
- a guide-moderated bulletin board where visitors can post questions,
opinions or information;
- a chat room for visitors that is used for regularly scheduled,
guide-hosted chat sessions and unscheduled open chat;
- an events calendar maintained by the guide that lists various activities
and events related to the GuideSite's topic;
- a guide biography page that provides users with background information
regarding the guide; and
- a feedback form for users to submit comments directly to the guide
regarding a particular GuideSite.
In order to receive e-mail newsletters and to access GuideSite bulletin boards
and chat rooms, users first register with MININGCO.COM by providing basic
information.
MiningCo's editors regularly identify noteworthy content features within the
GuideSites, and combine this content in a variety of formats for users. This
content is used to create daily features on pages within MININGCO.COM (e.g.,
"MININGCO TODAY"), and to develop e-mail newsletters. MiningCo believes that
these features and newsletters are effective site promotion and user retention
tools.
DISTRIBUTION AND SYNDICATION PARTNERSHIPS
MiningCo believes that its distribution and syndication partnerships drive
traffic to MININGCO.COM. Through these partnerships, MiningCo provides content
to a partner's web site, and users can link to MININGCO.COM by clicking on the
content. The flexibility and breadth of MiningCo's content enables it to partner
with a broad range of Internet companies, including Internet service providers,
content web sites, search engines/Internet directories and broadband
cable-related sites. MiningCo has agreements to provide content to some of the
leading Internet service providers, such as AT&T WorldNet, BellSouth.net and
EarthLink. Additionally, MiningCo provides content to popular content web sites
such as CBS SportsLine and Weather.com. MiningCo also currently has agreements
with search engines/Internet directories such as GoTo.com, LookSmart,
Metacrawler and Netscape Communications' NetSearch. MiningCo also has agreements
with broadband cable-related sites such as AMC American Pop, American Movie
Classics, Bravo, Court TV, LifetimeTV.com, Home Box Office, Independent Film
Channel, Romance Classics and Showtime. These agreements typically require
MiningCo to make payments that are either fixed or are based on the amount of
user traffic directed from the partner's site to MININGCO.COM. In some
instances, MiningCo will display a partner's logo and/or color scheme to users
who are directed to MININGCO.COM by that partner.
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ADVERTISING AND ELECTRONIC COMMERCE RELATIONSHIPS
MiningCo believes its service provides a highly targeted platform for
advertisers and electronic commerce partners over a broad range of consumer and
business categories. To date, sales of advertisements on MININGCO.COM have been
generated primarily by MiningCo's internal advertising sales organization and,
to a lesser extent, by third-party advertising sales representatives. As of
January 31, 1999, MiningCo had an internal advertising sales organization
consisting of nine professionals, located in New York, Los Angeles and San
Francisco. MiningCo intends to significantly increase the size of its internal
advertising sales organization. MiningCo's internal advertising sales force
maintains close relationships with advertisers by consulting regularly with them
on design and placement of their Internet-based advertising, by providing them
with advertising measurement analysis and by providing a high level of customer
support. MiningCo's agreements with its third-party advertising sales
representatives are generally terminable by either party with 90 days' prior
written notice.
MiningCo's advertisers enter into short-term agreements, typically one to
three months, under which they generally receive a guaranteed number of
impressions for a fixed fee. MiningCo's agreements with its electronic commerce
partners are typically longer in length, ranging from six months to two years
and, in particular cases, these agreements entitle MiningCo to a share of
revenues generated by sales of merchandise or services over a particular
threshold resulting from direct links from MININGCO.COM. Advertisers and
electronic commerce partners have significant flexibility in determining the
placement of their advertisements based on the level of targeting they want to
achieve. MiningCo offers advertisers and electronic commerce partners numerous
sizes and types of advertising placement, including banner advertisements,
button advertisements and text links. MiningCo also offers sponsorship programs
and other promotional opportunities to build brand awareness and to drive
traffic to the web sites of its advertisers and electronic commerce partners.
ADVERTISING CUSTOMERS. The following is a list of some of the advertisers
that advertised on MININGCO.COM during 1998:
- @Hand
- Auction Universe
- Bid.com
- Bell Atlantic's Big Yellow
- Citibank
- Dow Jones Interactive
- eBay
- HomeShark
- House.net
- IBM
- Intellipost
- Schering-Plough
- Tripod
- ValuPage
- Ziff Davis' ZD University
ELECTRONIC COMMERCE PARTNERS. As of January 31, 1999, MiningCo had
electronic commerce partnerships with the following entities:
- Bertelsmann Music Group (Music CD's)
- Beyond.com (Software)
- BigStar Entertainment (Videos)
- Buy.com (Computer hardware)
- iVillage (Baby supplies through iBaby)
- LowestFare.com (Travel)
- Office Max (Office supplies)
- Trading Direct (Online brokerage)
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MiningCo leverages its content to facilitate online sales of merchandise and
services. For several of its electronic commerce partners, MiningCo has
developed promotions that integrate original content from MININGCO.COM with
traditional commercial advertising. MiningCo provides links to these integrated
promotional web sites by prominently displaying an electronic commerce partner's
advertisement within MININGCO.COM. For example, MiningCo has developed an online
video store for BigStar that integrates BigStar's video offerings with movie
reviews independently written by MININGCO.COM guides. As part of this promotion,
guides can make recommendations for movies related to their GuideSites' topics
that are linked to the BigStar video store. As of December 31, 1998, over 130
guides had created annotated links to BigStar's video store within their
GuideSites. MiningCo believes these features create a more relevant, engaging
purchasing vehicle for users, while enhancing the value of MiningCo's service as
an electronic commerce platform.
MARKETING AND BRAND PROMOTION
MiningCo believes that an aggressive brand promotion campaign will increase
usage of MININGCO.COM, as well as attract additional advertisers and electronic
commerce partners. MiningCo markets its service through online advertising. In
addition, MiningCo has been advertising in selected cities through traditional
offline media, including outdoor and radio advertisements, and a national trade
magazine campaign. MiningCo also utilizes public relations, trade shows and
ongoing customer communications programs. MiningCo intends to expand its
marketing and brand promotion initiatives.
THE GUIDE RELATIONSHIP
As of January 31, 1999, MiningCo's 605 guides, 333 of which had been guides
for at least one year, were located in over 40 states and 18 countries. Through
the GuideSites, these independent contractors create annotated Internet
directories and original content, and moderate community tools such as bulletin
boards and chat.
APPLICATION AND TRAINING. MiningCo recruits its guides through various
methods, including searches of the Internet for topic-specific web sites run by
individuals, MININGCO.COM user inquiries, referrals by existing guides and
Internet-based classified job listings. Guide applications are available on
MININGCO.COM and are screened by a team of editors who read and evaluate the
applicant's sample feature and Internet directories, as well as assess the
applicant's knowledge of his or her topic. Once an application is accepted, the
applicant becomes an associate guide and is placed into a four-week preliminary
training class. During this period, the associate guide is taught how to
construct and maintain a GuideSite, how to administer a bulletin board and chat,
and how to create features and newsletters. At the same time, MiningCo reviews
the associate guide's feature articles and directories for quality of
organization, annotation, completeness, direct linking to relevant pages within
web sites and writing skills. If the associate guide meets certain qualification
criteria at the end of this period, his or her web site becomes a live GuideSite
and the associate guide becomes a guide.
Following successful completion of the training class, each guide is placed
in a comprehensive 12-week follow-on training and quality control process.
During this period, the editorial staff provides guides with feedback on the
strengths and weaknesses of their GuideSites and makes recommendations for
further improvements of both quality and consistency. At the end of this 12-week
period, the quality of the GuideSite is rated. This rating is regularly
revisited by the editors and is one of the factors that determines a guide's
minimum compensation.
GUIDE CONTRACTS. Pursuant to the standard guide contract, MiningCo is
granted an exclusive perpetual license to use guide-developed MININGCO.COM
content on the Internet and on any other commercial online service, subject to
the guide sharing in any associated revenue. In addition, MiningCo also retains
the right, on a non-exclusive basis, to use the content in any offline media,
subject to the guide sharing in any associated revenue. The guides have agreed
to share with MiningCo
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any revenue derived from the guide's use of this content in any offline media.
The standard guide contract is terminable by either party upon 15 days' prior
written notice.
GUIDE COMPENSATION. Guides are currently compensated based on the greater
of a monthly guarantee or a percentage of net advertising revenues generated by
all of the GuideSites on MININGCO.COM, which is distributed among the guides
based on the user traffic on each guide's respective GuideSite. By compensating
guides based on the net advertising revenues of all of the GuideSites, the
guides are provided incentives to help and encourage each other. Guides are also
currently entitled to share a percentage of net transaction revenues and net
syndication revenues. In addition, MiningCo may distribute a discretionary bonus
to guides based on outstanding content, exceptional performance and longevity.
Upon the closing of this offering, MiningCo intends to grant non-qualified stock
options to a significant majority of its guides to purchase up to an aggregate
of 200,000 shares of common stock at an exercise price per share equal to the
initial public offering price.
EDITORIAL PROCEDURES. The guides are directly supported by a team of 35
MiningCo employees, including 22 editors. Editors regularly monitor each
GuideSite to assess the relevance and quality of features, the management of
community tools and compliance with MiningCo policies. Editors also provide
weekly newsletters and host chats with guides to better communicate GuideSite
tips, including news, ideas for improving sites and marketing information.
ONLINE GUIDE LOUNGE. MiningCo provides relevant information to the guides
through a password-protected web site and via bulletin boards, chat and
newsletters. The guide lounge includes a library of reference information for
the guides, including MiningCo policies, publishing regulations and other useful
information. The guide lounge also enables guides to become members of their own
community.
OPERATING INFRASTRUCTURE
MININGCO.COM's operating infrastructure is designed to provide timely and
efficient delivery of the service to users. In response to end-user requests,
each page on a GuideSite is generated and delivered by one of MiningCo's web and
applications servers. MiningCo's service uses Microsoft Windows NT and Sun
Solaris as operating systems, and Microsoft's Internet Index Server and
Netscape's Enterprise Web server software. MININGCO.COM's functions integrate
commercial and company-developed software. All of MiningCo's internally
developed applications utilize Active Server Page technology, and many interact
with various third-party applications licensed by MiningCo, including
Microsoft's Internet Index Server search function, Microsoft's SQL Server
database software, Proxicom's Forum Bulletin Board System, Paralogic's Parachat
and L-Soft's Listserv for e-mail newsletters. MiningCo intends to add to its
serving and technical capabilities as required to meet usage demands.
The administrative control center is MiningCo's internally developed
Internet-based site management environment. This center enables MiningCo's
guides to remotely manage their GuideSites at any time via a password-protected
interface in order to preview and upload content, view usage and feedback
reports, and access administrative tools for newsletters, chat, bulletin boards
and events calendars.
In March 1998, MiningCo entered into an Internet-hosting agreement with
Frontier to maintain all of MiningCo's production servers at Frontier's
Manhattan Data Center. This agreement terminates on February 1, 2000. Frontier
provides comprehensive facilities management services including human and
technical monitoring of all production servers 24 hours per day, seven days per
week. Frontier provides the means of connectivity for MININGCO.COM's servers to
end-users via the Internet through high capacity transmission wires. These
connections link to many different parts of the Internet via a combination of
public and private peering agreements. The facility has two independent
uninterruptible power supplies, which are battery-powered, as well as two
independent diesel generators designed to provide power to these systems within
seconds of a power outage. The diesel generators can supply the data center's
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power for nine days before refueling is required. Frontier does not guarantee
that MiningCo's Internet access will be uninterrupted, error-free or secure.
MiningCo's operations are dependent on Frontier's ability to protect both
Frontier's and MiningCo's systems against damage from fire, power loss, water
damage, telecommunications failures, vandalism and other malicious acts, and
similar unexpected adverse events. Any disruption in the Internet access
provided by Frontier could have a material adverse effect on MiningCo's
business, results of operations and financial condition.
MININGCO.COM must accommodate a high volume of traffic and MININGCO.COM has
in the past and may in the future experience slower response times and system
downtime for a variety of reasons. An increase in volume of users accessing
MININGCO.COM could lead to systems failures or slower response times and
adversely affect advertising revenues. Users may become dissatisfied by any
system failure that interrupts MiningCo's ability to provide MININGCO.COM to
them or results in slower response time. MININGCO.COM could also be affected by
computer viruses, electronic break-ins or other similar disruptions. MiningCo's
insurance policies have low coverage limits and therefore insurance may not
adequately compensate MiningCo for any losses that may occur due to any failures
in its system or interruptions in its service. MiningCo is in the process of
developing a comprehensive disaster recovery plan to respond to system failures.
MiningCo's business, results of operations and financial condition could be
materially adversely affected by any damage or failure that interrupts or delays
its operations.
All of MiningCo's production data is copied to backup tapes each night and
these backup tapes are rotated to a third-party facility for off-site storage.
MiningCo keeps all of its production servers behind packet-filtered routers and
does not allow any outside access to any administrative functions. Strict
password management and physical security measures are followed.
MiningCo's users and guides depend on Internet service providers, online
service providers and other web site operators for access to MININGCO.COM. Each
of these providers and operators has experienced significant outages in the
past, and could experience outages, delays and other difficulties due to system
failures unrelated to MiningCo's systems. Moreover, the Internet infrastructure
may not be able to support continued growth in its use. Any of these problems
could materially adversely affect MiningCo's business, results of operations and
financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
GENERAL. There is an increasing number of laws and regulations pertaining
to the Internet. In addition, a number of legislative and regulatory proposals
are under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, online content regulation, user privacy, taxation and quality of
products and services. Moreover, the applicability to the Internet of existing
laws governing issues such as intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment and personal
privacy is uncertain and developing. Any new legislation or regulation, or the
application or interpretation of existing laws, may decrease the growth in the
use of the Internet, which could in turn decrease the demand for MiningCo's
service, increase MiningCo's cost of doing business or otherwise have a material
adverse effect on MiningCo's business, results of operations and financial
condition.
LIABILITY FOR INFORMATION RETRIEVED FROM MININGCO.COM AND FROM THE
INTERNET. Content may be accessed on MININGCO.COM or on the web sites of
MiningCo's distribution partners, and this content may be downloaded by users
and subsequently transmitted to others over the Internet. This could result in
claims against MiningCo based on a variety of theories, including defamation,
obscenity, negligence, copyright or trademark infringement or other theories
based on the nature, publication and distribution of this content. These types
of claims have been brought, sometimes successfully, against providers of
Internet services in the past. MiningCo could also be exposed to liability with
respect to third-party content that may be posted by users in chat rooms or
bulletin boards offered on the GuideSites. It is
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also possible that if any information, including information deemed to
constitute professional advice such as legal, medical, financial or investment
advice, provided on MININGCO.COM contains errors or false or misleading
information, third parties could make claims against MiningCo for losses
incurred in reliance on such information. MININGCO.COM contains approximately
400,000 human-filtered annotated links to other web sites. As a result, MiningCo
may be subject to claims alleging that, by directly or indirectly providing
links to other web sites, MiningCo is liable for copyright or trademark
infringement or the wrongful actions of third parties through their respective
web sites.
The Communications Decency Act of 1996 (the "CDA") was enacted to prohibit
the transmission over the Internet of indecent, obscene or offensive content.
While selected parts of the CDA have been deemed unconstitutional, provisions
protecting providers of Internet services from claims related to third-party
content remain effective. Under the CDA, a provider of Internet services will
generally not be treated as a publisher or speaker of any information available
on its service but provided by a third-party content provider unless the
provider of Internet services exerts editorial control over the content or
embraces the content as its own. MiningCo's activities may prevent it from being
able to take advantage of this safe harbor provision. In particular, while
MiningCo does not edit the guide-developed content prior to its availability on
MININGCO.COM and only monitors this content to ensure compliance with MiningCo's
policies, MiningCo may be subjected to claims that it is the publisher of the
content available on the GuideSites. In addition, since MiningCo has exclusive
online rights to all guide-developed content on MININGCO.COM, it aggregates this
content for use on MININGCO.COM and for syndication and distribution to
third-party web sites and electronic commerce partners. MiningCo may be
subjected to claims that it is the publisher of this aggregated guide-developed
content. While MiningCo attempts to reduce its exposure to this potential
liability through, among other things, provisions in guide agreements, user
policies and disclaimers, the enforceability and effectiveness of such measures
are uncertain.
MiningCo's general liability insurance may not cover all potential claims to
which MiningCo is exposed and may not be adequate to indemnify MiningCo for all
liability that may be imposed. Any imposition of liability that is not covered
by insurance or is in excess of insurance coverage could have a material adverse
effect on MiningCo's business, results of operations and financial condition.
Even to the extent that these claims do not result in liability to MiningCo,
MiningCo could incur significant costs in investigating and defending against
these claims. Potential liability for information disseminated through
MININGCO.COM could lead MiningCo to implement measures to reduce its exposure to
such liability, which may require the expenditure of substantial resources and
limit the attractiveness of MiningCo's service to users.
STATUS OF THE GUIDES AS INDEPENDENT CONTRACTORS. MiningCo treats the guides
as independent contractors for tax and employee benefit purposes. One or more
jurisdictions may deem the guides to be employees of MiningCo rather than
independent contractors and seek to impose taxes, interest and penalties to
MiningCo. MiningCo could have substantial tax and employee benefit liabilities
if it were ultimately determined that the guides are employees of MiningCo. See
"Risks Factors--We could incur significant withholding taxes and employee
benefits expenses if the guides were deemed to be our employees rather than
independent contractors."
ONLINE CONTENT REGULATIONS. Several federal and state statutes prohibit the
transmission of indecent, obscene or offensive content over the Internet to
particular groups of persons. In addition, pending legislation seeks to ban
Internet gambling and federal and state officials have taken action against
businesses that operate Internet gambling activities. The enforcement of these
statutes and initiatives, and any future enforcement activities, statutes and
initiatives, may result in limitations on the type of content and advertisements
available on MININGCO.COM. Legislation regulating online content could dampen
the growth in use of the Internet generally and decrease the acceptance of the
Internet as an advertising and electronic commerce medium, which could have a
material adverse effect on MiningCo's business, results of operations and
financial condition.
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PRIVACY CONCERNS. The Federal Trade Commission is considering adopting
regulations regarding the collection and use of personal identifying information
obtained from individuals when accessing web sites, with particular emphasis on
access by minors. These regulations may include requirements that companies
establish certain procedures to, among other things:
- give adequate notice to consumers regarding information collection and
disclosure practices;
- provide consumers with the ability to have personal identifying
information deleted from a company's database;
- provide consumers with access to their personal information and with the
ability to rectify inaccurate information;
- clearly identify affiliations or a lack thereof with third parties that
may collect information or sponsor activities on a company's web site; and
- obtain express parental consent prior to collecting and using personal
identifying information obtained from children under 13 years of age.
These regulations may also include enforcement and redress provisions. While
MiningCo is implementing programs designed to enhance the protection of the
privacy of its users, including children, there can be no assurance that these
programs will conform with any regulations adopted by the FTC. Moreover, even in
the absence of those regulations, the FTC has begun investigations into the
privacy practices of companies that collect information on the Internet. One
investigation resulted in a consent decree pursuant to which an Internet company
agreed to establish programs to implement the principles noted above. MiningCo
may become subject to a similar investigation, or the FTC's regulatory and
enforcement efforts may adversely affect the ability to collect demographic and
personal information from users, which could have an adverse effect on
MiningCo's ability to provide highly targeted opportunities for advertisers and
electronic commerce marketers. Any of these developments would have a material
adverse effect on MiningCo's business, results of operations and financial
condition.
It is also possible that cookies, or information keyed to a specific server,
file pathway or directory location that is stored on a user's hard drive,
possibly without the user's knowledge, which are used to track demographic
information and to target advertising, may become subject to laws limiting or
prohibiting their use. A number of Internet commentators, advocates and
governmental bodies in the United States and other countries have urged the
passage of laws limiting or abolishing the use of cookies. Limitations on or
elimination of MiningCo's use of cookies could limit the effectiveness of
MiningCo's targeting of advertisements, which could have a material adverse
effect on MiningCo's business, results of operations and financial condition.
The European Union has adopted a directive that imposes restrictions on the
collection and use of personal data. Under the directive, EU citizens are
guaranteed rights to access their data, rights to know where the data
originated, rights to have inaccurate data rectified, rights to recourse in the
event of unlawful processing and rights to withhold permission to use their data
for direct marketing. The directive could, among other things, affect U.S.
companies that collect information over the Internet from individuals in EU
member countries, and may impose restrictions that are more stringent than
current Internet privacy standard in the United States. In particular, companies
with offices located in EU countries will not be allowed to send personal
information to countries that do not maintain adequate standards of privacy. The
directive does not, however, define what standards of privacy are adequate. As a
result, the directive may adversely affect the activities of entities such as
MiningCo that engage in data collection from users in EU member countries.
DATA PROTECTION. Legislative proposals have been made by the federal
government that would afford broader protection to owners of databases of
information such as stock quotes and sports scores.
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This protection already exists in the EU. If enacted, this legislation could
result in an increase in the price of services that provide data to web sites
and could create potential liability for unauthorized use of this data. Either
of these possibilities could have a material adverse effect on MiningCo's
business, results of operations and financial condition.
INTERNET TAXATION. A number of legislative proposals have been made at the
federal, state and local level, and by certain foreign governments, that would
impose additional taxes on the sale of goods and services over the Internet and
certain states have taken measures to tax Internet-related activities. Although
Congress recently placed a three-year moratorium on state and local taxes on
Internet access or on discriminatory taxes on electronic commerce, existing
state or local laws were expressly excepted from this moratorium. Further, once
this moratorium is lifted, some type of federal and/or state taxes may be
imposed upon Internet commerce. This legislation, or other attempts at
regulating commerce over the Internet, may substantially impede the growth of
commerce on the Internet and, as a result, adversely affect MiningCo's
opportunity to derive financial benefit from those activities.
ARRANGEMENTS WITH ELECTRONIC COMMERCE PARTNERS. MiningCo enters into
agreements with certain electronic commerce partners under which MiningCo may be
entitled to receive a share of certain revenue generated from the purchase of
goods and services through direct links from MININGCO.COM. These agreements may
expose MiningCo to additional legal risks and uncertainties, including potential
liabilities to consumers of those products and services by virtue of MiningCo's
involvement in providing access to those products or services, even if MiningCo
does not itself provide those products or services. Any indemnification provided
to MiningCo in its agreements with these parties, if available, may not be
adequate.
DOMAIN NAMES. Domain names are the user's Internet "addresses." The current
system for registering, allocating and managing domain names has been the
subject of litigation, including trademark litigation, and of proposed
regulatory reform. MiningCo has registered the domain name "MININGCO.COM."
Although MiningCo is seeking to register "MININGCO.COM" as a trademark in the
United States, it may not successfully obtain the registration and third parties
may bring claims for infringement against MiningCo for the use of this
trademark. There can be no assurance that MiningCo's domain names will not lose
their value, or that MiningCo will not have to obtain entirely new domain names
in addition to or in lieu of its current domain names if reform efforts result
in a restructuring in the current system.
JURISDICTIONS. Due to the global nature of the Internet, it is possible
that, although transmissions by MiningCo over the Internet originate primarily
in New York, the governments of other states and foreign countries might attempt
to regulate MiningCo's transmissions or prosecute MiningCo for violations of
their laws. These laws may be modified, or new laws enacted, in the future. Any
of the foregoing developments could have a material adverse effect on MiningCo's
business, results of operations and financial condition. In addition, as
MiningCo's service is available over the Internet in multiple states and foreign
countries, these jurisdictions may claim that MiningCo is required to qualify to
do business as a foreign corporation in each of these states or foreign
countries. MiningCo is qualified to do business only in California and New York,
and failure by MiningCo to qualify as a foreign corporation in a jurisdiction
where it is required to do so could subject MiningCo to taxes and penalties and
could result in the inability of MiningCo to enforce contracts in these
jurisdictions. Any new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to MiningCo's
business, or the application of existing laws and regulations to the Internet
and other online services could have a material adverse effect on MiningCo's
business, results of operations and financial condition.
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INTELLECTUAL PROPERTY
MiningCo seeks to protect its proprietary rights, but its actions may be
inadequate to protect its patents, trademarks or other proprietary rights or to
prevent others from claiming violations of their proprietary rights. MiningCo
has one United States patent pending, four patent applications on file with the
United States Patent and Trademark Office and one international patent
application. MiningCo enters into confidentiality agreements with its material
employees, guides, consultants and strategic partners, and generally controls
access to and distribution of its proprietary information. Despite MiningCo's
efforts to protect its proprietary rights from unauthorized use or disclosure,
parties may attempt to disclose, obtain or use its proprietary information. The
steps MiningCo has taken may not prevent misappropriation of its proprietary
information. Third parties may infringe or misappropriate MiningCo's proprietary
rights, which could have a material adverse affect on MiningCo's business,
results of operations and financial condition. The validity, enforceability and
scope of protection of proprietary rights in Internet-related industries is
uncertain and still evolving.
Furthermore, third parties may assert infringement claims against MiningCo.
From time to time MiningCo has been, and MiningCo expects to continue to be,
subject to claims in the ordinary course of its business, including claims of
alleged infringement of the trademarks and other intellectual property rights of
third parties by MiningCo or its guides. These claims and any resultant
litigation, should it occur, could subject MiningCo to significant liability for
damages and could result in the invalidation of MiningCo's proprietary rights.
In addition, even if MiningCo prevails, any litigation could be time-consuming
and expensive to defend, and could result in the diversion of management's time
and attention, any of which could materially adversely affect MiningCo's
business, results of operations and financial condition. Any claims from third
parties may also result in limitations on MiningCo's ability to use the
trademarks and other intellectual property subject to those claims unless
MiningCo enters into agreements with the third parties responsible for those
claims, which may be unavailable on commercially reasonable terms.
COMPETITION
MiningCo competes for users, advertisers and electronic commerce marketers
with the following:
- Internet retrieval companies, search engines and other Internet "portal"
companies (such as Excite, InfoSeek, Lycos and Yahoo!);
- online content web sites (such as C--net, ESPN.com and ZDNet.com);
- online community web sites (such as iVillage);
- online personal homepage services (such as GeoCities and theglobe.com);
- publishers and distributors of television, radio and print (such as CBS,
Disney, NBC and Time Warner);
- general purpose consumer online services (such as America Online and
Microsoft Network); and
- web sites maintained by Internet service providers (such as AT&T WorldNet,
EarthLink and MindSpring).
MiningCo believes that its ability to compete depends on many factors, many
of which are outside of its control. These factors include the quality of
content provided by MiningCo and its competitors, the ease of use of services
developed either by MiningCo or its competitors, the timing and market
acceptance of new and enhanced services developed either by MiningCo or its
competitors, and sales and marketing efforts of MiningCo and its competitors.
MiningCo also competes with television, radio, cable and print (traditional
advertising media) for a share of advertisers' total advertising budgets. If
advertisers perceive the Internet or MININGCO.COM to be
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a limited or ineffective advertising medium, advertisers may be reluctant to
devote a significant portion of their advertising budget to Internet advertising
or to advertise on MININGCO.COM.
Please see "Risk Factors--We may not be able to compete successfully" for a
more detailed description of the risks of competition to MiningCo.
EMPLOYEES AND GUIDES
As of January 31, 1999, MiningCo had 113 full-time employees, including 27
in marketing and sales, 35 in editorial and guide support, 12 in finance and
administration and 39 in product development, operations and technical support.
As of January 31, 1999, MiningCo had 605 guides and an additional 91 guides in
training. None of the guides are employed by MiningCo, but rather they are
engaged by MiningCo as independent contractors. None of MiningCo's employees are
represented by a union. MiningCo believes its relationship with its employees
and the guides is good.
FACILITIES
MiningCo's headquarters are currently located in a leased facility in New
York City, consisting of approximately 12,000 square feet of office space that
is under a four-year lease with two years remaining. Annual rental payments
under this lease during 1998 was approximately $285,000, which amount is subject
to annual increases. MiningCo also entered into a six-month lease for
approximately 3,000 square feet of commercial space in Westchester, New York.
MiningCo believes that additional space will be available on commercially
acceptable terms.
LEGAL PROCEEDINGS
MiningCo is not a party to any material legal proceedings.
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MANAGEMENT
The following table sets forth, as of January 31, 1999, the name, age and
position within MiningCo of each director, executive officer and other key
employee of MiningCo.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Scott P. Kurnit*(1)....................... 44 Chairman of the Board of Directors, President and Chief
Executive Officer
William C. Day*........................... 34 Chief Operating Officer
Todd B. Sloan*............................ 36 Chief Financial Officer
Alan T. Wragg*............................ 55 President--Advertising Sales and E-Commerce
John R. Caplan............................ 29 Vice President--Marketing
A. Jeffrey Radov.......................... 47 Vice President--Business Development
Elizabeth A. Maier........................ 46 Vice President--Product Design and Development
Eric W. Bingham........................... 39 Vice President--Business Operations
Olga V. Taller............................ 41 Vice President--Guide Operations
Robert W. Harris.......................... 41 Vice President--Finance and Administration
Kenneth H. Appleman....................... 40 Vice President--Chief Technology Officer
Frank J. Biondi, Jr....................... 53 Director
Dixon R. Doll (1)......................... 56 Director
Ronald Unterman (1)(2).................... 52 Director
Marc M. Watson (1)(2)..................... 53 Director
Kristopher A. Wood (2).................... 27 Director
</TABLE>
- ------------------------
* Denotes executive officer.
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
SCOTT P. KURNIT has served as MiningCo's Chairman of the Board of Directors,
President and Chief Executive Officer since he founded MiningCo in June 1996.
From March 1995 to February 1996, Mr. Kurnit served as President and Chief
Executive Officer of MCI/News Corporation Internet Ventures with responsibility
for the Internet initiatives of the parent companies. From June 1993 to March
1995, Mr. Kurnit served as Executive Vice President of Prodigy Service Co., an
online services company ("Prodigy"). From March 1985 to June 1993, Mr. Kurnit
was the President for both Viewer's Choice and Showtime Event Television for
Viacom Inc. From June 1979 to March 1985, Mr. Kurnit was employed by Warner
Communication in various capacities, including Director of Programming for Qube
and Vice President of Programming and Advertising Sales for all of the company's
cable systems. Mr. Kurnit received his B.A. in Sociology and Communications from
Hampshire College.
WILLIAM C. DAY has served as MiningCo's Chief Operating Officer since he
co-founded MiningCo in June 1996. From December 1998 until January 1999, Mr. Day
also served as MiningCo's Chief Financial Officer. From October 1995 to June
1996, Mr. Day served as Vice President, Software Development for Prodigy. From
July 1994 to October 1995, Mr. Day served as Vice President, General Manager for
Content and Community for Prodigy, and from May 1993 to July 1994, he served as
Director, Internet Development for Prodigy. Mr. Day received his B.S. in
Mechanical Engineering from Yale University, and an M.B.A. from The Wharton
School of the University of Pennsylvania.
TODD B. SLOAN has served as MiningCo's Chief Financial Officer since January
1999. From August 1996 to October 1998, Mr. Sloan served as Executive Vice
President/Chief Operating Officer for SW Networks (a wholly owned subsidiary of
Sony Music since November 1997 and a wholly owned subsidiary of Sony Corporation
of America from February 1995 to October 1997). From February 1995 to October
1998, Mr. Sloan also served as Chief Financial Officer of SW Networks. From
September 1985 to February 1995, Mr. Sloan served in various capacities,
including Senior Manager, for Ernst &
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Young. Mr. Sloan received his B.B.A. in Accounting and Finance from the
University of Wisconsin/ Madison. Mr. Sloan is a C.P.A.
ALAN T. WRAGG has served as MiningCo's President--Advertising Sales and
E-Commerce since August 1996. From September 1987 to August 1996, Mr. Wragg
served as the Publisher of TVSM, Inc. (now owned by News Corporation), a U.S.
publisher of cable television programming guides, including The Cable Guide,
Total TV Weekly and Total TV Online. Mr. Wragg also spent 14 years at Time Inc.
as Advertising Director at LIFE Monthly and as a sales executive at Sports
Illustrated. Mr. Wragg received his B.B.A. in Marketing from Cleveland State
University, and an M.B.A. from Adelphi University.
JOHN R. CAPLAN has served as MiningCo's Vice President--Marketing since
November 1998. From October 1995 to November 1998, Mr. Caplan served as Director
of Marketing for Berenter Greenhouse & Webster, an advertising and marketing
agency specializing in consumer brands. From October 1994 to September 1995, he
served as President of Advertising & Diversity, Inc., a marketing strategy firm.
From September 1991 to October 1994, Mr. Caplan served as an Account Executive
for TDI Worldwide (now owned by CBS Corporation), an outdoor advertising
company. Mr. Caplan received his B.A. in English from the University of
Rochester.
A. JEFFREY RADOV has served as MiningCo's Vice President--Business
Development since September 1996, and also served as MiningCo's Chief Financial
Officer from November 1997 to December 1998. From January 1996 to August 1996,
Mr. Radov served as Director of Content and Communities for Prodigy. From
January 1992 to December 1995, Mr. Radov served as a principal of Radov &
Associates, a private consulting firm. Mr. Radov received his B.A. in Social
Science from Cornell University, and an M.B.A. from The Wharton School of the
University of Pennsylvania.
ELIZABETH A. MAIER has served as MiningCo's Vice President--Product Design
and Development since July 1996. From November 1995 to July 1996, Ms. Maier
served as Prodigy's Senior Director, Product Design. From July 1995 to November
1995, Ms. Maier served as Prodigy's Manager, Customer Applications. From October
1988 to July 1995, Ms. Maier held a variety of product design and management
positions with Prodigy. Ms. Maier received her B.A. in Psychology from Syracuse,
and a Ph.D. in Cognitive Psychology from Michigan State University.
ERIC W. BINGHAM has served as MiningCo's Vice President--Business Operations
since July 1996. From June 1995 to June 1996, Mr. Bingham served as Director,
Business Development for News Corporation, an international media company. From
January 1990 to May 1995, Mr. Bingham served as Director, International
Operations for Home Box Office, a division of Time Warner Inc. Mr. Bingham
received his B.A. in History from Allegheny College, and an M.B.A. from Boston
University.
OLGA V. TALLER has served as MiningCo's Vice President--Guide Operations
since August 1996. From April 1987 to August 1996, Ms. Taller held various
positions at Prodigy, including Director, Server Infrastructure and Manager of
the Advanced Connectivity and Database Group. Ms. Taller received her M.S. in
Economics from the Moscow Institute of Economics and Statistics.
ROBERT W. HARRIS has served as MiningCo's Vice President--Finance and
Administration since July 1996. From January 1994 to June 1996, Mr. Harris was a
private consultant to media start-up venture companies. From 1986 to December
1993, Mr. Harris worked in various capacities for Home Box Office and Paramount
Pictures Corp. Mr. Harris received his B.S. in Commerce from the University of
Virginia and is a C.P.A.
KENNETH H. APPLEMAN has served as MiningCo's Vice President--Chief
Technology Officer since July 1996. From October 1995 to July 1996, Mr. Appleman
served as President of Precognetics, Inc., a technical consulting firm. From
September 1985 to October 1995, Mr. Appleman held a variety of technical
management and software development positions at Prodigy. Mr. Appleman received
his B.A. in English from S.U.N.Y. Albany, and an M.S. in Computer Science from
Pace University.
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FRANK J. BIONDI, JR. has served as a director of MiningCo since December
1998. From April 1996 to November 1998, Mr. Biondi served as Chairman and Chief
Executive Officer of Universal Studios, Inc., an international entertainment
company. From July 1987 to January 1996, Mr. Biondi served as President and
Chief Executive Officer of Viacom Inc., an international entertainment company.
Mr. Biondi currently serves on the boards of directors of Bank of New York
Company, Inc., a bank holding company, and Vail Resorts, Inc., a mountain resort
company. Mr. Biondi received his B.A. in Psychology from Princeton University,
and an M.B.A. from Harvard University.
DIXON R. DOLL has served as a director of MiningCo since August 1997. Since
June 1996, Mr. Doll has served as Managing General Partner of Doll Capital
Management, a venture capital investment firm. From September 1994 to June 1996,
Mr. Doll was an independent venture capitalist. From 1985 to September 1994, Mr.
Doll served as General Partner of Accel Partners, a venture capital investment
firm. Since 1973, Mr. Doll has held various senior management positions at DMW
Group LLC and predecessor entities, a network integration and professional
services firm, including Chairman of the Board of Directors and Chief Executive
Officer. Mr. Doll serves on the boards of directors of International
Manufacturing Services, Inc., a provider of advanced manufacturing services,
Network Equipment Technologies, Inc., a manufacturer of multi-service
communications products, Zamba Corp., a supplier of mobile data communication
software, and a number of private companies. Mr. Doll received a B.S. in
Electrical Engineering from Kansas State University, and an M.S.E. and Ph.D.
from the University of Michigan.
RONALD UNTERMAN has served as a director of MiningCo since January 1997.
From August 1988 to December 1997, Mr. Unterman served as Vice President of
Envirogen, Inc. Since December 1997, Mr. Unterman has served as Senior Vice
President, Technology Development of Envirogen, Inc., an environmental
biotechnology company. Mr. Unterman received his B.A. in Biology from Haverford
College, and a Ph.D. from Columbia University in Biochemistry.
MARC M. WATSON has served as a director of MiningCo since April 1998. In
1998, Mr. Watson co-founded C-Max Capital Corp., an investment firm focusing on
private technology and medical-related companies and currently serves as its
Managing Director. From October 1993 to October 1998, Mr. Watson was Chairman of
the Board of Sano Corporation, a drug delivery systems development company. Mr.
Watson currently serves on the board of directors of Equitrac Corporation, a
provider of computer system solutions. Mr. Watson received both his B.B.A. in
Accounting and his J.D. from the University of Miami.
KRISTOPHER A. WOOD has served as a director of MiningCo since November 1998.
Since September 1997, Mr. Wood has served as Managing Director of XL Ventures,
Inc., the parent company of XL Ventures LLC, which is the venture capital
investment subsidiary of Big Flower Holdings, Inc., an advertising, marketing
and information services company. Since September 1995, Mr. Wood has also served
as Director--Mergers & Acquisitions for Big Flower Holdings, Inc. (and its
predecessor, Big Flower Press Holdings, Inc.). From July 1993 to May 1995, Mr.
Wood was a member of the Global Finance Group at BT Alex. Brown Incorporated, an
investment banking firm. Mr. Wood received his B.S. in Economics from The
Wharton School of the University of Pennsylvania.
DIRECTORS' TERMS
All directors hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified. Each of Messrs.
Doll, Unterman, Watson and Wood was originally elected to the board of directors
pursuant to an agreement that will terminate upon the closing of this offering.
Mr. Kurnit was originally elected to the board of directors pursuant to a
provision of his employment agreement, which provision will terminate upon the
closing of this offering.
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BOARD COMMITTEES
The audit committee of the board of directors was established in May 1998
and reviews, acts on and reports to the board of directors with respect to
various auditing and accounting matters, including the recommendation of
MiningCo's independent auditors, the scope of the annual audits, fees to be paid
to the independent auditors, the performance of MiningCo's independent auditors
and the accounting practices of MiningCo. The members of the audit committee are
Messrs. Unterman, Watson and Wood.
The compensation committee of the board of directors was established in May
1998 and determines the salaries, benefits and stock option grants for
MiningCo's employees, consultants, directors and other individuals compensated
by MiningCo. The compensation committee also administers MiningCo's compensation
plans. The members of the compensation committee are Messrs. Doll, Kurnit,
Unterman and Watson.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, MiningCo does not currently
compensate its directors.
Under MiningCo's stock option plan, each individual who first becomes a
non-employee member of the board of directors at any time after this offering
will be granted an option to purchase 20,000 shares of common stock on the date
the individual joins the board of directors, provided the individual has not
previously been employed by MiningCo or any parent or subsidiary corporation. In
addition, on the date of each annual stockholders' meeting beginning in 1999,
each non-employee member of the board of directors who is to continue to serve
on the board of directors will automatically be granted an option to purchase
5,000 shares of common stock, provided the individual has served as a
non-employee member of the board of directors for at least six months. Please
see "--Amended and Restated 1998 Stock Option/Stock Issuance Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
MiningCo's compensation committee currently consists of Messrs. Doll,
Kurnit, Unterman and Watson. Other than Mr. Kurnit, MiningCo's President and
Chief Executive Officer, none of the members of the compensation committee is or
has been an officer or employee of MiningCo. Prior to the formation of the
compensation committee in May 1998, the board of directors as a whole made
decisions relating to compensation of MiningCo's executive officers. Mr. Kurnit
has participated in all discussions and decisions concerning the compensation of
MiningCo's executive officers, except that he was excluded from discussions by
the board of directors regarding his own compensation.
Mr. Doll is affiliated with Doll Technology Investment Fund, Doll Technology
Affiliates Fund, L.P. and Doll Technology Side Fund, L.P. Mr. Marc Watson is
affiliated with C-Max Capital Limited Partnership-I. These funds, together with
Mr. Kurnit, have in the past provided financing to MiningCo in consideration for
the issuance of MiningCo securities. Please see "Certain Transactions" for
information relating to these financing transactions.
In addition to Mr. Marc Watson, Mr. Kevin Watson is affiliated with C-Max
Capital Limited Partnership-I. MiningCo and Mr. Kevin Watson entered into an
advisory agreement effective April 20, 1998, pursuant to which Mr. Kevin Watson
agreed to provide consulting and advisory services to MiningCo. These services
include introducing MiningCo to members of the investment community and
assisting MiningCo with respect to financial and strategic matters. In
consideration for his services under this agreement, Mr. Kevin Watson was
granted a warrant to purchase up to a total of 21,360 shares of common stock at
an exercise price of $5.06 per share. This warrant is exercisable at any time
during the 10-year period beginning on the date of the closing of this offering.
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EMPLOYMENT, SEVERANCE AND OTHER AGREEMENTS
MiningCo and Mr. Kurnit are parties to a letter agreement dated October 20,
1996, as amended, governing his employment with MiningCo. The agreement expires
in June 1999. The agreement provides that Mr. Kurnit will receive a base salary
of $195,000 per annum and will be eligible to receive a bonus at the discretion
of the board of directors, which bonus shall not be less than $100,000 per
annum. Mr. Kurnit's employment may be terminated by MiningCo at any time. In the
event that Mr. Kurnit is terminated by MiningCo without cause, Mr. Kurnit shall
be entitled to be paid his base salary for 12 months following his termination.
In addition, if Mr. Kurnit is involuntarily terminated within 12 months
following a change of control of MiningCo, all of his unvested stock options
will immediately vest and become fully exercisable.
MiningCo and Mr. Wragg are parties to a letter agreement dated July 28,
1996, as amended on October 21, 1998, governing his employment with MiningCo.
The agreement provides that Mr. Wragg will receive a base salary of $125,000 per
annum and will be eligible to receive a quarterly commission bonus based on
annual gross advertising sales revenue. The agreement also provides that Mr.
Wragg's salary, bonus and option grants are to be reviewed annually by the
compensation committee. In the event that Mr. Wragg's employment is terminated
for any reason by MiningCo other than for gross misconduct, Mr. Wragg shall be
entitled to be paid his base salary for 12 months following his termination and
he shall receive MiningCo's standard benefits for six months following his
termination. In addition, if Mr. Wragg is involuntarily terminated within 12
months following a change of control of MiningCo, all of his unvested stock
options will immediately vest and become fully exercisable.
MiningCo and Mr. Sloan are parties to a letter agreement dated January 11,
1999 governing his employment with MiningCo. The agreement provides that Mr.
Sloan will receive a base salary of $165,000 per annum and options to purchase
62,300 shares of common stock at an exercise price of $4.21 per share. Mr. Sloan
will also be eligible to participate in an executive bonus pool if one is
established. In the event that Mr. Sloan is terminated without cause he shall be
entitled to be paid his base salary for three months following his termination.
In addition, if Mr. Sloan is involuntarily terminated within 12 months following
a change of control of MiningCo, all of his unvested stock options will
immediately vest and become fully exercisable.
45
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to MiningCo's Chief Executive Officer and the other two executive officers
of MiningCo whose annual salary and bonus exceeded $100,000 in 1998 for services
rendered in all capacities to MiningCo during 1997 and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------
ANNUAL COMPENSATION(1) AWARDS
-----------------
---------------------- SHARES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- -------------------------------------------------------------- --------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Scott P. Kurnit............................................... 1998 $ 170,750 $ 100,000 9,204
President, Chief Executive Officer and Chairman of the Board 1997 138,125 100,000 21,475
of Directors
William C. Day................................................ 1998 125,625 25,000 74,012
Chief Operating Officer 1997 109,687 -- 180,990
Alan T. Wragg................................................. 1998 133,170 -- 11,840
President--Advertising Sales and E-Commerce 1997 131,250 -- 118,449
</TABLE>
- ------------------------
(1) In accordance with the rules of the SEC, other compensation in the form of
perquisites and other personal benefits has been omitted for the named
executive officers because the aggregate amount of these perquisites and
other personal benefits constituted less than the lesser of $50,000 or 10%
of the total of annual salary and bonuses for each of the named executive
officers in 1997 and 1998.
OPTION GRANTS IN LAST YEAR
The following table sets forth information regarding options granted to the
named executive officers during the year ended December 31, 1998. Each option
represents the right to purchase one share of common stock and was granted under
MiningCo's stock option plan. These options become exercisable at a rate of 25%
annually over four years from the date of grant. However, all options that
expire prior to July 2008 shall accelerate and become exercisable upon the
closing of this offering. MiningCo has not granted any stock appreciation
rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
-------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(3)
OPTIONS EMPLOYEES EXERCISE MARKET EXPIRATION ------------------------
NAME GRANTED IN 1998(1) PRICE PRICE(2) DATE 0% 5%
- ------------------------------ ----------- ------------- ----------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Scott P. Kurnit............... 9,204 2.2% $ 0.56 $13.00 03/30/08 $ 114,498 $ 189,746
William C. Day................ 6,372 1.5 0.51 13.00 03/30/08 79,586 131,681
67,640 16.3 1.01 13.00 07/02/08 811,004 1,364,003
Alan T. Wragg................. 4,720 1.1 0.51 13.00 03/30/08 58,953 97,542
7,120 1.7 1.01 13.00 07/02/08 85,369 143,579
<CAPTION>
NAME 10%
- ------------------------------ ------------
<S> <C>
Scott P. Kurnit............... $ 305,192
William C. Day................ 211,606
2,212,413
Alan T. Wragg................. 156,745
232,886
</TABLE>
- ------------------------
(1) During the year ended December 31, 1998, MiningCo granted options to
purchase a total of 415,611 shares of common stock to employees.
(2) There was no public market for the common stock during 1998. For purposes of
this table, the assumed initial public offering price of $13.00 per share
has been assumed to be the market price at the date of grant.
46
<PAGE>
(3) Amounts in these columns represent hypothetical gains that could be achieved
for the respective options if exercised at the end of the option term. The
0%, 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the SEC and do not represent MiningCo's estimate or
projection of MiningCo's future common stock prices. Actual gains, if any,
on stock option exercises depend on MiningCo's future performance and
overall stock market conditions. The amounts reflected in the table may be
more or less than the amounts actually achieved.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998 AND YEAR-END
OPTION VALUES
The following table sets forth information concerning the value realized
upon exercise of options during 1998 and the number and value of unexercised
options held by each of the named executive officers at December 31, 1998. There
was no public trading market for the common stock as of December 31, 1998.
Accordingly, the values set forth below have been calculated on the basis of the
assumed initial public offering price of $13.00 per share, less the applicable
exercise price per share, multiplied by the number of shares underlying the
options.
<TABLE>
<CAPTION>
VALUE NUMBER OF SECURITIES
REALIZED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES (MARKET PRICE OPTIONS AT DECEMBER 31, IN-THE- MONEY OPTIONS AT
ACQUIRED AT EXERCISE 1998 DECEMBER 31, 1998
ON LESS EXERCISE -------------------------- --------------------------
NAME EXERCISE PRICE)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott P. Kurnit................. -- -- 30,678 -- $ 381,634 $ --
William C. Day.................. 1,780 $ 22,232 123,282 129,940(2) 1,539,792 1,589,131
Alan T. Wragg................... -- -- 69,769 60,520(3) 871,414 752,335
</TABLE>
- ------------------------
(1) Solely for purposes of this calculation, the fair market value of the common
stock at the time of the exercise was deemed to be the assumed initial
public offering price of $13.00 per share. The exercise price of the options
was $0.51 per share.
(2) Options to purchase 62,300 shares of common stock will accelerate and become
exercisable when this offering closes. This will result in an increase in
the value of Mr. Day's unexercised in-the-money exercisable options of
$778,127.
(3) Options to purchase 53,400 shares of common stock will accelerate and become
exercisable when this offering closes. This will result in an increase in
the value of Mr. Wragg's unexercised in-the-money exercisable options of
$666,966.
AMENDED AND RESTATED 1998 STOCK OPTION/STOCK ISSUANCE PLAN
MiningCo's amended and restated 1998 stock option/stock issuance plan serves
as the successor equity incentive program to MiningCo's 1997 employee incentive
stock option plan. The 1998 stock option/stock issuance plan became effective on
July 2, 1998 upon adoption by the board of directors and was approved by the
stockholders on the same day. On February 1, 1999 the board approved the amended
and restated 1998 stock option/stock issuance plan, which was approved by the
stockholders on the same day. 1,886,800 shares of common stock were initially
authorized for issuance under the stock option plan. This initial share reserve
was comprised of the shares that remained available for issuance under the old
stock option plan on the effective date of the new stock option plan, including
the shares subject to outstanding options under that plan plus an increase of
890,000 shares. On February 5, 1999, the board authorized, and the stockholders
approved, an increase of 1,338,085 shares. Outstanding options under the old
stock option plan were incorporated into the new stock option plan upon the date
of the approval of the new stock option plan, and no further option grants are
being made under the old stock option plan. The incorporated options will
continue to be governed by their existing terms, unless the plan administrator
elects to extend one or more features of the new stock option plan to those
options.
47
<PAGE>
As of the date of this prospectus, there are outstanding options to purchase
a total of 2,075,267 shares of common stock under the new stock option plan, of
which options to purchase 508,222 shares are currently exercisable. Of the
options to purchase 1,567,045 shares of common stock that are not currently
exercisable, the options to purchase 372,936 shares of common stock, with a
weighted average exercise price of $0.51 per share, originally granted under the
old stock option plan shall immediately vest and become exercisable upon the
closing of this offering. Since MiningCo intends to file a registration
statement on Form S-8 as soon as practicable following the closing of this
offering, any shares issued upon exercise of these options will be immediately
available for sale in the public market, subject to the terms of lock-up
agreements entered into between substantially all of these optionholders and the
underwriters.
Except as otherwise noted in the previous paragraph or below, the
outstanding options under the old stock option plan contain substantially the
same terms and conditions summarized below for the discretionary option grant
program in effect under the new stock option plan. The new stock option plan is
divided into three separate components:
- the discretionary option grant program under which eligible individuals in
MiningCo's employ or service (including officers, non-employee members of
the board of directors, consultants and guides) may, at the discretion of
the plan administrator, be granted options to purchase shares of common
stock at an exercise price determined by the plan administrator;
- the stock issuance program under which those individuals may, in the plan
administrator's discretion, be issued shares of common stock directly,
through the purchase of those shares at a price determined by the plan
administrator or as a bonus tied to the performance of services; and
- the automatic option grant program under which option grants will
automatically be made at periodic intervals to eligible non-employee
members of the board of directors to purchase shares of common stock at an
exercise price equal to 100% of the fair market value of those shares on
the grant date.
In no event may any one participant in the new stock option plan receive
option grants or direct stock issuances for more than 267,000 shares in the
aggregate per calendar year. Under the old stock option plan, only employees
were eligible to receive option grants and the exercise price could not be less
than the fair market value per share on the grant date.
The discretionary option grant program and the stock issuance program are
administered by the compensation committee of the board of directors. The
compensation committee as plan Administrator has complete discretion to
determine which eligible individuals are to receive option grants or stock
issuances, the time or times when option grants or stock issuances are to be
made, the number of shares subject to each grant or issuance, the status of any
granted option as either an incentive stock option or a non-statutory stock
option under the Federal tax laws, the vesting schedule to be in effect for the
option grant or stock issuance and the maximum term for which any granted option
is to remain outstanding. The administration of the automatic option grant
program is self-executing in accordance with the express provisions of that
program. Under the old stock option plan, only incentive stock options were
granted.
The exercise price for the shares of common stock subject to option grants
made under the new stock option plan may be paid in cash or in shares of common
stock valued at fair market value on the exercise date. The option may also be
exercised through a same-day sale program without any cash outlay by the
optionee. In addition, the plan administrator may provide financial assistance
to one or more participants in the new stock option plan in connection with
their acquisition of shares, by allowing those individuals to deliver a
full-recourse, interest-bearing promissory note in payment of the option
exercise price and any associated withholding taxes incurred in connection with
that acquisition.
48
<PAGE>
In the event of an acquisition of MiningCo, whether by merger or asset sale
or a sale by the stockholders of more than 50% of the total voting power of
MiningCo that is recommended by the board of directors, each outstanding option
under the discretionary option grant program which is not to be assumed by the
successor corporation or otherwise continued will automatically accelerate in
full, and all repurchase rights relating to shares under the discretionary
option grant program and stock issuance program will immediately lapse, except
to the extent MiningCo's repurchase rights with respect to those shares are to
be assigned to the successor corporation or otherwise continued in effect. Under
the stock option plan, the plan administrator has the authority at the time of
grant to provide that the shares subject to options granted under the
discretionary option grant program will automatically vest:
- upon an acquisition of MiningCo whether or not those options are assumed
or continued, or
- upon a hostile change in control of MiningCo effected through:
- a tender offer for more than 50% of MiningCo's outstanding voting
stock, or
- a proxy contest for the election of the board of directors, or
- if the individual is terminated involuntarily or resigns for good
reason within 12 months following an acquisition in which the
individual's options were assumed or otherwise continued in effect or
following a hostile change in control.
The vesting of outstanding shares under the stock issuance program may be
accelerated upon similar terms and conditions. In addition, all outstanding
options under MiningCo's old stock option plan will be exercisable upon the
closing of this offering.
Stock appreciation rights are authorized for issuance under the
discretionary option grant program, which rights provide the holders with the
election to surrender their outstanding options for an appreciation distribution
from MiningCo equal to the excess of the fair market value of the vested shares
of common stock subject to the surrendered option over the aggregate exercise
price payable for those shares. This appreciation distribution may be made in
cash or in shares of common stock. There are currently no outstanding stock
appreciation rights.
The plan administrator has the authority to effect the cancellation of
outstanding options under the discretionary option grant program (including
options incorporated from the old stock option plan) in return for the grant of
new options for the same or different number of option shares with an exercise
price per share based upon the fair market value of the common stock on the new
grant date.
Under the automatic option grant program, non-employee board of directors
members will be entitled to receive option grants. Each automatic grant will
have an exercise price equal to the fair market value per share of common stock
on the grant date and will have a maximum term of 10 years, subject to earlier
termination following the optionee's cessation of board of directors service.
Each automatic option will be immediately exercisable; however, any shares
purchased upon exercise of the option will be subject to repurchase, at the
option exercise price paid per share, should the optionee's service as a
non-employee member of the board of directors cease prior to vesting in the
shares. Each 20,000-share grant will vest in four equal and successive annual
installments over the optionee's period of board of director service. Each
annual 5,000-share grant will vest upon the optionee's completion of one year of
board of directors service measured from the grant date. However, each
outstanding option will immediately vest upon changes in control of MiningCo or
the death or disability of the optionee while serving as a board of directors
member. Please see "--Director Compensation."
The board of directors may amend or modify the stock option plan at any
time, subject to any required stockholder approval. The stock option plan will
terminate on the earliest of:
- July 1, 2008
49
<PAGE>
- the date on which all shares available for issuance under the stock option
plan have been issued as fully-vested shares
- the termination of all outstanding options in connection with particular
changes in control or ownership of MiningCo
1999 EMPLOYEE STOCK PURCHASE PLAN
MiningCo's employee stock purchase plan will become effective when the
underwriting agreement for this offering is executed. The purchase plan is
designed to allow eligible employees of MiningCo and participating subsidiaries
to purchase shares of common stock, at semi-annual intervals, through their
periodic payroll deductions. 125,000 shares of common stock have been reserved
for issuance under the purchase plan.
The purchase plan will be implemented in a series of successive purchase
periods, each with a duration of six months. Purchase periods will generally run
from the first business day in May to the last business day in October each year
and from the first business day in November to the last business day in April
the next year. However, the initial purchase period will begin on the
underwriting agreement's execution date and will end on October 31, 1999.
Employees who are scheduled to work more than 20 hours per week for more
than five calendar months per year on the start date of any purchase period are
eligible to enter the purchase plan on that start date.
Payroll deductions may not exceed 15% of the participant's cash earnings.
The accumulated payroll deductions of each participant will be applied to the
purchase of shares on the participant's behalf on each purchase date. The
purchase price per share will equal 85% of the lower of the fair market value of
the common stock on the start of the purchase period or the fair market value on
the purchase date. No participant may purchase more than 500 shares on any
purchase date.
In the event MiningCo is acquired by merger or asset sale, all outstanding
purchase rights will automatically be exercised immediately prior to the
effective date of the acquisition. The purchase price will be equal to 85% of
the lower of the fair market value per share of common stock on the start of the
purchase period in which that acquisition occurs or the fair market value per
share of common stock immediately prior to the acquisition.
The purchase plan will terminate on the earliest of:
- October 31, 2009
- the date on which all shares available for issuance under the purchase
plan have been sold in accordance with the purchase plan
- the date on which all purchase rights are exercised in connection with an
acquisition of MiningCo by merger or asset sale
Subject to stockholder approval for certain amendments, the board of
directors may at any time alter, suspend or discontinue the purchase plan.
50
<PAGE>
CERTAIN TRANSACTIONS
SERIES A FINANCING
Between March 1997 and January 1998, MiningCo issued convertible promissory
notes in an aggregate principal amount of $4,950,000 to a number of investors,
including the investors set forth in the table below. Pursuant to their terms,
the principal amount due on these notes was either automatically convertible
into shares of MiningCo's capital stock upon the closing of the next equity
financing conducted by MiningCo or due and payable on the earlier of the fifth
anniversary of the delivery of the notes or upon an event of default under the
notes. These notes bore interest at a variable rate equal to the prime rate
published by a major financial institution plus 2% per annum. On April 23, 1998,
in consideration for the cancellation of the principal amount of these notes and
$70,000 in interest that accrued on these notes prior to August 12, 1997,
MiningCo issued to the noteholders a total of 3,346,715 shares of Series A
convertible preferred stock. The remaining interest on these notes was evidenced
by newly issued unsecured promissory notes that, by their terms, will be
forgiven and cancelled upon the closing of this offering. Upon the closing of
this offering, the outstanding shares of Series A convertible preferred stock
will convert into a total of 1,191,433 shares of common stock.
At the time of the delivery of the convertible promissory notes, MiningCo
issued warrants to purchase a total of 309,748 shares of common stock to the
investors. Of these warrants, warrants to purchase 218,890 shares of common
stock had an exercise price of $0.03 per share and warrants to purchase 90,858
shares of common stock had an exercise price of $4.21 per share. In December
1998, all of the warrants to purchase common stock at an exercise price of $0.03
per share were exercised and warrants to purchase a total of 66,753 shares of
common stock at an exercise price of $4.21 per share were exercised. The
remaining warrant for 24,105 shares was cancelled.
The following table lists the number of shares of Series A convertible
preferred stock that were purchased, and the warrants that were exercised in
December 1998, by executive officers, directors and their affiliated entities,
and by 5% stockholders:
<TABLE>
<CAPTION>
AMOUNT OF
PRINCIPAL AMOUNT OF
SURRENDERED IN INTEREST
CONSIDERATION SURRENDERED IN NUMBER OF $0.03 NUMBER OF $4.21
NUMBER OF SHARES OF SERIES A CONSIDERATION WARRANTS WARRANTS
OF SERIES A PREFERRED OF SERIES A TO PURCHASE COMMON TO PURCHASE COMMON
PURCHASER PREFERRED STOCK STOCK PREFERRED STOCK STOCK EXERCISED STOCK EXERCISED
- ------------------------------ ----------------- -------------- --------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Crystal Internet Venture Fund,
L.P......................... 711,109 $ 1,066,664 -- 14,748 39,556
Doll Technology Affiliates
Fund, L.P................... 49,217 $ 73,826 -- 5,270 183
Doll Technology Investment
Fund........................ 836,542 $ 1,219,776 $ 35,036 89,563 3,099
Doll Technology Side Fund,
L.P......................... 32,044 $ 48,066 -- 3,431 119
Scott P. Kurnit............... 200,000 $ 300,000 -- 4,154 11,125
Open Text Corporation......... 433,333 $ 650,000 -- -- --
Zero Stage Capital V, L.P..... 917,803 $ 1,341,668 $ 35,036 98,263 3,400
</TABLE>
SERIES B FINANCING
Between November 1997 and February 1998, MiningCo issued convertible
promissory notes in an aggregate principal amount of $2,800,000 to a number of
existing investors, including Crystal Internet Venture Fund, L.P., Doll
Technology Affiliates Fund, L.P., Doll Technology Investment Fund, Doll
Technology Side Fund, L.P. and Zero Stage Capital V, L.P. Pursuant to their
terms, the notes were either automatically convertible into shares of MiningCo's
Series B convertible preferred stock upon
51
<PAGE>
the closing of the next equity financing conducted by MiningCo or due and
payable on the earlier of the first anniversary of the delivery of the notes,
unless the payee extended the maturity date, or upon an event of default under
the notes. These notes bore interest at a fixed rate equal to 10% per annum,
although a few of these notes bore interest at a variable rate equal to the
prime rate published by a major financial institution plus 2% per annum. In
addition, at the time of the delivery of the convertible promissory notes,
MiningCo issued warrants to these investors to purchase a total of 250,192
shares of common stock at an exercise price of $5.06 per share. In December
1998, all of these warrants were exercised.
On April 23, 1998, in consideration for the cancellation of the principal
amount of $2,800,000 and $69,800 in accrued interest under the convertible
promissory notes, MiningCo issued to the noteholders a total of 1,594,380 shares
of Series B convertible preferred stock. Further, in consideration for the
cancellation of $1,700,000 in principal and $305,800 in accrued interest under
an obligation to Open Text Corporation, MiningCo issued to Open Text Corporation
1,114,327 shares of Series B convertible preferred stock. Moreover, additional
investors, including C-Max Capital Limited Partnership-I, purchased a total of
2,688,893 shares of Series B convertible preferred stock in consideration for
$4,840,007. In addition to the issuance of shares of Series B convertible
preferred stock, on April 23, 1998, MiningCo issued warrants to the additional
investors to purchase a total of 107,695 shares of common stock at an exercise
price of $7.02 per share. In December 1998, warrants to purchase a total of
103,801 shares of common stock were exercised. The remaining warrant was
cancelled.
In June 1998, MiningCo issued a total of 1,199,996 shares of Series B
convertible preferred stock to various investors in consideration for
$2,160,000. These investors included Crystal Internet Venture Fund, L.P., Doll
Technology Affiliates Fund, L.P., Doll Technology Investment Fund, Doll
Technology Side Fund, L.P. and XL Capital Corporation.
Upon the closing of this offering, the outstanding shares of Series B
convertible preferred stock will convert into a total of 2,348,752 shares of
common stock.
The following table lists the shares of Series B convertible preferred stock
purchased, and the warrants exercised in December 1998, by executive officers,
directors and their affiliated entities, and by 5% stockholders:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
PRINCIPAL INTEREST
SURRENDERED IN SURRENDERED IN
CONSIDERATION CONSIDERATION NUMBER OF $5.06 NUMBER OF $7.02
NUMBER OF SHARES OF SERIES B OF SERIES B WARRANTS WARRANTS
OF SERIES B PREFERRED PREFERRED TO PURCHASE COMMON TO PURCHASE COMMON
PURCHASER PREFERRED STOCK STOCK STOCK STOCK EXERCISED STOCK EXERCISED
- ------------------------------ ----------------- -------------- -------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
C-Max Capital Limited
Partnership-I............... 2,222,222 -- -- -- 85,440
Crystal Internet Venture Fund,
L.P......................... 482,136 $ 600,000 $ 17,850 54,884 --
Doll Technology Affiliates
Fund, L.P................... 30,437 $ 40,219 $ 1,162 3,659 --
Doll Technology Investment
Fund........................ 517,339 $ 683,595 $ 19,752 62,192 --
Doll Technology Side Fund,
L.P......................... 19,817 $ 26,186 $ 757 2,383 --
Open Text Corporation......... 1,114,327 $ 1,700,000 $ 305,789 -- --
XL Ventures LLC............... 277,778 -- -- -- --
Zero Stage Capital V, L.P..... 428,771 $ 750,000 $ 21,788 68,234 --
</TABLE>
52
<PAGE>
SERIES C FINANCING
On October 5, 1998, MiningCo issued convertible promissory notes in an
aggregate principal amount of $1,081,000 to a number of existing investors,
including some of the investors set forth in the table below. Pursuant to their
terms, these notes were either automatically convertible into shares of
MiningCo's Series C convertible preferred stock upon the closing of the next
equity financing conducted by MiningCo or due and payable on the earlier of the
60th day following October 5, 1999 or an event of default under the notes. These
notes bore interest at a fixed rate equal to 8% per annum. On November 13, 1998,
in consideration for the cancellation of the principal amount and $8,900 in
accrued interest under the convertible promissory notes, MiningCo issued to the
noteholders a total of 558,917 shares of Series C convertible preferred stock.
Further, in consideration for the cancellation of $1,555,600 in principal and
$226,400 in accrued interest under an obligation to Open Text Corporation,
MiningCo issued to Open Text Corporation 913,856 shares of Series C convertible
preferred stock. This amount represented all of the remaining principal and
interest under this obligation. Moreover, additional investors, including some
of the investors set forth in the table below, purchased a total of 5,437,953
shares of Series C convertible preferred stock in consideration for $10,604,000.
On December 4, 1998, MiningCo issued an aggregate of 391,085 shares of
Series C convertible preferred stock to existing stockholders in consideration
for $762,600.
Upon the closing of this offering, the outstanding shares of Series C
convertible preferred stock will convert into a total of 2,599,455 shares of
common stock.
The following table lists the number of shares of Series C convertible
preferred stock purchased by executive officers, directors and their affiliated
entities, and by 5% stockholders:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
PRINCIPAL INTEREST
NUMBER OF SURRENDERED IN SURRENDERED IN
SHARES OF CONSIDERATION CONSIDERATION
SERIES C OF SERIES C OF SERIES C
PREFERRED PREFERRED PREFERRED
PURCHASERS STOCK STOCK STOCK
- ---------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
C-Max Capital Limited Partnership-I........... 599,123 $ 400,000 $ 3,289
Crystal Internet Venture Fund, L.P............ 513,635 $ 193,000 $ 1,587
Doll Technology Affiliates Fund, L.P.......... 27,640 $ 5,000 $ 41
Doll Technology Investment Fund............... 469,792 $ 245,000 $ 2,014
Doll Technology Side Fund, L.P................ 17,996 $ 3,000 $ 25
Open Text Corporation......................... 913,856 $ 1,555,600 $ 226,400
Prospect Street NYC Discovery Fund, L.P....... 1,794,872 -- --
XL Ventures LLC............................... 1,794,872 -- --
Zero Stage Capital V, L.P..................... 121,503 $ 235,000 $ 1,932
Zero Stage Capital VI, L.P.................... 512,821 -- --
</TABLE>
OPEN TEXT CORPORATION
On October 17, 1996, MiningCo executed a promissory note payable to Open
Text in the original principal amount of $3,905,616. On August 27, 1997,
MiningCo and Open Text amended this note to reduce the principal amount
outstanding under this note to $3,255,600. The remaining $650,000 in principal
was evidenced by a newly issued convertible subordinated promissory note that
was subsequently cancelled on April 23, 1998, in consideration for the issuance
of 433,333 shares of Series A convertible preferred stock. None of the
outstanding interest was evidenced by the newly issued convertible subordinated
promissory note. On April 23, 1998, MiningCo and Open Text amended the
53
<PAGE>
promissory note to reduce the outstanding principal amount from $3,255,600 to
$1,555,600. This reduction of $1,700,000 in principal, as well as $305,800 of
interest, was simultaneously converted into 1,114,327 shares of Series B
convertible preferred stock. On November 13, 1998, MiningCo issued 913,856
shares of Series C convertible preferred stock in cancellation of the remaining
$1,555,600 in principal and $226,400 in interest outstanding under the
promissory note.
On August 27, 1997, in connection with the execution of the convertible
subordinated promissory note, MiningCo issued Open Text warrants to purchase
24,105 shares of common stock at an exercise price of $4.21 per share. These
warrants were cancelled in December 1998. In January 1998, MiningCo issued Open
Text warrants to purchase 2,670 shares of common stock at an exercise price of
$4.21 per share. In June and July of 1998, MiningCo issued Open Text warrants to
purchase an aggregate of 6,230 shares of common stock at an exercise price of
$4.21 per share. These warrants to purchase an aggregate of 8,900 shares of
common stock remain outstanding.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
On April 23, 1998, MiningCo and the purchasers of its Series A convertible
preferred stock and Series B convertible preferred stock entered into an
investors' rights agreement. On November 13, 1998, the investors' rights
agreement was amended and restated to include the purchasers of MiningCo's
Series C convertible preferred stock. Under the terms of the amended and
restated investors' rights agreement, holders of MiningCo's Series A convertible
preferred stock, Series B convertible preferred stock and Series C convertible
preferred stock were granted registration rights with respect to the
registration under the Securities Act of the shares of common stock issuable
upon conversion of their respective shares of MiningCo's convertible preferred
stock. Comcast will become a party to the amended and restated investors' rights
agreement. As a result, it will receive rights to have its shares of common
stock registered for resale under the Securities Act. Please see "Description of
Securities--Registration Rights."
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS
For information regarding the grant of stock options to executive officers
and directors, please see "Management--Director Compensation" and "--Executive
Compensation."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of MiningCo's common stock as of February 8, 1999, and as adjusted to
reflect the sale of the shares of common stock offered by this prospectus and in
the concurrent placement, by:
- each person, or group of affiliated persons, who MiningCo knows
beneficially owns 5% or more of the common stock,
- each director and named executive officer of MiningCo and
- all directors and executive officers of MiningCo as a group.
In accordance with the SEC's rules, the following table gives effect to the
shares of common stock that could be issued upon the exercise of outstanding
options and warrants within 60 days of February 8, 1999. In addition, the shares
beneficially owned include the common stock issuable upon conversion of the
convertible preferred stock upon the closing of this offering and the concurrent
placement. Unless otherwise indicated in the footnotes to the table, the
following individuals have sole vesting and sole investment control with respect
to the shares they beneficially own.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
---------------------------------------------
NUMBER OF SHARES BEFORE OFFERING AND AFTER OFFERING AND
BENEFICIAL OWNER BENEFICIALLY OWNED CONCURRENT PLACEMENT CONCURRENT PLACEMENT
- ---------------------------------------------- ------------------------- ----------------------- --------------------
<S> <C> <C> <C>
Scott P. Kurnit (1)........................... 1,537,597 18.4% 13.3%
Marc M. Watson (2)............................ 1,107,640 13.3 9.6
C-Max Capital Limited Partnership-I (3)....... 1,089,840 13.1 9.4
Dixon R. Doll (4)............................. 904,445 10.8 7.8
Open Text Corporation (5)..................... 885,201 10.6 7.7
Doll Funds (6)................................ 882,195 10.6 7.6
Zero Stage Capital Entities (7)............... 875,099 10.5 7.6
XL Ventures LLC (8)........................... 737,864 8.8 6.4
Kristopher A. Wood (9)........................ 737,864 8.8 6.4
Crystal Internet Venture Fund, L.P. (10)...... 716,839 8.6 6.2
Prospect Street NYC Discovery Fund, L.P.
(11)........................................ 638,975 7.7 5.5
William C. Day (12)........................... 135,742 1.6 1.2
Alan T. Wragg (13)............................ 69,769 * *
Ronald Unterman............................... 17,800 * *
Frank J. Biondi, Jr........................... 17,800 * *
All directors and executive officers as a
group (9 persons) (14)...................... 4,510,857 52.6 38.3
</TABLE>
- ------------------------
* Less than 1% of total.
(1) Includes 30,678 shares issuable upon the exercise of stock options. Does not
include 195,800 shares issuable upon the exercise of options that do not
vest within 60 days of February 8, 1999.
(2) Includes 1,089,840 shares beneficially owned by C-Max Capital Limited
Partnership-I. Mr. Watson is a director of C-Max Capital Corporation, the
general partner of C-Max Capital Limited Partnership-I. Mr. Watson disclaims
beneficial ownership of the shares held by C-Max Capital Limited
Partnership-I except to the extent of his pecuniary interest therein.
(3) Includes 85,440 shares issuable upon the exercise of warrants. The address
of C-Max Capital Limited Partnership-I is 2950 SW 27th Avenue, Suite 110,
Miami, FL 33133.
55
<PAGE>
(4) Includes 22,250 shares held by the Dixon and Carol Doll Family Trust, of
which Mr. Doll is a beneficiary. Also includes:
- 804,082 shares beneficially owned by Doll Technology Investment Fund
- 47,310 shares beneficially owned by Doll Technology Affiliates Fund, L.P.
- 30,803 shares beneficially owned by Doll Technology Side Fund, L.P.
Mr. Doll is the managing member of Doll Technology Investment Management,
L.L.C., the general partner of each of these funds. Mr. Doll disclaims
beneficial ownership of the shares held by these funds except to the extent
of his pecuniary interest in each of them.
(5) Includes 8,900 shares issuable upon the exercise of warrants. The address of
Open Text Corporation is 185 Columbia Street West, Waterloo, Ontario, Canada
N2L 5Z5.
(6) Consists of:
- 804,082 shares held by Doll Technology Investment Fund
- 47,310 shares held by Doll Technology Affiliates Fund, L.P.
- 30,803 shares held by Doll Technology Side Fund, L.P.
The address of each of the foregoing entities is 3000 Sand Hill Road,
Building 3, Suite 210, Menlo Park, California 94025.
(7) Consists of:
- 692,534 shares held by Zero Stage Capital V Limited Partnership
- 182,565 shares held by Zero Stage Capital VI Limited Partnership
The address of each of the foregoing entities is 101 Main Street, 17th Floor,
Cambridge, Massachusetts 02142-1519.
(8) The address of XL Ventures LLC is 1105 North Market Street, Suite 1300,
Wilmington, DE 19801.
(9) Consists of 737,864 shares held by XL Ventures LLC. Mr. Wood is an employee
of its parent company, XL Ventures, Inc. Mr. Wood disclaims beneficial
ownership of these shares.
(10) The address of Crystal Internet Venture Fund, L.P. is 1120 Chester Avenue,
Suite 310, Cleveland, Ohio 44114.
(11) The address of Prospect Street NYC Discovery Fund, L.P. is 10 East 40th
Street, 44th Floor, New York, New York 10016.
(12) Includes 121,502 shares issuable upon the exercise of options. Does not
include 62,300 shares issuable upon the exercise of options which will
become exercisable upon the closing of this offering or 202,920 shares
issuable upon the exercise of options that do not vest within 60 days of
February 8, 1999.
(13) Consists of 69,769 shares issuable upon the exercise of options. Does not
include 53,400 shares issuable upon the exercise of options which will
become exercisable upon the closing of this offering or 24,920 shares
issuable upon the exercise of options that do not vest within 60 days of
Februay 8, 1999.
(14) Includes 225,509 shares issuable upon the exercise of stock options.
56
<PAGE>
DESCRIPTION OF SECURITIES
The following descriptions of the common stock, the preferred stock and
provisions of MiningCo's certificate of incorporation reflect changes that will
occur upon the filing of an amended and restated certificate of incorporation
prior to the closing of this offering. This document will be filed with the SEC
as an exhibit to MiningCo's registration statement, of which this prospectus
forms a part.
The authorized capital stock of MiningCo consists of 50,000,000 shares of
common stock, par value $.001 per share, and 5,000,000 shares of preferred
stock, par value $.001 per share.
COMMON STOCK
As of the date of this prospectus, there are 2,205,406 shares of common
stock outstanding and held of record by 51 stockholders. There will be
11,551,829 shares of common stock outstanding upon the closing of this offering
and the concurrent placement.
Holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. Holders of a majority of the shares
of common stock entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of common stock are entitled to
receive dividends, if, as, and when declared by the board of directors out of
funds legally available for such purposes, subject to any dividend preferences
of any outstanding preferred stock. Upon the liquidation, dissolution or winding
up of MiningCo, the holders of common stock are entitled to share ratably in the
assets of MiningCo available for distribution, subject to the preferential
rights of any outstanding preferred stock. Holders of the common stock have no
preemptive, subscription, redemption or conversion rights. Upon the closing of
this offering, there will be no shares of preferred stock outstanding. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock that MiningCo may designate and issue in the future.
PREFERRED STOCK
As of the date of this prospectus, there are 17,246,122 shares of
convertible preferred stock outstanding. All outstanding shares of convertible
preferred stock will be converted into a total of 6,139,640 shares of common
stock upon the closing of this offering. After the closing, these shares of
convertible preferred stock will no longer be authorized, issued or outstanding.
Upon the closing of this offering, the board of directors will be
authorized, without further stockholder approval, to issue from time to time up
to an aggregate of 5,000,000 shares of preferred stock in one or more series.
The board of directors may fix or alter the designations, preferences, rights
and any qualifications, limitations or restrictions of the shares of each of
these series, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption, redemption price or prices, liquidation
preferences and the number of shares constituting any series or designations of
these series. MiningCo has no present plans to issue any shares of preferred
stock. Please see "--Anti-Takeover Effects of Certain Provisions of Delaware Law
and MiningCo's Certificate of Incorporation and Bylaws."
OPTIONS
Options to purchase a total of 3,221,560 shares of common stock may be
granted under the stock option plan. As of the date of this prospectus, there
are outstanding under the stock option plan options to purchase a total of
2,075,267 shares of common stock, of which options to purchase 508,222 shares
are currently exercisable. Of the options to purchase 1,567,045 shares of common
stock that are not currently exercisable, the options to purchase 372,936 shares
of common stock originally granted under MiningCo's predecessor stock option
plan will immediately vest and become exercisable upon the closing of this
offering. In addition, as of the date of this prospectus, there are outstanding
options to
57
<PAGE>
purchase a total of 49,787 shares of common stock which were not granted under
the stock option plan, none of which are currently exercisable. Since MiningCo
intends to file a registration statement on Form S-8 as soon as practicable
following the closing of this offering, any shares issued upon exercise of these
options will be immediately available for sale in the public market, subject to
the terms of lock-up agreements entered into between substantially all of these
optionholders and the underwriters. Please see "Management--Amended and Restated
1998 Stock Option/Stock Issuance Plan" and "Shares Eligible for Future Sale."
COMMON STOCK WARRANTS
As of the date of this prospectus, MiningCo has outstanding warrants to
purchase a total of 65,860 shares of common stock, at an average exercise price
of $9.80 per share. Of these warrants, the holders of warrants to purchase a
total of 30,260 shares of common stock have entered into lock-up agreements with
the underwriters. The warrants contain anti-dilution provisions providing for
adjustments of the exercise price and the number of shares of common stock
underlying the warrants upon the occurrence of any recapitalization,
reclassification, stock dividend, stock split, stock combination or similar
transaction. The warrants grant to their holders registration rights, described
below, with respect to the common stock issuable upon their exercise. Please see
"Shares Eligible for Future Sale."
REGISTRATION RIGHTS
Pursuant to the terms of the amended and restated investors' rights
agreement, after the closing of this offering and the concurrent placement the
holders of 6,779,276 shares of common stock will be entitled to demand that
MiningCo register their shares for resale under the Securities Act. The holders
of 50% or more of the shares of common stock to be issued upon the conversion of
each series of convertible preferred stock are entitled to demand that MiningCo
register their shares under the Securities Act, subject to certain limitations.
MiningCo is not required to effect more than one demand registration for each
group of holders. In addition, after the closing of this offering and the
concurrent placement, these holders and Comcast will be entitled to piggyback
registration rights with respect to the registration of shares of common stock
under the Securities Act. In the event that MiningCo proposes to register any
shares of common stock under the Securities Act, either for its account or for
the account of other security holders, the holders of shares having piggyback
rights are entitled to receive notice of that registration and are entitled to
include their shares in the registration, subject to limitations. Further, at
any time after MiningCo becomes eligible to file a registration statement on
Form S-3, the holders of 6,986,059 shares of common stock may require MiningCo
to file on two occasions Form S-3 registration statements under the Securities
Act with respect to their shares of common stock. These registration rights are
subject to conditions and limitations, among them the right of the underwriters
of an offering to limit the number of shares of common stock to be included in
the registration. MiningCo is generally required to bear all of the expenses of
these registrations, except underwriting discounts and selling commissions.
Registration of any of the shares of common stock held by security holders with
registration rights would result in those shares becoming freely tradable
without restriction under the Securities Act.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND MININGCO'S
CERTIFICATE OF INCORPORATION AND BYLAWS
MiningCo is subject to the provisions of Section 203 of the Delaware General
Corporation Law (as amended from time to time, the "DGCL"). Section 203 of the
DGCL generally prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained that status with the
approval of the board of directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
58
<PAGE>
interested stockholder. Subject to exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three years
did own, fifteen percent (15%) or more of a corporation's voting stock. This
statute could prohibit or delay the accomplishment of mergers or other takeover
or change in control attempts with respect to MiningCo and, accordingly, may
discourage attempts to acquire MiningCo.
In addition, certain provisions of the certificate and MiningCo's bylaws,
which will be in effect upon the closing of this offering and which are
described in the following paragraphs, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
stockholders.
BOARD OF DIRECTORS VACANCIES. The certificate authorizes the board of
directors to fill vacant directorships or increase the size of the board of
directors. This may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by that removal with its own nominees.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. The certificate
provides that stockholders may not take action by written consent, but only at
duly called annual or special meetings of stockholders. The certificate further
provides that special meetings of stockholders of MiningCo may be called only by
the chairman of the board of directors or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must deliver a written notice
to the principal executive offices of MiningCo within a prescribed time period.
The bylaws also specify requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
directors at an annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to limitations imposed by the Nasdaq National
Market. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
acquisitions and employee benefit plans. The existence of authorized but
unissued and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of MiningCo by means of a
proxy contest, tender offer, merger or otherwise.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The certificate provides that, except to the extent prohibited by the DGCL,
MiningCo's directors shall not be personally liable to MiningCo or its
stockholders for monetary damages for any breach of fiduciary duty as directors
of MiningCo. Under the DGCL, the directors have a fiduciary duty to MiningCo
that is not eliminated by this provision of the certificate and, in appropriate
circumstances, injunctions and other nonmonetary relief will remain available.
This provision also does not affect the directors' responsibilities under any
other laws, including the Federal securities laws or state or Federal
environmental laws.
Section 145 of the DGCL enables a corporation to indemnify its directors and
officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers. However, this provision does
not eliminate or limit the liability of a director:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders,
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<PAGE>
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
- for payments of dividends or approval of stock repurchases or redemptions
that are prohibited by the DGCL or
- for any transaction from which the director derived an improper personal
benefit.
MiningCo's certificate provides that it may fully indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (whether civil, criminal, administrative
or investigative) by reason of the fact that the person is or was a director or
officer of MiningCo or is or was serving at the request of MiningCo as a
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by that person in connection with any threatened, pending or
completed action, suit or proceeding.
MiningCo intends to enter into indemnification agreements with its directors
and executive officers. MiningCo believes that the provisions of its certificate
and bylaws and these agreements are necessary to attract and retain qualified
directors and executive officers. MiningCo's bylaws also permit it to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions, regardless of whether the DGCL
would permit indemnification. MiningCo has obtained liability insurance for its
officers and directors.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent for which indemnification will be required
or permitted under the certificate. MiningCo is not aware of any threatened
litigation or proceeding that may result in a claim for indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be American Stock
Transfer & Trust Company, New York, New York.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for the common
stock, and no prediction can be made as to the effect, if any, that market sales
of shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of common stock in the public market,
or the perception that such sales could occur, could adversely affect the market
price of the common stock and could impair MiningCo's future ability to raise
capital through the sale of its equity securities.
Upon the closing of this offering and the concurrent placement, MiningCo
will have an aggregate of 11,551,829 shares of common stock outstanding,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants. Of the outstanding shares, the 3,000,000
shares being sold in this offering will be freely tradable, except that any
shares held by "affiliates" of MiningCo may only be sold in compliance with the
limitations described below. The remaining 8,551,829 shares of common stock will
be deemed "restricted securities" that may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act. These rules are
summarized below.
Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ------------------ -------------------------------------------------------------------------
<C> <S>
3,128 After the date of this prospectus
24,442 Upon the filing of a registration statement to register for resale shares
of common stock issuable upon the exercise of options granted under
MiningCo's stock option plan
5,075,537 After 180 days from the date of this prospectus (subject, in some cases,
to volume limitations)
3,448,722 At various times after 180 days from the date of this prospectus
</TABLE>
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of common stock (approximately 115,518 shares immediately
after this offering and the concurrent placement) or (ii) the average weekly
trading volume in the common stock during the four calendar weeks preceding the
date on which notice of that sale is filed, subject to restrictions. In
addition, a person who is not deemed to have been an affiliate of MiningCo at
any time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years is entitled to sell those
shares under Rule 144(k) without regard to the requirements described above. To
the extent that shares are acquired from an affiliate of MiningCo, the acquiring
person's holding period for the purpose of effecting a sale under Rule 144
commences on the date of transfer from the affiliate.
As of the date of this prospectus, options to purchase a total of 2,125,054
shares of common stock are outstanding, of which options to purchase 508,222
shares are currently exercisable. Of the options to purchase 1,616,832 shares of
common stock that are not currently exercisable, options to purchase 372,936
shares of common stock shall immediately vest and become exercisable upon the
closing of this offering. Upon the closing of this offering, MiningCo intends to
file a registration statement to register for resale the 3,221,560 shares of
common stock reserved for issuance under the stock option plan and
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<PAGE>
the 125,000 shares of Common Stock authorized for issuance under the purchase
plan. That registration statement will automatically become effective upon
filing. Accordingly, shares issued upon the exercise of stock options granted
under the stock option plan will be eligible for resale in the public market
from time to time, subject to vesting restrictions and, in the case of some of
the options the lock-up agreements referred to below. Upon the closing of this
offering, 65,860 shares of common stock will be issuable upon the exercise of
outstanding warrants.
Upon the closing of this offering, MiningCo intends to grant fully vested,
non-qualified stock options to purchase up to 200,000 shares of common stock to
a substantial majority of its guides. The exercise price per share of these
options is expected to be the initial public offering price of the common stock.
MiningCo's directors and officers and stockholders who hold 8,524,259 shares
in the aggregate, together with the holders of options to purchase 2,069,927
shares of common stock and the holders of warrants to purchase 30,260 shares of
common stock, have agreed that they will not sell, directly or indirectly, any
shares of common stock without the prior written consent of Bear, Stearns & Co.
Inc. for a period of 180 days from the date of this prospectus. Please see
"Underwriting."
MiningCo has agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except
MiningCo may issue, and grant options to purchase, shares of common stock under
the stock option plan and the purchase plan. In addition, MiningCo may issue
shares of common stock in connection with any acquisition of another company if
the terms of that issuance provide that the common stock shall not be resold
prior to the expiration of the 180-day period referenced in the preceding
sentence.
Following this offering, some holders of shares of common stock will have
rights to have their shares of common stock registered for resale under the
Securities Act. Please see "Description of Securities--Registration Rights."
62
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among the underwriters and MiningCo, each of the underwriters named below, for
whom Bear, Stearns & Co. Inc., Volpe Brown Whelan & Company, LLC and Wit Capital
Corporation as e-Manager-TM- are acting as representatives, has severally agreed
to purchase from MiningCo the aggregate number of shares of common stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
Bear, Stearns & Co. Inc..............................................................................
Volpe Brown Whelan & Company, LLC....................................................................
Wit Capital Corporation..............................................................................
----------
Total............................................................................................ 3,000,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the underwriters
are subject to approval of certain legal matters by counsel and to various other
conditions. The nature of the underwriters' obligations is that they are
committed to purchase and pay for all of the above shares of common stock if any
are purchased. This offering and the concurrent placement are contingent on each
other.
The underwriters propose to offer the shares of common stock directly to the
public at the "initial public offering price" set forth on the cover page of
this prospectus and at that price less a concession not in excess of $ per
share of common stock to certain other dealers who are members of the National
Association of Securities Dealers, Inc. The underwriters may allow, and those
dealers may reallow, concessions not in excess of $ per share of common stock
to certain other dealers. After this offering, this offering price, concessions
and other selling terms may be changed by the underwriters.
MiningCo has granted a 30-day over-allotment option to the underwriters to
purchase up to an aggregate of 450,000 additional shares of common stock of
MiningCo at the "initial public offering price" less the "underwriting
discounts", each as set forth on the cover page of this prospectus. If the
underwriters exercise this option in whole or in part, then each of the
underwriters will be severally committed, subject to certain conditions,
including the approval of certain matters by counsel, to purchase the additional
shares of common stock in proportion to their respective purchase commitments as
indicated in the preceding table.
The underwriters, at the request of MiningCo, have reserved for sale at the
initial public offering price up to ten percent (10%) of the shares of common
stock to be sold in this offering for sale to employees and directors of
MiningCo and other persons designated by MiningCo. The number of shares
available for sale to the general public will be reduced to the extent that any
reserved shares are purchased. Any reserved shares not so purchased will be
offered by the underwriters on the same basis as the other shares offered
hereby.
Wit Capital is making a prospectus in electronic format available on its
Internet web site. All dealers purchasing shares from Wit Capital in this
offering have also agreed to make a prospectus in electronic format available on
web sites maintained by each of the dealers. Other than the prospectus in
electronic format, the information on such web sites is not part of this
prospectus or the registration statement of which this prospectus forms a part,
has not been approved and/or endorsed by MiningCo or any underwriter in such
capacity and should not be relied on by prospective investors.
The underwriters do not expect to confirm sales of common stock to any
accounts over which they exercise discretionary authority.
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<PAGE>
The underwriting agreement provides that MiningCo will indemnify the
underwriters against certain liabilities under the Securities Act of 1933, as
amended, or will contribute to payments that the underwriters may be required to
make in respect thereof.
MiningCo's directors and officers and stockholders who hold 8,524,259 shares
in the aggregate, together with the holders of options to purchase 2,069,927
shares of common stock and the holders of warrants to purchase 30,260 shares of
common stock, have agreed that they will not sell, directly or indirectly, any
shares of common stock without the prior written consent of Bear, Stearns & Co.
Inc. for a period of 180 days from the date of this prospectus. However, Bear,
Stearns & Co. Inc. may, in its sole discretion and at any time or from time to
time, without notice to MiningCo's stockholders or to Nasdaq, release all or any
portion of the securities subject to lock-up agreements.
In addition, MiningCo has agreed that for a period of 180 days after the
date of this prospectus it will not, without the prior written consent of Bear,
Stearns & Co. Inc., offer, sell or otherwise dispose of any shares of common
stock except for the shares of common stock offered by this prospectus and in
the concurrent placement, the shares of common stock issuable upon exercise of
outstanding warrants and the shares issued and options granted pursuant to
MiningCo's stock option plan and purchase plan.
Prior to this offering, there has been no public market for the common stock
of MiningCo. Consequently, the initial offering price for the common stock will
be determined by negotiations between MiningCo and the representatives of the
underwriters. Among the factors to be considered in those negotiations will be:
- the results of operations of MiningCo in recent periods;
- estimates of the prospects of MiningCo and the industry in which MiningCo
competes;
- an assessment of MiningCo's management;
- the general state of the securities markets at the time of this offering;
and
- the prices of similar securities of generally comparable companies.
MiningCo's common stock has been approved for quotation on the Nasdaq National
Market under the symbol MINE. There can be no assurance, however, that an active
or orderly trading market will develop for the common stock or that the common
stock will trade in the public markets subsequent to this offering at or above
the initial offering price.
In order to facilitate this offering, persons participating in this offering
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock during and after this offering, including
over-allotment, stabilizing and short-covering transactions and the impositions
of penalty bids. Persons participating in this offering may also engage in
passive market making transactions in the common stock on the Nasdaq National
Market. Specifically, the underwriters may over-allot or otherwise create a
short position in the common stock for their own account by selling more shares
of common stock than have been sold to them by MiningCo. The underwriters may
elect to cover this short position by purchasing shares of common stock in the
open market or by exercising the over-allotment option granted to the
underwriters. In addition, the underwriters may stabilize or maintain the price
of the common stock by bidding for or purchasing shares of common stock in the
open market and may impose penalty bids, under which selling concessions allowed
to syndicate members or other broker-dealers participating in this offering are
reclaimed if shares of common stock previously distributed in this offering are
repurchased in connection with stabilization transactions or otherwise. The
effect of these transactions may be to stabilize or maintain the market price at
a level above that which might otherwise prevail in the open market. The
imposition of a penalty bid may also affect the price of the common stock to the
extent that it discourages resales. No representation is made as to the
magnitude or effect of this stabilization or other transactions. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
64
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for MiningCo by Brobeck, Phleger & Harrison LLP, New York, New
York, and for the underwriters by O'Sullivan Graev and Karabell, LLP, New York,
New York.
EXPERTS
The financial statements for MiningCo.com, Inc. as of December 31, 1997 and
1998 and for the period from June 27, 1996 (inception) to December 31, 1996 and
the years ended December 31, 1997 and 1998 included in this prospectus and
elsewhere in the registration statement have been so included in reliance on the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, upon the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
MiningCo has filed with the SEC a registration statement on Form S-1
(including exhibits, schedules and amendments) under the Securities Act with
respect to the shares of common stock to be sold in this offering. This
prospectus does not contain all the information set forth in the registration
statement. For further information with respect to MiningCo and the shares of
common stock to be sold in this offering, reference is made to the registration
statement. Statements contained in this prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
In each instance reference is made to the copy of that contract, agreement or
other document filed as an exhibit to the registration statement.
You may read and copy all or any portion of the registration statement or
any other information MiningCo files at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. MiningCo's SEC filings, including the registration statement,
are also available to you on the SEC's web site (http://www.sec.gov).
As a result of this offering, MiningCo will become subject to the
information and reporting requirements of the Securities Exchange Act, and, in
accordance with those requirements, will file periodic reports, proxy statements
and other information with the SEC. These reports, proxy and information
statements and other information may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
MiningCo intends to furnish its stockholders with annual reports containing
audited financial statements and with quarterly reports for the first three
quarters of each year containing unaudited interim financial information.
65
<PAGE>
MININGCO.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Balance Sheets as of December 31, 1997 and 1998........................................................... F-3
Statement of Operations for the period from June 27, 1996 (inception) to December 31, 1996, and for the
years ended December 31, 1997 and 1998.................................................................. F-4
Statements of Stockholders' Deficit for the period from June 27, 1996 (inception) to December 31, 1996,
and for the years ended December 31, 1997 and 1998...................................................... F-5
Statements of Cash Flows for the period from June 27, 1996 (inception) to December 31, 1996, and for the
years ended December 31, 1997 and 1998.................................................................. F-6
Notes to Financial Statements............................................................................. F-8
</TABLE>
F-1
<PAGE>
The Board of Directors and Stockholders
MiningCo.com, Inc.:
When the reverse stock split referred to in Note 14 of the Notes to
Financial Statements has been consummated, we will be in a position to render
the following report.
KPMG LLP
/S/ KPMG LLP
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
MiningCo.com, Inc.:
We have audited the accompanying balance sheets of MiningCo.com, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' deficit and cash flows for the period from June 27, 1996
(inception) to December 31, 1996 and for the years ended December 31, 1997 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MiningCo.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from June 27, 1996 (inception) to December 31, 1996 and for the
years ended December 31, 1997 and 1998 in conformity with generally accepted
accounting principles.
New York, New York
January 20, 1999, except as to Note 14
which is as of , 1999
F-2
<PAGE>
MININGCO.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, (SEE NOTE
------------------------ 2(A))
1997 1998 DECEMBER 31,
----------- ----------- 1998
--------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 303,200 $10,644,300 $ 10,644,300
Accounts receivable, less allowance for doubtful accounts of $6,000 in 1997
and $146,000 in 1998........................................................... 118,300 917,300 917,300
Prepaid assets................................................................... -- 100,000 100,000
----------- ----------- --------------
Total current assets........................................................... 421,500 11,661,600 11,661,600
Property and equipment, net........................................................ 748,400 3,302,000 3,302,000
Debt issuance costs, net of amortization of $24,500 in 1997........................ 97,800 -- --
Deferred offering costs............................................................ -- 568,700 568,700
Deposits........................................................................... 89,400 125,400 125,400
----------- ----------- --------------
Total assets................................................................... $ 1,357,100 $15,657,700 $ 15,657,700
----------- ----------- --------------
----------- ----------- --------------
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Trade accounts payable and accrued expenses...................................... $ 1,257,300 $ 6,413,200 $ 6,413,200
Deferred compensation payable--related party..................................... 414,700 181,700 181,700
Guide fees payable............................................................... 157,300 462,400 462,400
Deferred revenue................................................................. 529,600 -- --
Convertible loans payable........................................................ 1,010,200 -- --
Current portion of notes payable................................................. -- 154,000 154,000
Current installments of obligations under capital leases......................... 150,000 219,000 219,000
----------- ----------- --------------
Total current liabilities...................................................... 3,519,100 7,430,300 7,430,300
Convertible notes payable, net of unamortized debt discount of $38,700 in 1997..... 4,851,000 -- --
Notes payable, excluding current portion........................................... 3,630,100 620,600 283,500
Deferred rent...................................................................... 49,600 47,700 47,700
Obligations under capital leases, excluding current installments................... 251,600 149,400 149,400
Redeemable convertible preferred stock, $0.001 par value;
Series A--3,346,715 shares authorized, issued and outstanding at December 31,
1998; liquidation preference of $1.50 per share plus unpaid dividends of 9%
per annum ($5,325,700 in the aggregate at December 31, 1998).................. -- 5,259,700 --
Series B--6,597,596 shares authorized, issued and outstanding at December 31,
1998; liquidation preference of $1.80 per share plus unpaid dividends of 9%
per annum ($12,602,100 in the aggregate at December 31, 1998)................. -- 12,448,300 --
Series C--8,717,949 shares authorized, 7,301,811 shares issued and outstanding
at December 31, 1998; liquidation preference of $1.95 per share plus unpaid
dividends of 9% per annum ($14,403,100 in the aggregate at December 31,
1998)......................................................................... -- 14,363,700 --
Stockholders' (deficit) equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued
and outstanding................................................................ -- -- --
Common stock, $0.001 par value; 50,000,000 shares authorized, 1,475,339 and
2,202,558 shares issued and outstanding at December 31, 1997 and 1998,
respectively, 8,342,198 issued and outstanding pro forma (unaudited)........... 1,500 2,200 8,300
Additional paid-in capital....................................................... 132,700 3,231,000 35,633,700
Deferred compensation............................................................ -- (1,238,900) (1,238,900)
Accumulated deficit.............................................................. (11,078,500) (26,656,300) (26,656,300)
----------- ----------- --------------
Total stockholders' (deficit) equity........................................... (10,944,300) (24,662,000) 7,746,800
----------- ----------- --------------
Commitments and contingencies
Total liabilities and stockholders deficit................................... $ 1,357,100 $15,657,700 $ 15,657,700
----------- ----------- --------------
----------- ----------- --------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
MININGCO.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27, 1996
(INCEPTION)
TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------------
1996 1997 1998
------------- ------------- --------------
<S> <C> <C> <C>
Revenues............................................................ $ -- $ 390,600 $ 3,721,600
Cost of revenues.................................................... 90,800 1,847,900 3,988,500
------------- ------------- --------------
Gross profit (loss)........................................... (90,800) (1,457,300) (266,900)
Operating expenses:
Sales and marketing............................................... 240,900 1,678,300 7,724,500
General and administrative........................................ 1,100,900 2,414,400 3,677,900
Product development............................................... 948,000 2,791,200 2,771,500
Amortization of deferred compensation............................. -- -- 451,000
------------- ------------- --------------
Total operating expenses........................................ 2,289,800 6,883,900 14,624,900
------------- ------------- --------------
Loss from operations.......................................... (2,380,600) (8,341,200) (14,891,800)
Other income (expense):
Other income, net................................................. -- 349,800 --
Interest income................................................... 9,200 8,800 49,700
Interest expense, including $65,300 and $230,300 of amortization
of debt discount in 1997 and 1998 and $24,500 and $6,100 of debt
issuance costs in 1997 and 1998, respectively................... (66,700) (657,800) (735,700)
------------- ------------- --------------
Total other income (expense), net............................. (57,500) (299,200) (686,000)
------------- ------------- --------------
Net loss............................................................ (2,438,100) (8,640,400) (15,577,800)
Cumulative dividends and accretion of convertible preferred stock to
liquidation value................................................. -- -- (1,230,500)
------------- ------------- --------------
Net loss attributable to common stockholders.................. $ (2,438,100) $ (8,640,400) $ (16,808,300)
------------- ------------- --------------
------------- ------------- --------------
Basic and diluted net loss per common share......................... $ (1.20) $ (4.94) $ (9.71)
------------- ------------- --------------
------------- ------------- --------------
Weighted average shares outstanding used in basic and diluted net
loss per common share calculation................................. 2,035,144 1,748,850 1,731,598
------------- ------------- --------------
------------- ------------- --------------
Pro forma basic and diluted net loss per share...................... $ (1.98)
--------------
--------------
Weighted average shares outstanding used in pro forma basic and
diluted net loss per common share calculation..................... 7,871,238
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
MININGCO.COM, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------- PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT DEFICIT
---------- --------- ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock.............. 1,816,255 $ 1,800 $ 11,500 $ -- $ -- $ 13,300
Net loss for the period from June 27,
1996 (inception) to December 31,
1996................................ -- -- -- -- (2,438,100) (2,438,100)
---------- --------- ------------ ------------- -------------- --------------
Balance as of December 31, 1996....... 1,816,255 1,800 11,500 -- (2,438,100) (2,424,800)
Cancellation of common stock.......... (367,802) (300) 300 -- -- --
Issuance of warrants in connection
with debt transactions.............. -- -- 104,000 -- -- 104,000
Exercise of stock options............. 26,886 -- 13,600 -- -- 13,600
Issuance of stock options in lieu of
services............................ -- -- 3,300 -- -- 3,300
Net loss for the year ended December
31, 1997............................ -- -- -- -- (8,640,400) (8,640,400)
---------- --------- ------------ ------------- -------------- --------------
Balance as of December 31, 1997....... 1,475,339 1,500 132,700 -- (11,078,500) (10,944,300)
Issuance of warrants in connection
with debt transactions.............. -- -- 216,000 -- -- 216,000
Deferred compensation related to stock
options granted..................... -- -- 1,716,900 (1,716,900) -- --
Amortization of deferred
compensation........................ -- -- -- 478,000 -- 478,000
Common stock issued for stock
options............................. 87,583 100 77,100 -- -- 77,200
Issuance of common stock in connection
with the exercise of warrants....... 639,636 600 2,255,800 -- -- 2,256,400
Issuance of stock options and warrants
in lieu of services rendered........ -- -- 63,000 -- -- 63,000
Cumulative dividends on convertible
preferred stock..................... -- -- (1,196,800) -- -- (1,196,800)
Accretion of convertible preferred
stock to liquidation value.......... -- -- (33,700) -- -- (33,700)
Net loss for the year ended December
31, 1998............................ -- -- -- -- (15,577,800) (15,577,800)
---------- --------- ------------ ------------- -------------- --------------
Balance as of December 31, 1998....... 2,202,558 $ 2,200 $ 3,231,000 $ (1,238,900) $ (26,656,300) $ (24,662,000)
---------- --------- ------------ ------------- -------------- --------------
---------- --------- ------------ ------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
MININGCO.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27,
1996
(INCEPTION) YEAR ENDED
TO DECEMBER 31,
DECEMBER 31, -----------------------
1996 1997 1998
------------ ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................................... $(2,438,100) $(8,640,400) $(15,577,800)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization of property and equipment.............. 29,400 213,400 567,600
Amortization of debt issuance costs.................................. -- 24,500 6,100
Amortization of debt discount........................................ -- 65,300 230,300
Amortization of deferred compensation expense........................ -- -- 478,000
Stock options and warrants issued in lieu of services rendered....... -- 3,300 63,000
Deferred rent........................................................ 39,100 10,500 (1,900)
Deferred compensation--related party................................. 151,300 263,400 67,000
Deferred interest on debt............................................ 66,100 558,300 401,700
Bad debt expense..................................................... -- 6,000 140,000
Changes in operating assets and liabilities:
Accounts receivable................................................ (300) (124,000) (939,000)
Prepaid assets..................................................... -- -- (100,000)
Deposits........................................................... (62,900) (26,500) (36,000)
Accounts payable and accrued expenses.............................. 301,600 955,700 5,155,900
Guide fees payable................................................. -- 157,300 305,100
Deferred revenue................................................... -- 529,600 (529,600)
------------ ---------- -----------
Net cash used in operating activities............................ (1,913,800) (6,003,600) (9,769,600)
------------ ---------- -----------
Cash flows from investing activities:
Capital expenditures................................................... (357,800) (148,000) (2,941,900)
------------ ---------- -----------
Net cash used in investing activities............................ (357,800) (148,000) (2,941,900)
------------ ---------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock................................. 13,300 -- --
Proceeds from issuance of common stock in connection with the exercise
of warrants.......................................................... -- -- 2,256,400
Proceeds from secured credit facility, net............................. -- -- 437,500
Proceeds from issuance of convertible preferred stock, net of expenses
of $184,900.......................................................... -- -- 18,181,700
Proceeds from issuance of loans payable................................ 3,905,600 5,000,000 2,881,000
Principal payments under capital lease obligations..................... -- (83,800) (212,500)
Proceeds from exercise of common stock options......................... -- 13,600 77,200
Deferred financing/offering costs...................................... -- (122,300) (568,700)
------------ ---------- -----------
Net cash provided by financing activities........................ 3,918,900 4,807,500 23,052,600
------------ ---------- -----------
Net increase (decrease) in cash and cash equivalents........... 1,647,300 (1,344,100) 10,341,100
Cash and cash equivalents at beginning of period......................... -- 1,647,300 303,200
------------ ---------- -----------
Cash and cash equivalents at end of period............................... $1,647,300 $ 303,200 $10,644,300
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
MININGCO.COM, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 27,
1996
(INCEPTION) YEAR ENDED
TO DECEMBER 31,
DECEMBER 31, -----------------------
1996 1997 1998
------------ ---------- -----------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid.......................................................... $ 600 $ 8,100 $ 94,165
------------ ---------- -----------
------------ ---------- -----------
Noncash transactions:
Equipment acquired under capital leases................................ $ -- $ 485,400 $ 179,300
------------ ---------- -----------
------------ ---------- -----------
Barter transactions.................................................... $ -- $ 72,500 $ 365,700
------------ ---------- -----------
------------ ---------- -----------
Conversion of $4,950,000 of the convertible notes payable-Series A
notes together with $70,000 of interest thereon into 3,346,715 shares
of Series A preferred stock on April 23, 1998........................ $ -- $ -- $ 5,020,000
------------ ---------- -----------
------------ ---------- -----------
Conversion of $1,700,000 of the 8.25% notes payable together with
$305,800 of interest thereon into 1,114,327 shares of Series B
preferred stock on April 23, 1998.................................... $ -- $ -- $ 2,005,800
------------ ---------- -----------
------------ ---------- -----------
Conversion of $2,800,000 of the convertible notes payable-Series B
together with $69,800 of interest thereon into 1,594,380 shares of
Series B preferred stock on April 23, 1998........................... $ -- $ -- $ 2,869,800
------------ ---------- -----------
------------ ---------- -----------
Conversion of $1,555,600 of the 8.25% notes payable together with
$226,400 of interest thereon into 913,856 shares of Series C
preferred on November 13, 1998....................................... $ -- $ -- $ 1,782,000
------------ ---------- -----------
------------ ---------- -----------
Conversion of $1,081,000 of the convertible notes payable-Series C
together with $8,900 of interest thereon into 558,917 shares of
Series C preferred stock on November 13, 1998........................ $ -- $ -- $ 1,089,900
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) ORGANIZATION AND BUSINESS
MiningCo.com, Inc. ("MiningCo") was incorporated in New York on June 27,
1996 (inception) as General Internet Inc. and commenced operations on that date.
In December 1998, MiningCo reincorporated in Delaware. MiningCo's Internet
service, MININGCO.COM, is an Internet news, information and entertainment
service. MiningCo's network is comprised of numerous GuideSites, each of which
focuses on a particular topic and is managed by a human guide. The guides are
independent contractors who are compensated based on the greater of a monthly
guarantee or a percentage of advertising revenues generated by all of the
GuideSites. MiningCo's primary revenue source is the sale of advertising.
MiningCo's business is characterized by rapid technological change, new
product and service development and evolving industry standards. Inherent in the
Company's business are various risks and uncertainties, including its limited
operating history, uncertain profitability, history of losses, anticipated
continuing losses, the dependence on the Internet and risks associated with
Internet advertising.
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(A) INITIAL PUBLIC OFFERING, CONCURRENT PLACEMENT AND UNAUDITED PRO FORMA
BALANCE SHEET
In December 1998, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission ("SEC") that
would permit MiningCo to sell shares of MiningCo's common stock in connection
with a proposed initial public offering ("IPO").
On February 23, 1999, MiningCo and Comcast Interactive Investments, Inc.
("Comcast") entered into a common stock purchase agreement pursuant to which
MiningCo has agreed to sell Comcast up to $2,500,000 of common stock. Since
Comcast will purchase the shares directly from MiningCo in a private placement
transaction, the underwriters will not receive any discount or commission
relating to the sale of the shares. As a result, Comcast will purchase the
shares at a price of 93% of the initial public offering price per share. The
closing of the concurrent placement and the IPO are contingent on each other.
If the IPO is consummated under the terms presently anticipated, upon the
closing of the proposed IPO, each of the then outstanding shares of the
Company's convertible preferred stock will automatically convert into 0.356
shares of common stock (see note 10).
The accompanying pro forma balance sheet as of December 31, 1998 gives
effect to (a) the automatic conversion of 3,346,715, 6,597,596 and 7,301,811
shares of Series A, B and C convertible preferred stock, respectively,
representing all outstanding shares of convertible preferred stock, into
6,139,640 shares of common stock (see note 10) and (b) the automatic forgiveness
and cancellation of $337,100 in unsecured promissory notes payable (see note 8),
both upon the closing of the IPO.
(B) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
F-8
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(C) CASH AND CASH EQUIVALENTS
MiningCo considers all highly liquid securities with original maturities of
three months or less to be cash equivalents, which principally consist of money
market accounts.
(D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over three
years, which is the estimated useful life of the related assets. Leasehold
improvements are amortized over their estimated useful lives, or the term of the
related lease, whichever is shorter. Equipment under capital leases is stated at
the present value of minimum lease payments and is amortized using the
straight-line method over the shorter of the lease term or the estimated useful
life of the assets.
(E) DEBT ISSUANCE COSTS
Amortization of debt issuance costs is calculated on the straight-line
method over the life of the related debt instrument.
(F) IMPAIRMENT OF LONG-LIVED ASSETS
MiningCo reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. To date, no
impairment has occurred.
(G) INCOME TAXES
MiningCo accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in results of operations in
the period that includes the enactment date.
(H) REVENUE AND EXPENSE RECOGNITION
REVENUE RECOGNITION
To date, substantially all of MiningCo's revenues have been derived from the
sale of advertisements on MININGCO.COM. MiningCo offers numerous sizes and types
of advertising placement, including banner advertisements, button
advertisements, text links and sponsorship programs. Revenues from advertising
sales are recognized ratably in the period in which the advertisement is
displayed,
F-9
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
provided that no significant MiningCo obligations remain and collection of the
resulting receivable is probable. Payments received from advertisers prior to
displaying their advertisements on MININGCO.COM are recorded as deferred revenue
and are recognized as revenue ratably as the advertisements are displayed.
Pursuant to its agreements with advertisers, MiningCo generally guarantees a
minimum number of impressions (times that an advertisement appears in pages
viewed by the users of MININGCO.COM) for a fixed fee. To the extent minimum
guaranteed impression levels are not met, MiningCo defers recognition of the
corresponding revenues until guaranteed impression levels are achieved.
MiningCo's short-term advertising agreements are generally terminable by either
party upon relatively short notice. MiningCo's agreements with its electronic
commerce partners are typically longer in length, and in certain cases, entitle
MiningCo to a share of revenues generated by sales over a particular threshold
resulting from direct links from MININGCO.COM. To date, MiningCo has not
recognized any revenues from these revenue sharing agreements. MiningCo's
revenue derived from these revenue sharing agreements will be recognized by
MiningCo upon notification from its advertisers and electronic commerce partners
of sales attributable to MININGCO.COM.
A portion of MiningCo's revenues are from barter advertisements (agreements
whereby MiningCo trades advertisements on MININGCO.COM in exchange for
advertisements on third-party web sites). Barter advertising revenues and
expenses are recorded at the fair market value of services provided or received,
whichever is more determinable in the circumstances. Revenue from barter
advertising transactions is recognized as income when advertisements are
delivered on MININGCO.COM. Barter expense is recognized when MiningCo's
advertisements are run on third-party web sites, which is typically in the same
period when barter revenue is recognized. Barter expense is included as a
component of cost of revenues. Barter advertising revenues and expenses were $0,
$72,500 and $365,700 for the period from June 27, 1996 (inception) through
December 31, 1996 and for the years ended December 31, 1997 and 1998,
respectively.
At December 31, 1998, accounts receivable include approximately $417,300 of
unbilled receivables, $392,300 of which have been subsequently billed. Such
unbilled receivables represent the recognized sales value of short term
advertising contracts that were earned but not billable to customers at December
31, 1998. The terms of the related advertising contracts typically require
billing at the end of 30, 60 or 90 days from the signing of the contract.
EXPENSE RECOGNITION--GUIDE COMPENSATION
MiningCo's guides are compensated at an amount equal to the greater of a
monthly minimum guarantee or a percentage of net advertising revenues generated
by the entire GuideSite network, which is distributed among the guides based on
the user traffic on their respective GuideSites. Net advertising revenues has
been defined as total advertising revenues received less particular types of
non-cash revenues, third-party advertising sales representative organization
fees and marketing expenses. Guides are currently entitled to a percentage of
net transaction revenues and net syndication revenues. In addition, management
may distribute a semi-annual discretionary bonus to guides. Guide compensation
is included as a component of cost of revenues.
F-10
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EXPENSE RECOGNITION--DISTRIBUTION AND SYNDICATION PARTNERSHIPS
MiningCo has entered into distribution and syndication partnership
agreements that drive traffic to MININGCO.COM. Through these partnerships,
MiningCo provides content to a partner's web site, and users can link to
MININGCO.COM by clicking on the content. MiningCo has agreements to provide
content to some of the leading Internet service providers, content web sites,
search engines/Internet directories and broadband cable-related sites. These
short term agreements typically require MiningCo to make payments, which are
expensed, that are either fixed or are based on the amount of user traffic
directed from the partner's site to MININGCO.COM.
(I) PRODUCT DEVELOPMENT EXPENSES
Product development expenses include personnel and consulting costs
associated with the design, development and testing of MININGCO.COM and
MiningCo's systems and editorial personnel costs. MiningCo generally expenses
its product development expenses as incurred. Software development costs are
required to be capitalized when a product's technological feasibility has been
established by completion of a working model of the product. To date, completion
of a working model of MiningCo's service and general release have substantially
coincided. As a result, MiningCo has not capitalized any software development
costs since those costs have not been significant.
(J) ADVERTISING EXPENSES
MiningCo expenses the costs of advertising its service as incurred. These
costs amounted to $60,000, $510,900 and $5,262,800 for the period from June 27,
1996 (inception) through December 31, 1996 and for the years ended December 31,
1997 and 1998, respectively, and are included in sales and marketing in
MiningCo's statements of operations.
(K) STOCK-BASED COMPENSATION
MiningCo accounts for its employee stock option plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. Compensation
expense related to employee stock options is recorded only if, on the date of
grant, the fair value of the underlying stock exceeds the exercise price.
MiningCo adopted the disclosure-only requirements of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," which allows entities to continue to apply the provisions of APB
Opinion No. 25 for transactions with employees and provide pro forma net income
and pro forma earnings per share disclosures for employee stock as if the
fair-value-based method of accounting in SFAS No. 123 had been applied to these
transactions.
MiningCo accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measured.
F-11
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(L) BASIC AND DILUTED NET LOSS PER COMMON SHARE
MiningCo adopted SFAS No. 128, "Computation of Earnings Per Share," during
the year ended December 31, 1997. In accordance with SFAS No. 128 and the SEC
Staff Accounting Bulletin No. 98, basic earnings per share is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares consist of the
incremental common shares issuable upon the conversion of the convertible
preferred stock (using the if-converted method) and shares issuable upon the
exercise of stock options and warrants (using the Treasury Stock method); common
equivalent shares are excluded from the calculation if their effect is
anti-dilutive. Pursuant to SEC Staff Accounting Bulletin No. 98, all options,
warrants or other potentially dilutive instruments issued for nominal
consideration, prior to the anticipated effective date of an initial public
offering (including the IPO), are required to be included in the calculation of
basic and diluted net loss per share, as if they were outstanding for all
periods presented. As a result, MiningCo has included 218,890 shares of common
stock in the calculation of basic and diluted net loss per common share for all
periods presented which relate to certain investor warrants issued for nominal
consideration, all of which were exercised in December 1998 when MiningCo
exercised its right to call those warrants (see notes 8 and 10).
Diluted net loss per common share for the period from June 27, 1996
(inception) through December 31, 1996, the years ended December 31, 1997, and
1998, does not include the effects of options to purchase 0, 818,638, and
1,178,436 shares of common stock, respectively, 0, 427,003, and 68,708 common
stock warrants, respectively, or 0, 0 and 6,139,640 shares of convertible
preferred stock on an "as if" converted basis, respectively, as the effect of
their inclusion is anti-dilutive during each period.
The pro forma net loss per common share for the year ended December 31, 1998
is computed by dividing the net loss by the sum of the weighted average number
of shares of common stock outstanding and the shares resulting from the
automatic conversion of all of the outstanding convertible preferred stock into
6,139,640 shares of common stock, as if they had been outstanding for the entire
year ended December 31, 1998.
(M) STOCK SPLIT
In August 1996, MiningCo authorized and implemented a 1-for-40,000 common
stock split. Accordingly, all share and per share information in the
accompanying financial statements has been retroactively restated to reflect the
effect of the stock split (see note 14).
(N) DEFERRED OFFERING COSTS
At December 31, 1998, specific incremental costs directly attributable to
the IPO transaction have been deferred for an aggregate amount of $568,700.
(O) RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, MiningCo adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting and
displaying comprehensive
F-12
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income and its components in a full set of general purpose financial statements.
The adoption of this standard has had no impact on MiningCo's financial
statements. Accordingly, MiningCo's comprehensive net loss is equal to its net
loss for all periods presented.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which establishes standards for the way
that a public enterprise reports information about operating segments in annual
financial statements, and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. In the initial
year of application, comparative information for earlier years must be restated.
MiningCo has determined that it does not have any separately reportable business
segments.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"), which provides guidance
for determining whether computer software is internal-use software and on
accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It also
provides guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. MiningCo does not expect the adoption of
SOP 98-1 to have a material effect on its capitalization policy.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. This
statement is not expected to affect MiningCo as MiningCo currently does not
engage or plan to engage in derivative instruments or hedging activities.
(3) BUSINESS AND CREDIT CONCENTRATIONS
Financial instruments which subject MiningCo to concentrations of credit
risk consist primarily of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities. The carrying amounts of these
instruments approximate fair value. The carrying amount of MiningCo's capital
leases and other equipment financing obligations approximates the fair value of
these instruments based upon management's best estimate of interest rates which
are similar to the rates obtained in its January and February 1999 lease line of
credit (see note 13).
MiningCo maintains cash and cash equivalents with a domestic financial
institution. MiningCo performs periodic evaluations of the relative credit
standing of this institution. From time to time, MiningCo's cash balances with
this financial institution may exceed Federal Deposit Insurance Corporation
insurance limits.
MiningCo's customers are concentrated in the United States. MiningCo
performs ongoing credit evaluations, generally does not require collateral and
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of each customer, historical trends and other information; to
date, such amounts have been within management's expectations.
F-13
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(3) BUSINESS AND CREDIT CONCENTRATIONS (CONTINUED)
For the period from June 27, 1996 (inception) to December 31, 1996, there
were no customers that accounted for over 10% of total revenues generated by
MiningCo, or of gross accounts receivable at December 31, 1996.
For the year ended December 31, 1997, one customer accounted for
approximately 19% of total revenues generated by MiningCo. No customers
accounted for over 10% of gross accounts receivable at December 31, 1997. As of
December 31, 1997, MiningCo had receivables in excess of $10,000 from three
separate customers totaling approximately $43,000.
For the year ended December 31, 1998, one customer accounted for
approximately 12% of total revenues generated by MiningCo. This advertising
arrangement ended on December 31, 1998. For the year ended December 31, 1998, a
third-party Internet advertising sales representative organization accounted for
approximately 21% of MiningCo's total revenues and accounted for approximately
35% of gross accounts receivable at December 31, 1998, totaling approximately
$376,000.
In June 1997, MiningCo entered into a consulting agreement with a major
financial institution pursuant to which MiningCo agreed to provide consulting
assistance in connection with the development of micro communities for an
aggregate amount of $450,000. Fees in connection with this agreement have been
recognized as performance occurred under the terms of the agreement, net of any
expenses, and have been recorded as other income for the year ended December 31,
1997. In connection with this agreement, MiningCo issued the financial
institution a warrant to purchase 35,600 shares of common stock at $14.05 per
share with an expiration date of December 31, 1999. The fair value of the
warrants, using the Black-Scholes model based upon the following assumptions:
risk-free interest rate of 6%; dividend yield of 0%; expected life of 2.5 years;
and volatility of 0%, was deemed insignificant on the date of grant.
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
----------- ------------
<S> <C> <C>
Equipment and computer hardware, including
assets under capital leases of $485,400
and $664,700, respectively....................................... $ 949,100 $ 4,062,200
Leasehold improvements............................................. 32,400 32,400
Furniture and fixtures............................................. 9,700 17,800
----------- ------------
991,200 4,112,400
Less accumulated depreciation and amortization, including assets
under capital leases of $64,500, and $239,900, respectively...... (242,800) (810,400)
----------- ------------
Total.............................................................. $ 748,400 $ 3,302,000
----------- ------------
----------- ------------
</TABLE>
F-14
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(5) INCOME TAXES
No provision for US federal or state income taxes has been recorded for any
period as MiningCo has incurred operating losses since inception.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
MiningCo's deferred tax assets for federal and state income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1998
------------- --------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................. $ 4,887,000 $ 12,100,000
Allowance for doubtful accounts.............................. 1,000 67,000
Deferred compensation........................................ 191,000 84,000
Depreciation................................................. (14,000) (26,000)
Deferred rent................................................ 23,000 22,000
------------- --------------
5,088,000 12,247,000
------------- --------------
Less valuation allowance..................................... (5,088,000) (12,247,000)
------------- --------------
Deferred tax assets............................................ $ -- $ --
------------- --------------
------------- --------------
</TABLE>
Realization of deferred tax assets is dependent upon future earnings, if
any. MiningCo has recorded a full valuation allowance against its deferred tax
assets since management believes that it is not more likely than not that these
assets will be realized. No income tax benefit has been recorded for all periods
presented because of the valuation allowance.
During the period from June 27, 1996 (inception) to December 31, 1996, the
years ended December 31, 1997 and 1998, the valuation allowance for the deferred
tax assets increased by $1,121,000, $3,967,000, and $7,159,000, respectively.
As of December 31, 1997 and 1998, MiningCo had net operating loss
carryforwards for federal income tax purposes of approximately $10.6 million and
$26.3 million, respectively. There can be no assurance that MiningCo will
realize the benefit of the net operating loss carryforwards. The federal net
operating loss carryforwards are available to offset future taxable income and
expire at various dates beginning in fiscal year 2011 through 2013 if not
utilized.
Due to the "change in ownership" provisions of the Internal Revenue Code,
the availability of MiningCo's net operating loss and credit carryforwards may
be subject to an annual limitation against taxable income in future periods,
which could substantially limit the eventual utilization of these carryforwards.
(6) RELATED PARTY TRANSACTIONS
At December 31, 1997, Mr. Scott P. Kurnit, MiningCo's President and Chief
Executive Officer and Chairman of the Board of Directors, elected to defer
compensation in the amount of $414,700, for accrued but unpaid salary and
bonuses. In January 1998, Mr. Kurnit converted $300,000 of that amount
F-15
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(6) RELATED PARTY TRANSACTIONS (CONTINUED)
into a convertible note payable (see note 8). During 1998, Mr. Kurnit elected to
defer an additional $67,000 of compensation, which at December 31, 1998 totaled
$181,700.
On April 20, 1998, MiningCo and a director of an investor in MiningCo
executed an advisory agreement, pursuant to which, the individual agreed to
provide consulting and advisory services to MiningCo including, but not limited
to, introducing MiningCo to members of the investment community and assisting
MiningCo with respect to financial and strategic matters. In consideration for
his services under the advisory agreement, the individual was issued a warrant
to purchase up to an aggregate of 21,360 shares of MiningCo's common stock, at
an exercise price of $5.06 per share. The warrant is exercisable at any time
during the 10-year period commencing on the date of the closing of a qualified
initial public offering (which would include the IPO). The fair value of the
warrants, using the Black-Scholes model and the following assumptions: (1)
risk-free interest rate of 6%, dividend yield of 0%, expected life of ten years,
and volatility of 0%, resulted in a compensation charge of $36,000 during 1998.
(7) NOTES PAYABLE
8.25% NOTES PAYABLE
The following summarizes the 8.25% Notes Payable activity during 1997 and
1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
------------- ----------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997......................... $ 3,905,600 $ 66,100 $ 3,971,700
Conversion into convertible note payable-- Series A
on August 27, 1997............................... (650,000) -- (650,000)
Accrued interest during 1997....................... -- 308,400 308,400
------------- ----------- -------------
Balance at December 31, 1997....................... 3,255,600 374,500 3,630,100
------------- ----------- -------------
Conversion into Series B preferred stock on April
23, 1998......................................... (1,700,000) (305,800) (2,005,800)
Accrued interest from January 1, 1998 through
November 13, 1998................................ -- 157,700 157,700
Conversion into Series C preferred stock on
November 13, 1998................................ (1,555,600) (226,400) (1,782,000)
------------- ----------- -------------
Balance at December 31, 1998....................... $ -- $ -- $ --
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
On October 17, 1996, MiningCo executed a secured 8.25% Promissory Note
("8.25% Note") in the original principal amount of $3,905,600. On August 27,
1997, the 8.25% Note was amended to, among other things, reduce the principal
amount outstanding thereunder to $3,255,600, reflecting a reduction of $650,000
which was converted into a convertible note payable. In connection with the
execution of the convertible note payable (see note 8), MiningCo issued warrants
to purchase 24,105 shares of MiningCo's common stock at an exercise price of
$4.21 per share. The fair value of the warrants, using a Black-Scholes model and
the following assumptions: risk-free interest rate of 5.7%, dividend yield of
0%, expected life of ten years and volatility of 0%, was deemed insignificant on
the date of grant.
F-16
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(7) NOTES PAYABLE (CONTINUED)
On April 23, 1998, the 8.25% Note was amended again to, among other things,
(i) reduce the principal amount outstanding thereunder to $1,555,600, reflecting
a reduction of $1,700,000 which was simultaneously converted into 944,444 shares
of Series B convertible preferred stock ("Series B Preferred") (see notes 9 and
10), (ii) reduce the interest amount outstanding thereunder by $305,800, which
was simultaneously converted into 169,883 shares of Series B Preferred, and
(iii) provide that the remaining principal and interest would automatically
convert into shares of MiningCo's Series C convertible preferred stock ("Series
C Preferred") upon the closing of the next financing conducted by MiningCo if
the next sale of equity to new investors on or prior to March 31, 1999 was at a
price per share less than $3.00 per share (on a pre-split basis), otherwise the
note was due and payable on March 31, 1999. On November 13, 1998, MiningCo
issued 913,856 shares of MiningCo's Series C Preferred at $1.95 per preferred
share in consideration for the cancellation of the remaining $1,555,600 of
principal and $226,400 of interest outstanding under the 8.25% Note.
In January, June and July 1998, MiningCo issued to the holder of the 8.25%
Note warrants to purchase an additional 2,670, 2,111 and 4,119 shares of
MiningCo's common stock at an exercise price of $4.21 per share in consideration
for entering into a subordination agreement with another creditor of MiningCo.
The value attributed to the warrants, using a Black-Scholes pricing model and
the following assumptions: risk-free interest rate of 6.0%, dividend yield of
0%, expected life of ten years and volatility of 0%, was $18,000 in the
aggregate, based upon the respective grant dates, which was recorded as
additional interest expense in 1998.
NOTES PAYABLE--CREDIT FACILITY
During January 1998, MiningCo entered into an asset backed credit facility
with Phoenix Leasing Incorporated ("Phoenix") which was funded as MiningCo
pledged fixed assets as security to Phoenix. During the year ended December 31,
1998, MiningCo received a total loan of $507,700 and pledged $507,700 of fixed
assets as security. The effective interest rate of the credit facility is 18%.
As of December 31, 1998, the balance outstanding was $437,500 of which $154,000
is due in 1999, $157,000 in 2000 and $126,500 in 2001.
F-17
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(8) CONVERTIBLE NOTES PAYABLE--SERIES A NOTES
The following summarizes the Convertible Notes Payable--Series A Notes
activity during 1997 and 1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
------------- ----------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997......................... $ -- $ -- $ --
Issuance of notes between March 27, 1997 and
December 31, 1997................................ 4,000,000 -- 4,000,000
Conversion of $650,000 of the 8.25% notes payable
into a Series A convertible note on August 27,
1998............................................. 650,000 -- 650,000
Accrued interest during 1997....................... -- 239,700 239,700
------------- ----------- -------------
Balance at December 31, 1997....................... 4,650,000 239,700 4,889,700
------------- ----------- -------------
Conversion of $300,000 of Mr. Kurnit's deferred
compensation into Series A convertible note...... 300,000 -- 300,000
Interest accrued through April 23, 1998............ -- 154,800 154,800
Conversion into Series A preferred stock on April
23, 1998......................................... (4,950,000) (70,000) (5,020,000)
Conversion of remaining accrued interest into a
newly issued unsecured promissory note on April
23, 1998......................................... -- (324,500) (324,500)
------------- ----------- -------------
Balance at December 31, 1998....................... $ -- $ -- $ --
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
Between March 27, 1997 and January 15, 1998, MiningCo issued several secured
subordinated notes, which converted into Series A Notes ("Series A Notes"), for
an aggregate principal amount of $4,950,000, which amount included (i) the
conversion of $650,000 from the 8.25% Notes and (ii) the conversion of $300,000
of deferred compensation owed to Mr. Kurnit. These notes bore interest at a
variable rate equal to the prime rate plus two percent per annum. At December
31, 1997, prime rate plus 2% was 10.5%. Pursuant to their terms, the principal
due on the Series A Notes were automatically convertible into shares of
MiningCo's common stock or convertible preferred stock upon the closing of the
next equity financing conducted by MiningCo. The conversion price for these
notes, as provided for in the original note agreement, was $1.50 per preferred
share.
In connection with the issuance of this debt, MiningCo issued warrants to
purchase 218,890 shares of MiningCo's common stock at an exercise price of $0.03
per share and 90,858 shares of MiningCo's common shares at an exercise price of
$4.21 per share (which includes warrants to purchase 24,105 shares relating to
the conversion of $650,000 from the 8.25% Notes), all of which expire ten years
from their date of issuance; provided that, under certain circumstances,
MiningCo could cancel the warrants after providing the holders thereof a
reasonable period of time to exercise the warrants prior to their cancellation.
The value attributed to the warrants was $106,000 for warrants issued with an
exercise price of $0.03 and $31,000 for warrants issued with an exercise price
of $4.21 per share. These values were estimated, using a Black-Scholes pricing
model, based on the following assumptions: risk-free interest rate of 6.0%,
dividend yield of 0%, expected life of 10 years and volatility of 0%. These
F-18
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(8) CONVERTIBLE NOTES PAYABLE--SERIES A NOTES (CONTINUED)
amounts were recorded as an original issue debt discount and amortized to
interest expense over the life of the loans. In December 1998, MiningCo
exercised its right to call certain investor warrants which resulted in the
issuance of 218,890 shares of common stock at $0.03 per share and 66,753 shares
of common stock at $4.21 per share for net cash proceeds of approximately
$287,600. The remaining 24,105 warrants with an exercise price of $4.21 per
share were cancelled.
On April 23, 1998, MiningCo issued an aggregate of 3,346,715 shares of
Series A Preferred, at a purchase price of $1.50 per preferred share, to holders
of the Series A Notes, in consideration for the cancellation of all principal
owed under the Series A Notes and $70,000 of interest accrued under the Series A
Notes prior to August 12, 1997. All remaining interest under the Series A Notes
up through April 23, 1998 was evidenced by newly issued unsecured promissory
notes of MiningCo which amounted to $337,100 as of December 31, 1998. The notes
bear interest at 6% and have no due date. In accordance with the terms of the
note upon the closing of a qualified initial public offering (including the
IPO), all amounts due under these unsecured promissory notes will automatically,
by its original terms, be forgiven and canceled. Accordingly, such amount shall
be recorded as a contribution to additional paid in capital upon the closing of
the IPO.
The following summarizes the unsecured promissory notes activity during
1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
---------- --------- ----------
<S> <C> <C> <C>
Balance at January 1, 1998................................. $ -- $ -- $ --
Conversion of remaining accrued interest on Series A notes
into a newly issued unsecured promissory note on April
23, 1998................................................. 324,500 -- 324,500
Accrued interest during 1998............................... -- 12,600 12,600
---------- --------- ----------
Balance at December 31, 1998............................... $ 324,500 $ 12,600 $ 337,100
---------- --------- ----------
---------- --------- ----------
</TABLE>
(9) CONVERTIBLE LOAN PAYABLE--SERIES B NOTES
The following summarizes the Convertible Loans Payable--Series B Notes
activity during 1997 and 1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
------------- ---------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997.......................... $ -- $ -- $ --
Issuance of Series B notes on November 26, 1997..... 1,000,000 -- 1,000,000
Accrued interest during 1997........................ -- 10,200 10,200
------------- ---------- -------------
Balance at December 31, 1997........................ 1,000,000 10,200 1,010,200
------------- ---------- -------------
Issuance of Series B notes in February 1998......... 1,800,000 -- 1,800,000
Accrued interest through April 23, 1998............. -- 59,600 59,600
Conversion of the Series B notes and accrued
interest thereon into Series B preferred stock on
April 23, 1998.................................... (2,800,000) (69,800) (2,869,800)
------------- ---------- -------------
Balance at December 31, 1998........................ $ -- $ -- $ --
------------- ---------- -------------
------------- ---------- -------------
</TABLE>
F-19
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(9) CONVERTIBLE LOAN PAYABLE--SERIES B NOTES (CONTINUED)
Between November 1997 and February 1998, MiningCo issued several secured
subordinated notes ("Series B Notes") for an aggregate principal amount of
$2,800,000, of which $1,000,000 bore interest at a variable rate equal to the
prime rate plus two percent per annum and $1,800,000 bore interest at 10%
percent per annum and were due on demand. At December 31, 1997, prime rate plus
2% was 10.5%. Pursuant to their terms, the Series B Notes were automatically
convertible into shares of MiningCo's Series B Preferred upon the closing of the
next equity financing conducted by MiningCo. The conversion price for these
notes, as provided for in the original note agreement, was $1.80 per preferred
share.
In connection with the issuance of this debt, MiningCo issued warrants to
purchase 250,192 shares of MiningCo's common stock at an exercise price of $5.06
per share, all of which expire ten years from their date of issuance; provided
that, under certain circumstances, MiningCo may cancel the warrants after
providing the holders thereof a reasonable period of time to exercise the
warrants prior to their cancellation. The fair value of the warrants, using the
Black-Scholes model and the following assumptions: risk-free interest rate of
6.0%, dividend yield of 0%, expected life of 10 years and volatility of 0%, was
$150,000 and recorded as additional interest expense. In December 1998, MiningCo
exercised its right to call certain investor warrants which resulted in the
issuance of 250,192 shares of common stock at $5.06 per share for net cash
proceeds of approximately $1,266,000.
On April 23, 1998, MiningCo issued 1,594,380 shares of Series B Preferred,
at a purchase price of $1.80 per share, to holders of the Series B Notes, in
consideration for the cancellation of all indebtedness of MiningCo under the
Series B Notes.
(10) CAPITALIZATION
AUTHORIZED SHARES
During 1996 and 1997, MiningCo amended and restated its certificate of
incorporation. As a result, at December 31, 1997, the total number of shares
which MiningCo was authorized to issue was 30,000,000; 26,500,000 of these
shares were common stock, each having a par value of $0.001; and 3,500,000
shares were preferred stock, each having a par value of $0.001. During each of
April 1998 and November 1998, MiningCo amended and restated its certificate of
incorporation. As a result, at December 31, 1998, the total number of shares
which MiningCo was authorized to issue was 53,662,260; 35,000,000 of these
shares were common stock, each having a par value of $0.001; and 18,662,260
shares were preferred stock, each having a par value of $0.001 of which
3,346,715, 6,597,596, and 8,717,949 have been designated as Series A Preferred,
Series B Preferred and Series C Preferred, respectively (see note 13).
REDEEMABLE CONVERTIBLE PREFERRED STOCK
On April 23, 1998, MiningCo issued an aggregate of 3,346,715 shares of
Series A Preferred, at a purchase price of $1.50 per share, to holders of the
Series A Notes, in consideration for the cancellation of all principal owed
under the Series A Notes, amounting to $4,950,000, and $70,000 of interest
accrued under the Series A Notes prior to August 12, 1997. All remaining
interest under the Series A Notes up through April 23, 1998 was evidenced by
newly unsecured promissory notes of MiningCo which amounted to $337,100 as of
December 31, 1998 (see note 8).
F-20
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(10) CAPITALIZATION (CONTINUED)
On April 23, 1998, MiningCo issued an aggregate of 6,597,596 shares of
Series B Preferred, at a purchase price of $1.80 per share, to (i) holders of
the Series B Notes in consideration for the cancellation of all indebtedness of
MiningCo under the Series B Notes, amounting to $2,869,900, (ii) the 8.25% Note
holder, in consideration for the cancellation of $1,700,000 in principal and
$305,800 in accrued interest, and (iii) $7,000,000 from other investors.
In connection with the issuance of the Series B Preferred, MiningCo issued
warrants to purchase 107,695 shares of MiningCo's common stock at an exercise
price of $7.02 per share, all of which expire ten years from their date of
issuance; provided that, under certain circumstances, MiningCo may cancel the
warrants after providing the holders with a reasonable period of time to
exercise the warrants prior to their cancellation. In December 1998, MiningCo
exercised its right to call certain investor warrants which resulted in the
issuance of 103,801 shares of common stock at $7.02 per share for net cash
proceeds of approximately $702,800. The warrant for the remaining 3,894 shares
was cancelled.
On October 5, 1998, MiningCo delivered a number of convertible promissory
notes ("Series C Notes") in the aggregate principal amount of $1,081,000.
Pursuant to their terms, the Series C Notes were automatically convertible into
shares of MiningCo's Series C Convertible Preferred Stock ("Series C
Preferred"), at a conversion price equal to the lesser of $3.60 per share of
Series C Preferred or the purchase price per share of the Series C Preferred,
upon the closing of the next equity financing conducted by MiningCo. The
conversion price for the notes was $1.95 per preferred share which was the
highest price paid for the Company's preferred stock during such time period.
On November 13, 1998 and December 4, 1998, MiningCo issued an aggregate of
7,301,811 shares of Series C Preferred, at a purchase price of $1.95 per share,
to (i) holders of the Series C Notes in consideration for the cancellation of
all indebtedness of MiningCo under the Series C Notes, amounting to $1,089,900
(ii) the holders of the Series C Notes in consideration for the payment of
$2,322,000, (iii) the 8.25% Note holder, in consideration for the cancellation
of $1,782,000 in principal and accrued interest, and (iv) other investors in
consideration for the payment of $9,044,600, including $762,600 from existing
stockholders pursuant to participation rights granted to those stockholders.
The following summarizes the Convertible Notes Payable--Series C Notes
activity during 1998:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
------------- --------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997........................... $ -- $ -- $ --
Issuance of notes on October 5, 1998................. 1,081,000 -- 1,081,000
Accrued interest through November 13, 1998........... -- 8,900 8,900
Conversion into Series C preferred stock on November
13, 1998........................................... (1,081,000) (8,900) (1,089,900)
------------- --------- -------------
Balance at December 31, 1998......................... $ -- $ -- $ --
------------- --------- -------------
------------- --------- -------------
</TABLE>
Each share of Series A Preferred, Series B Preferred and Series C Preferred
is entitled to a cumulative dividend at the rate of $0.135, $0.162, and $0.176
per share per annum, respectively, payable in preference and priority to any
payment of any cash dividend on common stock, when and as declared by the Board
of Directors of MiningCo. Upon the closing of a qualified initial public
offering (including the IPO), all cumulative dividends will be canceled. Each
holder of Series A Preferred, Series B Preferred and Series C Preferred shares
shall be entitled to the number of votes equal to the
F-21
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(10) CAPITALIZATION (CONTINUED)
number of whole shares of common stock into which the shares of preferred stock
are convertible into on the date of the vote.
Each share of Series A Preferred, Series B Preferred and Series C Preferred
is convertible into 0.356 shares of common stock, as adjusted for dilutive
issuances of stock and other securities. In the event of any liquidation or
dissolution of MiningCo, including certain mergers, consolidations and asset
sales, holders of the Series A Preferred, Series B Preferred and Series C
Preferred will receive a liquidation preference if the total proceeds of the
sale or liquidation are less than $60,000,000. Series A Preferred, Series B
Preferred and Series C Preferred stockholders first receive the purchase price
of their Series A Preferred, Series B Preferred and Series C Preferred shares,
as applicable, plus all accrued and/or declared but unpaid dividends, before
sharing the balance of the proceeds on an as-converted basis with common
stockholders. At the option of the stockholders, Series A Preferred, Series B
Preferred and Series C Preferred may be converted into shares of common stock;
however, those shares automatically convert into common shares in the event of a
qualified initial public offering (including the IPO) resulting in proceeds to
MiningCo of not less than $15 million and at an offering price per share equal
to at least $10.00 per common share. If the IPO is consummated under the terms
currently anticipated, upon the closing of the proposed IPO, 3,346,715,
6,597,596 and 7,301,811 shares of Series A, B and C convertible preferred stock,
respectively, representing all of the outstanding shares of convertible
preferred stock, shall automatically convert into 6,139,640 shares of common
stock.
<TABLE>
<CAPTION>
SERIES A SERIES B
------------------------- ---------------------------
<S> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- --------------
Balance at January 1, 1998................................................
Conversion of the $4,950,000 of the convertible notes payable Series A
together with $70,000 of interest thereon into Series A preferred stock
on April 23, 1998........................................................ 3,346,715 $ 5,020,000
Conversion of $1,700,000 of the 8.25% notes payable together with $305,800
of interest thereon into Series B preferred stock on April 23, 1998...... 1,114,327 $ 2,005,800
Conversion of $2,800,000 of the convertible notes payable-- Series B
together with $69,800 of interest thereon into Series B preferred stock
on April 23, 1998........................................................ 1,594,380 $ 2,869,800
Issuance of Series B preferred stock on April 23, 1998 in consideration of
cash proceeds of $7 million.............................................. 3,888,889 $ 7,000,000
Conversion of the remaining $1,555,600 of 8.25% notes payable together
with $226,400 of interest thereon into Series C preferred stock on
November 13, 1998........................................................
Conversion of $1,081,000 of the convertible notes payable-- Series C
together with $8,900 of interest thereon into Series C preferred stock on
November 13, 1998........................................................
Issuance of Series C preferred on November 13, and December 4, 1998 in
consideration of cash proceeds of $11.4 million..........................
----------- ------------ ----------- --------------
Balance at December 31, 1998.............................................. 3,346,715 $ 5,020,000 6,597,596 $ 11,875,600
----------- ------------ ----------- --------------
----------- ------------ ----------- --------------
<CAPTION>
SERIES C
---------------------------
<S> <C> <C>
SHARES AMOUNT
----------- --------------
Balance at January 1, 1998................................................
Conversion of the $4,950,000 of the convertible notes payable Series A
together with $70,000 of interest thereon into Series A preferred stock
on April 23, 1998........................................................
Conversion of $1,700,000 of the 8.25% notes payable together with $305,800
of interest thereon into Series B preferred stock on April 23, 1998......
Conversion of $2,800,000 of the convertible notes payable-- Series B
together with $69,800 of interest thereon into Series B preferred stock
on April 23, 1998........................................................
Issuance of Series B preferred stock on April 23, 1998 in consideration of
cash proceeds of $7 million..............................................
Conversion of the remaining $1,555,600 of 8.25% notes payable together
with $226,400 of interest thereon into Series C preferred stock on
November 13, 1998........................................................ 913,856 $ 1,782,000
Conversion of $1,081,000 of the convertible notes payable-- Series C
together with $8,900 of interest thereon into Series C preferred stock on
November 13, 1998........................................................ 558,917 $ 1,089,900
Issuance of Series C preferred on November 13, and December 4, 1998 in
consideration of cash proceeds of $11.4 million.......................... 5,829,038 $ 11,366,600
----------- --------------
Balance at December 31, 1998.............................................. 7,301,811 $ 14,238,500
----------- --------------
----------- --------------
</TABLE>
Upon request of Series A Preferred, Series B Preferred and Series C
Preferred stockholders on or after March 31, 2003, MiningCo may be required to
redeem Series A Preferred, Series B Preferred and
F-22
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(10) CAPITALIZATION (CONTINUED)
Series C Preferred at an amount equal to $1.50, $1.80 and $1.95 per share,
respectively, plus all accrued and/or declared but unpaid dividends.
<TABLE>
<CAPTION>
CARRYING 1998
# OF PRICE PER DIVIDEND TOTAL VALUE AT --------------------------
SHARES SHARE RATE CONSIDERATION ISSUANCE(1) ACCRETION DIVIDENDS
----------- ----------- --------- -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Series A.............. 3,346,715 $ 1.50 $ 0.135 $ 5,020,000 $ 4,943,900 $ 10,100 $ 305,700
Series B.............. 6,597,596 $ 1.80 $ 0.162 $ 11,875,600 $ 11,698,200 $ 23,600 $ 726,560
Series C.............. 7,301,811 $ 1.95 $ 0.176 $ 14,238,500 $ 14,199,100 -- $ 164,600
------------ ------------
$ 33,700 $ 1,196,800
------------ ------------
------------ ------------
<CAPTION>
BALANCE AT EQUIVALENT
DECEMBER 31, LIQUIDATION SHARES OF
1998 VALUE COMMON STOCK
-------------- -------------- --------------
<S> <C> <C> <C>
Series A.............. $ 5,259,700 $ 5,325,700 1,191,433
Series B.............. $ 12,448,300 $ 12,602,100 2,348,752
Series C.............. $ 14,363,700 $ 14,403,100 2,599,455
--------------
6,139,640
--------------
--------------
</TABLE>
- ------------------------------
(1) Includes offering related costs of $76,100, $177,460 and $39,400 for Series
A, B and C, respectively
COMMON STOCK
During 1996, MiningCo issued shares of common stock to its founders and
original employees at approximately $0.03 per share. MiningCo's right to
repurchase these shares in certain circumstances was to lapse over a period of
three years. During 1997, MiningCo's Board of Directors approved a resolution to
cancel these shares in exchange for incentive stock options. Accordingly, on
March 20, 1997, MiningCo canceled 367,802 common shares and exchanged these
shares on a one-for-one basis for participation in the 1997 Employee Stock
Incentive Plan. These incentive stock options were granted with an exercise
price equal to their fair market value, or $0.51 per share, at the date of grant
as determined by an independent valuation.
WARRANTS
Warrant activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WARRANTS EXERCISE
GRANTED PRICE
---------- -----------
<S> <C> <C>
Outstanding at December 31, 1996....................................... -- $ --
Granted................................................................ 427,003 3.14
Exercised.............................................................. -- --
Canceled............................................................... -- --
----------
Outstanding at December 31, 1997....................................... 427,003 3.14
Granted................................................................ 309,340 5.60
Exercised.............................................................. (639,636) 3.53
Canceled............................................................... (27,999) 4.60
----------
Outstanding at December 31, 1998....................................... 68,708 9.66
----------
----------
</TABLE>
All warrants are exercisable and have expiration dates generally ten years
from the date of grant.
F-23
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(10) CAPITALIZATION (CONTINUED)
At December 31, 1998, there were 68,708 shares of common stock reserved for
issuance upon exercise of outstanding warrants at a weighted average exercise
price of $9.66 per share, of which 2,848 warrants in the aggregate with an
exercise price of $6.32 per share were exercised on January 11, 1999.
The weighted-average fair value of warrants granted during 1997 and 1998 was
$0.25 and $1.03, respectively, on the date of grant using a Black Scholes
pricing model with the following weighted-average assumptions for 1997 and 1998:
(i) risk-free interest rate-6.0% for both years; (ii) dividend yield-0.0% for
both years; (iii) expected life-10 years for both years.
As of December 31, 1998, the following number of warrants to purchase common
stock remain outstanding: 8,900 shares at $4.21 per share; 21,360 shares at
$5.06 per share; 2,848 shares at $6.32 per share (which where exercised on
January 11, 1999); and 35,600 shares at $14.05 per share.
(11) STOCK OPTION PLAN
MiningCo's Board of Directors has authorized 996,800 shares at December 31,
1997 and 1,886,800 shares at December 31, 1998 of its common stock for issuance
pursuant to its 1998 Stock Option/Stock Issuance Plan (successor plan to
MiningCo's 1997 Employee Incentive Stock Option Plan). On February 1, 1999, the
Board of Directors and shareholders increased the authorized number of shares
authorized under the plan by 890,000 shares, effectively authorizing 2,776,800
in the aggregate. These options have ten year terms and have been issued at the
fair market value of MiningCo's common stock on the date of the applicable grant
(except for certain 1998 options issued with exercise prices less than the
deemed fair value at the date of grant). Incentive options granted to
stockholders who own more than 10% of the outstanding stock of MiningCo must be
issued at 110% of the fair market value of the stock on the date that the
options are granted.
F-24
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(11) STOCK OPTION PLAN (CONTINUED)
Stock option activity under the Plan during the periods indicated is as
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS GRANTED EXERCISE PRICE
--------------- -----------------
<S> <C> <C>
Options outstanding at December 31, 1996.................. --
Granted at $0.51.......................................... 871,343 $ 0.51
Granted at $0.56(1)....................................... 21,475 $ 0.56
Exercised................................................. (26,886) $ 0.51
Canceled.................................................. (97,081) $ 0.51
--------------- -----
Outstanding as of December 31, 1997....................... 768,851 $ 0.51
--------------- -----
Granted at $0.51.......................................... 146,759 $ 0.51
Granted at $0.56(1)....................................... 9,204 $ 0.56
Granted at $1.01.......................................... 237,879 $ 1.01
Granted at $2.81.......................................... 10,110 $ 2.81
Granted at $4.21.......................................... 81,969 $ 4.21
Exercised................................................. (87,583) $ 0.90
Canceled.................................................. (38,540) $ 0.64
--------------- -----
Outstanding as of December 31, 1998....................... 1,128,649 $ 0.87
--------------- -----
--------------- -----
Exercisable at December 31, 1997.......................... 244,123 $ 0.51
---------------
---------------
Exercisable at December 31, 1998.......................... 477,721 $ 0.55
---------------
---------------
Total options available as of December 31, 1997........... 201,063
---------------
---------------
Total options available as of December 31, 1998........... 643,682
---------------
---------------
</TABLE>
- ------------------------
(1) Represents options granted to stockholder owning more than 10% of the
outstanding stock of MiningCo.
The weighted-average remaining life of the 1,128,649 options outstanding at
December 31, 1998 is 8.75 years.
For the twelve months ended December 31, 1998, MiningCo recorded deferred
compensation expense of approximately $1,716,900, in connection with the grant
of certain options to employees and directors, representing the difference
between the deemed fair value of MiningCo's common stock at the date of grant
for accounting purposes and the exercise price of the related options. This
amount is presented as a reduction of stockholders equity (deficit) and
amortized over the vesting period, typically four years, of the applicable
options. MiningCo granted approximately 485,921 options at a weighted average
exercise price of $1.43 per share; all of which were granted at less than the
deemed fair value at the date of grant. MiningCo has amortized $478,000 of
deferred compensation for the year ended December 31, 1998 of which $27,000 has
been included in cost of revenues. MiningCo expects to amortize the following
amounts of deferred compensation annually: 1999--$332,000; 2000--$332,000;
2001--$332,000; and 2002--$242,900. However, $92,000 of the deferred
compensation will amortize upon the closing of a qualified initial public
offering (including the IPO) as a result of an automatic
F-25
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(11) STOCK OPTION PLAN (CONTINUED)
acceleration clause contained within the original terms of 372,936 options under
the original option plan.
In September 1997, MiningCo recorded compensation expense of approximately
$3,300 in connection with options granted to consultants to purchase 49,787
shares of common stock at an exercise price of $0.51 per share. The fair value
of the options was determined using the Black-Scholes model and the following
assumptions: risk-free interest rate of 5.7%, dividend yield of 0%, expected
life of 10 years and volatility of 0%.
MiningCo also recorded compensation expense of approximately $23,000 in
connection with options granted to consultants under the Plan in December 1998
to purchase 5,340 shares of common stock at an exercise price of $4.21 per
share. The fair value of the options was determined using the Black-Scholes
model and the following assumptions: risk-free interest rate of 6.0%, dividend
yield of 0%, and volatility of 0%.
Had MiningCo determined compensation expense based on the fair value on the
grant date for its stock options issued to employees under SFAS No. 123,
MiningCo's net loss would have been adjusted to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1997 1998
------------- --------------
<S> <C> <C>
Net loss attributable to common stockholders--as reported...... $ (8,640,400) $ (16,808,300)
------------- --------------
------------- --------------
Net loss attributable to common stockholders--pro forma per
SFAS No. 123................................................. $ (8,675,900) $ (17,007,500)
------------- --------------
------------- --------------
Basic and diluted net loss per common share--as reported....... $ (4.94) $ (9.71)
------------- --------------
------------- --------------
Basic and diluted net loss per common share--pro forma per SFAS
No. 123...................................................... $ (4.96) $ (9.82)
------------- --------------
------------- --------------
</TABLE>
The per share weighted-average fair value of stock options granted during
1997 and 1998 was $0.09 and $3.87, respectively, on the date of grant using the
Black Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1998: (i) risk-free interest rate--5.7% and 6%
respectively; (ii) dividend yield--0.0% for both years; and (iii) expected
life--3.4 and 4.4 years, respectively. As permitted under the provisions of SFAS
No. 123, and based on the historical lack of a public market for MiningCo's
options, no factor for volatility has been reflected in the option pricing
calculation.
(12) COMMITMENTS AND CONTINGENCIES
(A) LEASES
MiningCo leases certain facilities in New York and White Plains (Westchester
County) and equipment under non-cancelable operating leases. These leases
generally provide for rental increases at
F-26
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(12) COMMITMENTS AND CONTINGENCIES (CONTINUED)
specified intervals. In addition, MiningCo is a lessee, under several capital
lease agreements with third parties for certain equipment. Total rent expense
for the years ended December 31, 1997 and December 31, 1998 was $320,900 and
$320,600, respectively.
Future minimum lease payments under non-cancelable operating leases and
capital leases as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- ---------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
1999.................................................................. $ 255,500 $ 284,700
2000.................................................................. 143,800 197,300
2001.................................................................. 18,400 --
---------- ----------
Total minimum lease payments.................................... 417,700 $ 482,000
----------
----------
Less amount representing interest (at rates ranging from 9.7% to
18.7%).............................................................. 49,300
----------
Present value of net minimum lease payments........................... 368,400
Less current installment of obligations under capital leases.......... 219,000
----------
Obligations under capital leases, excluding current installments...... $ 149,400
----------
----------
</TABLE>
(B) EMPLOYMENT AGREEMENTS
MiningCo has employment agreements with two senior employees which provide
for severance benefits, among other items. In the event these agreements are
terminated, MiningCo may be liable for severance up to $420,000 payable during
the year following that termination.
(13) SUBSEQUENT EVENTS--UNAUDITED
Effective upon the closing of the IPO, MiningCo will be authorized to issue
50,000,000 shares of common stock and 5,000,000 shares of undesignated preferred
stock.
During January 1999, MiningCo entered into employment arrangements with two
employees. The employment arrangements provide for minimum salary levels, and
incentive compensation and severance benefits, among other items. MiningCo
granted 133,500 options in the aggregate to the two employees. The exercise
price of the options is $4.21 per share. As a result, MiningCo expects to record
deferred compensation expense in the first quarter of 1999 relating to the
133,500 options for the difference between the deemed fair value of MiningCo's
common stock (the initial public offering price for accounting purposes) and the
exercise price of that option at the date of grant of $4.21 per share. This
amount will be presented as a reduction of stockholders' equity and amortized
over the four-year vesting period of the applicable options.
In January and February 1999, MiningCo entered into a lease line of credit
for $781,300 to finance capital equipment, of which $232,200 is due in 1999,
$268,800 in 2000, $273,300 in 2001, and $7,000 in 2002. The effective interest
rate of the credit facility was 16%.
F-27
<PAGE>
MININGCO.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(13) SUBSEQUENT EVENTS--UNAUDITED (CONTINUED)
In February 1999, the Board adopted an Employee Stock Purchase Plan and
reserved 125,000 shares of common stock for issuance thereunder.
In February 1999, the Board of Directors authorized an increase in the
shares reserved for issuance under the Company's stock option plan from
1,886,800 to 2,776,800. In addition, a total of 813,122 additional options were
granted at the IPO price
(14) REVERSE STOCK SPLIT--UNAUDITED
All common share and per share amounts in the accompanying financial
statements have been adjusted retroactively for a 1.00-for-2.809 reverse stock
split of MiningCo's common stock which is subject to Board of Directors and
stockholder approval.
F-28
<PAGE>
[LOGOS OF ADVERTISERS AND ELECTRONIC COMMERCE PARTNERS]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the registrant in connection with the sale of
the common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
------------
<S> <C>
SEC registration fee................................................................................ $ 13,700
NASD filing fee..................................................................................... 5,500
Nasdaq National Market listing fee.................................................................. 95,000
Legal fees and expenses............................................................................. 425,000
Accounting fees and expenses........................................................................ 400,000
Printing and engraving.............................................................................. 250,000
Blue sky fees and expenses (including legal fees)................................................... 20,000
Transfer agent fees................................................................................. 15,000
Miscellaneous....................................................................................... 175,800
------------
Total......................................................................................... $ 1,400,000
------------
------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's Amended and Restated Certificate of Incorporation in effect
as of the date hereof, and the registrant's Second Amended and Restated
Certificate of Incorporation to be in effect upon the closing of this offering
(collectively, the "certificate") provides that, except to the extent prohibited
by the Delaware General Corporation Law, as amended (the "DGCL"), the
registrant's directors shall not be personally liable to the registrant or its
stockholders for monetary damages for any breach of fiduciary duty as directors
of the registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to the registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by the DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the Federal securities laws or state or Federal environmental laws. The
registrant has applied for liability insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The certificate eliminates the personal liability
of directors to the fullest extent permitted by Section 102(b)(7) of the
II-1
<PAGE>
DGCL and provides that the registrant may fully indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that that person is or was a director or
officer of the registrant, or is or was serving at the request of the registrant
as a director or officer of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with any threatened, pending or
completed action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate. The registrant is not aware of any
threatened litigation or proceeding that may result in a claim for any
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The registrant has sold and issued the following securities since June 27,
1996 (inception):
COMMON STOCK AND PREFERRED STOCK. In June 1996, the registrant issued (i)
an aggregate of 100 shares of its common stock, no par value per share, to its
founder Mr. Scott P. Kurnit in exchange for $10,000 in cash and (ii) an
aggregate of 7.5 shares of its common stock, no par value per share, to its
co-founder Mr. William C. Day in exchange for $750 in cash. Those shares were
subsequently recapitalized into 4,000,000 and 300,000 shares of the registrant's
common stock, respectively.
On April 23, 1998, the registrant issued an aggregate of 3,346,715 shares of
Series A Convertible Preferred Stock (the "Series A Preferred"), at a purchase
price of $1.50 per share, to investors in consideration for the cancellation of
outstanding indebtedness. Upon the closing of this offering, all of the
outstanding shares of Series A Preferred will convert into an aggregate of
1,191,433 shares of common stock.
On April 23, 1998, the registrant issued an aggregate of 5,397,600 shares of
Series B Convertible Preferred Stock (the "Series B Preferred"), at a purchase
price of $1.80 per share, to investors in consideration for the cancellation of
outstanding indebtedness and the payment of additional cash. At a subsequent
closing, the registrant issued an aggregate of 1,199,996 shares of Series B
Preferred to investors for $1,799,994. Upon the closing of this offering, all of
the outstanding shares of Series B Preferred will convert into an aggregate of
2,348,752 shares of common stock.
On November 13, 1998, the registrant issued an aggregate of 6,910,726 shares
of Series C Convertible Preferred Stock (the "Series C Preferred"), at a
purchase price of $1.95 per share, to investors in consideration for the
cancellation of outstanding indebtedness and cash. At a subsequent closing, the
registrant issued an aggregate of 391,085 shares of Series C Preferred to
certain investors for $1.95. Upon the closing of this offering, all of the
outstanding shares of Series C Preferred will convert into an aggregate of
2,599,455 shares of common stock.
WARRANTS. The registrant from time to time has granted warrants to
investors, consultants and other third parties in connection with business
transactions in reliance upon exemption from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended. The following table sets
II-2
<PAGE>
forth information regarding those grants and assumes a 1.00 for 2.809 reverse
stock split of the common stock to be effected prior to the closing of this
offering.
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICES
----------- --------------
<S> <C> <C>
June 27, 1996 (inception) to December 31, 1996.................. -- --
January 1, 1997 to December 31, 1997............................ 427,003 $0.03-$14.04
January 1, 1998 to December 31, 1998............................ 309,340 $0.03-$7.02
January 1, 1999 to February 8, 1999............................. -- --
</TABLE>
OPTIONS. The registrant from time to time has granted stock options to
employees and consultants in reliance upon exemption from registration pursuant
to either (i) Section 4(2) of the Securities Act of 1933, as amended, or (ii)
Rule 701 promulgated under the Securities Act of 1933, as amended. The following
table sets forth information regarding such grants and assumes a 1.00 for 2.809
reverse stock split of the common stock to be effected prior to the closing of
this offering.
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICES
----------- --------------
<S> <C> <C>
June 27, 1996 (inception) to December 31, 1996............... -- --
January 1, 1997 to June 30, 1998............................. 1,098,568 $0.51-$0.56
July 1, 1998 to December 31, 1998............................ 329,958 $1.01-$4.21
January 1, 1999 to February 8, 1999.......................... 331,852 IPO Price-110%
IPO Price
</TABLE>
The above securities were offered and sold by the registrant in reliance
upon exemptions from registration pursuant to either (i) Section 4(2) of the
Securities Act of 1933, as amended, as transactions not involving any public
offering, or (ii) Rule 701 promulgated under the Securities Act of 1933, as
amended. No underwriters were involved in connection with the sales of
securities referred to in this Item 15.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation
3.2 Form of Certificate of Amendment to Amended and Restated Certificate of Incorporation.
3.3 Form of Second Amended and Restated Certificate of Incorporation to be in effect upon the closing of
this offering.
3.4** Bylaws.
3.5 Form of Amended and Restated Bylaws to be in effect upon the closing of this offering.
4.1 Specimen Common Stock certificate.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.1** 1997 Employee Incentive Stock Option Plan.
10.2** 1998 Stock Option/Stock Issuance Plan.
10.3** Amended and Restated Investors' Rights Agreement, dated as of November 13, 1998.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.4** Sublease, dated as of November 1, 1996, by and between the Registrant and Minet, Inc., and Lease, dated
as of January 27, 1998, by and between Two Twenty East Limited Partnership and Minet, Inc.
10.5** Form of MiningCo.com, Inc. Guide Agreement
10.6** Letter Agreement, dated as of October 20, 1996, by and between the Registrant and Mr. Scott P. Kurnit,
as amended.
10.7 Agreement, dated as of January 27, 1998, and Extension of Agreement, dated as of January 29, 1999, by
and between the Registrant and Frontier Global Center.
10.8** Letter Agreement, dated as of July 28, 1996, by and between the Registrant and Mr. Alan Wragg, as
amended.
10.9** Amended and Restated 1998 Stock Option/Stock Issuance Plan.
10.10 1999 Employee Stock Purchase Plan.
10.11** Letter Agreement, dated as of January 11, 1999, by and between the Registrant and Mr. Todd B. Sloan.
10.12** Common Stock Purchase Agreement, dated as of February 23, 1999, by and between the Registrant and
Comcast Interactive Investments, Inc.
10.13** Form of Second Amended and Restated Investors' Rights Agreement, to be entered into on or before the
closing of this Offering.
10.14 Letter agreement, dated as of March 16, 1999, by and between the Registrant and Mr. Scott P. Kurnit.
11.1** Statement re: Computation of Basic and Diluted Net Loss Per Share.
23.1 Consent of KPMG LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1** Powers of Attorney.
24.2** Power of Attorney for Todd B. Sloan, the registrant's Chief Financial Officer.
27.1** Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Supplied previously as exhibits to Form S-1.
(b) Financial Statement Schedules.
Valuation and Qualifying Accounts--Allowance for Doubtful Accounts
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in those
denominations and registered in those names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
this indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
those liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by that
director,
II-4
<PAGE>
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether this indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
that issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424 (b)(1) or
(4), or 497(h) under the Securities Act of 1933, shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of these securities at
that time shall be deemed to be the initial BONA FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 3 to the registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized in The
City of New York, State of New York, on this 17th day of March, 1999.
<TABLE>
<S> <C> <C>
MININGCO.COM, INC.
By: /s/ SCOTT P. KURNIT
-----------------------------------------
Name: SCOTT P. KURNIT
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on March 17, 1999:
SIGNATURE TITLE
- ------------------------------ ---------------------------
President and Chief
/s/ SCOTT P. KURNIT Executive Officer, and
- ------------------------------ Chairman of the Board of
Scott P. Kurnit Directors (principal
executive officer)
* Chief Financial Officer
- ------------------------------ (principal financial and
Todd B. Sloan accounting officer)
* Director
- ------------------------------
Frank J. Biondi, Jr.
* Director
- ------------------------------
Dixon R. Doll
* Director
- ------------------------------
Ronald Unterman
* Director
- ------------------------------
Marc M. Watson
* Director
- ------------------------------
Kristopher A. Wood
<TABLE>
<S> <C> <C> <C>
*By: /s/ SCOTT P. KURNIT
-------------------------
Scott P. Kurnit
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
The Board of Directors and Stockholders
MiningCo.com, Inc.:
When the reverse split referred to in Note 13 of the Notes to Financial
Statements has been consummated, we will be in a position to render the
following report.
KPMG LLP
/S/ KPMG LLP
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors and Stockholders
MiningCo.com, Inc.:
Under date of January 20, 1999, except as to Note 13, which is as of January
, 1999, we reported on the balance sheets of MiningCo.com, Inc. as of December
31, 1997 and 1998, and the related statements of operations, stockholders'
deficit and cash flows for the period from June 27, 1996 (inception) to December
31, 1996 and for the years ended December 31, 1997 and 1998, as contained in the
Registration Statement. In connection with our audits of the aforementioned
financial statements, we also audited the related financial statement schedule
as listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
New York, New York
March 17, 1999
S-1
<PAGE>
MININGCO.COM, INC.
VALUATION AND QUALIFYING ACCOUNTS--
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
PROVISION
BALANCE AT FOR BALANCE AT
BEGINNING DOUBTFUL END
OF PERIOD ACCOUNTS DEDUCTIONS OF PERIOD
----------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
For the period from June 27, 1996 (inception) to December 31,
1996:
Allowance for doubtful accounts.............................. $ 0 $ 0 $ 0 $ 0
--
--
----------- ----------- ----------
----------- ----------- ----------
For the year ended December 31, 1997:
Allowance for doubtful accounts.............................. $ 0 $ 6,000 $ 0 $ 6,000
--
--
----------- ----------- ----------
----------- ----------- ----------
For the year ended December 31, 1998:
Allowance for doubtful accounts.............................. $ 6,000 $ 140,000 $ 0 $ 146,000
--
--
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
S-2
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation.
3.2 Form of Certificate of Amendment to Amended and Restated Certificate of Incorporation.
3.3 Form of Second Amended and Restated Certificate of Incorporation to be in effect upon the closing of
this offering.
3.4** Bylaws.
3.5 Form of Amended and Restated Bylaws to be in effect upon the closing of this offering.
4.1 Specimen Common Stock certificate.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.1** 1997 Employee Incentive Stock Option Plan.
10.2** 1998 Stock Option/Stock Issuance Plan.
10.3** Amended and Restated Investors' Rights Agreement, dated as of November 13, 1998.
10.4** Sublease, dated as of November 1, 1996, by and between the Registrant and Minet, Inc., and Lease, dated
as of January 27, 1998, by and between Two Twenty East Limited Partnership and Minet, Inc.
10.5** Form of MiningCo.com, Inc. Guide Agreement.
10.6** Letter Agreement, dated as of October 20, 1996, by and between the Registrant and Mr. Scott P. Kurnit,
as amended.
10.7 Agreement, dated as of January 27, 1998, and Extension of Agreement, dated as of January 29, 1999, by
and between the Registrant and Frontier Global Center.
10.8** Letter Agreement, dated as of July 28, 1996, by and between the Registrant and Mr. Alan Wragg, as
amended.
10.9** Amended and Restated 1998 Stock Option/Stock Issuance Plan.
10.10 1999 Employee Stock Purchase Plan.
10.11** Letter Agreement, dated as of January 11, 1999, by and between the Registrant and Mr. Todd B. Sloan.
10.12** Common Stock Purchase Agreement, dated as of February 23, 1999, by and between the Registrant and
Comcast Interactive Investments, Inc.
10.13** Form of Second Amended and Restated Investors' Rights Agreement, to be entered into on or before the
closing of this Offering.
10.14 Letter Agreement, dated as of March 16, 1999, by and between the Registrant and Mr. Scott P. Kurnit.
11.1** Statement re: Computation of Basic and Diluted Net Loss Per Share.
23.1 Consent of KPMG LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1** Powers of Attorney.
24.2** Power of Attorney for Todd B. Sloan, the registrant's Chief Financial Officer.
27.1** Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Supplied previously as exhibits to Form S-1.
(b) Financial Statement Schedules.
<PAGE>
Exhibit 1.1
_______Shares of Common Stock
MININGCO.COM, INC.
UNDERWRITING AGREEMENT
_________ __, 1999
BEAR, STEARNS & CO. INC.
Volpe Brown Whelan & Company, LLC
Wit Capital Corporation, as e-Manager
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Dear Sirs:
MiningCo.com, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company"), proposes, subject to the terms
and conditions stated herein, to issue and sell to the several underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of 3,000,000 shares
(the "Firm Shares") of its common stock, par value $.001 per share (the "Common
Stock"), and, for the sole purpose of covering over-allotments in connection
with the sale of the Firm Shares, at the option of the Underwriters, up to an
additional 450,000 shares (the "Additional Shares") of Common Stock. The Firm
Shares and any Additional Shares purchased by the Underwriters are referred to
herein as the "Offered Shares." The Company also proposes to issue and sell
[206,783] shares of Common Stock (the "Comcast Shares") to Comcast Interactive
Investments, Inc. ("Comcast") pursuant to a Common Stock Purchase Agreement
dated as of February 23, 1999 (the "Comcast Purchase Agreement"), between the
Company and Comcast. The Offered Shares and the Comcast Shares are collectively
referred to herein as the "Shares." The Shares are more fully described in the
Registration Statement referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No.
333-69881), and may have filed an amendment or amendments thereto, for the
registration of the Offered Shares under the Securities Act of 1933, as
amended (the "Act"). Such registration statement, including the
prospectus, financial statements and schedules, exhibits and all other
documents filed as a part thereof, as amended at the time of effectiveness
of the registration statement, including any information deemed to be a
part thereof as of the time of effectiveness pursuant to paragraph (b) of
Rule 430A or Rule 434 of the Rules
<PAGE>
and Regulations of the Commission under the Act (the "Regulations"), is
herein called the "Registration Statement" and the prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations
or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) or Rule 434 filing is required, is herein
called the "Prospectus." The term "preliminary prospectus" as used herein
means a preliminary prospectus as described in Rule 430 of the
Regulations.
(b) At the time of the effectiveness of the Registration Statement
or the effectiveness of any post-effective amendment to the Registration
Statement, when the Prospectus is first filed with the Commission pursuant
to Rule 424(b) or Rule 434 of the Regulations, when any supplement to or
amendment of the Prospectus is filed with the Commission and at the
Closing Date and the Additional Closing Date, if any (as hereinafter
respectively defined), the Registration Statement and the Prospectus and
any amendments thereof and supplements thereto complied or will comply in
all material respects with the applicable provisions of the Act and the
Regulations and does not or will not contain an untrue statement of a
material fact and does not or will not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein (i) in the case of the Registration Statement, not misleading and
(ii) in the case of the Prospectus, in light of the circumstances under
which they were made, not misleading. When the preliminary prospectus
dated March 3, 1999 relating to the Offered Shares was first filed with
the Commission (whether filed as part of the registration statement for
the registration of the Offered Shares or any amendment thereto or
pursuant to Rule 424(a) of the Regulations) and when any amendment thereof
or supplement thereto was first filed with the Commission, such
preliminary prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the
Act and the Regulations and did not contain an untrue statement of a
material fact and did not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein in
light of the circumstances under which they were made not misleading. No
representation and warranty is made in this subsection (b), however, with
respect to any information contained in or omitted from the Registration
Statement or the Prospectus or any related preliminary prospectus or any
amendment thereof or supplement thereto in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of
any Underwriter through the Representatives as herein stated expressly for
use in connection with the preparation thereof. If Rule 434 is used, the
Company will comply with the requirements of Rule 434.
(c) KPMG LLP, who have certified the financial statements and
supporting schedules included in the Registration Statement, are
independent public accountants as required by the Act and the Regulations.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set
forth in the Registration Statement and the Prospectus, there has been no
material adverse change or any development involving a prospective
material adverse change in the business, prospects, properties,
operations, condition (financial or other) or results of operations of the
Company, whether or not arising from transactions in the ordinary course
of business,
2
<PAGE>
and since the date of the latest balance sheet presented in the
Registration Statement and the Prospectus, the Company has not incurred or
undertaken any liabilities or obligations, direct or contingent, whether
or not arising from transactions in the ordinary course of business, which
are material to the Company, except for liabilities or obligations that
are reflected in the Registration Statement and the Prospectus.
(e) This Agreement, the Comcast Purchase Agreement and the
transactions contemplated herein and therein have been duly and validly
authorized by the Company and this Agreement and the Comcast Purchase
Agreement have been duly and validly executed and delivered by the
Company.
(f) The Company is not in violation of its certificate of
incorporation or by-laws (or other organizational documents) or in default
in the performance of any obligation, agreement or condition contained in
any agreement, instrument, franchise, license, permit, judgment, order or
decree to which the Company is a party or by which it or any of its
properties or assets is bound, which default would have a material adverse
effect on the Company's business, prospects, properties, operations,
condition (financial or other) or results of operations (a "Material
Adverse Effect").
(g) The execution, delivery and performance of this Agreement and
the Comcast Purchase Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
pursuant to, any material agreement, instrument, franchise, license or
permit to which the Company is a party or by which any of its properties
or assets may be bound or (ii) violate or conflict with any provision of
applicable law or the certificate of incorporation or by-laws (or other
organizational documents) of the Company or (iii) violate or conflict with
any judgment, decree, order, statute, rule or regulation of any court or
any public, governmental or regulatory agency or body having jurisdiction
over the Company or any of its properties or assets, which violation or
conflict would have a Material Adverse Effect. No consent, approval,
authorization, order, registration, filing, qualification, license or
permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its
properties or assets is required for the execution, delivery and
performance of this Agreement or the Comcast Purchase Agreement or the
consummation of the transactions contemplated hereby and thereby,
including the issuance, sale and delivery of the Shares to be issued, sold
and delivered by the Company hereunder and thereunder, except the
registration under the Act of the Offered Shares and such consents,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Offered
Shares by the Underwriters. The issuance and sale of the Comcast Shares
pursuant to the Comcast Purchase Agreement is exempt from the registration
requirements of the Act by virtue of Section 4(2) of the Act.
3
<PAGE>
(h) All of the outstanding shares of Common Stock are duly and
validly authorized and issued, fully paid and nonassessable and were not
issued and are not now in violation of or subject to any preemptive
rights. The Shares, when issued, delivered and sold in accordance with
this Agreement or the Comcast Purchase Agreement, as the case may be, will
be duly and validly issued and outstanding, fully paid and nonassessable,
and will not have been issued in violation of or be subject to any
preemptive rights. The Company had, at December 31, 1998, an authorized
and outstanding capitalization as set forth in the Registration Statement
and the Prospectus. The Common Stock, the Firm Shares, the Additional
Shares and the Comcast Shares conform to the descriptions thereof
contained in the Registration Statement and the Prospectus.
(i) The Company does not own, directly or indirectly, any stock,
partnership interest or joint venture interest in, or any security issued
by, any other entity.
(j) Each promissory note issued by the Company that was convertible
into preferred stock of the Company has, prior to the date hereof, been
converted into such preferred stock. All of the outstanding Series A,
Series B and Series C Convertible Preferred Stock (collectively, the
"Preferred Stock") of the Company has been duly and validly authorized and
is validly issued and outstanding, fully paid and nonassessable and was
not issued in violation of any preemptive rights and the shares of Common
Stock issuable upon conversion thereof have been duly and validly
authorized and reserved for issuance upon such conversion and, upon
conversion of the Preferred Stock on the Closing Date, the shares of
Common Stock issuable upon such conversion will be validly issued and
outstanding, fully paid and nonassessable and will not have been issued in
violation of or be subject to any preemptive rights. All outstanding
warrants (the "Warrants") to purchase Common Stock of the Company, have
been duly and validly authorized, executed and delivered by the Company
and constitute valid and binding obligations of the Company and the shares
of Common Stock issuable upon exercise of such Warrants have been duly and
validly authorized and reserved for issuance upon such exercise and, upon
payment of the exercise price thereof upon exercise of such Warrants, such
shares of Common Stock will be validly issued and outstanding, fully paid
and nonassessable and will not have been issued in violation of or be
subject to any preemptive rights. Except as described in or expressly
contemplated by the Registration Statement and the Prospectus, there are
no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interests in the Company or any of its subsidiaries, or any
contract, commitment, agreement, understanding or arrangement (including
without limitation preemptive rights) of any kind relating to the issuance
of any capital stock of the Company or any such subsidiary, or any such
convertible or exchangeable securities or any such rights, warrants or
options.
(k) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the state of Delaware.
The Company is duly qualified and is in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its
business makes such qualification necessary, except for those failures to
4
<PAGE>
be so qualified or in good standing which will not, individually or in the
aggregate, have a Material Adverse Effect. The Company has all requisite
corporate power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies and
bodies, to own, lease and operate its properties and conduct its business
as now being conducted and as described in the Registration Statement and
the Prospectus, except as would not result in a Material Adverse Effect,
and no such consent, approval, authorization, order, registration,
qualification, license or permit contains a materially burdensome
restriction not adequately disclosed in the Registration Statement and the
Prospectus.
(l) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company is a party or to which any
property of the Company is subject or which is pending or, to the
knowledge of the Company, contemplated against the Company which, if
determined adversely to the Company, might individually or in the
aggregate have a Material Adverse Effect, or which is required to be
disclosed in the Registration Statement and the Prospectus, and there are
no statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described or
filed as required.
(m) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock
to facilitate the sale or resale of the Offered Shares.
(n) The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of the
dates indicated and the results of its operations and changes in cash
flows for the periods specified; except as otherwise stated in the
Registration Statement, said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis; and the supporting schedules included in the
Registration Statement present fairly the information required to be
stated therein; and except as disclosed therein, the pro forma financial
information included in the Registration Statement and the Prospectus has
been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements and the assumptions used in
the preparation thereof are, in the Company's opinion, reasonable; and the
other financial and statistical information and data included in the
Registration Statement and the Prospectus is, in all material respects,
accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(o) Except as described in the Prospectus, no holder of securities
of the Company has any rights to the registration of securities for sale
under the Securities Act of 1933, as amended, of the Company because of
the filing of the Registration Statement or otherwise in connection with
the sale of the Offered Shares.
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(p) The Company is not, and upon consummation of the transactions
contemplated hereby and by the Comcast Purchase Agreement will not be,
subject to registration as an "investment company" under the Investment
Company Act of 1940, as amended.
(q) The Shares have been approved for quotation subject to official
notice of issuance on the Nasdaq National Market System.
(r) No labor dispute with the employees of the Company exists or, to
the knowledge of the Company, is imminent.
(s) Except as described in the Prospectus, the Company owns,
possesses or can acquire on reasonable terms, adequate trademarks, trade
names, inventions, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), patents, copyrights, and other intellectual property
reasonably necessary to conduct the business now operated by it, or
presently employed by it, and has not received any notice of infringement
of or conflict with asserted rights of others with respect to any
intellectual property rights that, if determined adversely to the Company,
would individually or in the aggregate have a Material Adverse Effect.
(t) The Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to (A) the
protection of human health and safety and (B) the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) has received all permits, licenses or other approvals
required of it under applicable Environmental Laws to conduct its business
and (iii) is in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals would not, individually or in the
aggregate, have a Material Adverse Effect.
(u) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, individually or in the aggregate, have a Material
Adverse Effect.
(v) The Company owns no real property and has good and marketable
title to all personal property owned by it which is material to the
business of the Company, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company; and any real property and buildings held under
lease by the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of
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such property and buildings by the Company, in each case except as
described in or contemplated by the Prospectus.
(w) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the business in which it is engaged; the Company
has not been refused any insurance coverage sought or applied for; and the
Company does not have any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect.
(x) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access
to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences. (y) Except as described
in the Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), the Company has not sold,
issued or distributed any shares of Common Stock during the six-month
period preceding the date hereof, including any sales of Common Stock
pursuant to Rule 144A under, or Regulation D or S of, the Act, other than
shares of Common Stock issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans or
pursuant to outstanding options, rights or warrants.
(z) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders,
customers, suppliers or providers of outsourced services of the Company on
the other hand, which is required by the Act to be described in the
Registration Statement and the Prospectus which is not so described.
(aa) The merger of General Internet, Inc, a New York corporation
("General Internet"), with and into the Company (the "Merger") has become
effective and the identity, existence, corporate organization, purposes,
powers, objects, franchises, privileges, rights, immunities, restrictions,
debts, liabilities and duties (the "Corporate Rights") of General Internet
will continue in effect and be unimpaired by the Merger, and the Corporate
Rights of General Internet have been merged with and into the Company,
which is, as the surviving corporation, fully vested therewith. All
consents, approvals, orders and authorizations of, and all registrations,
declarations and filings with, all persons (governmental and private)
required to be obtained or made in connection with the consummation of the
Merger have been so obtained or made. The Merger qualifies as a
reorganization under the provisions of Section 368 of the Internal Revenue
Code of 1986, as amended.
2. PURCHASE, SALE AND DELIVERY OF THE OFFERED SHARES.
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(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Company agrees to sell to the Underwriters and the
Underwriters, severally and not jointly, agree to purchase from the
Company, at a purchase price per share of $__________, the number of Firm
Shares set forth opposite the respective names of the Underwriters in
Schedule I hereto plus any additional number of Offered Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 9 hereof.
(b) Payment of the purchase price for, and delivery of certificates
for, the Firm Shares shall be made at the offices of Brobeck, Phleger &
Harrison LLP, 1633 Broadway, 47th Floor, New York, New York 10019, or at
such other place as shall be agreed upon by the Representatives and the
Company, at 9:00 A.M. on the third or fourth business day (as permitted
under Rule 15c6-1 under the Exchange Act) (unless postponed in accordance
with the provisions of Section 9 hereof), following the date of the
effectiveness of the Registration Statement (or, if the Company has
elected to rely upon Rule 430A of the Regulations, the third or fourth
business day (as permitted under Rule 15c6-1 under the Exchange Act) after
the determination of the initial public offering price of the Offered
Shares), such time and date of payment and delivery being herein called
the "Closing Date." Payment shall be made to the Company by wire transfer
in same day funds, against delivery to the Representatives for the
respective accounts of the Underwriters of the Offered Shares to be
purchased by them. Certificates for the Offered Shares shall be registered
in such name or names and in such authorized denominations as the
Representatives may request in writing at least two full business days
prior to the Closing Date. The Company will permit you to examine and
package such certificates for delivery at least one full business day
prior to the Closing Date.
(c) In addition, the Company hereby grants to the Underwriters
options to purchase up to an aggregate of 450,000 Additional Shares at the
same purchase price per share to be paid by the Underwriters to the
Company for the Firm Shares as set forth in this Section 2, for the sole
purpose of covering over-allotments in the sale of Firm Shares by the
Underwriters. These options may be exercised at any time and from time to
time, in whole or in part, on or before the thirtieth day following the
date of the Prospectus, by written notice by the Representatives to the
Company. Each such notice shall set forth the aggregate number of
Additional Shares as to which an option is being exercised and the date
and time, as reasonably determined by the Representatives, when the
Additional Shares are to be delivered (each such date and time being
herein sometimes referred to as the "Additional Closing Date"); PROVIDED,
HOWEVER, that no Additional Closing Date shall be earlier than the Closing
Date or earlier than the second full business day after the date on which
the option shall have been exercised nor later than the eighth full
business day after the date on which the option shall have been exercised
(unless such time and date are postponed in accordance with the provisions
of Section 9 hereof). Certificates for Additional Shares shall be
registered in such name or names and in such authorized denominations as
the Representatives may request in writing at least two full business days
prior to the applicable Additional Closing Date. The Company will permit
you to examine and package such certificates for delivery at least one
full business day prior to the applicable Additional Closing Date.
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<PAGE>
The number of Additional Shares to be sold to each Underwriter on an
Additional Closing Date shall be the number which bears the same ratio to the
aggregate number of Additional Shares being purchased on such Additional Closing
Date as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number increased as set forth in
Section 9 hereof) bears to 3,000,000 subject, however, to such adjustments to
eliminate any fractional shares as the Representatives in their sole discretion
shall make.
Payment for the Additional Shares shall be made by wire transfer in same
day funds at the offices of Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th
Floor, New York, New York 10019, or such other location as may be mutually
acceptable, upon delivery of the certificates for the Additional Shares to the
Representatives for the respective accounts of the Underwriters.
3. OFFERING.
(a) Upon the Representatives' authorization of the release of the
Firm Shares, the Underwriters propose to offer the Offered Shares for sale
to the public upon the terms set forth in the Prospectus.
(b) The Company and the Underwriters hereby agree that up to 300,000
of the Firm Shares to be purchased by the Underwriters (the "Directed
Shares") shall be reserved for sale by the Underwriters to eligible
employees of and certain persons designated by the Company (the "Directed
Shares Purchasers"), as part of the distribution of the Offered Shares by
the Underwriters subject to the terms of this Agreement, the applicable
rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and
regulations, PROVIDED, HOWEVER, that under no circumstances will Bear,
Stearns & Co. Inc. or any other Underwriter be liable to the Company or to
any of the -------- ------- Directed Shares Purchasers for any action
taken or omitted in good faith in connection with transactions effected
with regard to the Directed Shares Purchasers. To the extent that such
Directed Shares are not orally confirmed for purchase by such persons by
the end of the first day after the date of this Agreement, such Directed
Shares will be offered to the public as part of the underwritten offering
contemplated hereby.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriters that:
(a) If the Registration Statement has not yet been declared
effective, the Company will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
possible, and if Rule 430A is used or the filing of the Prospectus is
otherwise required under Rule 424(b) or Rule 434, the Company will file
the Prospectus (properly completed if Rule 430A has been used) pursuant to
Rule 424(b) or Rule 434 within the prescribed time period and will provide
evidence satisfactory to the Representatives of such timely filing. If the
Company elects to rely on Rule 434, the Company will prepare and file a
term sheet that complies with the requirements of Rule 434.
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<PAGE>
The Company will notify the Representatives as promptly as possible (and,
if requested by you will confirm such notice in writing) (i) when the
Registration Statement and any amendments thereto become effective, (ii) of any
request by the Commission for any amendment of or supplement to the Registration
Statement or the Prospectus or for any additional information, (iii) of the
mailing or the delivery to the Commission for filing of any amendment of or
supplement to the Registration Statement or the Prospectus, (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of the
initiation, or the threatening, of any proceedings therefor, (v) of the receipt
of any comments from the Commission, and (vi) of the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for that purpose. If the Commission shall propose or enter a stop
order at any time, the Company will make every reasonable effort to prevent the
issuance of any such stop order and, if issued, to obtain the lifting of such
order as soon as possible. The Company will not file any amendment to the
Registration Statement or any amendment of or supplement to the Prospectus
(including the prospectus required to be filed to Rule 424(b) or Rule 434) that
differs from the prospectus on file at the time of the effectiveness of the
Registration Statement before or after the effective date of the Registration
Statement to which the Representatives shall reasonably object in writing after
being timely furnished in advance a copy thereof.
(b) If at any time when a prospectus relating to the Offered Shares
is required to be delivered under the Act any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would, in
the judgment of the Underwriters or the Company, include an untrue
statement of a material fact or omit to state any material fact required
to be stated in order to make any statement therein, in light of the
circumstances under which it was made, not misleading, or if it shall be
necessary, in the judgment of the Underwriters or the Company, at any time
to amend or supplement the Prospectus or the Registration Statement to
comply with the Act or the Regulations, the Company will notify the
Representatives promptly and prepare and file with the Commission an
appropriate amendment or supplement (in form and substance satisfactory to
the Representatives) which will correct such statement or omission and
will use its best efforts to have any amendment to the Registration
Statement declared effective as soon as possible.
(c) The Company will promptly deliver to the Representatives two
signed copies of the Registration Statement, including exhibits and all
amendments thereto, and the Company will promptly deliver to each of the
Underwriters such number of copies of any preliminary prospectus, the
Prospectus, the Registration Statement and all amendments of and
supplements to such documents, if any, as the Representatives may
reasonably request.
(d) The Company will endeavor in good faith, in cooperation with the
Representatives, at or prior to the time of effectiveness of the
Registration Statement, to qualify the Offered Shares for offering and
sale under the securities laws relating to the offering or sale of the
Shares of such jurisdictions as the Representatives may designate
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<PAGE>
and to maintain such qualification in effect for so long as required for
the distribution thereof, except that in no event shall the Company be
obligated in connection therewith to qualify as a foreign corporation or
to execute a general consent to service of process.
(e) The Company will make generally available (within the meaning of
11(a) of the Act) to its security holders and to the Representatives as
soon as practicable, but not later than 45 days after the end of its
fiscal quarter in which the first anniversary date of the effective date
of the Registration Statement occurs, an earnings statement (in form
complying with the provisions of Rule 158 of the Regulations) covering a
period of at least twelve consecutive months beginning after the effective
date of the Registration Statement.
(f) During the period of 180 days from the date of the Prospectus,
the Company will not, without the prior written consent of Bear, Stearns &
Co. Inc., issue, sell, offer or agree to sell, grant any option for the
sale of, pledge, make any short sale, establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Securities
Exchange Act of 1934, as amended, or otherwise dispose of, any Common
Stock (or any securities convertible into, exercisable for or exchangeable
for Common Stock) of the Company or (ii) enter into any swap, derivative
transaction or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash
or otherwise, PROVIDED that the foregoing shall not apply to (A) the
Shares, (B) the issuance of Common Stock upon conversion of the Preferred
Stock on the -------- Closing Date, (C) the issuance by the Company of
shares of Common Stock upon the exercise of any warrant outstanding on the
date hereof and disclosed in the Prospectus, (D) the issuance by the
Company of shares of Common Stock or options to purchase Common Stock
pursuant to any stock option or incentive plan described in the Prospectus
and (E) the issuance by the Company of shares of Common Stock in
connection with any acquisition of another company if the terms of such
issuance provide that such shares shall not be resold prior to the
expiration of the 180-day period from the date of the Prospectus; and the
Company will obtain the undertaking of each of its officers and directors
and such of its stockholders as have been heretofore designated by the
Representatives and listed on Schedule II attached hereto not to engage in
any of the aforementioned transactions on their own behalf.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to the Representatives,
copies of (i) all reports to its stockholders; and (ii) all reports,
financial statements and proxy or information statements filed by the
Company with the Commission or any national securities exchange.
(h) The Company will apply the proceeds from the sale of the Shares
as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause the Shares to
continue to qualify for inclusion in the Nasdaq National Market System.
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<PAGE>
(j) The Company will use its best efforts to ensure that the
Directed Shares are restricted as required by the National Association of
Securities Dealers Inc. or the National Association of Securities Dealers
Inc. rules from sale, transfer, assignment, pledge or hypothecation for a
period of three (3) months following the date of this Agreement. The
Underwriters will notify the Company as to which persons will need to be
so restricted. At the request of the Underwriters, the Company will direct
the transfer agent to place a stop transfer restriction upon such
securities for such a period of time. Should the Company release, or seek
to release, from such restrictions any of the Directed Shares, the Company
agrees to reimburse the Underwriters for any reasonable expenses
(including, without limitation, legal expenses) they incur in connection
with such release.
5. PAYMENT OF EXPENSES. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder and under the Comcast Purchase Agreement,
including those in connection with (i) preparing, printing, duplicating, filing
and distributing the Registration Statement, as originally filed and all
amendments thereof (including all exhibits thereto), any preliminary prospectus,
the Prospectus and any amendments or supplements thereto (including, without
limitation, fees and expenses of the Company's accountants and counsel), the
underwriting documents (including this Agreement and the Agreement Among
Underwriters) and all other documents related to the public offering of the
Offered Shares (including those supplied to the Underwriters in quantities as
hereinabove stated) and the Comcast Purchase Agreement, (ii) the issuance,
transfer and delivery of the Offered Shares to the Underwriters and the Comcast
Shares to Comcast, including any transfer or other taxes payable thereon, (iii)
the qualification of the Shares under state or foreign securities or Blue Sky
laws, including the costs of printing and mailing a preliminary and final "Blue
Sky Survey," (iv) the fees of counsel for the Underwriters in connection with
the qualification of the Offered Shares under state or foreign securities or
Blue Sky laws and in connection with the review and qualification of the
offering of the Offered Shares by the National Association of Securities Dealers
Inc., and such counsel's disbursements in relation thereto, (v) quotation of the
Shares on the Nasdaq National Market System, (vi) filing fees of the Commission
and the National Association of Securities Dealers, Inc., (vii) the cost of
printing certificates representing the Offered Shares and (viii) the cost and
charges of any transfer agent or registrar.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company herein contained, as of the date hereof and as of the
Closing Date (for purposes of this Section 6, "Closing Date" shall refer to the
Closing Date for the Firm Shares and any Additional Closing Date, if different,
for the Additional Shares), to the absence from any certificates, opinions,
written statements or letters furnished to you or to O'Sullivan Graev &
Karabell, LLP ("Underwriters' Counsel") pursuant to this Section 6 of any
misstatement or omission, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
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(a) The Registration Statement shall have become effective not later
than, if pricing pursuant to Rule 430A, 5:30 P.M., New York time, on the
date of this Agreement or, if pricing pursuant to a pricing amendment,
12:00 P.M., New York time on the date an amendment to the Registration
Statement containing the public offering price has been filed with the
Commission, or at such later time and date as shall have been consented to
in writing by the Representatives; if the Company shall have elected to
rely upon Rule 430A or Rule 434 of the Regulations, the Prospectus shall
have been filed with the Commission in a timely fashion in accordance with
Section 4(a) hereof; and, at or prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof shall have been issued and no proceedings
therefor shall have been initiated or threatened by the Commission.
(b) At the Closing Date, you shall have received the opinion of
Brobeck, Phleger & Harrison LLP, counsel for the Company, dated the
Closing Date addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company has been duly incorporated and is validly
existing in good standing under the laws of the State of Delaware.
The Company is duly qualified to transact business and is in good
standing as a foreign corporation in New York. The Company has the
requisite corporate power and authority, to own, lease and operate
its properties and conduct its business as described in the
Registration Statement and the Prospectus.
(ii) The authorized capital stock of the Company is as set
forth in the Registration Statement and the Prospectus. All of the
outstanding shares of Common Stock (including the shares of Common
Stock issued on the Closing Date upon conversion of the Preferred
Stock) are duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive
rights arising under the Delaware General Corporation Law or, to
such counsel's knowledge, similar rights that entitle or will
entitle any person to acquire any shares of capital stock of the
Company upon the issuance and sale of the Shares by the Company. The
Shares to be sold by the Company on the Closing Date have been duly
authorized and, when issued and delivered to the Underwriters or
Comcast, as applicable, against payment therefor in accordance with
this Agreement or the Comcast Purchase Agreement, as applicable,
will be validly issued, fully paid and nonassessable and will not
have been issued in violation of any preemeptive rights arising
under the Delaware General Corporation Law or, to such counsel's
knowledge, similar rights that entitle or will entitle any person to
acquire any shares of capital stock of the Company upon the issuance
and sale of the Shares by the Company. The Common Stock, the Firm
Shares, the Additional Shares and the Comcast Shares conform as to
legal matters to the descriptions thereof contained in the
Registration Statement and the Prospectus.
(iii) All outstanding Warrants to purchase Common Stock of the
Company have been duly authorized, executed and delivered by the
Company and constitute
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valid and binding obligations of the Company, enforceable against it
in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general equitable principles
(whether relief is sought in a proceeding at law or in equity) and
except as rights to indemnification and contribution thereunder may
be limited by applicable law or public policy relating thereto. The
shares of Common Stock issuable upon exercise of such Warrants have
been duly reserved for issuance upon such exercise and, upon payment
of the exercise price thereof upon exercise of such Warrants, such
shares of Common Stock will be validly issued and outstanding, fully
paid and nonassessable and will be free of any preemptive rights
arising under the Delaware General Corporation Law or, to such
counsel's knowledge, similar rights that entitle or will entitle any
person to acquire any shares of capital stock of the Company upon
the issuance and sale of such shares of Common Stock by the Company.
(iv) This Agreement and the Comcast Purchase Agreement have
been duly and validly authorized, executed and delivered by the
Company.
(v) To such counsel's knowledge, (i) there is no litigation or
governmental or other action, suit, proceeding or investigation
before any court or before or by any public, regulatory or
governmental agency or body pending or, threatened against, or
involving the properties or business of, the Company, which is of a
character required to be disclosed in the Registration Statement and
the Prospectus which has not been properly disclosed therein and
(ii) there are no statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(vi) The execution, delivery and performance of this Agreement
and the Comcast Purchase Agreement and the consummation of the
transactions contemplated hereby and thereby by the Company do not
and will not (A) conflict with or result in a breach of any of the
terms and provisions of, or constitute a default (or an event which
with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge
or encumbrance upon any properties or assets of the Company pursuant
to, any agreement, instrument, franchise, license or permit known to
such counsel to which the Company is a party or by which any of its
properties or assets may be bound or (B) violate or conflict with
any provision of applicable law or the certificate of incorporation
or by-laws (or other organizational documents) of the Company, or
any statute, rule or regulation, or to the best knowledge of such
counsel, any judgment, decree or order, of any court or any public,
governmental or regulatory agency or body having jurisdiction over
the Company or any of its properties or assets. No consent,
approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental
or regulatory agency or body having jurisdiction over the Company or
any of its properties or assets is required for the execution,
delivery and
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performance of this Agreement or the Comcast Purchase Agreement or
the consummation of the transactions contemplated hereby or thereby,
except for (1) such as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of
the Offered Shares by the Underwriters (as to which such counsel
need express no opinion) and (2) such as have been made or obtained
under the Act. The issuance and sale of the Comcast Shares pursuant
to the Comcast Purchase Agreement is exempt from the registration
requirements of the Act by virtue of Section 4(2) of the Act.
(vii) The statements (A) in the Prospectus under the captions
"Business-- Government Regulation and Legal Uncertainties,"
"Management -- Employment, Severance and Other Agreements," "--1998
Stock Option/Stock Issuance Plan," "Description of Securities" and
"Shares Eligible for Future Sale" and (B) in the Registration
Statement in Items 14 and 15, in each case insofar as such
statements constitute summaries of the legal matters, documents or
proceedings referred to therein, provide a fair summary of such
legal matters, documents and proceedings in all material respects.
(viii) The Company is not, and upon consummation of the
transactions contemplated hereby and by the Comcast Purchase
Agreement, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(ix) The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (except for the financial
statements and the schedules and the other financial and statistical
data included in the Registration Statement and the Prospectus, as
to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the
Regulations.
(x) The Registration Statement has been declared effective
under the Act, and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof has been issued and no proceedings
therefor have been initiated or threatened by the Commission and any
required filing of the Prospectus pursuant to Rule 424(b) of the
Regulations has been made in accordance with Rule 424(b).
(xi) To such counsel's knowledge, except as described in the
Prospectus, no holder of any security of the Company has the right,
not effectively satisfied or waived, to require inclusion of shares
of Common Stock or any other security of the Company in the
Registration Statement.
(xii) The Merger has become effective and the Corporate Rights
of General Internet will continue in effect and be unimpaired by the
Merger, and the Corporate Rights of General Internet have been
merged with and into the Company, which is, as the surviving
corporation, fully vested therewith. All consents, approvals, orders
and authorizations of, and all registrations,
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declarations and filings with, all persons (governmental and, to
such counsel's knowledge, private) required to be obtained or made
in connection with the consummation of the Merger have been so
obtained or made. The Merger qualifies as a reorganization under the
provisions of Section 368 of Internal Revenue Code.
In addition, such opinion shall also contain a statement that such counsel
has participated in conferences with certain officers and representatives of the
Company, its independent public accountants, the Underwriters and the
Underwriters' counsel at which the contents of the Registration Statement and
the Prospectus and related matters were discussed. Such counsel need not,
however, pass upon, or assume any responsibility for, and such counsel may state
that it has not independently checked or verified, the accuracy, completeness or
fairness of the information contained in the Registration Statement and the
Prospectus. Such counsel shall state, however, that based upon its participation
as described in the preceding two sentences, (i) it confirms that it has no
reason to believe that the Registration Statement (other than the financial
statements, including the notes and schedules thereto, and the other financial
and statistical data included in the Registration Statement, as to which such
counsel need not express any belief), at the time the Registration Statement
became effective, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and (ii) it confirms that it has no reason to
believe that the Prospectus (other than the financial statements, including the
notes and schedules thereto, and the other financial and statistical data
included in the Prospectus, as to which such counsel need not express any
belief), on the date of such opinion, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States, the
General Corporation Law of the State of Delaware, the laws of the State of New
York, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably
acceptable to Underwriters' Counsel, familiar with the applicable laws; (B) as
to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and certificates or other written statements
of officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to
Underwriters' Counsel. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, you and they are justified in relying thereon.
The opinion of Brobeck, Phleger & Harrison LLP described in this Section
6(b) shall be rendered to the Underwriters at the request of the Company and
shall so state therein.
(c) All proceedings taken in connection with the sale of the Shares
as herein contemplated and as contemplated in the Comcast Purchase
Agreement shall be satisfactory in form and substance to you and to
Underwriters' Counsel, and the Underwriters shall have received from said
Underwriters' Counsel a favorable opinion,
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dated as of the Closing Date with respect to the issuance and sale of the
Offered Shares, the Registration Statement and the Prospectus and such
other related matters as the Representatives may reasonably require, and
the Company shall have furnished to Underwriters' Counsel such documents
as they request for the purpose of enabling them to pass upon such
matters.
(d) At the Closing Date, you shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company,
dated the Closing Date to the effect that (i) the condition set forth in
subsection (a) of this Section 6 has been satisfied, (ii) as of the date
hereof and as of the Closing Date, the representations and warranties of
the Company set forth in Section 1 hereof are accurate, (iii)
simultaneously with the Closing, the sale of the Comcast Shares pursuant
to the Comcast Purchase Agreement shall have been consummated and the
Company shall have received $2,500,000 as a result of such sale, (iv) as
of the Closing Date, the obligations of the Company to be performed
hereunder and under the Comcast Purchase Agreement on or prior thereto
have been duly performed and (v) subsequent to the respective dates as of
which information is given with the Registration Statement and the
Prospectus, the Company has not sustained any material loss or
interference with its business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any labor dispute or any legal or governmental proceeding, and there has
not been any material adverse change, or any development involving a
material adverse change, in the business, prospects, properties,
operations, condition (financial or otherwise), or results of operations
of the Company, except in each case as described in or contemplated by the
Prospectus.
(e) At the time this Agreement is executed and at the Closing Date,
you shall have received a letter from KPMG LLP, independent public
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Underwriters and in
form and substance satisfactory to the Representatives, to the effect
that: (i) they are independent certified public accountants with respect
to the Company within the meaning of the Act and the Regulations and
stating that the answer to Item 10 of the Registration Statement is
correct insofar as it relates to them; (ii) stating that, in their
opinion, the financial statements and schedules of the Company included in
the Registration Statement and the Prospectus and covered by their opinion
therein comply as to form in all material respects with the applicable
accounting requirements of the Act and the applicable published rules and
regulations of the Commission thereunder; (iii) on the basis of procedures
consisting of a reading of the latest available unaudited interim
consolidated financial statements of the Company, a reading of the minutes
of meetings and consents of the stockholders and board of directors of the
Company and the committees of such board subsequent to December 31, 1998,
inquiries of officers and other employees of the Company who have
responsibility for financial and accounting matters of the Company and its
subsidiaries with respect to transactions and events subsequent to
December 31, 1998 and other specified procedures and inquiries to a date
not more than five days (three days in the case of the letter delivered on
the Closing Date) prior to the date of such letter, nothing has come to
their attention that would cause them to believe that: (A) the unaudited
consolidated financial statements and schedules of the Company presented
in the Registration Statement and the
17
<PAGE>
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the applicable published
rules and regulations of the Commission thereunder or that such unaudited
consolidated financial statements are not fairly presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited consolidated financial
statements of the Company included in the Registration Statement and the
Prospectus; (B) with respect to the period subsequent to December 31, 1998
there were, as of the date of the most recent available monthly financial
statements of the Company and as of a specified date not more than five
days (three days in the case of the letter delivered on the Closing Date)
prior to the date of such letter, any changes in the capital stock or
long-term indebtedness of the Company or any decrease in the net current
assets or stockholders' equity of the Company, in each case, as compared
with the amounts shown in the most recent balance sheet presented in the
Registration Statement and the Prospectus, except for changes or decreases
which the Registration Statement and the Prospectus disclose have occurred
or may occur or which are set forth in such letter or (C) that during the
period from January 1, 1999 to the date of the most recent available
monthly financial statements of the Company and to a specified date not
more than five days (three days in the case of the letter delivered on the
Closing Date) prior to the date of such letter, there was (1) any
decrease, as compared with the corresponding period in the prior fiscal
year, in total revenues, or any increase, as compared with the
corresponding period in the prior fiscal year, in operating loss or the
total or per share net loss or (2) any decrease, as compared with the
corresponding period in the prior fiscal quarter, in revenues, except in
any such case for decreases or increases which the Registration Statement
and the Prospectus disclose have occurred or may occur or which are set
forth in such letter; (iv) nothing has come to their attention that would
cause them to believe that the pro forma financial information included in
the Registration Statement do not comply in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such financial information; and (v) stating
that they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, and other financial information
pertaining to the Company set forth in the Registration Statement and the
Prospectus, which have been specified by the Representatives prior to the
date of this Agreement, to the extent that such amounts, numbers,
percentages and information may be derived from the general accounting and
financial records of the Company or from schedules furnished by the
Company, and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures specified by the
Representatives set forth in such letter, and found them to be in
agreement.
(f) Prior to the Closing Date, the Company shall have furnished to
you such further information, certificates and documents as you may
reasonably request.
(g) The Representatives shall have received from each person who is
a director or officer of the Company or stockholder that has been
heretofore designated by the Representatives and listed on Schedule II
hereto an agreement to the effect that such person will not, directly or
indirectly, without the prior written consent of Bear, Stearns
18
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& Co. Inc., offer, sell, offer or agree to sell, grant any option to
purchase, pledge, make any short sale, establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Securities
Exchange Act of 1934, as amended, or otherwise dispose of, any Common
Stock (or any securities convertible into, exercisable for or exchangeable
for Common Stock) of the Company or (ii) enter into any swap, derivative
transaction or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash
or otherwise, for a period of 180 days after the date of the Prospectus.
(h) The closing of the sale of the Comcast Shares shall be
consummated concurrently with or prior to the closing of the sale of the
Firm Shares and the Company shall have received $____ per share or
[$2,500,000] in the aggregate with respect thereto.
(i) At the Closing Date, the Shares shall have been approved for
quotation on the Nasdaq National Market System.
If any of the conditions specified in this Section 6 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to you or to Underwriters'
Counsel pursuant to this Section 6 shall not be in all material respects
reasonably satisfactory in form and substance to the Representatives and to
Underwriters Counsel, all obligations of the Underwriters hereunder may be
cancelled by the Representatives at, or at any time prior to, the Closing Date
and the obligations of the Underwriters to purchase the Additional Shares may be
cancelled by the Representatives at, or at any time prior to, the Additional
Closing Date. Notice of such cancellation shall be given to the Company in
writing, or by telephone, telex or telegraph, confirmed in writing.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any and all
losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act,
the Exchange Act or otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration
of the Offered Shares, as originally filed or any amendment thereof, or
any related preliminary prospectus or the Prospectus, or in any supplement
thereto or amendment thereof, or arise out of or are based upon 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; PROVIDED, HOWEVER, that the Company will not be liable in any
such case to the extent but only to
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<PAGE>
the extent that any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or
on behalf of any Underwriter through the Representatives expressly for use
therein. This indemnity agreement will be in addition to any liability
which the Company may otherwise have, including under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to indemnify
and hold harmless the Company, each of the directors of the Company, each
of the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any losses, liabilities, claims, damages and expenses whatsoever
as incurred (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation),
jointly or severally, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for
the registration of the Shares, as originally filed or any amendment
thereof, or any related preliminary prospectus or the Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based
upon 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, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriter through the Representatives expressly for use
therein; PROVIDED, HOWEVER, that in no case shall any Underwriter be
liable or responsible for any amount in excess of the underwriting
discount applicable to the Shares purchased by such Underwriter hereunder.
This indemnity will be in addition to any liability which any Underwriter
may otherwise have, including under this Agreement. The Company
acknowledges that the statements set forth in the third, seventh and
twelfth paragraphs under the caption "Underwriting" in the Prospectus
constitute the only information furnished in writing by or on behalf of
any Underwriter expressly for use in the registration statement relating
to the Offered Shares as originally filed or in any amendment thereof, any
related preliminary prospectus or the Prospectus or in any amendment
thereof or supplement thereto, as the case may be.
(c) In connection with the offer and sale of the Directed Shares,
the Company agrees, promptly upon a request in writing, to indemnify and
hold harmless the Underwriters from and against any and all losses,
liabilities, claims, damages and expenses incurred by them as a result of
the failure of the Directed Shares Purchasers to pay for and accept
delivery of the Directed Shares which, by the end of the day following the
date of this Agreement, were subject to a properly confirmed agreement to
purchase such Directed Shares.
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<PAGE>
(d) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party
against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying party
shall not relieve it from any liability which it may have under this
Section 7). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein, and to the
extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the
indemnifying parties in connection with the defense of such action, (ii)
the indemnifying parties shall not have employed counsel to have charge of
the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties
shall have reasonably concluded that there may be defenses available to it
or them which are different from or additional to those available to one
or all of the indemnifying parties (in which case the indemnifying parties
shall not have the right to direct the defense of such action on behalf of
the indemnified party or parties), in any of which events such fees and
expenses shall be borne by the indemnifying parties. Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall
not be liable for any settlement of any claim or action effected without
its written consent; PROVIDED, HOWEVER, that -------- ------- such consent
was not unreasonably withheld.
8. CONTRIBUTION. In order to provide for contribution in circumstances in
which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company, and the Underwriters shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company any contribution received by
the Company from persons, other than the Underwriters, who may also be liable
for contribution, including persons who control the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the
Company who signed the Registration Statement and directors of the Company) as
incurred to which the Company, and one or more of the Underwriters may be
subject, in such proportions as is appropriate to reflect the relative benefits
received by the Company and the Underwriters from the offering of the Offered
Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 7 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Underwriters in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received
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<PAGE>
by the Company and the Underwriters shall be deemed to be in the same proportion
as (x) the total proceeds from the offering of the Offered Shares (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and (y) the underwriting discounts and commissions received by
the Underwriters, respectively, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company and of the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter be liable or responsible
for any amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 8 and the
preceding sentence, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Offered Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 8, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 8. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld.
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default
relates do not (after giving effect to arrangements, if any, made by you
pursuant to subsection (b) below) exceed in the aggregate 10% of the
number of Firm Shares or Additional Shares, to which the default relates
shall be purchased by the non-defaulting Underwriters in proportion to the
respective proportions which the numbers of Firm Shares set forth opposite
their
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respective names in Schedule I hereto bear to the aggregate number of Firm
Shares set forth opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of the
Firm Shares or Additional Shares, as the case may be, the Representatives
may in their discretion arrange for the Representatives or for another
party or parties (including any non-defaulting Underwriter or Underwriters
who so agree) to purchase such Firm Shares or Additional Shares, as the
case may be, to which such default relates on the terms contained herein.
In the event that within five calendar days after such a default the
Representatives do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as
provided in this Section 9, this Agreement or, in the case of a default
with respect to the Additional Shares, the obligations of the Underwriters
to purchase and of the Company to sell the Additional Shares shall
thereupon terminate, without liability on the part of the Company with
respect thereto (except in each case as provided in Section 5, 7(a) and 8
hereof) or the Underwriters, but nothing in this Agreement shall relieve a
defaulting Underwriter or Underwriters of its or their liability, if any,
to the other Underwriters and the Company for damages occasioned by its or
their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to which
the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as
aforesaid, the Representatives or the Company shall have the right to
postpone the Closing Date or the applicable Additional Closing Date, as
the case may be, for a period, not exceeding five business days, in order
to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus which, in the
opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall include
any party substituted under this Section 9 with like effect as if it had
originally been a party to this Agreement with respect to such Firm Shares
and Additional Shares.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and
warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including the agreements contained in Section 5,
the indemnity agreements contained in Section 7 and the contribution agreements
contained in Section 8, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or any
controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, and shall survive
delivery of and payment for the Shares to and by the Underwriters. The
representations contained in Section 1 and the agreements contained in Sections
5, 7, 8 and 11(d) hereof shall survive the termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
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11. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective upon the later of when (i)
the Representatives and the Company shall have received notification of
the effectiveness of the Registration Statement and (ii) the execution of
this Agreement. If either the initial public offering price or the
purchase price per Offered Share has not been agreed upon prior to 5:00
P.M., New York time, on the fifth full business day after the Registration
Statement shall have become effective, this Agreement shall thereupon
terminate without liability to the Company or the Underwriters except as
herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying you or by the
Representatives notifying the Company. Notwithstanding the foregoing, the
provisions of this Section 11 and of Section 1, 5, 7 and 8 hereof shall at
all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the obligations of the Underwriters to
purchase Additional Shares at any time prior to the applicable Additional
Closing Date, as the case may be, if (A) any domestic or international
event or act or occurrence has materially disrupted, or in the opinion of
the Representatives will in the immediate future materially disrupt, the
market for the Company's securities or securities in general; or (B) if
trading on the New York Stock Exchange or the Nasdaq Stock Market shall
have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been
required, on the New York Stock Exchange or the Nasdaq Stock Market by the
New York Stock Exchange, the National Association of Securities Dealers,
Inc. or by order of the Commission or any other governmental authority
having jurisdiction; or (C) if a banking moratorium has been declared by a
state or federal authority or if any new restriction materially adversely
affecting the distribution of the Firm Shares or the Additional Shares, as
the case may be, shall have become effective; or (D) (i) if the United
States becomes engaged in hostilities or there is an escalation of
hostilities involving the United States or there is a declaration of a
national emergency or war by the United States or (ii) if there shall have
been such change in political, financial or economic conditions, if the
effect of any such event in (i) or (ii) as in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the
offering, sale and delivery of the Firm Shares or the Additional Shares,
as the case may be, on the terms contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall be
by telephone, telex or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by the
Representatives as provided in Section 11(a) hereof or (ii) Section 9(b)
or 11(b) hereof), or if the sale of the Offered Shares provided for herein
is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement
herein or comply with any provision hereof, the Company will, subject to
demand by the Representatives, reimburse
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<PAGE>
the Underwriters for all out-of-pocket expenses (including the fees and
expenses of their counsel) incurred by the Underwriters in connection
herewith.
12. NOTICES. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and , if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, N.Y. 10167, Attention: James B. Carroll, with a copy to O'Sullivan
Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112,
Attention: Julie M. Allen, Esq.; if sent to the Company, shall be mailed,
delivered, or telegraphed and confirmed in writing to the Company, 220 East 42nd
Street, 24th Floor, New York, New York 10017, Attention: Chief Financial
Officer, with a copy to Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th
Floor, New York, N.Y. 10019, Attention : Alexander D. Lynch, Esq.
13. PARTIES. This Agreement shall insure solely to the benefit of, and
shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Section 7 and
8, and their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Offered Shares from any of the Underwriters.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
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If the foregoing correctly sets forth the understanding between you and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
MiningCo.com, Inc.
By
-------------------------------------
Scott P. Kurnit
Chairman of the Board, President and
Chief Executive Officer
26
<PAGE>
Accepted as of the date first above written
BEAR, STEARNS & CO. INC.
Volpe Brown Whelan & Company, LLC
Wit Capital Corporation, as e-Manager
on behalf of themselves and the other
Underwriters named in Schedule I hereto
BY: BEAR, STEARNS & CO. INC.
By
---------------------------
Name:
Title:
27
<PAGE>
SCHEDULE I
Number of Firm
Name of Underwriter Shares to be Purchased
------------------- ----------------------
Bear, Stearns & Co. Inc
Volpe Brown Whelan & Company, LLC
Wit Capital Corporation
[Others]
Total............................. __________
28
<PAGE>
SCHEDULE II
Lock-up Officers, Directors and Stockholders
[To be completed]
29
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MININGCO.COM, INC.
PURSUANT TO SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
-------------------------------------------
MiningCo.com, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), DOES HEREBY CERTIFY:
FIRST: That Article FOURTH of the Amended and Restated Certificate of
Incorporation of the Corporation, stating the total number of shares the
Corporation is authorized to issue, is hereby amended to include the following
paragraph:
Each 2.809 shares of the Corporation's Common Stock, par value
$.001 per share, issued and outstanding immediately prior to 6:00 P.M. on
a date prior to the initial public offering of the Corporation's common
stock, as determined by the officers of the Corporation, shall be
converted and reclassified automatically effective as of such date at 6:00
P.M., Delaware time, into 1 share of the Corporation's Common Stock, par
value $.001 per share, so that each share of the Corporation's Common
Stock issued and outstanding is hereby converted and reclassified. No
fractional interests resulting from such conversion shall be issued but,
in lieu thereof, the Corporation will round the number of shares of the
Corporation's Common Stock issuable to each holder up to the nearest whole
share of Common Stock.
SECOND: That the foregoing amendment has been duly adopted in
accordance with the provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Scott P. Kurnit, its President, Chief Executive Officer and Chairman
of the Board of Directors, this ___ day of March 1999.
By:
---------------------------------------
Scott P. Kurnit
President, Chief Executive Officer and
Chairman of the Board of Directors
ATTEST:
- ----------------------------------
Robert W. Harris, Secretary
<PAGE>
Exhibit 3.3
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MININGCO.COM, INC.
(Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware)
MiningCo.co, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law"),
DOES HEREBY CERTIFY:
FIRST: That the Corporation filed its original Certificate of
Incorporation with the Secretary of State of Delaware on November 17, 1998. On
December 15, 1998, the Corporation filed with the Secretary of State of the
State of Delaware an Amended and Restated Certificate of Incorporation. A
Certificate of Merger was filed with the Secretary of State of the State of
Delaware on December 24, 1998. On March ___, 1999, the Corporation filed a
Certificate of Amendment to its Amended and Restated Certificate of
Incorporation.
SECOND: That the Board of Directors duly adopted resolutions
proposing to amend and restate the Second Amended and Restated Certificate of
Incorporation of the Corporation, declaring said amendment and restatement to be
advisable and in the best interests of the Corporation and its stockholders, and
authorizing the appropriate officers of the Corporation to solicit the consent
of the stockholders of the issued and outstanding Common Stock, $0.001 par
value, and Preferred Stock, $0.001 par value, voting as a single class and as
separate classes, all in accordance with the applicable provisions of Sections
228, 242 and 245 of the General Corporation Law of the State of Delaware;
THIRD: That the resolution setting forth the proposed amendment and
restatement is as follows:
"RESOLVED, that the Second Amended and Restated Certificate of
Incorporation of the Corporation be amended and restated in its
entirety as follows:
ARTICLE I
Name
The name of the Corporation is MiningCo.com, Inc.
<PAGE>
ARTICLE II
Registered Office
The address of the registered office of the Corporation in the State
of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, State of Delaware 19801, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Corporation.
ARTICLE III
Powers/Term
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law. The Corporation is to have perpetual existence.
ARTICLE IV
Capital Stock
A. CLASSES OF STOCK. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which the Corporation is
authorized to issue is 55,000,000 shares. 50,000,000 shares, par value $0.001
per share, shall be Common Stock and 5,000,000 shares, par value $0.001 per
share, shall be Preferred Stock. The consideration for the issuance of the
shares shall be paid to or received by the Corporation in full before their
issuance and shall not be less than the par value per share. The number of
authorized shares of Common Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the stock of the Corporation entitled to
vote, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware.
B. COMMON STOCK.
(1) GENERAL. All shares of Common Stock will be identical and will
entitle the holders thereof to the same rights, powers and privileges. The
rights, powers and privileges of the holders of the Common Stock are subject to
and qualified by the rights of holders of any then outstanding Preferred Stock.
(2) DIVIDENDS. Dividends may be declared and paid on the Common
Stock from funds lawfully available therefor as and when determined by the Board
of Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
<PAGE>
(3) DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
(4) VOTING RIGHTS. Except as otherwise required by law or this
Amended and Restated Certificate of Incorporation, each holder of Common Stock
shall have one vote in respect of each share of stock held of record by such
holder on the books of the Corporation for the election of directors and on all
matters submitted to a vote of stockholders of the Corporation. Except as
otherwise required by law or provided herein, holders of Preferred Stock shall
vote together with holders of Common Stock as a single class, subject to any
special or preferential voting rights of any then outstanding Preferred Stock.
There shall be no cumulative voting.
(5) REDEMPTION. The Common Stock is not redeemable.
C. PREFERRED STOCK. The Board of Directors is authorized, subject to
limitations prescribed by law, by the rules of a national securities exchange,
if applicable, and by the provisions of this ARTICLE IV, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
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 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 privileges, and, if
so, the terms and conditions of such conversion, including provision for
adjustment of the conversion 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
dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different conditions
and at different redemption dates;
<PAGE>
(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 or priority, if any, of payment of shares
of that series; and
(8) Any other relative rights, preferences and limitations of that
series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the Common Stock with respect to the same
dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to holders
of shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
D. PREEMPTIVE RIGHTS. No holder of any of the shares of any class or
series of stock or of options, warrants or other rights to purchase shares of
any class or series of stock or of other securities of the Corporation shall
have any preemptive right to purchase or subscribe for any unissued stock of any
class or series, or any unissued bonds, certificates of indebtedness, debentures
or other securities convertible into or exchangeable for stock of any class or
series or carrying any right to purchase stock of any class or series; but any
such unissued stock, bonds, certificates or indebtedness, debentures or other
securities convertible into or exchangeable for stock or carrying any right to
purchase stock may be issued pursuant to resolution of the Board of Directors of
the Corporation to such persons, firms, corporations or associations, whether or
not holders thereof, and upon such terms as may be deemed advisable by the Board
of Directors in the exercise of its sole discretion.
ARTICLE V
Directors
A. NUMBER. The number of directors of the Corporation shall be such
number, not less than five (5) nor more than fifteen (15) (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation, voting separately as a class), as shall be set forth from time to
time in the bylaws. Vacancies in the Board of Directors of the Corporation,
however caused, and newly created directorships shall be filled by a vote of a
majority of the directors then in office, whether or not a quorum, and any
director so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which the director has been
chosen expires and when the director's successor is elected and qualified.
<PAGE>
B. REMOVAL OF DIRECTORS. Notwithstanding any other provisions of
this Certificate or the By-laws of the Corporation, any director or the entire
Board of Directors of the Corporation may be removed, at any time, but only for
cause and only by the affirmative vote of the holders of not less than 66.67% of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose.
Notwithstanding the foregoing, whenever the holders of any one or more series of
preferred stock of the Corporation shall have the right, voting separately as a
class, to elect one or more directors of the Corporation, the preceding
provisions of this ARTICLE V shall not apply with respect to the director or
directors elected by such holders of preferred stock.
ARTICLE VI
Stockholder Meetings
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 statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-laws of the Corporation. The stockholders of the
Corporation may not take any action by written consent in lieu of a meeting.
ARTICLE VII
Limitation of Directors' Liability
Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. If the General Corporation Law is amended after approval by the
stockholders of this ARTICLE VII to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as so
amended. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment.
ARTICLE VIII
Indemnification
<PAGE>
The Corporation may, to the fullest extent permitted by Section 145
of the General Corporation Law of Delaware, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan) (all such persons being referred to hereafter as an
"Indemnitee"), or by reason of any action alleged to have been taken or omitted
in such capacity, against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with such action, suit or proceeding and any appeal
therefrom. Indemnification may include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the Indemnitee to repay
such payment if it is ultimately determined that such person is not entitled to
indemnification under this ARTICLE VIII, which undertaking may be accepted
without reference to the financial ability of such person to make such
repayment.
The Corporation shall not indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person unless the initiation thereof was approved by the Board of Directors
of the Corporation.
The indemnification rights provided in this ARTICLE VIII (i) shall
not be deemed exclusive of any other rights to which Indemnitees may be entitled
under any law, agreement or vote of stockholders or disinterested directors or
otherwise, and (ii) shall inure to the benefit of the heirs, executors and
administrators of such persons. The Corporation may, to the extent authorized
from time to time by its Board of Directors, grant indemnification rights to
other employees or agents of the Corporation or other persons serving the
Corporation and such rights may be equivalent to, or greater or less than, those
set forth in this ARTICLE VIII.
ARTICLE IX
Amendment of Bylaws
In furtherance of and not in limitation of powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized to
adopt, repeal, alter, amend and rescind the bylaws of the Corporation by vote of
66.67% of the Board of Directors.
<PAGE>
ARTICLE X
Amendment of Certificate
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Second Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and this
Second Amended and Restated Certificate of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this reservation.
Notwithstanding the foregoing, the provisions set forth in ARTICLES VII, VIII,
IX and this ARTICLE X may not be repealed, altered, amended or rescinded in any
respect unless the same is approved by the affirmative vote of the holders of
not less than 66.67% of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as a single class) cast at a meeting of the stockholders called
for that purpose (provided that notice of such proposed repeal, alteration,
amendment or rescission is included in the notice of such meeting).
* * *
FOURTH: That said amendments were duly adopted in accordance with
the provisions of Section 242 and 245 of the General Corporation Law.
<PAGE>
IN WITNESS WHEREOF, this Second Amended and Restated Certificate of
Incorporation has been signed by the President and the Assistant Secretary of
the Corporation this ____ day of _______________, 1999.
----------------------------------------
Scott Kurnit
President and Chief Executive Officer
and Chairman of the Board of Directors
----------------------------------------
Robert Harris
Secretary
<PAGE>
Exhibit 3.5
AMENDED AND RESTATED BY-LAWS
OF
MININGCO.COM, INC.
ARTICLE I
CERTIFICATE OF INCORPORATION AND BYLAWS
Section 1. These By-Laws are subject to the Certificate of Incorporation
of the Corporation. In these By-Laws, references to law, the Certificate of
Incorporation and By-Laws mean the law, the provisions of the Certificate of
Incorporation and the By-Laws as from time to time in effect.
ARTICLE II
OFFICES
Section 1. The registered office shall be in the city of Wilmington, state
of Delaware.
Section 2. The Corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders shall be held at such date and
time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which they shall elect by a plurality
vote the directors to be elected at such meeting, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
<PAGE>
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of the Chairman of the Board of
Directors or two-thirds of the Board of Directors.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the Certificate of Incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no
2
<PAGE>
proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period.
Section 11.
A. ANNUAL MEETINGS OF STOCKHOLDERS
1. Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice of
meeting, (b) by or at the direction of the Board of Directors or (c) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this Section 11, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section
11.
2. For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (a)(1) of
this Section 11, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
one hundred twentieth (120th) day nor earlier than the close of business on the
one hundred fiftieth (150th) day prior to the first anniversary of the date of
the proxy statement delivered to stockholders in connection with the preceding
year's annual meeting; provided, however, that if either (i) the date of the
annual meeting is more than thirty (30) days before or more than sixty (60) days
after such an anniversary date or (ii) no proxy statement was delivered to
stockholders in connection with the preceding year's annual meeting, notice by
the stockholder to be timely must be so delivered not earlier than the close of
business on the ninetieth (90th) day prior to such annual meeting and not later
than the close of business on the later of the sixtieth (60th) day prior to such
annual meeting or the close of business on the tenth (10th) day following the
day on which public announcement of the date of such meeting is first made by
the Corporation. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director it elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of capital stock of the
Corporation that are owned beneficially and held of record by such stockholder
and such beneficial owner.
3. Notwithstanding anything in the second sentence of paragraph (a)(2)
of this Section 11 to the contrary, in the event that the number of directors to
be elected to
3
<PAGE>
the Board of Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least seventy (70)
days prior to the first anniversary of the preceding year's annual meeting (or,
if the annual meeting is held more than thirty (30) days before or sixty (60)
days after such anniversary date, at least seventy (70) days prior to such
annual meeting), a stockholder's notice required by this Section 11 shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive office of the Corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice of
the special meeting, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 11. If the
Corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the Board of Directors, any such stockholder may
nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Section 11 shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the ninetieth (90th) day prior to such special meeting not
later than the later of (x) the close of business of the sixtieth (60th) day
prior to such special meeting or (y) the close of business of the tenth (10th)
day following the day on which public announcement is first made of the date of
such special meeting and of the nominees proposed by the Board of Directors to
be elected at such meeting.
C. GENERAL.
1. Only such persons who are nominated in accordance with the
procedures set forth in this Section 11 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 11. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 11 and, if any proposed
nomination or business is not incompliance herewith, to declare that such
defective proposal or nomination shall be disregarded.
2. For purposes of this Section 11, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 and 15(d) of the Exchange Act.
4
<PAGE>
3. Notwithstanding the foregoing provisions of this Section 11, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in this Section 11 shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
Notwithstanding any other provision of law, the Certificate of
Incorporation or these By-Laws, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least 66.67% of the votes which all the stockholders would be entitled to cast
at any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Section 11.
ARTICLE IV
DIRECTORS
Section 1. The number of directors which shall constitute the whole Board
shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article. Directors need not be stockholders.
Section 2. Vacancies and new created directorships resulting from any
increase in the authorized number of directors may be filled by 66.67% of the
directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election at which directors are to be elected and until their successors are
duly elected and shall qualify, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
Section 3. The business of the Corporation shall be managed by or under
the direction of its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Certificate of Incorporation or by these By-Laws directed or required to
be exercised or done by the stockholders.
Meetings of the Board of Directors
Section 4. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
5
<PAGE>
Members of the Board of Directors may participate in regular or special meetings
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such participation
shall constitute presence in person.
Section 6. Special meetings of the Board may be called by the president on
two (2) days' notice to each director by mail or forty-eight (48) hours notice
to each director either personally or by telegram; special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of two directors unless the Board consists of only one director,
in which case special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of the sole director.
Section 7. At all meetings of the Board a majority of the directors fixed
by Section 1 shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 8. Unless otherwise restricted by the Certificate of Incorporation
of these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, 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.
Section 9. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, members of the Board of Directors, or any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Committees of Directors
Section 10. The Board of Directors may, by resolution passed by a majority
of the whole Board, 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 of disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not such member or members 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
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the
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<PAGE>
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws of the Corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 11. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
Compensation of Directors
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Director and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Removal of Directors
Section 13. Any director or the entire Board of Directors may be removed
only in accordance with the provisions of the Corporation's Certificate of
Incorporation.
ARTICLE V
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
7
<PAGE>
ARTICLE VI
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the Board of
Directors and shall be a chief executive officer, chief financial officer,
president, treasurer and a secretary. The Board of Directors may elect from
among its members a Chairman of the Board and a Vice Chairman of the Board. The
Board of Directors may also choose one or more vice-presidents, assistant
secretaries and assistant treasurers. Any number of offices may be held by the
same person, unless the Certificate of Incorporation or these By-Laws otherwise
provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a president, a treasurer, and a secretary
and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the Board
of Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
The Chairman of the Board
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which such
individual shall be present. Such individual shall have and may exercise such
powers as are, from time to time, assigned to him by the Board and as may be
provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and of the stockholders at which such individual shall be present. Such
individual shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Chief Executive Officer
Section 8. Such individual shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect.
Section 9. Such individual shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to
8
<PAGE>
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
The President and Vice-Presidents
Section 10. In the absence of the Chairman and Vice Chairman of the Board
the President shall preside at all meetings of the stockholders and the Board of
Directors; such individual shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect.
Section 11. Such individual shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
Section 12. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
The Secretary and Assistant Secretary
Section 13. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. Such individual shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or president, under whose supervision such individual shall be. Such individual
shall have custody of the corporate seal of the Corporation and he, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
Section 14. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of directors may from
time to time prescribe.
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<PAGE>
The Treasurer and Assistant Treasurers
Section 15. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 16. The treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
Corporation.
Section 17. If required by the Board of Directors, such individual shall
give the Corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 18. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE VII
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the Corporation shall be entitled to
have a certificate, signed by, or in the name of the Corporation by, the
chairman or vice-chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each
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<PAGE>
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Any of or all the signatures on the certificate may be
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 such
individual were such office, transfer agent or registrar at the date of issue.
Lost Certificates
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Transfer of Stock
Section 4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Fixing Record Date
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholder or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record 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.
Registered Stockholders
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as
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<PAGE>
such owner, and to hold liable for calls and assessments a person registered on
its books as the owner of shares and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purposes as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Checks
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
Fiscal Year
Section 4. The fiscal year of the Corporation shall end on December 31,
unless otherwise fixed by resolution of the Board of Directors.
Seal
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Indemnification
Section 6. The Corporation shall, to the fullest extent authorized under
the laws of the State of Delaware, as those laws may be amended and supplemented
from time to time, indemnify any director or officer made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director or officer of the
Corporation or a predecessor corporation or, at the Corporation's request, a
12
<PAGE>
director or officer of another corporation, provided, however, that the
Corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the Corporation. The indemnification provided for in this Section 6
shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
continue as to a person who has ceased to be a director, and (iii) inure to the
benefit of the heirs, executors and administrators of such a person. The
Corporation's obligation to provide indemnification under this Section 6 shall
be offset to the extent of any other source of indemnification or any otherwise
applicable insurance coverage under a policy maintained by the Corporation or
any other person.
Expenses incurred by a director or officer of the Corporation in defending
a civil or criminal action, suit or proceeding by reason of the fact that such
individual is or was a director of the Corporation (or was serving at the
Corporation's request as a director or officer of another corporation) shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that such individual is
not entitled to be indemnified by the Corporation as authorized by relevant
sections of the General Corporation Law of Delaware. Notwithstanding the
foregoing, the Corporation shall not be required to advance such expenses to an
agent who is a party to an action, suit or proceeding brought by the Corporation
and approved by a majority of the Board of Directors of the Corporation which
alleges willful misappropriation of corporate assets by such agent, disclosure
of confidential information in violation of such agent's fiduciary or
contractual obligations to the Corporation or any other willful and deliberate
breach in bad faith of such agent's duty to the Corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the Corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
To assure indemnification under this Section 6 of all directors and
officers who are determined by the Corporation or otherwise to be or to have
been "fiduciaries" of any employee benefit plan of the Corporation which may
exist from time to time, Section 145 of the General Corporation Law of Delaware
shall, for the purposes of this Section 6, be interpreted as follows: and "other
enterprise" shall be deemed to include such an employee benefit plan, including
without limitation, any plan of the Corporation which is governed by the Act of
Congress entitled "Employee Retirement Income Security Act of 1974," as amended
from time to time; the Corporation shall be deemed to have requested a person to
serve an employee benefit plan where the performance by such person of his
duties to the Corporation also imposes duties on, or otherwise involves services
by, such person to the plan or participants or beneficiaries of the plan; excise
taxes assessed on a person with respect to an employee benefit plan pursuant to
such Act of Congress shall be deemed "fines."
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<PAGE>
Transactions with Interested Parties
Section 7. No contract or transaction between the Corporation and one or
more of the directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of the directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
such director or officer is present at or participates in the meeting of the
Board of Directors or a committee of the Board of Directors which authorizes the
contract or transaction or solely because his, her or their votes are counted
for such purpose, if:
(1) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IX
AMENDMENTS
These By-Laws may be repealed, altered, amended or rescinded by the
stockholders of the Corporation by vote of not less than 66.67% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting). In addition, in accordance with the
Corporation's Certificate of Incorporation, the Board of Directors may repeal,
alter, amend or rescind these By-Laws by vote of 66.67% of the Board of
Directors.
14
<PAGE>
<TABLE>
<S><C><C>
NUMBER MININGCO.COM-TRADEMARK- SHARES
MININGCO.COM, INC.
MC
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR
THE STATE OF DELAWARE CERTAIN DEFINITIONS
THIS CERTIFIES THAT CUSIP 60366T 10 8
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.001 PER SHARE, OF
-----------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------- MININGCO.COM, INC. --------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney, upon surrender of this
certificate properly endorsed.
This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated
/s/ Robert Harris [MININCO.COM, INC. CORPORATE DELAWARE 1999 SEAL] /s/ Scott Kurnit
- --------------------------------------- ---------------------------------------
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD OF DIRECTORS
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
- ----------------------------------------------- ------------------------------------------------------------
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: BELINDA BECK: 215-830-2198
680 BLAIR MILL ROAD PROOF OF FEBRUARY 9, 1999
HORSHAM, PA 19044 MININGCO.COM
(215) 657-3480 H 60666 FC
- ----------------------------------------------- ------------------------------------------------------------
SALES: L. TOGLIA: 212-593-5700 OPERATOR: JW/HJ/EG
- ----------------------------------------------- ------------------------------------------------------------
/NET/BANKNOTE/HOME 13/ MININGCO 60666 REV2
- ----------------------------------------------- ------------------------------------------------------------
</TABLE>
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-______________Custodian______________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act______________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, ______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ___________________________
_________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:___________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17AD-15.
<TABLE>
<S> <C>
- ----------------------------------------------- ------------------------------------------------------------
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: BELINDA BECK: 215-830-2198
680 BLAIR MILL ROAD PROOF OF FEBRUARY 11, 1999
HORSHAM, PA 19044 MININGCO.COM
(215) 657-3480 H 60666 BK
- ----------------------------------------------- ------------------------------------------------------------
SALES: L. TOGLIA: 212-593-5700 OPERATOR: JW/HJ/EG
- ----------------------------------------------- ------------------------------------------------------------
/NET/BANKNOTE/HOME 13/ MININGCO 60666 REV2
- ----------------------------------------------- ------------------------------------------------------------
</TABLE>
<PAGE>
March 17, 1999
MiningCo.com, Inc.
220 East 42nd Street, 24th Floor
New York, NY 10017
Ladies and Gentlemen:
We have assisted in the preparation and filing by MiningCo.com, Inc. (the
"Company") of a Registration Statement on Form S-1, as amended through March 17,
1999 (the "Registration Statement"), with the Securities and Exchange
Commission, relating to the sale of up to 3,450,000 shares (the "Shares") of
Common Stock, $.001 par value (the "Common Stock"), of the Company. A form of
underwriting agreement (the "Underwriting Agreement") is filed as an exhibit to
the Registration Statement.
We have examined such records and documents and have made such examination
of laws as we considered necessary to form a basis for the opinion set forth
herein. In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity with the originals of all documents submitted to us as copies
thereof.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized and, when sold and paid for in accordance with
the terms of the Underwriting Agreement, will be validly issued, fully paid and
nonassessable.
We hereby consent to the use of our name in the Registration Statement
under the caption "Legal Matters" in the related Prospectus and consent to the
filing of this opinion as an exhibit thereto.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
-----------------------------------
Brobeck, Phleger & Harrison LLP
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GLOBALCENTER Master Service Agreement No. ____
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This Master Services Agreement (this "Agreement") is entered into as
the 27th day of January, 1998 ("Effective Date") by and between the entity
indicated on the Services Order form attached hereto, with an office at the
address listed on the Services Order Form, ("Client"), and GlobalCenter Inc., a
corporation with offices at 88 Pine Street, New York, New York ("GlobalCenter")
and describes the terms and conditions pursuant to which GlobalCenter shall
license to Client certain Software and provide certain Services (as defined
below).
In consideration of the mutual promises and upon the terms and
conditions set forth below, the parties agree as follows
1. NATURE OF AGREEMENT This is an Agreement for the provision by GlobalCenter of
Internet connectivity services (the "Bandwidth"), the lease of equipment to
provide such services (the "Hardware"), the availability of space to store and
operate such Hardware ("Space") and the licensing of software to provide such
Services (the "Software"), together comprising an Internet connectivity and
collocation package to be provided by GlobalCenter under this Agreement
(together, the "Services").
2. SERVICE ORDERS
2.1. Orders. Client may issue one or more service orders describing the
Bandwidth, Space, Hardware, and Software that Client desires ("Service Order").
Each Service Order Exhibit I will set forth the prices, initial term of Services
and other information in the form set forth in the Service Order Form. No
Service Order shall be effective until accepted by GlobalCenter. All Service
Orders will be subject to the terms and conditions of this Agreement, and the
terms of this Agreement shall supersede any terms and conditions which may
appear on Client's order form, or purchase order unless GlobalCenter signs such
order and thereby agrees to such amendment, in which event such amendment shall
supersede this agreement.
2.2. Cancellation. In the event that Client cancels or terminates a Service
Order at any time for any reason whatsoever other than expiration of a Service
Order, a Service Interruption (as defined below), or after the first sixty (60)
days of the agreement, Client agrees to pay GlobalCenter a cancellation fee
equaling two (2) months of the Monthly Recurring Charges specified in the
Service Order which shall become due and owing as of the effective date of
cancellation or termination.
2.3. IP Addresses. GlobalCenter may assign on a temporary basis a reasonable
number of Internet Protocol Addresses ("IP Addresses") from the address space
assigned to the GlobalCenter by InterNIC. Client acknowledges that the IP
Addresses are the sole property of GlobalCenter are assigned to Client as part
of the Service, and are not "portable," as such term is used by InterNIC.
GlobalCenter reserves the right to change the IP Address assignments at any
time; however, GlobalCenter shall use reasonable efforts to avoid any disruption
to Client resulting from such renumbering requirement. GlobalCenter will give
Client reasonable notice of any such renumbering. Client agrees that it will
have no right to IP Addresses upon termination of this Agreement, and that any
renumbering required of Client after termination shall be the sole
responsibility of Client.
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GLOBALCENTER Master Service Agreement No. ____
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GlobalCenter acknowledges that GlobalCenter shall have no right in or to any
domain names, unique telephone numbers for access to clients services or similar
properties and in the event that GlobalCenter comes into possession of or has
any interest in such rights, GlobalCenter shall hold such rights as the agent
for and irrevocably assign all such right to Client.
3. SOFTWARE LICENSE AND RIGHTS
3.1. License. During the term of the applicable Service Order, GlobalCenter
grants Client a nontransferable, nonexclusive license to use the Software in
object code form only, solely on the Hardware in conjunction with the Services.
GlobalCenter acknowledges that Client Software shall be operating on the
Hardware and GlobalCenter shall have no right, title or interest thereto.
3.2. Proprietary Rights. This Agreement transfers to neither client nor
GlobalCenter title nor any proprietary or intellectual property rights to the
Software, Hardware, documentation, or any copyrights, patents, or trademarks,
embodied or used in connection therewith, except for the rights expressly
granted herein.
3.3. License Restrictions. 3.4. Client and GlobalCenter agree that it will not
itself, or through any parent, subsidiary, affiliate, agent or other third
party:
3.4.1. copy the Software except as expressly allowed under this Agreement. In
the event Client makes any copies of the Software, Client shall reproduce all
proprietary notices of GlobalCenter on any such copies;
3.4.2. reverse engineer, decompile, disassemble, or otherwise attempt to derive
source code from the Software;
3.4.3. sell, lease, license or sublicense the Software or the documentation;
3.4.4. write or develop any derivative software or any other software program
based upon the Software or any Confidential Information (as defined below); or
3.4.5. use the Software to provide processing services to third parties, or
otherwise use the Software on a `service bureau' basis.
4. HARDWARE TERMS AND CONDITIONS
4.1. Installation. GlobalCenter will use commercially reasonable efforts to
install the Hardware as the Hardware is shipped to GlobalCenter. At Client's
request, GlobalCenter will work with the Client on an installation plan to
define installation time frame and requirements.
4.2. Purchase and Title of Hardware. If so indicated on the Service Order,
Client shall purchase the Hardware and deliver, at Client's expense, the
Hardware to the Space. GlobalCenter agrees that the Hardware may reside at the
Space during the term of this agreement and that the Hardware is and shall
remain the property of the Client. GlobalCenter shall not have taken or
attempted to take any right, title or interest therein or permit any third party
to take an interest therein. GlobalCenter will not transfer, sell, assign,
sublicense, pledge or otherwise dispose of, encumber or suffer a lien or
encumbrance upon the Hardware or any interest in the Hardware. GlobalCenter
shall not move the Hardware from the
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GLOBALCENTER Master Service Agreement No. ____
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facility without Client's prior written permission.
4.3. Lease of Hardware. If so indicated on the Service Order, Client shall lease
the Hardware, and GlobalCenter shall obtain and deliver to the Space the
Hardware. In the event Client leases the Hardware, the following terms and
conditions shall apply: The Hardware is and shall remain the property of
GlobalCenter. Client shall not have taken, or attempt to take, any right, title
or interest therein or permit any third party to take any interest therein.
Client will not transfer, sell, assign, sublicense, pledge, or otherwise dispose
of, encumber or suffer a lien or encumbrance upon or against the Hardware or any
interest in the Hardware. Client will use the Hardware only at the Space. Client
will not move the Hardware from that facility without GlobalCenter's prior
written permission. Client shall be responsible for any damage to the Hardware.
Client will use the Hardware only for the purpose of exercising its rights under
this Agreement.
4.4. Rent to Own. If so indicated on the Service Order, Client shall lease the
Hardware on a "rent to own" plan. In such event, all of the terms and conditions
in Section 4.3 shall apply, and the following terms and conditions shall also
apply. At the end of the term of the Service Order, providing Client is not in
breach of this Agreement, Client shall have the option to purchase the Hardware.
The purchase price shall be as indicated on the Service Order. Upon payment by
Client of the purchase price, title in the Hardware shall pass to Client at the
Space. Unless the Service Order is extended by mutual agreement, Client shall
immediately delete, or shall allow GlobalCenter to delete, all copies of the
Software, associated documentation, or any other materials of GlobalCenter
resident on the Hardware.
5. SPACE
5.1. License to Occupy. GlobalCenter grants to Client a nonexclusive license to
occupy the Space. Client acknowledges that it has been granted only a license to
occupy the Space and that it has not been granted any real property interests in
the Space.
5.2. Material and Changes. Client shall not make any construction changes or
material alterations to the interior or exterior portions of the Space,
including any cabling or power supplies for the Hardware, without obtaining
GlobalCenter's prior written approval for Client to have the work performed.
Alternatively, Client may request GlobalCenter to perform the work. GlobalCenter
reserves the right to perform and manage any construction or alterations within
the Space areas at rates to be negotiated between the Parties hereto. Client
agrees not to erect any signs or devices to the exterior portion of the Space
without submitting the request to GlobalCenter and obtaining GlobalCenter's
advance written approval.
5.3. Damage. Client agrees to reimburse GlobalCenter for all reasonable repair
or restoration costs associated with damage or destruction caused by Client's
personnel, Client's agents, Client's suppliers/contractors, or Client's visitors
during the term or as a consequence of Client's removal of the Hardware or
property installed in the Space except for normal wear and tear or based upon
actions taken by GlobalCenter
5.4. Insurance. Unless otherwise agreed. Client agrees to maintain, at Client's
expense, (i) Comprehensive
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General Liability Insurance in an amount not less than One Million Dollars
($1,000,000) per occurrence for bodily injury or property damage, (ii)
Employer's Liability in an amount not less than Five Hundred Thousand Dollars
($500,000) per occurrence, and (iii) Worker's Compensation in an amount not less
than that prescribed by statutory limits. Prior to taking occupancy of the
Collocation Space, Client shall furnish GlobalCenter with certificates of
insurance which evidence the minimum levels of insurance set forth herein.
Client shall also maintain insurance covering Hardware or property owned or
leased by Client against loss or physical damage.
5.5. Regulations. Client shall comply with and not violate all of GlobalCenter's
generally accepted industry standards for safety, health and operational rules
and regulations. Client's failure to comply with GlobalCenter's generally
accepted industry standards for rules and regulations shall constitute a
material default under this Agreement. GlobalCenter may, in its sole discretion,
limit Client's access to a reasonable number of authorized Client employees or
designees. Client shall not interfere with any other clients of GlobalCenter or
such other clients' use of the Space.
5.6. Disclaimer. GlobalCenter represents and warrants to Client that (i) the
Space meets the manufacturer's recommendations for the use of the equipment and
(ii) shall meet the specifications set forth in Exhibit 111 hereto. Client
hereby assumes any and all risks associated with Client, its agents or
employees' use of the Space and shall indemnify, defend and hold harmless
GlobalCenter from any and all claims, liabilities, judgments, causes of action,
damages, costs, and expenses (including reasonable attorneys' end experts'
fees), caused by or arising in connection with such use.
6. SERVICE INTERRUPTIONS
6.1. 99% Uptime Guarantee. In the event of Downtime (as defined below), the
monthly fee payable for the Services shall be reduced as follows:
6.1.1. if the total Downtime in the calendar month is more than two (2)
hours, but does not exceed four (4) hours, the monthly fee for that month
shall be reduced by one-third (33.3%);
6.1.2. if the total Downtime in the calendar month is more than four (4)
hours, but does not exceed eight (8) hours, the monthly fee for that month
shall be reduced by two-thirds (66.6%);
If the total Downtime in the calendar month is more than eight (8) hours,
the monthly fee for that month shall be waived.
For the purposes of this Section, Downtime shall mean any interruption of one
(1) minute or more in the availability to users of any Web site residing on the
Hardware and made available through the Services, only if such interruption is
due to either (i) failure by GlobalCenter to manage a server anomaly as agreed
in Exhibit II so as to avoid interruption in Web availability, or (ii) a
disruption in the connection between any such server and the Internet. For
purposes of this Section, the Internet is deemed to consist of services that
commence where GlobalCenter transmits a
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GLOBALCENTER Master Service Agreement No. ____
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Client's content to GlobalCenter's carrier(s) at the GlobalCenter border router
port(s). Such carriers provide GlobalCenter with private and dedicated
bandwidth. GlobalCenter undertakes no obligation for the circuit or link between
GlobalCenter's facilities and such carrier's services. If router packet loss is
excess of seventy percent (70%) and is sustained for sixty (60) seconds or more,
GlobalCenter will classify this an "outage." If an "outage" continues for a time
period of more than two (2) minutes, then such outage will be deemed Downtime.
6.2. Investigation of Service Interruptions. GlobalCenter will investigate any
report of Downtime, and attempt to remedy any Downtime expeditiously.
GlobalCenter reasonably determines that all facilities, systems and equipment
furnished by GlobalCenter are functioning properly, and that Downtime arose from
some other cause, GlobalCenter reserves the right to recover labor and materials
cost for services actually performed at the usual and customary rates for
similar services provided by GlobalCenter to clients in the same locality.
6.3. Termination. Client may terminate a Service Order in the event of Downtime
of either twenty-four (24) hours of cumulative time during any continuous twelve
(12) month period, or any continuous Downtime of eight (8) hours or more.
6.4. Sole Remedy. The terms and conditions of this Section 6 shall Client's sole
remedy and GlobalCenter's sole obligation for any Downtime.
7. USER CONTENT GlobalCenter acknowledges that GlobalCenter shall have no right,
title or interest in or to any of the services, any postings, data or
transmission using the services (the "Content"). Disruptions include without
limitation distribution of unsolicited advertising or chain letters, repeated
harassment of other network users, wrongly impersonating another such user,
falsifying one's network identity for improper or illegal purposes, sending
unsolicited mass e-mailings, propagation of computer worms and viruses, and
using the network to make unauthorized entry to any other machine accessible via
the network. If GlobalCenter has reasonable grounds to believe that Client or a
User is utilizing the Services for any such illegal or disruptive purpose,
GlobalCenter may suspend or terminate Services immediately upon notice to Client
provided that GlobalCenter shall attempt to give client reasonable notice of
such problem and an opportunity to cure. Client shall defend, indemnify, hold
harmless GlobalCenter from and against all liabilities and costs (including
reasonable attorney's fees) arising from any and all claims by any person
arising out of Client's use of the Services, including without limitation any
content.
8. PRICING AND PAYMENT TERMS
8.1. Payment Terms. Client shall pay the fees set forth in the Services Order
Form according to the terms set forth therein. Client agrees to pay a late
charge of one percent (1%) above the prime rate as reported by the Wall Street
Journal at the time of assessment or the maximum lawful rate, whichever is less,
for all undisputed amounts not paid within thirty (30) days of receipt of
invoice.
8.2. Late Payments. In the event of non-payment by Client of sums over-due
hereunder for more than sixty (60) days, GlobalCenter may upon written notice to
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GLOBALCENTER Master Service Agreement No. ____
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Client request Client to remove equipment from GlobalCenter's premises within
ten (10) days. If Client fails to so remove, GlobalCenter may deliver the
equipment to Client at the latter's address for notices at Client's expense for
shipment and insurance, and Client shall be obligated to accept such delivery.
8.3. Price Increases. GlobalCenter shall not increase the prices for services
during the initial term of any Service Order. Pricing for additional service is
specified in Exhibit 111.
9. MAINTENANCE AND SUPPORT GlobalCenter shall provide Client with maintenance
and support Software and Hardware, if any ("Maintenance and Support") as
specified in Exhibit 11
9.1. Exclusions. Maintenance and Support shall not include services for problems
arising out of (a) modification, on, alteration on or addition or attempted
modification, alteration or addition of the Hardware or Software undertaken by
persons other than GlobalCenter or GlobalCenter's authorized representatives.
Client Duties. Client shall document and promptly report all errors or
malfunctions of the Hardware or Software to GlobalCenter Client shall take all
steps necessary to carry out procedures for the rectification of errors or
malfunctions within a reasonable time after such procedures have been received
from GlobalCenter Client shall maintain a current backup copy of all programs
and data. Client shall properly train its personnel in the use and application
of the Hardware and Software.
10. TERM AND TERMINATION
10.1. Term. The term of this Agreement shall commence on the Effective Date and
continue indefinitely terminated in accordance with this Section 10. At the end
of the initial term, the agreement will be automatically extended on month to
month basis and can be canceled by either party with ninety (90) days written
notice.
10.2. Termination Upon Default. Either party may terminate this Agreement in the
event that the other party materially defaults in performing any obligation
under this Agreement and such default continues unremedied for a period of shiny
(30) days following written notice of default. In the event this Agreement is
terminated due to GlobalCenter's breach, GlobalCenter shall refund to Client any
Services fees on a straight line prorated basis.
10.3. Termination Upon Insolvency. This Agreement shall terminate, effective
upon delivery of written notice by a party, (i) upon the institution of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of debts of the other party; (ii) upon the making of an
assignment for the benefit of creditors by the other party; or (iii) upon the
dissolution on of the other party.
10.4. Effect of Termination. The provisions of Sections 1, 2.3, 3.2, 3.3, 7,
10.4, 11, 12, 13 and 14 shall survive termination of this Agreement. All other
rights and obligations of the parties shall cease upon termination of this
Agreement. The term of any license granted hereunder shall expire upon
expiration or termination of this Agreement
11. CONFIDENTIAL INFORMATION All information
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identified disclosed by either party ("Disclosing Party") to the other party
("Receiving Party"), if disclosed in writing, labeled as proprietary or
confidential, or if disclosed orally, or through access to the services of the
type of information which would normally be deemed to be confidential
("Confidential Information") shall remain the sole property of Disclosing Party.
Except for the specific rights granted by this Agreement, Receiving Party shall
not use any Confidential Information of Disclosing Party for its own account.
Receiving Party shall use the highest commercially reasonable degree of care to
protect Disclosing Party's Confidential Information. Receiving Party shall not
disclose Confidential Information to any third party without the express written
consent of Disclosing Party (except solely for Receiving Party's internal
business needs, to employees or consultants who are bound by a written agreement
with Receiving Party to maintain the confidentiality of such Confidential
Information in a manner consistent with this Agreement who or which are actually
working on the project on a need to know basis and such Party shall not
distribute any reports or other information with respect to or which contain the
other Party's Confidential Information to any other employees, consultants or
otherwise, without the prior written consent of the Party which owns such
Confidential Information). Confidential Information shall exclude information
(i) available to the public other than by a breach of this Agreement; (ii)
rightfully received from a third party not in breach of an obligation of
confidentiality; (iii) independently developed by Receiving Party without access
to Confidential Information; (iv) known to Receiving Party at the time of
disclosure; or (v) produced in compliance with applicable law or a court order,
provided Disclosing Party is given reasonable notice of such law or order and an
opportunity to attempt to preclude or limit such production. Subject to the
above, Receiving Party agrees to cease using any and all materials embodying
Confidential Information, and to promptly return such materials to Disclosing
Party upon request. GlobalCenter acknowledges that any breach of the
understanding set forth herein will cause continuing irreparable injury to the
Client. which injury will not be measurable or fully or adequately compensated
in money damages. Accordingly, GlobalCenter hereby agree that if you breach any
of the covenants hereunder, in addition to all rights and remedies which the
Client may have, the Client shall be entitled to seek preliminary and/or
permanent injunctions to restrain such continuing breach and may do so without
having to post the bond or other security. GlobalCenter shall be responsible for
any breach of the provisions of this paragraph by any of your employees or
agents.
12. LIMITATION OF LIABILITY GLOBALCENTER'S LIABILITY FOR ALL CLAIMS ARISING OUT
OF THIS AGREEMENT SHALL BE LIMITED TO THE AMOUNT OF FEES PAID BY CLIENT TO
GLOBALCENTER UNDER THIS AGREEMENT. IN NO EVENT SHALL GLOBALCENTER BE LIABLE FOR
ANY LOSS OF DATA, LOSS OF PROFITS, COST OF COVER OR OTHER SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR INDIRECT DAMAGES ARISING FROM OR IN RELATION TO THIS AGREEMENT
OR THE USE OF THE SERVICES, HOWEVER CAUSED AND REGARDLESS OF THEORY OF
LIABILITY. THIS LIMITATION WILL
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GLOBALCENTER Master Service Agreement No. ____
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APPLY EVEN IF GLOBALCENTER HAS BEEN ADVISED OR IS AWARE OF THE POSSIBILITY OF
SUCH DAMAGES.
13. DISCLAIMER OF WARRANTIES EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
GLOBALCENTER SPECIFICALLY DISCLAIMS ALL WARRANTIES EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, AND NON-INFRINGEMENT OF THE SYSTEM OR SERVICES PROVIDED BY
GLOBALCENTER HEREUNDER.
14. MISCELLANEOUS
14.1. Independent Contractor. The relationship of GlobalCenter and Client
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either party the
power to direct and control the day-to-day activities of the other; (ii)
constitute the parties as partners, joint ventures, co-owners or otherwise as
participants in a joint undertaking; or (iii) allow either party to create or
assume any obligation on behalf of the other party for any purpose whatsoever.
14.2. Notices. Any notice required or permitted hereunder shall be in writing
and shall be given by registered or certified mail addressed to the addresses
first written above. Such notice shall be deemed to be given upon the earlier of
actual receipt or three (3) days after it has been sent, properly addressed and
with postage prepaid. Either party may change its address for notice by means of
notice to the other party given in accordance with this Section.
14.3. Assignment. Client or GlobalCenter may not assign this Agreement, in whole
or in part, either voluntarily or by operation of law without written consent of
either party, and any attempt to do so shall be a material default of this
Agreement and shall be void. Notwithstanding the foregoing, Client may assign
such right in conjunction with a sale of all or substantially all of its assets,
a merger, consolidation or similar transaction without GlobalCenter's consent
provided that such assignment is not to a direct competitor of GlobalCenter or
to an entity which is not in good financial standing with or in litigation with
GlobalCenter. In the event an assignment is contemplated, per the provisions of
the foregoing sentence, client shall notify GlobalCenter of such assignment
prior to its effect or such assignment shall be null and void.
14.4. Governing Law. This Agreement shall be interpreted according to the laws
of the State of New York without regard to or application of choice-of-law rules
or principles. The panics hereby agree to the exclusive jurisdiction of the
state and federal courts located in New York, NY.
14.5. Entire Agreement and Waiver. This Agreement shall constitute the entire
agreement between GlobalCenter and Client with respect to the subject matter
hereof and all prior agreements, representations, and statement with respect to
such subject matter are superseded hereby, including without limitation any
non-disclosure agreement previously executed between the parties. This Agreement
may be changed only by written agreement signed by both GlobalCenter and Client.
No failure of either party to exercise or enforce any of its rights under this
Agreement shall act as a waiver of subsequent breaches; and the
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GLOBALCENTER Master Service Agreement No. ____
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waiver of any breach shall not act as a waiver of subsequent breaches.
14.6. Severability. In the event any provision of this Agreement is held by a
court of other tribunal of competent jurisdiction to be unenforceable, that
provision will be enforced to the maximum extent permissible under applicable
law, and the other provisions of this Agreement will remain in full force and
effect.
14.7. Non-Solicitation. During the term of this agreement and for a period of
one (1) year thereafter neither the Client nor GlobalCenter shall not solicit,
nor attempt to solicit the services, of any employee or subcontractor of
GlobalCenter without the prior written consent of GlobalCenter
14.8. Substitution. GlobalCenter may substitute, change or modify the
Software or Hardware at any time, but shall not thereby alter the technical
parameters of the Services.
GlobalCenter Client
/s/ William H. Rhinehart /s/ Eric W. Bingham
- ---------------------------- ----------------------------
By: William H. Rhinehart By: Eric W. Bingham
Title: SVP/GM Title: Vice President
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SERVICE SPECIFICATION
Collocation Service
GlobalCenter will provide a level of service which includes the following
features and options:
General Features:
Maintenance of the Space (including Janitorial Services):
In connection with the Space made available hereunder, GlobalCenter or its
landlord shall perform services that support the overall operation of each Space
at no additional charge to Client. Those services include the following
* Janitorial Services
* 24 x 7 Access to the Space
* Authorized Security System Access to Raised Floor Collocation Space
* Primary A/C 110 volt Power to the Space
* Backup Power- UPS Systems & Battery Plant (30 - 60 minute survivability
objective)
* Generator Back-up (Sustained backup power)
* HVAC Systems for facility air conditioning
* Fire Control Systems
* Network Monitoring Systems
* Redundant Network Connectivity and Hardware
* 19" Rack Spaces for installation of Hardware
* 10-base-T or 100-base-T switched port with direct high speed Internet backbone
connection.
24x7 NOC support: Will provide proactive site monitoring with ExpressLane(TM)
statistics on Client information base; including bandwidth usage, statistics and
network availability reporting, host monitoring and management interface, access
to GlobalCenter incident tracking system to expedite fault resolution and remote
server reboot.
24x7 console access: GlobalCenter facilities in Sunnyvale and Herndon will
provide systems which allow Clients access to a terminal with a connection to
servers inside the Data Centers.
GlobalCenter Escalation Plan and Procedures: To be provided in the GlobalCenter
Welcome Package 5-10 days after contract signing.
Right-of-Way and Access:
GlobalCenter will allow 24 x 7 access and right-of-way to Client Hardware
located in GlobalCenter facility at no charge. Clients will be escorted at all
times while in the facility. Access to the facilities will not be unreasonably
withheld by GlobalCenter to Clients for performing appropriate procedures and
maintenance of Hardware, facilities, and systems.
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GlobalCenter Value-Added Services EXHIBIT #2
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Items 1. to VII. are included in the costs outlined in the GlobalCenter
proposal:
I. The NY GlobalCenter Network Operations Center will provide constant
monitoring of server output 24 hours a day, 7 days a week, 365 days a
year.
ICMP, HTTP, and process monitoring will be performed by GlobalCenter via
SNMP and NT Performance counter querying. In addition, specific URLs will
be checked through the standard HTTP query process..
II. ICMP checks will be performed every minute and http checks every 5 minutes
by the NOC. URL checking will take place at 10-15 minute intervals
(dependent upon the number of URL s that are to be checked). This interval
can be modified at any time to meet changing MiningCo requirements.
III. The GlobalCenter NOC will monitor the following conditions and will take
appropriate action (to be agreed between MiningCo and GlobalCenter - see
below) when the stated conditions are met:
1) ICMP tests fail for more than 5 minutes
2) HTTP checks fail for more than 5 minutes
3) If server CPU usage stays above 70% for 5 minutes or longer.
4) If server available memory remains below 10 Megabytes for 5 minutes
or longer.
5) If server hard drive space falls below 1 gigabyte.
In addition, GlobalCenter can monitor specific server processes as
MiningCo require. With these processes we can monitor:
6) If the process is running on the server.
7) If the process exceeds a certain threshold of virtual bytes used.
8) If any process thread count increases above a certain threshold.
IV. First level NOC staff, in the event of a fault condition, will attempt to
solve the problem immediately. This excludes any specific events requiring
immediate notification of MiningCo - this can be done automatically from
our monitoring systems via e-mail or pager; alternatively, NOC personnel
can call a nominated MiningCo contact. After 15 minutes, the outage will
be escalated to the appropriate level 2 technician, and if not resolved in
another 15 minutes time (30 minutes total), MiningCo will be notified and
a decision will be made on a further course of action.
V. At all times, NOC personnel will use mutually agreed upon procedures to
move toward resolution of the problem GlobalCenter will perform tape
rotation on a regular basis as required. System restores can be carried
out by GlobalCenter NOC or TAM as instructed by MiningCo personnel, to
mutually agreed upon procedures.
VI. GlobalCenter will provide a web-interface to MiningCo which will deliver a
real-time view of Bandwidth usage, GlobalCenter DS3 useage and a current
status of all servers at GC facilities.
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VII. GlobalCenter will provide a dedicated Primary Technical Account Manager
for support, failure resolution, and scope of work performance who will
be:
- Educated in MiningCo's operations and configuration
- Directly reachable during normal business hours (8AM to 5PM EST) via
phone or pager.
- Familiar with scope of work and contractual issues.
VII. (a) GlobalCenter will provision a T-1 circuit from The Mining Company's
office located at 220 East 42nd street to GlobalCenter's data center
located at 60 Hudson Street.
(b) GlobalCenter will provision a T-1 circuit from The Mining Company's
office located at 20 Harlem Avenue in White Plains N.Y. to
GlobalCenter's data center located at 60 Hudson Street.
(c) The cost of migration of servers from The Mining Company's office to
GlobalCenter's data center is covered by the start up costs which
are covered in the "Installation" portion of Exhibit #1, Title:
Globalcenter Service order.
(d) Configuration of Mining Company's servers will be done by employees
of The Mining Company for the initial installation into
GlobalCenter's data center, and assisted by GlobalCenter TAMS if
necessary. For all servers moved to GlobalCenter at future dates, a
standard configuration will be established between the GlobalCenter
TAM, Sara, and Olga of the Mining Company.
(e) Rebooting of Servers will be established based on either human or
automatic reboot procedures to be established at the Migration
meeting, prior to moving equipment to 60 Hudson.
(f) Servers to be installed at the GlobalCenter Data center are: Index
server(s), Mail server(s), Net Gravity server(s), boards machine(s).
All machines migrated to the GlobalCenter Data center will be
cataloged by The Mining Company and GlobalCenter by serial number,
Brand name, and number of each type of server being moved.
(g) GlobalCenter will be responsible for secondary DNS for The Mining
Company.
(h) Back-up currently run every evening by The Mining Company.
GlobalCenter will run back-up on times agreed by The Mining Company
and the GlobalCenter TAM.
(i) All specifics that were not covered in the above areas (a-h) will be
covered at length during the Migration Meeting. A thorough plan will
be in place before a single server is moved from The Mining
Company's office. A migration meeting will be set for a time that is
reasonable for both parties to discuss in depth all aspects of the
migration.
<PAGE>
Items covered under Section Vlll. would be provided as additional services
with an associated additional cost, usually billed in number of TAM hours
used.
VIII. GlobalCenter has the capability to provide value added services, such as;
- a content monitoring system
- server load-balancing
- server mirroring (Express Mirror is a Unix based product)
- mail system upgrades
- database replication consultancy etc.
These services are available upon request and execution of a service order
by MiningCo. This service will involve an extra cost to MiningCo.
<PAGE>
GLOBALCENTER Service Order #
- ------------------------------------------------------------------------------
Account Rep: Joe Bransom
Service Order Term: 1 year Sr. Account Executive
Date: 1/22/97 Office: Global Center
Customer: Ms. Olga Taller 88 Pine Street
Company: The Mining Company Suite 700
Address: 220 East 42nd Street New York, NY
City/St/Zip: New York, NY 10017 10005
Phone: 914-328-4200 Phone: 212-571-2000
FAX: 914-328-4232 FAX: 212-571-2036
Email: [email protected] Email: [email protected]
- --------------------------------------------------------------------------------
One Time Fees: EXHIBIT #1
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Item/Service Description Qty Unit price Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Installation Provisioning of Bandwidth $2,000.00
- ---------------------------------------------------------------------------------------------
100base-T 100base-T Fast Ethernet $1,500.00
- ---------------------------------------------------------------------------------------------
Total $3500.00
- ---------------------------------------------------------------------------------------------
</TABLE>
Monthly Recurring Fees:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Item/Service Description Qty Unit price Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Co-location (5)19" equipment racks in the New 5 $1300.00 for $6,500.00
York, NY facility the first (5)
racks. (See
attachment for
scaled price
rate.)
- ---------------------------------------------------------------------------------------------
Committed Connection to a single 5 $1,000 per $5,000.00
Bandwidth-T 100base-T.(5) Megabyte bandwidth megabyte 5 Meg
commitment commited
bandwidth.
(See attachment
for scaled
price rate)
- ---------------------------------------------------------------------------------------------
Professional Technical Account management 2 2 Months
Services Hours for simple programming months no
purposes. (All TAM hours are at charge.
subject to Olga Tallers prior no
approval. No TAM hours will be charge
used without the proper
authorization.) GlobalCenter
will give The Mining Company
two (2) free months of TAM hours.
Two months from the day the
agreement is signed.
- ---------------------------------------------------------------------------------------------
Scaled Pricing See attachment for scaled pricing
(All service orders signed during
the length of the 1 year
agreement will receive scaled
pricing as outlined in the
original proposal, dated January,
22nd 1998).
- ---------------------------------------------------------------------------------------------
</TABLE>
This information (data) contained in this Service Order constitutes a trade
secret and/or information that is commercial or financial and confidential or
privileged. It is furnished to the Buyer in confidence with the understanding
that it will not, without permission of the offeror, be used or disclosed other
than for internal evaluation purposes.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Item/Service Description Qty Unit price Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Monthly Total $11,500.00
==========
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
GLOBALCENTER Service Order #
- --------------------------------------------------------------------------------
95th Percentile Rule
Every GlobalCenter customer purchases a certain amount of guaranteed bandwidth
on GC/ISl's Internet Backbone per month for an entire year. We realize that
there are certain instances that your Web Site will burst over your purchased
amount of bandwidth. Therefore, we have devised a billing method to accommodate
for bandwidth burst over your subscribed amount using the "95th Percentile
Rule."
First of all, you will be billed monthly for the bandwidth you have committed to
each month. GlobalCenter's SNMP bandwidth monitoring will sample (take a data
point reflecting how much bandwidth you are utilizing at that particular
instance) your Internet connection every 5 minutes and store those samples for a
period of one month.
At the end of the month, all the data samples ABOVE the amount of bandwidth you
have committed to will be collected and then be sorted from highest to lowest
and the top 5% will be discarded. The remaining data sample will then be
referred to as the "95th Percentile" number. This number will then be used as
the basis in computing the additional bandwidth rate for that particular month
over what bandwidth you have already purchased.
Service Order subject to a GlobalCenter Master Service Agreement. Service Order
serves as a Purchase Order when signed by an authorized representative. Please
send or FAX signed Service Order to the above address.
Accepted by: /s/ Eric W. Bingham
----------------------------
Printed Name: Eric W. Bingham Title: Vice President
PO #: Date: 1/27/98
----------------------------
<PAGE>
GLOBALCENTER Master Service Agreement No. ____
- --------------------------------------------------------------------------------
This Master Services Agreement (this "Agreement") is entered into as
the 29th day of January, 1999 ("Effective Date") by and between the entity
indicated on the Services Order form attached hereto, with an office at the
address listed on the Services Order Form, ("Client"), and GlobalCenter Inc., a
corporation with offices at 88 Pine Street, New York, New York.
("GlobalCenter"), and describes the terms and conditions pursuant to which
GlobalCenter shall license to Client certain Software and provide certain
Services (as defined below).
In consideration of the mutual promises and upon the terms and
conditions set forth below, the parties agree as follows
1. NATURE OF AGREEMENT This is an Agreement for the provision by GlobalCenter of
Internet connectivity services (the "Bandwidth"), the lease of equipment to
provide such services (the "Hardware"), the availability of space to store and
operate such Hardware ("Space") and the licensing of software to provide such
Services (the "Software"), together comprising an Internet connectivity and
collocation package to be provided by GlobalCenter under this Agreement
(together, the "Services").
2. SERVICE ORDERS
2.1. Orders. Client may issue one or more service orders describing the
Bandwidth, Space, Hardware, and Software that Client desires ("Service Order").
Each Service Order Exhibit I will set forth the prices, initial term of Services
and other information in the form set forth in the Service Order Form. No
Service Order shall be effective until accepted by GlobalCenter. All Service
Orders will be subject to the terms and conditions of this Agreement, and the
terms of this Agreement shall supersede any terms and conditions which may
appear on Client's order form, or purchase order unless GlobalCenter signs such
order and thereby agrees to such amendment, in which event such amendment shall
supersede this agreement.
2.2. Cancellation. In the event that Client cancels or terminates a Service
Order at any time for any reason whatsoever other than expiration of a Service
Order, a Service Interruption (as defined below), or after the first sixty (60)
days of the agreement, Client agrees to pay GlobalCenter a cancellation fee
equaling two (2) months of the Monthly Recurring Charges specified in the
Service Order which shall become due and owing as of the effective date of
cancellation or termination.
2.3. IP Addresses. GlobalCenter may assign on a temporary basis a reasonable
number of Internet Protocol Addresses ("IP Addresses") from the address space
assigned to the GlobalCenter by InterNIC. Client acknowledges that the IP
Addresses are the sole property of GlobalCenter are assigned to Client as part
of the Service, and are not "portable," as such term is used by InterNIC.
GlobalCenter reserves the right to change the IP Address assignments at any
time; however, GlobalCenter shall use reasonable efforts to avoid any disruption
to Client resulting from such renumbering requirement. GlobalCenter will give
Client reasonable notice of any such renumbering. Client agrees that it will
have no right to IP Addresses upon termination of this Agreement, and that any
renumbering required of Client after termination shall be the sole
responsibility of Client.
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GLOBALCENTER Master Service Agreement No. ____
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GlobalCenter acknowledges that GlobalCenter shall have no right in or to any
domain names, unique telephone numbers for access to clients services or similar
properties and in the event that GlobalCenter comes into possession of or has
any interest in such rights, GlobalCenter shall hold such rights as the agent
for and irrevocably assign all such right to Client.
3. SOFTWARE LICENSE AND RIGHTS
3.1. License. During the term of the applicable Service Order, GlobalCenter
grants Client a nontransferable, nonexclusive license to use the Software in
object code form only, solely on the Hardware in conjunction with the Services.
GlobalCenter acknowledges that Client Software shall be operating on the
Hardware and GlobalCenter shall have no right, title or interest thereto.
3.2. Proprietary Rights. This Agreement transfers to neither client nor
GlobalCenter title nor any proprietary or intellectual property rights to the
Software, Hardware, documentation, or any copyrights, patents, or trademarks,
embodied or used in connection therewith, except for the rights expressly
granted herein.
3.3. License Restrictions. 3.4. Client and GlobalCenter agree that it will not
itself, or through any parent, subsidiary, affiliate, agent or other third
party:
3.4.1. copy the Software except as expressly allowed under this Agreement. In
the event Client makes any copies of the Software, Client shall reproduce all
proprietary notices of GlobalCenter on any such copies;
3.4.2. reverse engineer, decompile, disassemble, or otherwise attempt to derive
source code from the Software;
3.4.3. sell, lease, license or sublicense the Software or the documentation;
3.4.4. write or develop any derivative software or any other software program
based upon the Software or any Confidential Information (as defined below); or
3.4.5. use the Software to provide processing services to third parties, or
otherwise use the Software on a `service bureau' basis.
4. HARDWARE TERMS AND CONDITIONS
4.1. Installation. GlobalCenter will use commercially reasonable efforts to
install the Hardware as the Hardware is shipped to GlobalCenter At Client's
request, GlobalCenter will work with the Client on an installation plan to
define installation time frame and requirements.
4.2. Purchase and Title of Hardware. If so indicated on the Service Order,
Client shall purchase the Hardware and deliver, at Client's expense, the
Hardware to the Space. GlobalCenter agrees that the Hardware may reside at the
Space during the term of this agreement and that the Hardware is and shall
remain the property of the Client. GlobalCenter shall not have taken or
attempted to take any right, title or interest therein or permit any third party
to take an interest therein. GlobalCenter will not transfer, sell, assign,
sublicense, pledge or otherwise dispose of, encumber or suffer a lien or
encumbrance upon the Hardware or any interest in the Hardware. GlobalCenter
shall not move the Hardware from the facility without Client's prior written
permission.
4.3. Lease of Hardware. If so indicated on the Service Order, Client shall lease
the Hardware, and GlobalCenter shall obtain and deliver to the Space the
Hardware. In the event Client leases the Hardware, the
2
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GLOBALCENTER Master Service Agreement No. ____
- ------------------------------------------------------------------------------
following terms and conditions shall apply: The Hardware is and shall remain the
property of GlobalCenter. Client shall not have taken, or attempt to take, any
right, title or interest therein or permit any third party to take any interest
therein. Client will not transfer, sell, assign, sublicense, pledge, or
otherwise dispose of, encumber or suffer a lien or encumbrance upon or against
the Hardware or any interest in the Hardware. Client will use the Hardware only
at the Space. Client will not move the Hardware from that facility without
GlobalCenter's prior written permission. Client shall be responsible for any
damage to the Hardware. Client will use the Hardware only for the purpose of
exercising its rights under this Agreement.
4.4. Rent to Own. If so indicated on the Service Order, Client shall lease the
Hardware on a "rent to own" plan. In such event, all of the terms and conditions
in Section 4.3 shall apply, and the following terms and conditions shall also
apply. At the end of the term of the Service Order, providing Client is not in
breach of this Agreement, Client shall have the option to purchase the Hardware.
The purchase price shall be as indicated on the Service Order. Upon payment by
Client of the purchase price, title in the Hardware shall pass to Client at the
Space. Unless the Service Order is extended by mutual agreement, Client shall
immediately delete, or shall allow GlobalCenter to delete, all copies of the
Software, associated documentation, or any other materials of GlobalCenter
resident on the Hardware.
5. SPACE
5.1. License to Occupy. GlobalCenter grants to Client a nonexclusive license to
occupy the Space. Client acknowledges that it has been granted only a license to
occupy the Space and that it has not been granted any real property interests in
the Space.
5.2. Material and Changes. Client shall not make any construction changes or
material alterations to the interior or exterior portions of the Space,
including any cabling or power supplies for the Hardware, without obtaining
GlobalCenter's prior written approval for Client to have the work performed.
Alternatively, Client may request GlobalCenter to perform the work. GlobalCenter
reserves the right to perform and manage any construction or alterations within
the Space areas at rates to be negotiated between the Parties hereto. Client
agrees not to erect any signs or devices to the exterior portion of the Space
without submitting the request to GlobalCenter and obtaining GlobalCenter's
advance written approval.
5.3. Damage. Client agrees to reimburse GlobalCenter for all reasonable repair
or restoration costs associated with damage or destruction caused by Client's
personnel, Client's agents, Client's suppliers/contractors, or Client's visitors
during the term or as a consequence of Client's removal of the Hardware or
property installed in the Space except for normal wear and tear or based upon
actions taken by GlobalCenter.
5.4. Insurance. Unless otherwise agreed. Client agrees to maintain, at Client's
expense, (i) Comprehensive General Liability Insurance in an amount not less
than One Million Dollars ($1,000,000) per occurrence for bodily injury or
property damage, (ii) Employer's Liability in an amount not less than Five
Hundred Thousand Dollars ($500,000) per occurrence, and (iii) Worker's
Compensation in an amount not less than that prescribed by statutory limits.
Prior to taking occupancy of the Collocation Space, Client shall furnish
GlobalCenter with certificates of insurance which evidence the minimum levels of
insurance set forth herein. Client shall also maintain insurance
3
<PAGE>
GLOBALCENTER Master Service Agreement No. ____
- ------------------------------------------------------------------------------
covering Hardware or property owned or leased by Client against loss or physical
damage.
5.5. Regulations. Client shall comply with and not violate all of GlobalCenter's
generally accepted industry standards for safety, health and operational rules
and regulations. Client's failure to comply with GlobalCenter's generally
accepted industry standards for rules and regulations shall constitute a
material default under this Agreement. GlobalCenter may, in its sole discretion,
limit Client's access to a reasonable number of authorized Client employees or
designees. Client shall not interfere with any other clients of GlobalCenter or
such other clients' use of the Space.
5.6. Disclaimer. GlobalCenter represents and warrants to Client that (i) the
Space meets the manufacturer's recommendations for the use of the equipment and
(ii) shall meet the specifications set forth in Exhibit III hereto. Client
hereby assumes any and all risks associated with Client, its agents or
employees' use of the Space and shall indemnify, defend and hold harmless
GlobalCenter from any and all claims, liabilities, judgments, causes of action,
damages, costs, and expenses (including reasonable attorneys' and experts'
fees), caused by or arising in connection with such use.
6. SERVICE INTERRUPTIONS
6.1. 99% Uptime Guarantee. In the event of Downtime (as defined below), the
monthly fee payable for the Services shall be reduced as follows:
6.1.1. if the total Downtime in the calendar month is more than two (2)
hours, but does not exceed four (4) hours, the monthly fee for that
month shall be reduced by one-third (33.3%);
6.1.2. if the total Downtime in the calendar month is more than four (4)
hours, but does not exceed eight (8) hours, the monthly fee for that
month shall be reduced by two-thirds (66.6%);
If the total Downtime in the calendar month is more than eight (8)
hours, the monthly fee for that month shall be waived.
For the purposes of this Section, Downtime shall mean any interruption of one
(1) minute or more in the availability to users of any Web site residing on the
Hardware and made available through the Services, only if such interruption is
due to either (i) failure by GlobalCenter to manage a server anomaly as agreed
in Exhibit II so as to avoid interruption in Web availability, or (ii) a
disruption in the connection between any such server and the Internet. For
purposes of this Section. the Internet is deemed to consist of services that
commence where GlobalCenter transmits a Client's content to GlobalCenter's
carrier(s) at the GlobalCenter border router port(s). Such carriers provide
GlobalCenter with private and dedicated bandwidth. GlobalCenter undertakes no
obligation for the circuit or link between GlobalCenter's facilities and such
carrier's services. If router packet loss is excess of seventy percent (70%) and
is sustained for sixty (60) seconds or more, GlobalCenter will classify this an
"outage." If an "outage" continues for a time period of more than two (2)
minutes, then such outage will be deemed Downtime.
6.2. Investigation of Service Interruptions. GlobalCenter will investigate any
report of Downtime, and attempt to remedy any Downtime expeditiously.
GlobalCenter reasonably
4
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GLOBALCENTER Master Service Agreement No. ____
- ------------------------------------------------------------------------------
determines that all facilities, systems and equipment furnished by GlobalCenter
are functioning properly, and that Downtime arose from some other cause.
GlobalCenter reserves the right to recover labor and materials cost for services
actually performed at the usual and customary rates for similar services
provided by GlobalCenter to clients in the same locality.
6.3. Termination. Client may terminate a Service Order in the event of Downtime
of either twenty-four (24) hours of cumulative time during any continuous twelve
(12) month period, or any continuous Downtime of eight (8) hours or more.
6.4. Sole Remedy. The terms and conditions of this Section 6 shall Client's sole
remedy and GlobalCenter's sole obligation for any Downtime.
7. USER CONTENT GlobalCenter acknowledges that GlobalCenter shall have no right,
title or interest in or to any of the services, any postings, data or
transmission using the services (the "Content"). Disruptions include without
limitation distribution of unsolicited advertising or chain letters, repeated
harassment of other network users, wrongly impersonating another such user,
falsifying one's network identity for improper or illegal purposes, sending
unsolicited mass e-mailings, propagation of computer worms and viruses, and
using the network to make unauthorized entry to any other machine accessible via
the network. If GlobalCenter has reasonable grounds to believe that Client or a
User is utilizing the Services for any such illegal or disruptive purpose,
GlobalCenter may suspend or terminate Services immediately upon notice to Client
provided that GlobalCenter shall attempt to give client reasonable notice of
such problem and an opportunity to cure. Client shall defend, indemnify, hold
harmless GlobalCenter from and against all liabilities and costs (including
reasonable attorney's fees) arising from any and all claims by any person
arising out of Client's use of the Services, including without limitation any
content.
8. PRICING AND PAYMENT TERMS
8.1. Payment Terms. Client shall pay the fees set forth in the Services Order
Form according to the terms set forth therein. Client agrees to pay a late
charge of one percent (1%) above the prime rate as reported by the Wall Street
Journal at the time of assessment or the maximum lawful rate, whichever is less,
for all undisputed amounts not paid within thirty (30) days of receipt of
invoice.
8.2. Late Payments. In the event of non-payment by Client of sums over-due
hereunder for more than sixty (60) days, GlobalCenter may upon written notice to
Client request Client to remove equipment from GlobalCenter's premises within
ten (10) days. If Client fails to so remove, GlobalCenter may deliver the
equipment to Client at the latter's address for notices at Client's expense for
shipment and insurance, and Client shall be obligated to accept such delivery.
8.3. Price Increases. GlobalCenter shall not increase the prices for services
during the initial term of any Service Order. Pricing for additional service is
specified in Exhibit III.
9. MAINTENANCE AND SUPPORT. GlobalCenter shall provide Client with maintenance
and support Software and Hardware, if any ("Maintenance and Support") as
specified in Exhibit II.
9.1. Exclusions. Maintenance and Support shall not include services for problems
arising out of (a) modification,
5
<PAGE>
alteration or addition or attempted modification, alteration or addition of the
Hardware or Software undertaken by persons other than GlobalCenter or
GlobalCenter's authorized representatives. Client Duties. Client shall document
and promptly report all errors or malfunctions of the Hardware or Software to
GlobalCenter. Client shall take all steps necessary to carry out procedures for
the rectification of errors or malfunctions within a reasonable time after such
procedures have been received from GlobalCenter. Client shall maintain a current
backup copy of all programs and data. Client shall properly train its personnel
in the use and application of the Hardware and Software.
10. TERM AND TERMINATION
10.1. Term. The term of this Agreement shall commence on the Effective Date and
continue indefinitely terminated in accordance with this Section 10. At the end
of the initial term, the agreement will be automatically extended on month to
month basis and can be canceled by either party with ninety (90) days written
notice.
10.2. Termination Upon Default. Either party may terminate this Agreement in the
event that the other party materially defaults in performing any obligation
under this Agreement and such default continues unremedied for a period of
thirty (30) days following written notice of default. In the event this
Agreement is terminated due to GlobalCenter's breach, GlobalCenter shall refund
to Client any Services fees on a straight line prorated basis.
10.3. Termination Upon Insolvency. This Agreement shall terminate, effective
upon delivery of written notice by a party, (i) upon the institution of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of debts of the other party; (ii) upon the making of an
assignment for the benefit of creditors by the other party; or (iii) upon the
dissolution on of the other party.
10.4. Effect of Termination. The provisions of Sections 1, 2.3, 3.2, 3.3, 7,
10.4, 11, 12, 13 and 14 shall survive termination of this Agreement. All other
rights and obligations of the parties shall cease upon termination of this
Agreement. The term of any license granted hereunder shall expire upon
expiration or termination of this Agreement
11. CONFIDENTIAL INFORMATION. All information identified disclosed by either
party ("Disclosing Party") to the other party ("Receiving Party"), if disclosed
in writing, labeled as proprietary or confidential, or if disclosed orally, or
through access to the services of the type of information which would normally
be deemed to be confidential ("Confidential Information") shall remain the sole
property of Disclosing Party. Except for the specific rights granted by this
Agreement, Receiving Party shall not use any Confidential Information of
Disclosing Party for its own account. Receiving Party shall use the highest
commercially reasonable degree of care to protect Disclosing Party's
Confidential Information. Receiving Party shall not disclose Confidential
Information to any third party without the express written consent of Disclosing
Party (except solely for Receiving Party's internal business needs, to employees
or consultants who are bound by a written agreement with Receiving Party to
maintain the confidentiality of such Confidential Information in a manner
consistent with this Agreement who or which are actually working on the project
on a need to know basis and such Party shall not distribute any reports or other
information with respect to or which contain the other Party's Confidential
Information to any other
6
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GLOBALCENTER Master Service Agreement No. ____
- ------------------------------------------------------------------------------
employees, consultants or otherwise, without the prior written consent of the
Party which owns such Confidential Information). Confidential Information shall
exclude information (i) available to the public other than by a breach of this
Agreement; (ii) rightfully received from a third party not in breach of an
obligation of confidentiality; (iii) independently developed by Receiving Party
without access to Confidential Information; (iv) known to Receiving Party at the
time of disclosure; or (v) produced in compliance with applicable law or a court
order, provided Disclosing Party is given reasonable notice of such law or order
and an opportunity to attempt to preclude or limit such production. Subject to
the above, Receiving Party agrees to cease using any and all materials embodying
Confidential Information, and to promptly return such materials to Disclosing
Party upon request.
12. LIMITATION OF LIABILITY GLOBALCENTER'S LIABILITY FOR ALL CLAIMS ARISING OUT
OF THIS AGREEMENT SHALL BE LIMITED TO THE AMOUNT OF FEES PAID BY CLIENT TO
GLOBALCENTER UNDER THIS AGREEMENT. IN NO EVENT SHALL GLOBALCENTER BE LIABLE FOR
ANY LOSS OF DATA, LOSS OF PROFITS, COST OF COVER OR OTHER SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR INDIRECT DAMAGES ARISING FROM OR IN RELATION TO THIS AGREEMENT
OR THE USE OF THE SERVICES, HOWEVER CAUSED AND REGARDLESS OF THEORY OF
LIABILITY. THIS LIMITATION WILL APPLY EVEN IF GLOBALCENTER HAS BEEN ADVISED OR
IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
13. DISCLAIMER OF WARRANTIES EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
GLOBALCENTER SPECIFICALLY DISCLAIMS ALL WARRANTIES EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, AND NON-INFRINGEMENT OF THE SYSTEM OR SERVICES PROVIDED BY
GLOBALCENTER HEREUNDER.
14. MISCELLANEOUS
14.1. Independent Contractor. The relationship of GlobalCenter and Client
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either party the
power to direct and control the day-to-day activities of the other; (ii)
constitute the parties as partners, joint ventures, co-owners or otherwise as
participants in a joint undertaking; or (iii) allow either party to create or
assume any obligation on behalf of the other party for any purpose whatsoever.
14.2. Notices. Any notice required or permitted hereunder shall be in writing
and shall be given by registered or certified mail addressed to the addresses
first written above. Such notice shall be deemed to be given upon the earlier of
actual receipt or three (3) days after it has been sent, properly addressed and
with postage prepaid. Either party may change its address for notice by means of
notice to the other party given in accordance with this Section.
14.3. Assignment. Client or GlobalCenter may not assign this Agreement, in whole
or in part, either voluntarily or by operation of law without written consent of
either party, and any attempt to do so shall be a material default of this
Agreement and shall be void. Notwithstanding the foregoing, Client may assign
such right in conjunction with a sale of all or substantially all of its assets,
a
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GLOBALCENTER Master Service Agreement No. ____
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merger, consolidation or similar transaction without GlobalCenter's consent
provided that such assignment is not to a direct competitor of GlobalCenter or
to an entity which is not in good financial standing with or in litigation with
GlobalCenter In the event an assignment is contemplated, per the provisions of
the foregoing sentence, client shall notify GlobalCenter of such assignment
prior to its effect or such assignment shall be null and void.
14.4. Governing Law. This Agreement shall be interpreted according to the laws
of the State of New York without regard to or application of choice-of-law rules
or principles. The parties hereby agree to the exclusive jurisdiction of the
state and federal courts located in New York, NY.
14.5. Entire Agreement and Waiver. This Agreement shall constitute the entire
agreement between GlobalCenter and Client with respect to the subject matter
hereof and all prior agreements, representations, and statement with respect to
such subject matter are superseded hereby, including without limitation any
non-disclosure agreement previously executed between the parties. This Agreement
may be changed only by written agreement signed by both GlobalCenter and Client.
No failure of either party to exercise or enforce any of its rights under this
Agreement shall act as a waiver of subsequent breaches; and the waiver of any
breach shall not act as a waiver of subsequent breaches.
14.6. Severability. In the event any provision of this Agreement is held by a
court of other tribunal of competent jurisdiction to be unenforceable, that
provision will be enforced to the maximum extent permissible under applicable
law, and the other provisions of this Agreement will remain in full force and
effect.
14.7. Non-Solicitation. During the term of this agreement and for a period of
one (1 ) year thereafter neither the Client nor GlobalCenter shall not solicit,
nor attempt to solicit the services, of any employee or subcontractor of
GlobalCenter without the prior written consent of GlobalCenter
14.8. Substitution. GlobalCenter may substitute, change or modify the Software
or Hardware at any time, but shall not thereby alter the technical parameters of
the Services.
GlobalCenter Client
/s/ Thomas Alvary /s/ Eric W. Bingham
- ---------------------------- ----------------------------
By: Thomas Alvary By: Eric W. Bingham
Title: VP Sales Title: Vice President
Business Operations
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GLOBALCENTER Master Service Agreement No. ____
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SERVICE SPECIFICATION
Collocation Service
GlobalCenter will provide a level of service which includes the following
features and options:
General Features:
Maintenance of the Space (including Janitorial Services):
In connection with the Space made available hereunder, GlobalCenter or its
landlord shall perform services that support the overall operation of each Space
at no additional charge to Client. Those services include the following
* Janitorial Services
* 24 x 7 Access to the Space
* Authorized Security System Access to Raised Floor Collocation Space
* Primary A/C 110 volt Power to the Space
* Backup Power- UPS Systems & Battery Plant (30 - 60 minute survivability
objective)
* Generator Back-up (Sustained backup power)
* HVAC Systems for facility air conditioning
* Fire Control Systems
* Network Monitoring Systems
* Redundant Network Connectivity and Hardware
* 19" Rack Spaces for installation of Hardware
* 10-base-T or 100-base-T switched port with direct high speed Internet backbone
connection.
24x7 NOC support: Will provide proactive site monitoring with ExpressLane(TM)
statistics on Client information base; including bandwidth usage, statistics and
network availability reporting, host monitoring and management interface, access
to GlobalCenter incident tracking system to expedite fault resolution and remote
server reboot.
24x7 console access: GlobalCenter facilities in Sunnyvale and Herndon will
provide systems which allow Clients access to a terminal with a connection to
servers inside the Data Centers.
GlobalCenter Escalation Plan and Procedures: To be provided in the GlobalCenter
Welcome Package 5-10 days after contract signing.
Right-of-Way and Access:
GlobalCenter will allow 24 x 7 access and right-of-way to Client Hardware
located in GlobalCenter facility at no charge. Clients will be escorted at all
times while in the facility. Access to the facilities will not be unreasonably
be withheld by GlobalCenter to Clients for performing appropriate procedures and
maintenance of Hardware, facilities, and systems.
9
<PAGE>
SERVICE ORDER # 8.0 SERVICE ORDER TERM: 12 MONTHS
MSA # 1.0 SERVICE ORDER DATE: 01/29/99
Site Express Estimated Install Date: 1/25/98
- --------------------------------------------------------------------------------
Primary Contact: Eric Bingham Contact: Joe Bransom
Secondary Contact: Sara Plath Account Executive
Company: MiningCo.com, Inc. Address: Frontier GlobalCenter, Inc.
Address: 220 East 42nd Street 188 Pine Street
New York, NY 10005
City/St/Zip: New York, NY Phone: 212-618-9608
Phone: 212-849-2012 FAX: 212-571-2000
FAX: Pager: 800-963-5881
Pager: Cell: 917-907-1874
Email: [email protected] Email: [email protected]
- --------------------------------------------------------------------------------
Site Express One Time Installation Fees:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Item # Description Qty. Unit price Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Port Installation: 1 $750 $0.00
Dedicated Switched 10Mbps Ethernet
port on Frontier GlobalCenter Cisco
Catalyst 5500 switch.
- --------------------------------------------------------------------------------------------
2 Co-location Installation: 1 $0.00 $0.00
7' x 19" Rack Unit w/ 20 amps power
- --------------------------------------------------------------------------------------------
3 Technical Account manager (TAM) 2 $200/Hour $0.00
Installation Per Server,
Application and/or device:
Installation includes IP address
allocation, customized monitoring
procedure setup, Express Control
and KickStart Remote Reboot setup,
hardware and software installation
and setup. $200 Per Hour for all
installations occurring during
non-standard business hours
(8AM-6PM Monday through Friday)
and/or less than 72 Hours
notification.
- --------------------------------------------------------------------------------------------
One Time Total $0.00
- --------------------------------------------------------------------------------------------
</TABLE>
Site Express Monthly Recurring Fees:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Item # Description Qty. Unit price Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Committed Bandwidth: 9 $800 $7,200
Guaranteed dedicated switched
xMbps bandwidth to the Frontier
GlobalCenter backbone via Cisco
Catalyst 550 switch
- --------------------------------------------------------------------------------------------
1A Burstable Bandwidth: x $1000 TBD
Bandwidth above the committed
XMbps determined and billed via
the 95th Percentile Rule
- --------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
SERVICE ORDER # 8.0 SERVICE ORDER TERM: 12 MONTHS
MSA # 1.0 SERVICE ORDER DATE: 01/29/99
Site Express Estimated Install Date: 1/25/98
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2 Co-location: 24 $800 $19,200
Full Rack: 7' x 19" Rack w/20
amps power.
- --------------------------------------------------------------------------------------------
3 Technical Account Manager (TAM) x $150 Per Hour TBD
Consulting Time:
Pre-contracted time billed at $150
per hour during standard business
hours (8AM-6PM Monday through
Friday excluding major holidays).
All non-standard business and non
contracted hours billed at $200
per hour.
- --------------------------------------------------------------------------------------------
Monthly Recurring Total $26,400
- --------------------------------------------------------------------------------------------
</TABLE>
This information (data) contained in this Service Order is confidential and
proprietary information, and contains trade secrets and other privileged
information. It is furnished to the Buyer in confidence and upon the condition
that it be used only for internal evaluation purposes, and not divulged or
disclosed to third parties without the written consent of Frontier GlobalCenter.
Terms outlined in this Service Order/Quote
11
<PAGE>
SERVICE ORDER # 8.0 SERVICE ORDER TERM: 12 MONTHS
MSA # 1.0 SERVICE ORDER DATE: 01/29/99
Site Express Estimated Install Date: 1/25/98
- --------------------------------------------------------------------------------
95th Percentile Rule
Every GlobalCenter client purchases a certain amount of guaranteed bandwidth on
GC/ISl's Internet Backbone per month for an entire year. We realize that there
are certain instances that your Web Site will burst over your purchased amount
of bandwidth. Therefore, we have devised a billing method to accommodate for
bandwidth burst over your subscribed amount using the "95th Percentile Rule."
First of all, you will be billed monthly for the bandwidth you have committed to
each month. GlobalCenter's SNMP bandwidth monitoring will sample (take a data
point reflecting how much bandwidth you are utilizing at that particular
instance) your Internet connection every 5 minutes and store those samples for a
period of one month.
At the end of the month, all the data samples ABOVE the amount of bandwidth you
have committed to will be collected and then be sorted from highest to lowest
and the top 5% will be discarded. The remaining data sample will then be
referred to as the "95th Percentile" number. This number will then be used as
the basis in computing the additional bandwidth rate for that particular month
over what bandwidth you have already purchased.
Service Order subject to a GlobalCenter Master Service Agreement. Service Order
serves as a Purchase Order when signed by an authorized representative. Please
send or FAX signed Service Order to the above address.
Accepted by: /s/ Eric W. Bingham
----------------------------
Printed Name: Eric W. Bingham Title: Vice President
Business Operations
PO #: Date: 1/29/99
----------------------------
<PAGE>
Exhibit 10.10
MININGCO.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This 1999 Employee Stock Purchase Plan is intended to promote
the interests of MiningCo.com, Inc., a Delaware corporation, by providing
eligible employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to
such terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret
and construe any provision of the Plan and to adopt such rules and regulations
for administering the Plan as it may deem necessary in order to comply with the
requirements of Section 423 of the Code. Decisions of the Plan Administrator
shall be final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed One Hundred
Twenty-Five Thousand (125,000) shares.
B. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date and (iii) the number and
class of securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of benefits
thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under
the Plan through a series of successive offering periods until such time as (i)
the maximum number of shares of Common Stock available for issuance under the
Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated.
B. Each offering period shall be of such duration (not to
exceed twenty-four (24) months) as determined by the Plan Administrator prior to
the start date of such offering period. However, the initial offering period
shall commence at the Effective Time and terminate
<PAGE>
on the last business day in April 2001. Subsequent offering periods shall
commence as designated by the Plan Administrator.
C. Each offering period shall be comprised of a series of one
or more successive Purchase Intervals. Purchase Intervals shall run from the
first business day in May each year to the last business day in October of the
same year and from the first business day in November each year to the last
business day in April of the following year. However, the first Purchase
Interval in effect under the initial offering period shall commence at the
Effective Time and terminate on the last business day in October 1999.
D. Should the Fair Market Value per share of Common Stock on
any Purchase Date within an offering period be less than the Fair Market Value
per share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty (24) months, unless a shorter duration is
established by the Plan Administrator within five (5) business days following
the start date of that offering period.
E. Notwithstanding anything to the contrary herein, should the
total number of shares of Common Stock to be purchased on any particular date
exceed the number of shares then available for issuance under the Plan, then the
Plan Administrator shall have the right to terminate the offering period during
which such purchase occurs and to determine when a new offering period shall
commence.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start
date of the initial offering period under the Plan may enter that offering
period on such start date or on any subsequent Semi-Annual Entry Date within
that offering period, provided he or she remains an Eligible Employee.
B. Each individual who is an Eligible Employee on the start
date of any subsequent offering period under the Plan may enter that offering
period on such start date or on any subsequent Semi-Annual Entry Date within
that offering period, provided in each case that he or she has completed at
least thirty (30) days of continuous employment with the Corporation or a
Corporate Affiliate prior to such date.
C. Each individual who first becomes an Eligible Employee
after the start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee, provided he or she has completed at least thirty (30)
days of continuous employment with the Corporation or a Corporate Affiliate
prior to such Semi-Annual Entry Date.
D. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
2
<PAGE>
E. To participate in the Plan for a particular offering
period, the Eligible Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a stock purchase agreement and a payroll
deduction authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock during an offering period may be
any multiple of one percent (1%) of the Cash Earnings paid to the Participant
during each Purchase Interval within that offering period, up to a maximum of
fifteen percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the
offering period, reduce his or her rate of payroll deduction to
become effective as soon as possible after filing the appropriate
form with the Plan Administrator. The Participant may not, however,
effect more than one (1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement
of any new Purchase Interval within the offering period, increase
the rate of his or her payroll deduction by filing the appropriate
form with the Plan Administrator. The new rate (which may not exceed
the fifteen percent (15%) maximum) shall become effective on the
start date of the first Purchase Interval following the filing of
such form.
B. Payroll deductions shall begin on the first pay day
following the Participant's Entry Date into the offering period and shall
(unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of that offering period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from the Participant shall
not be required to be held in any segregated account or trust fund and may be
commingled with the general assets of the Corporation and used for general
corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the
Plan on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date, whether within the
same or a different offering period.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the
3
<PAGE>
Participant with the right to purchase shares of Common Stock, in a series of
successive installments over the remainder of such offering period, upon the
terms set forth below. The Participant shall execute a stock purchase agreement
embodying such terms and such other provisions (not inconsistent with the Plan)
as the Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under
the Plan to any Eligible Employee if such individual would, immediately after
the grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall
be automatically exercised in installments on each successive Purchase Date
within the offering period, and shares of Common Stock shall accordingly be
purchased on behalf of each Participant (other than Participants whose payroll
deductions have previously been refunded pursuant to the Termination of Purchase
Right provisions below) on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.
C. PURCHASE PRICE. The purchase price per share at which
Common Stock will be purchased on the Participant's behalf on each Purchase Date
within the offering period shall be equal to eighty-five percent (85%) of the
LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of
Common Stock purchasable by a Participant on each Purchase Date during the
offering period shall be the number of whole shares obtained by dividing the
amount collected from the Participant through payroll deductions during the
Purchase Interval ending with that Purchase Date by the purchase price in effect
for the Participant for that Purchase Date. However, the maximum number of
shares of Common Stock purchasable per Participant on any one Purchase Date
shall not exceed Five Hundred (500) shares, subject to periodic adjustments in
the event of certain changes in the Corporation's capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not
applied to the purchase of shares of Common Stock on any Purchase Date because
they are not sufficient to purchase a whole share of Common Stock shall be held
for the purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable on the Purchase Date
shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions
shall govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the
next scheduled Purchase Date in the offering period, terminate his
or her outstanding
4
<PAGE>
purchase right by filing the appropriate form with the Plan
Administrator (or its designate), and no further payroll deductions
shall be collected from the Participant with respect to the
terminated purchase right. Any payroll deductions collected during
the Purchase Interval in which such termination occurs shall, at the
Participant's election, be immediately refunded or held for the
purchase of shares on the next Purchase Date. If no such election is
made at the time such purchase right is terminated, then the payroll
deductions collected with respect to the terminated right shall be
refunded as soon as possible.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
offering period for which the terminated purchase right was granted.
In order to resume participation in any subsequent offering period,
such individual must re-enroll in the Plan (by making a timely
filing of the prescribed enrollment forms) on or before his or her
scheduled Entry Date into that offering period.
(iii) Should the Participant cease to remain an
Eligible Employee for any reason (including death, disability or
change in status) while his or her purchase right remains
outstanding, then that purchase right shall immediately terminate,
and all of the Participant's payroll deductions for the Purchase
Interval in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to
remain in active service by reason of an approved unpaid leave of
absence, then the Participant shall have the right, exercisable up
until the last business day of the Purchase Interval in which such
leave commences, to (a) withdraw all the payroll deductions
collected to date on his or her behalf for that Purchase Interval or
(b) have such funds held for the purchase of shares on his or her
behalf on the next scheduled Purchase Date. In no event, however,
shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's
return to active service (i) within ninety (90) days following the
commencement of such leave or, (ii) prior to the expiration of any
longer period for which such Participant's right to reemployment
with the Corporation is guaranteed by either statute or contract,
his or her payroll deductions under the Plan shall automatically
resume at the rate in effect at the time the leave began. However,
should the Participant's leave of absence exceed ninety (90) days
and his or her re-employment rights not be guaranteed by either
statute or contract, then the Participant's status as an Eligible
Employee will be deemed to terminate on the ninety-first (91st) day
of that leave, and such Participant's purchase right for the
offering period in which that leave began shall thereupon terminate.
An individual who returns to active employment following such a
leave shall be treated as a new Employee for purposes of the Plan
and must, in order to resume participation in the Plan, re-enroll in
the Plan (by making a timely filing of the prescribed enrollment
forms) on or before his or her scheduled Entry Date into the
offering period.
G. CORPORATE TRANSACTION. Each outstanding purchase right
shall automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Interval in which such
5
<PAGE>
Corporate Transaction occurs to the purchase of whole shares of Common Stock at
a purchase price per share equal to eighty-five percent (85%) of the LOWER of
(i) the Fair Market Value per share of Common Stock on the Participant's Entry
Date into the offering period in which such Corporate Transaction occurs or (ii)
the Fair Market Value per share of Common Stock immediately prior to the
effective date of such Corporate Transaction. However, the applicable
limitations on the number of shares of Common Stock purchasable per Participant
and in the aggregate shall continue to apply to any such purchase.
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Corporate
Transaction, and Participants shall, following the receipt of such notice, have
the right to terminate their outstanding purchase rights prior to the effective
date of the Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of
shares of Common Stock to be purchased pursuant to outstanding purchase rights
on any particular date exceed the number of shares then available for issuance
under the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only
by the Participant and shall not be assignable or transferable by the
Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any purchase right outstanding under this Plan
if and to the extent such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right granted under this Plan and
(ii) similar rights accrued under other employee stock purchase plans (within
the meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the
purchase rights granted under the Plan, the following provisions shall be in
effect:
(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue in a series of installments
on each successive Purchase Date during the offering period on which
such right remains outstanding.
6
<PAGE>
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the
Participant has already accrued in the same calendar year the right
to acquire Common Stock under one (1) or more other purchase rights
at a rate equal to Twenty-Five Thousand Dollars ($25,000) worth of
Common Stock (determined on the basis of the Fair Market Value per
share on the date or dates of grant) for each calendar year such
rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase
right of a Participant does not accrue for a particular Purchase Interval, then
the payroll deductions which the Participant made during that Purchase Interval
with respect to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions
of this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on __________, 1999 and
shall become effective at the Effective Time, PROVIDED no purchase rights
granted under the Plan shall be exercised, and no shares of Common Stock shall
be issued hereunder, until (i) the Plan shall have been approved by the
stockholders of the Corporation and (ii) the Corporation shall have complied
with all applicable requirements of the 1933 Act (including the registration of
the shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation. In the event such
stockholder approval is not obtained, or such compliance is not effected, within
twelve (12) months after the date on which the Plan is adopted by the Board, the
Plan shall terminate and have no further force or effect, and all sums collected
from Participants during the initial offering period hereunder shall be
refunded.
B. Unless sooner terminated by the Board, the Plan shall
terminate upon the EARLIEST of (i) the last business day in April 2009, (ii) the
date on which all shares available for issuance under the Plan shall have been
sold pursuant to purchase rights exercised under the Plan or (iii) the date on
which all purchase rights are exercised in connection with a Corporate
Transaction. No further purchase rights shall be granted or exercised, and no
further payroll deductions shall be collected, under the Plan following such
termination.
X. AMENDMENT/TERMINATION OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan
at any time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase
7
<PAGE>
under the Plan, should the financial accounting rules applicable to the Plan at
the Effective Time be subsequently revised so as to require the recognition of
compensation expense in the absence of such amendment or termination.
B. In no event may the Board effect any of the following
amendments or revisions to the Plan without the approval of the Corporation's
stockholders: (i) increase the number of shares of Common Stock issuable under
the Plan or the maximum number of shares purchasable per Participant on any one
Purchase Date, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) alter the purchase price
formula so as to reduce the purchase price payable for the shares of Common
Stock purchasable under the Plan or (iii) modify eligibility requirements for
participation in the Plan.
XI. GENERAL PROVISIONS
A. Nothing in the Plan shall confer upon the Participant any
right to continue in the employ of the Corporation or any Corporate Affiliate
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Corporate Affiliate employing such
person) or of the Participant, which rights are hereby expressly reserved by
each, to terminate such person's employment at any time for any reason, with or
without cause.
B. All costs and expenses incurred in the administration of
the Plan shall be paid by the Corporation; however, each Plan Participant shall
bear all costs and expenses incurred by such individual in the sale or other
disposition of any shares purchased under the Plan.
C. The provisions of the Plan shall be governed by the laws of
the State of New York without regard to that State's conflict-of-laws rules.
8
<PAGE>
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
MiningCo.com, Inc.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CASH EARNINGS shall mean the (i) base salary payable to a
Participant by one or more Participating Corporations during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, current profit-sharing
distributions and other incentive-type payments. Such Cash Earnings shall be
calculated before deduction of (A) any income or employment tax withholdings or
(B) any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. However,
Cash Earnings shall NOT include any contributions (other than Code Section
401(k) or Code Section 125 contributions) made on the Participant's behalf by
the Corporation or any Corporate Affiliate to any employee benefit or welfare
plan now or hereafter established.
C. CODE shall mean the Internal Revenue Code of 1986, as
amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean MiningCo.com, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of MiningCo.com, Inc. which shall by appropriate action
adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the
Underwriting Agreement is executed. Any Corporate Affiliate which becomes a
Participating Corporation after such Effective Time shall designate a subsequent
Effective Time with respect to its employee-Participants.
A-1
<PAGE>
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by
a Participating Corporation on a basis under which he or she is regularly
expected to render more than twenty (20) hours of service per week for more than
five (5) months per calendar year for earnings considered wages under Code
Section 3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) For purposes of the initial offering period which
begins at the Effective Time, the Fair Market Value shall be deemed to
be equal to the price per share at which the Common Stock is sold in
the initial public offering pursuant to the Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and
such Corporate Affiliate or Affiliates as may be authorized from time to time by
the Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
O. PLAN shall mean the Corporation's 1999 Employee Stock
Purchase Plan, as set forth in this document.
A-2
<PAGE>
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or
more Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each
Purchase Interval. The initial Purchase Date shall be October 29, 1999.
R. PURCHASE INTERVAL shall mean each successive six (6)-month
period within the offering period at the end of which there shall be purchased
shares of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in
May and November each year on which an Eligible Employee may first enter an
offering period.
T. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the Corporation's
initial public offering of its Common Stock.
A-3
<PAGE>
Exhibit 10.14
MiningCo.com, Inc.
220 East 42nd Street
24th Floor
New York, NY 10017
March 16, 1999
Mr. Scott Kurnit
236 East 47th Street
Apartment 27E
New York, NY 10017
Dear Scott:
Reference is made to a letter agreement dated October 20, 1996 between
MiningCo.com, Inc. (F/K/A General Internet Inc.) and you with respect to your
employment (the "Employment Letter" and collectively with this letter (the
"Amendment Letter"), the "Agreement"). The parties hereto agree as follows:
1. Paragraph 5 is deleted from the Employment Letter.
2. Except as modified by this Amendment Letter, the Employment Letter shall
remain in full force and effect.
Please sign below to acknowledge your agreement with the terms hereof.
Sincerely,
/s/ Todd Sloan
------------------------------------
Todd Sloan
Chief Financial Officer
Agreed to and Accepted by
/s/ Scott Kurnit
- ----------------------------------
Scott Kurnit
<PAGE>
EXHIBIT 23.1
The Board of Directors and Stockholders
MiningCo.com, Inc.:
When the reverse stock split referred to in Note 14 of the Notes to
Financial Statements has been consummated, we will be in a position to render
the following consent.
KPMG LLP
/s/ KPMG LLP
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
MiningCo.com, Inc.:
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
New York, New York
March 17, 1999
