<PAGE> 1
Registration No. 333-78261
As filed with the Securities and Exchange Commission on June 22, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------------
takes.com, inc.
(Exact Name of Registrant as Specified in its Charter)
-----------------------
<TABLE>
<S> <C> <C>
Delaware 7373 86-0947454
(State of other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------
Joel W. Cohen
President and Chief Executive Officer
takes.com, inc.
3655 Nobel Drive, Suite 550
San Diego, California 92122
(619) 677-0500
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Susan M. Hermann Joseph P. Richardson
Pedersen & Houpt, P.C. Bryan Cave LLP
161 North Clark Street, Suite 3100 Two North Central Avenue, Suite 2200
Chicago, IL 60601-3224 Phoenix, Arizona 85004-4406
(312) 641-6888 (602) 364-7000
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, please check the following box: [X]
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 the Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
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 state where the offer or sale is not permitted.
Subject to Completion
PRELIMINARY PROSPECTUS DATED _________, 1999
PROSPECTUS
[Warrant cover page]
[LOGO]
takes.com, inc.
300,000,000 Warrants to Purchase 10,000,000 Shares of Common Stock
10,000,000 Shares of Common Stock Issuable upon Exercise of the Warrants
We are registering 300,000,000 warrants which will be offered to
individuals who visit and register on our Web site. We are also registering
10,000,000 shares of our common stock that our members will receive when they
exercise their warrants. The warrants may be exercised at any time after 180
days from the closing of our initial public offering and on or before the tenth
business day after the calendar year following the calendar year in which a
member earned the warrants. Initially, our members will be entitled to one share
of our common stock for every 30 warrants they earn and exercise. We reserve the
right to adjust our warrant exercise ratio in the future. Any future exercise
ratio adjustment will only affect warrants issued following notice of the
adjustment and will not change the exercise ratio of warrants then outstanding.
Shares of our common stock are listed on the Nasdaq National Market
under the symbol "TAKE." Our warrants are not publicly traded.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 TO READ ABOUT THE RISKS
INHERENT IN OWNING SHARES IN TAKES.COM.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
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 state where the offer or sale is not permitted.
Subject to Completion
PRELIMINARY PROSPECTUS DATED _________, 1999
PROSPECTUS
[IPO cover page]
[LOGO]
takes.com, inc.
2,825,000 Shares of Common Stock
This is our initial public offering of 2,825,000 shares of common
stock. We are also registering 300,000,000 warrants which will be offered to
individuals who visit and register on our Web site and 10,000,000 additional
shares of our common stock which will be available to individuals exercising
their warrants.
Prior to this offering, there has been no public market for our common
stock. We currently estimate that the initial public offering price for our
common stock will be between $7 and $9 per share.
We intend to list our common stock on the Nasdaq National Market under
the symbol "TAKE."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 TO READ ABOUT THE RISKS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price of common stock $ $
Underwriting discount $ $
Proceeds, before expenses, to takes.com, inc. $ $
</TABLE>
We have granted the underwriters the right to purchase up to 423,750
additional shares of common stock at the initial public offering price, less the
underwriting discount, to cover any over-allotments.
The underwriters expect to deliver the shares being offered against
payment on ________, 1999.
-----------------------
PARADISE VALLEY SECURITIES, INC.
-----------------------
The date of this prospectus is _______________, 1999.
<PAGE> 4
[inside cover artwork]
[description to be filed by amendment]
takes.com(sm) is a service mark of takes.com, inc. All other trademarks, service
marks or trade names referred to in this prospectus are the property of their
respective owners.
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<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY................................................................................................ 4
THE OFFERING...................................................................................................... 6
SUMMARY FINANCIAL INFORMATION..................................................................................... 7
RISK FACTORS...................................................................................................... 8
USE OF PROCEEDS................................................................................................... 18
DIVIDEND POLICY................................................................................................... 18
CAPITALIZATION.................................................................................................... 18
DILUTION ......................................................................................................... 20
SELECTED FINANCIAL DATA........................................................................................... 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................. 22
THE COMPANY....................................................................................................... 26
MANAGEMENT........................................................................................................ 34
PRINCIPAL STOCKHOLDERS............................................................................................ 37
RELATED PARTY TRANSACTIONS........................................................................................ 39
DESCRIPTION OF CAPITAL STOCK...................................................................................... 40
FEDERAL INCOME TAX CONSEQUENCES................................................................................... 42
UNDERWRITING...................................................................................................... 45
LEGAL MATTERS..................................................................................................... 48
EXPERTS........................................................................................................... 48
AVAILABLE INFORMATION............................................................................................. 48
</TABLE>
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS. THOSE STATEMENTS
INCLUDE INDICATIONS REGARDING OUR INTENT, BELIEF OR CURRENT EXPECTATIONS.
DISCUSSIONS IN THIS PROSPECTUS UNDER THE HEADINGS "PROSPECTUS SUMMARY,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "THE COMPANY" AND ELSEWHERE IN THIS PROSPECTUS INCLUDE
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES,
MANY OF WHICH ARE BEYOND OUR CONTROL, WHICH COULD CAUSE OUR ACTUAL FUTURE
RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING
STATEMENTS. IN PARTICULAR, THE RISKS AND UNCERTAINTIES DESCRIBED UNDER "RISK
FACTORS" IN THIS PROSPECTUS COULD CAUSE OUR ACTUAL FUTURE RESULTS TO DIFFER
MATERIALLY FROM WHAT WE CONTEMPLATE. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF
THIS PROSPECTUS.
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<PAGE> 6
PROSPECTUS SUMMARY
THIS SUMMARY INCLUDES ALL MATERIAL ITEMS RELATING TO THE OFFERING AND
SHOULD BE READ WITH THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND
NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS.
takes.com, inc.
OUR COMPANY: We are an early stage company that has
developed our takes.com Web site to serve as
a unique, useful and customizable portal to
the World Wide Web. takes.com was
incorporated in March 1999 as America's Home
Page, Inc. We changed our name to takes.com,
inc. in June 1999.
We have not generated any revenue or profits
to date. We currently anticipate four
revenue sources:
- sponsorship and advertising;
- search engine links;
- strategic alliances; and
- electronic commerce.
We presently have agreements in place to
generate revenues based upon our link to the
GoTo.com search engine, our alliance with
InfoSpace.com and links with approximately
40 online retailers and service providers
who will pay us either a commission or a
flat fee for purchases of their products and
services made by persons accessing their Web
sites from our site.
OUR ATTRACTION: We will award a warrant exercisable for our
common stock to Internet users who register
with us as members. The warrants will be
issued pursuant to a registration statement
filed with the Securities and Exchange
Commission. That registration statement will
also cover the issuance of shares of our
common stock upon exercise of the warrants.
We expect our Web site to develop into a
cooperative environment. We believe that our
co-ownership model is consistent with the
communal philosophy of the Internet.
OUR WARRANTS: Under our membership award program, members
will be awarded a warrant each day they
visit our Web site once they have completed
an online registration form. Members may
earn additional warrants for visiting our
site each day. In the future, we may award
warrants to users who use our Web site for
extended periods of time. Members may earn a
maximum of one warrant per day except if we
offer additional warrants in connection with
special promotions or contests. Initially,
we will award warrants which require that
members accumulate 30 warrants before they
may exchange their warrants for one share of
our common stock. In the future, we may
change the number of warrants which a member
must accumulate in order to obtain shares of
our common stock. Any exercise ratio
adjustment will only affect warrants issued
following notice of the adjustment and will
not change the exercise ratio of warrants
then outstanding.
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<PAGE> 7
Warrant Exercise and Expiration. Warrants
may not be exercised until 180 days after
the closing of our initial public offering.
Thereafter, warrants may be exercised by any
holder that has accumulated the number of
warrants required for a single share of
stock. Fractional shares will not be issued.
Warrants will expire, if not previously
exercised, on the tenth business day of the
calendar year following the calendar year
after the calendar year in which the
warrants are earned. For example, a warrant
earned on October 1, 1999 will expire on
January 16, 2001. However, we reserve the
right to terminate warrants exercisable for
less than one share of our common stock held
by any member who does not access our Web
site for a period of 60 or more consecutive
days. Our warrants will not be transferable
under any circumstances except upon the
death of a warrant holder.
FEDERAL TAX CONSEQUENCES: The value of warrants issued to our members
will be includible in the member's gross
income as ordinary income. In addition, the
warrants earned for post-registration visits
to our Web site and, if offered in the
future, for spending extended periods of
time on our Web site will be subject to
self-employment taxes. Because the warrants
will not have a readily ascertainable fair
market value when issued, the member will
not be required to recognize any income
until he exercises the warrants. Upon
exercise, the members will recognize
ordinary income in an amount equal to the
fair market value of the shares they receive
on the date of exercise. Upon a sale of the
shares, a member will recognize long term or
short term capital gain income depending
upon the holding period of the shares. The
holding period used to determine whether the
capital gain is long term or short term will
not include the holding period for the
warrants.
OUR BUSINESS STRATEGY: By offering our Web site users the
opportunity to earn an equity stake in
takes.com, we believe we will foster a sense
of ownership and create a home page
environment that our members will regularly
utilize as their Internet gateway. We intend
to use our membership award program to:
- develop and grow our user base;
- provide targeted market
opportunities for sponsors and
advertisers;
- create user loyalty;
- enhance our Web site's features and
functionality; and
- develop extraordinary content.
OUR WEB SITE: Initially, our Web site includes, among
other things:
- search capabilities through
GoTo.com, a search engine;
- content provided through
InfoSpace.com, an aggregator and
integrator of content;
- original editorial commentary or
"takes" on specific subjects;
- content categories allowing our
members and others to obtain
information regarding a broad range
of subjects;
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<PAGE> 8
- a customizable personal home page
containing features which allows
users to personalize their page
with, among other things,
customized pull-down menus,
hyperlinks to Web sites selected by
the member and information on their
holdings of our warrants and common
stock; and
- a frame-based mechanism which
provides our users with the ability
to carry a portion of the
functionality of our Web site with
them as they travel the Web. The
frame will carry our logo,
navigation buttons providing links
to our site and two pull down menus
which will operate as a virtual
briefcase, including a daily
planner, surf the Web feature and
search engine box and customizable
links to favorite sites. The frame
may also include a banner
advertisement.
OUR OFFICES: We are a Delaware corporation. Our principal
executive office is located at 3655 Nobel
Drive, Suite 550, San Diego, California
92122, and our telephone number is (619)
677-0500. Our Web site address is
http://www.takes.com. The information on our
Web site is not part of this prospectus.
THE OFFERING
The following table, and similar information throughout this prospectus
relating to shares to be outstanding after the completion of our initial public
offering, assumes that the underwriters do not exercise the over-allotment
option we granted them to purchase up to 423,750 additional shares and do not
exercise the warrants to purchase 282,500 shares of common stock we granted
them:
COMMON STOCK OFFERED BY
takes.com........................ 2,825,000 shares
COMMON STOCK TO BE OUTSTANDING
AFTER THE INITIAL PUBLIC
OFFERING.......................... 15,725,000 shares (1)
USE OF PROCEEDS................... We intend to use the net proceeds from our
initial public offering to develop and
acquire content for our Web site, for
advertising and marketing expenses,
production hardware and bandwidth,
advanced Web site development and
general corporate purposes, principally
working capital and operating expenses.
PROPOSED NASDAQ NATIONAL
MARKET SYMBOL..................... TAKE
(1) Excludes 10,000,000 shares of common stock reserved for issuance upon
exercise of 300,000,000 warrants issuable under our membership award
program. Also excludes 3,100,000 shares of our common stock authorized
for issuance under our stock option plans.
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<PAGE> 9
SUMMARY FINANCIAL INFORMATION
The summary financial information is derived from our financial
statements. The pro forma balance sheet data summarized below reflects the
application of the net proceeds from our sale of 2,825,000 shares of common
stock.
We expect to incur significant non-cash expenses from our issuance of
the 300,000,000 warrants to our users. The effects of issuing the warrants to
our users have not been presented on a pro forma basis because the amounts
cannot be reasonably estimated at this time.
<TABLE>
<CAPTION>
PERIOD FROM MARCH 16, 1999
STATEMENT OF OPERATIONS DATA (INCEPTION) TO MARCH 31, 1999
-----------------------------
<S> <C>
Total revenues $ --
Operating loss (197,520)
---------
Net loss (197,520)
=========
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA AS OF MARCH 31, 1999
-------------------------------------
ACTUAL PRO FORMA
--------------- -----------------
<S> <C> <C>
CASH $ -- $ 20,418,000
WORKING CAPITAL 981,098 21,399,098
TOTAL ASSETS 1,004,228 21,422,228
STOCKHOLDERS' EQUITY 981,098 21,399,098
</TABLE>
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<PAGE> 10
RISK FACTORS
This offering and our business involve various risks and uncertainties.
You should carefully consider the risks and uncertainties described below and
the other information in this prospectus before deciding whether to invest in
our shares of common stock. If any of the following risks actually occur, our
business, financial condition or operating results could be materially adversely
affected. This could cause the market price of our common stock to decline, and
you may lose part or all of your investment.
WE HAVE NOT GENERATED ANY REVENUE OR PROFITS AND WE HAVE FINANCED OUR INITIAL
OPERATIONS BY SELLING COMMON STOCK
We were incorporated on March 16, 1999. To date, we have not generated
any revenue or profits. We have financed our Web site and content development by
exchanging our common stock for services rendered by our founders through March
31, 1999 and subsequently from the proceeds of private sales of our common
stock, and not by cash generated from operations.
THE PERCENTAGE OWNERSHIP INTEREST IN OUR COMPANY OF HOLDERS OF OUR COMMON STOCK
WILL DECLINE AS OUR MEMBERS EXERCISE WARRANTS FOR OUR COMMON STOCK
The percentage ownership interest of holders of our common stock will
decline as our members exercise for shares of common stock the warrants they
earn by visiting our Web site. Upon the closing of our initial public offering,
the purchasers of our common stock in that offering will own approximately 18%
of our issued common stock. Assuming all of the 10,000,000 shares underlying the
warrants to be issued in connection with our membership award program are
outstanding, and excluding any other share issuances, purchasers of the shares
offered in our initial public offering would own only approximately 11% of our
issued common stock. We cannot predict how quickly this decline in percentage
ownership will occur.
WE CANNOT PREDICT OUR SUCCESS BECAUSE WE LACK AN OPERATING HISTORY
Since our formation, we have devoted our efforts primarily to
organizational activities, including raising seed capital, and developing and
testing our Web site and database and network capabilities. As a result of our
brief existence and focus on organizational activities, no operating history
exists upon which you can evaluate our performance and an investment in our
common stock. An investor in our common stock must consider the risks and
difficulties frequently encountered by early stage companies in a new, rapidly
evolving and highly competitive industry.
We cannot be certain that our business strategy will be successful or
that we will successfully address any or all of these risks. If we fail to
execute our plans and grow our business either as a result of risks identified
in this section or for any other reason, this failure could have a material
adverse effect on our business, financial condition and results of operation.
WE ANTICIPATE SIGNIFICANT LOSSES AND NEGATIVE CASHFLOW FOR THE FORESEEABLE
FUTURE
We expect operating losses and negative cash flow in the foreseeable
future. We anticipate losses because we expect to incur costs and expenses
related to:
- the development of our Web site, database systems and network
infrastructure;
- brand development, marketing and other promotional activities;
- ongoing Web site development and the development and expansion
of our Web site content; and
- strategic relationship development.
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<PAGE> 11
Our profitability depends on our ability to generate and sustain
revenue from advertisers, sponsors, electronic merchants and other sources while
maintaining reasonable expense levels. At this time, we are focused on
development matters and have established potential revenue generating
relationships and strategic partnerships. While we have entered into
approximately 40 third party arrangements from which we expect to generate
revenue, revenue from these sources is difficult to forecast because they
generally depend on the volume and duration of visits to our Web site. We do not
anticipate that initial revenue from these sources will offset our initial costs
and expenses. If we do achieve profitability, we cannot be certain that we would
be able to sustain or increase profitability on a quarterly or annual basis in
the future.
As of March 31, 1999, we had a deficit accumulated during the
development stage of $197,520 and we anticipate that we will incur net losses
for the foreseeable future. The extent of these losses will be dependent, in
part, on our ability to attract and sustain a user base. We expect our operating
expenses to increase, particularly our sales, marketing and brand promotion
expenses as well as our general and administrative expenses, as we hire
additional employees to develop and expand our business. To the extent that
revenue does not grow at anticipated rates, or that increases in operating
expenses are not followed by commensurate increases in revenue, or that we are
unable to adjust operating expense levels accordingly, our business, results of
operations and financial condition will be materially and adversely affected.
There can be no assurance that our operating losses will not increase in the
future or that we will ever achieve or sustain profitability.
OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE DIFFICULT TO FORECAST
As a result of our lack of an operating history, we have limited
meaningful historical financial data upon which to forecast quarterly revenues
and results of operations. In addition to the variable expense associated with
our membership award program, factors that may materially and adversely affect
our business and cause our operating results to fluctuate include, among others,
the following:
- failure to attract visitors to our takes.com Web site;
- our inability to retain users, encourage them to make repeat
visits to our Web site or encourage them to patronize the
businesses of our advertisers, sponsors, electronic merchants
or other revenue generating partners;
- the number and duration of visits to our Web site or our
inability to convert visitors to members;
- our inability to adequately maintain, upgrade and develop our
Web site, database systems or network infrastructure;
- the ability of our competitors to offer new or enhanced Web
sites, services or products;
- decreases in the market value of our stock, and thus the value
of warrants we issue to members;
- fluctuations in the demand for Internet services, information
or communication;
- our failure to develop strategic marketing relationships in
which we receive revenue, content or other services in
exchange for providing traffic on third-party Web sites;
- decreases in advertising rates;
- our inability to retain existing personnel or attract new
personnel in a timely and effective manner;
- the amount and timing of operating costs and capital
expenditures relating to expansion of our operations;
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<PAGE> 12
- technical difficulties, system downtime or Internet brownouts;
and
- general economic conditions and economic conditions specific
to the Internet.
OUR QUARTERLY EXPENSES MAY BE MATERIALLY AFFECTED BY OUR MEMBERSHIP AWARD
PROGRAM
Under our membership award program, we will award our members a warrant
to receive common stock each day they visit our Web site. In the future, we may
award warrants to users who use our Web site for extended periods of time. We
also intend to hold contests, promotions and other events from time to time
which will permit our members to receive additional warrants. Initially, the
warrants we issue will entitle holders to receive one share of stock for 30
warrants. Under generally accepted accounting principles, we will record a
membership award program expense for daily net warrant issuances in the
approximate amount of 1/30th of the market value of our common stock, less a
discount to adjust the expense to the fair value of the related warrants each
day. This non-cash expense is incurred because our membership award program
essentially involves our issuing the right to acquire shares as represented by
warrants, without our receipt of the cash value of the shares. If we change the
number of warrants required for exercise into a share of our common stock, the
non-cash charge would be increased or decreased proportionately. For example,
assuming a constant market value of the common stock, if we decreased to 15 the
number of warrants required to receive a share of our common stock, the per
warrant expense would double. Similarly, if we increased to 60 the number of
warrants required, the per warrant expense would decrease by half.
The amount of expense related to issuance of warrants that we will be
required to recognize in a quarter will be determined principally by:
- the market value of our common stock;
- the number of warrants required for exercise into a share of
common stock;
- a discount to recognize the restrictive and dilutive nature of
the warrants;
- the actual and/or estimated warrant expiration rate; and
- the number of users who visit our Web site and earn warrants.
Due to the variable nature of the foregoing factors, we cannot
reasonably estimate the non-cash expense associated with our membership award
program. We expect the expenses related to our membership award program will
increase as traffic on our Web site increases, assuming that visitors to the
site register with us and thus receive a warrant for each qualified visit to the
site. We also expect the expenses to fluctuate based on changes in the daily
closing price of our common stock.
OUR INABILITY TO SUCCESSFULLY MANAGE OUR FUTURE GROWTH MAY PLACE A SIGNIFICANT
STRAIN ON OUR MANAGEMENT, INFRASTRUCTURE, INFORMATION SYSTEMS AND RESOURCES
Our ability to successfully implement our business plan in a rapidly
evolving market requires effective planning and management. If we substantially
outperform our business model's expectations, our operations may be insufficient
to adequately accommodate our increasing need for, among others, improved Web
site features and functionality, expanded sales and marketing resources,
upgraded database systems and upgraded network infrastructure. In addition, the
administration of our Web site, including our award, conversion and distribution
of warrants and compliance with reporting requirements may suffer. We intend to
rapidly increase the scope of our operations and grow our resources
substantially by hiring additional employees, engaging independent contractors
and exploring strategic partnerships as we deem necessary or advisable. Our
anticipated growth and future operations may place a significant strain on our
management, infrastructure, information systems and resources.
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<PAGE> 13
COMPETITION FOR INTERNET USERS MAY LIMIT TRAFFIC ON, AND THE VALUE OF, OUR WEB
SITE
The market for Internet products, services and advertising is new,
rapidly evolving and intensely competitive. We will compete for consumer
attention and advertising expenditures with many other providers of Web content,
directories and search engines such as Yahoo!, Inc., Excite, Inc. and Lycos,
Inc. as well as traditional media companies investing in the Internet such as
NBC's investment in CNET, Inc.'s Snap service and The Walt Disney Company's
investment in Infoseek Corporation. We expect competition to further intensify
in the future. Barriers to entry by potential competitors are low. We believe
that the principal competitive factors for Web sites like ours include:
- quality and quantity of content;
- brand recognition; and
- the number of users, the duration and frequency of user visits
and user demographics.
Many of our existing and potential competitors, including Web
directories and search engines and large traditional media companies, have
longer operating histories in the Internet market, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than we have. As an example, one of these competitors,
Yahoo!, has 30,000,000 unique visitors every month. As of June 18, 1999, we did
not have any users. Competitors are able to undertake more extensive marketing
campaigns for their brands and services, and make more attractive offers to
potential employees, vendor affiliates, commerce companies and third-party
content providers.
WE WILL BE HIGHLY DEPENDENT ON ADVERTISING AND SPONSORSHIP REVENUE AND THE
MARKET FOR INTERNET ADVERTISING IS UNCERTAIN
In the foreseeable future, we expect to derive a substantial amount of
our revenue from advertising and sponsorship. Advertisers that have
traditionally relied upon other advertising media may be reluctant to advertise
on the Internet. Our ability to generate revenue would be adversely affected if
the market for Internet advertising fails to develop or develops more slowly
than expected.
Different pricing models are used to sell advertising on the Internet.
It is difficult to predict which, if any, will emerge as the industry standard.
This makes it difficult to project our future advertising rates and revenue. For
example, advertising rates based on the number of "click throughs," or user
requests for additional information made by clicking on the advertisement,
instead of rates based solely on the number of impressions, or times an
advertisement is displayed, could adversely affect our revenue because
impression-based advertising will comprise a substantial majority of our
expected advertising revenue. Our advertising revenue could be adversely
affected if we are unable to adapt to new forms of Internet advertising.
Moreover, 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.
WE MAY BE UNABLE TO ADEQUATELY TRACK AND MEASURE THE DELIVERY AND EFFECTIVENESS
OF ADVERTISEMENTS ON OUR WEB SITE
It is important to our advertisers that we accurately represent the
demographics of our user base and the delivery of advertisements on our Web
site. We depend on third parties to provide these measurement services. Further,
no widely accepted standards exist to measure the effectiveness of Internet
advertising. We are also implementing systems designed to record demographic
data on our users. If we do not develop these systems successfully, we may not
be able to accurately evaluate the demographic characteristics of our users.
Companies may not advertise on our Web site or may pay less for advertising if
they do not perceive our measurements or data collection, or measurements made
by third parties, to be reliable.
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<PAGE> 14
WE FACE STRONG COMPETITION FOR ADVERTISING AND SPONSORSHIP REVENUES
We compete with online services, other Web site operators and
advertising networks, as well as traditional offline media such as television,
radio and print for a share of advertisers' total advertising budgets. We
believe that the number of companies selling Web-based advertising and the
available inventory of advertising space has recently increased substantially.
Accordingly, we may face increased pricing pressure for the sale of
advertisements, which could impact our ability to generate advertising revenues.
In addition, our sales may be adversely affected to the extent that our
competitors offer superior advertising services that better target users or
provide better reporting of advertising results.
OUR BUSINESS DEPENDS ON THIRD PARTIES, INCLUDING PROVIDERS OF TECHNOLOGY,
CONTENT AND FEATURES AS WELL AS SYSTEMS DEVELOPERS
We have entered into a non-exclusive agreement with GoTo.com, Inc. to
provide our users with Internet search capabilities. We depend on GoTo.com for
ongoing maintenance and technical support to ensure accurate and rapid
presentation of search results to our users. Termination of our agreement with
GoTo.com or GoTo.com's failure to renew our agreement upon expiration could
result in substantial additional costs to us in developing or replacing
GoTo.com's search technology. We also entered into a non-exclusive agreement
with InfoSpace.com, Inc., an integrator and aggregator of Internet content, to
provide content for our Web site. The term of our agreement with InfoSpace.com
is two years. However, either party may terminate the agreement on 30 days
written notice in the event of a material breach of the agreement by the other
party. Any errors, delays or failures experienced in connection with these
third-party technologies and services could have a negative effect on our
relationship with our users, could materially and adversely effect our brand and
our business and could subject us to liability to third parties for business
negligence such as defamation or libel. We rely on Jedi Group Inc. to assist us
in developing our database capabilities on a fee for service arrangement. Any
termination of our agreements with these third parties could disrupt our service
to users and would adversely effect our business.
OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO DEVELOP, MAINTAIN AND RAPIDLY SCALE
OUR WEB SITE, NETWORK INFRASTRUCTURE AND SYSTEMS WITHOUT ANY INTERRUPTION IN
FEATURES AND SERVICES
We seek to generate a high volume of traffic on our Web site.
Accordingly, the satisfactory performance, reliability and availability of our
Web site, processing systems and network infrastructure are critical to our
reputation and our ability to attract and retain large numbers of users who make
our Web site their Internet home.
Our revenues will depend on the number and duration of visits to our
Web site. Any system interruptions that result in the unavailability of our site
or our ability to offer warrants to acquire our common stock diminish the
attractiveness of our services. We believe it is reasonable to expect periodic
system interruptions. Any substantial increase in the volume of traffic on our
Web site beyond what we have projected will require us to expand and upgrade its
technology, transaction processing systems and network infrastructure. There can
be no assurance that we will be able to accurately project the rate or timing of
increases, if any, in the use of our Web site or expand and upgrade its systems
and infrastructure to accommodate these increases in a timely manner.
We expect to use internally developed systems to operate our Web site.
We will be required to continually enhance and improve these systems to
accommodate the anticipated use of our Web site. Furthermore, in the future, we
may add additional features and functionality to our site's services that would
result in the need to develop or license additional technologies. Our inability
to develop and further upgrade our existing technology and to add new features
and functionality to our Web site may cause unanticipated system disruptions,
slower response times and degradation in levels of customer service or quality
of visits.
Our success, in particular our ability to successfully track and
distribute our warrants, successfully provide online content and services, and
appeal to advertisers, sponsors and other revenue generating partners, is
largely dependent on the efficient and uninterrupted operation of our computer
and communications systems. There can be
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<PAGE> 15
no assurance that we will be able in a timely manner to effectively upgrade and
expand our systems or to integrate smoothly any newly developed or purchased
technologies with our existing systems.
WE FACE THE RISKS OF SYSTEMS FAILURES, SUBSTANTIALLY ALL OF WHICH ARE MAINTAINED
BY A SINGLE THIRD PARTY ON WHOM WE DEPEND
Our success, and in particular our ability to draw high traffic to our
Web site, depends on the efficient and uninterrupted operation of our computer
and communications hardware systems. Substantially all of our computer hardware
for operating our Web site is currently located at the facilities of Verio, Inc.
in Irvine, California. These systems and operations are vulnerable to damage or
interruption from earthquakes, floods, fires, power loss, telecommunication
failures, break-ins, sabotage, viruses, intentional acts of vandalism and
similar events. We do not presently have fully redundant systems, a formal
disaster recovery plan or alternative providers of hosting services and do not
carry sufficient business interruption insurance to compensate us for losses
that may occur. Any damage to, failure of, or compromise of our systems could
result in reductions in, or terminations of, our Web site traffic. In the case
of frequent or persistent system failures, our reputation and name brand could
be materially adversely affected.
SUCCESS OF OUR BUSINESS MODEL COULD BE IMPAIRED IF INTERNET USERS CHOOSE NOT TO
PROVIDE US WITH THE INFORMATION WE REQUIRE TO BECOME MEMBERS BASED ON CONCERNS
ABOUT INTERNET SECURITY AND PRIVACY
Internet user concerns over the security and privacy of information
transmitted over the Internet may inhibit the growth of the Internet as a whole
and our ability to attract and retain a growing base of users. We cannot predict
whether Internet users will be willing to transmit the confidential information
necessary to identify them with the specificity we are requiring them to provide
to earn warrants. Although we believe that the prospect of receiving equity in
takes.com is a strong incentive for an Internet user to provide us with the
requisite information, an Internet user may nevertheless refuse to divulge his
name, address, date of birth and/or Social Security number and other information
over the Internet. If these security and privacy concerns are widespread, then
we may be unable to meet our expectations of rapidly creating a large base of
users.
We have a non-disclosure policy displayed on our Web site. Our policy
is not to willfully disclose any individually identifiable information about any
user to a third party without the user's consent. Despite this policy, if third
persons were able to penetrate our network security or otherwise misappropriate
our users' personal information, we could be subject to liability. These claims
could result in litigation. In addition, the Federal Trade Commission and state
regulatory agencies have been investigating Internet companies regarding their
use of personal information. We could incur additional expenses if new
regulations regarding the use of personal information are introduced or if
regulatory agencies choose to investigate our privacy practices.
To securely transmit confidential information over the Internet, we
expect that we will rely on encryption and authentication technology that we
license from third parties. We cannot predict whether events or developments
will result in a compromise or breach of the methods we intend to use to protect
confidential data transmissions. Moreover, servers used by us may be vulnerable
to computer viruses, physical or electronic break-ins, and similar disruptions.
We may need to expend significant additional capital and other resources to
protect against a security breach or to alleviate problems caused by any
breaches. We cannot assure that we can prevent all security breaches.
WE MAY BE UNABLE TO ESTABLISH OUR BRAND WITH POTENTIAL USERS OR MAINTAIN IT WITH
EXISTING MEMBERS
We believe that establishing and maintaining our brand will be critical
to attracting and expanding our user base and Web traffic and commerce
relationships. We also believe that the importance of brand recognition will
increase due to the growing number of Internet sites and the extremely low
barriers to entry. If our users do not perceive our services to be of high
quality, or if we alter or modify our brand image, introduce new services or
enter into new business ventures that are not favorably received by our users,
the value of our brand could be diluted and the attractiveness of our Web site
to our users could be decreased.
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<PAGE> 16
WE ANTICIPATE THAT WE MAY NEED TO RAISE ADDITIONAL CAPITAL AND THE TERMS OF ANY
ADDITIONAL FINANCING MAY DILUTE THE VALUE, RIGHTS, PREFERENCES OR PRIVILEGES OF
YOUR COMMON STOCK
We anticipate that we may require substantial working capital to fund
our business. We currently anticipate that the net proceeds of our initial
public offering will be sufficient to meet our expected needs for working
capital and capital expenditures through at least the next 12 months. However,
we may need to raise additional funds prior to the expiration of this period,
and we anticipate that we may need additional capital subsequent to the
expiration of this period. If we raise additional funds through the issuance of
equity, equity-related or debt securities, any or all of these securities may
have rights, preferences or privileges senior to those of the rights of our
common stock and our stockholders may experience additional dilution. We cannot
be certain that additional financing will be available to us on favorable terms
when required, or at all.
OUR BOARD OF DIRECTORS MAY ISSUE PREFERRED STOCK WITH RIGHTS SUPERIOR TO THOSE
OF COMMON STOCK WITHOUT THE CONSENT OF COMMON STOCKHOLDERS
After the closing of our initial public offering, our board of
directors will have the authority to issue up to 20,000,000 shares of preferred
stock without any further vote or action by common stockholders. Our board may
also determine the price, rights, preferences and privileges of preferred stock.
The rights of our common stockholders would be subject to, and may be adversely
affected by, the rights of any preferred stockholders. The issuance of preferred
stock with special voting or other rights could negatively impact the market
value of our common stock.
OUR REVENUES MAY BE SIGNIFICANTLY LESS THAN WE ANTICIPATE IF OUR USERS FAIL TO
EMBRACE THE MEMBERSHIP AWARD PROGRAM
Our success depends on the acceptance of our business model for
awarding warrants to our users. We expect our membership award program to
generate significant interest in our Web site and to create a large and loyal
user base. If our membership award program is not sufficient to generate traffic
to our Web site, our user base will not be as large as we expect and our
revenues from advertisers, sponsors and others could be significantly less than
expected.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR DEPENDENCE ON THE INTERNET AND
INTERNET INFRASTRUCTURE DEVELOPMENT
Our success will depend in large part on continued growth in, and use
of, the Internet. There are critical issues concerning the use of the Internet
which remain unresolved. The issues concerning the use of the Internet which we
expect to affect the development of the market for our services include:
- security;
- reliability;
- cost;
- ease of access;
- quality of service; and
- increases in bandwidth availability.
If the Internet develops more slowly than we expect, it will adversely
affect our business. In addition, companies that control access to the Internet
through network access or Web browsers could promote our
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<PAGE> 17
competitors or cause substantial roadblocks to our entrance and growth within
the Internet market. Either of these developments could adversely affect our
business.
OUR INABILITY TO KEEP UP WITH TECHNOLOGICAL CHANGE AND ENHANCE THE FEATURES AND
FUNCTIONALITY OF OUR WEB SITE TO THE SATISFACTION OF OUR USERS COULD DELAY OR
PROHIBIT OUR SUCCESS
To remain competitive, we must continue to enhance and improve the
functionality and features of our Web site. The Internet and the online services
industry are rapidly changing. If competitors introduce new products and
services embodying new technologies, or if new industry standards and practices
emerge, our existing Web site and proprietary technology and systems may become
obsolete. Our future success will depend on our ability to do the following:
- both license and internally develop leading technologies
useful in our business;
- enhance our existing Web site and online informational
services;
- develop new services and technologies that address the
increasingly sophisticated and varied needs of our prospective
users; and
- respond to technological advances and emerging industry
standards and practices on a cost- effective and timely basis.
The development of our Web site and other proprietary technology
entails significant technical and business risks. We may use new technologies
ineffectively or we may fail to adapt our Web site, database systems and network
infrastructure to our users' requirements or emerging industry standards. If we
face material delays in introducing new services, products and enhancements, our
existing and prospective users may forego the use of our services and use those
of our competitors.
OUR STEPS TO PROTECT OUR TRADEMARKS, PROPRIETARY RIGHTS AND DOMAIN NAMES MAY BE
INADEQUATE
We regard our anticipated copyrights, service marks, trademarks, trade
dress, trade secrets and similar intellectual property as critical to our
success. We intend to rely on trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
users, partners and others to protect our proprietary rights. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which we may expand to provide services online.
Therefore, the steps we take to protect our proprietary rights may be
inadequate.
We currently hold various Web domain names relating to our brand,
including the "takes.com" domain name. The acquisition and maintenance of domain
names generally are regulated by governmental agencies and their designees and
this regulation is subject to change. Governing bodies may establish additional
top-level domains, appoint additional domain name registrars or modify the
requirements for holding domain names. As a result, we may be unable to acquire
or maintain relevant domain names in all countries in which we intend to conduct
business. Furthermore, the relationship between regulations governing domain
names and laws protecting trademarks and similar proprietary rights is unclear.
Therefore, we may be unable to prevent third parties from acquiring domain names
that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights.
THE ADOPTION OR MODIFICATION OF LAWS OR REGULATIONS RELATING TO THE INTERNET AND
TO OUR DISTRIBUTION OF EQUITY OVER THE INTERNET COULD ADVERSELY AFFECT OUR
BUSINESS
We are not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to access to commerce on
the Internet. However, due to the increasing popularity and use of the Internet,
a number of legislative
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<PAGE> 18
and regulatory proposals are under consideration by federal, state, local and
foreign governmental organizations. Laws or regulations may be adopted with
respect to the Internet including user privacy, taxation, infringement, pricing,
quality of products and services and intellectual property ownership. The
adoption of any laws or regulations of this type may decrease the growth in the
use of the Internet, which could in turn decrease the demand for our online
services, increase our cost of doing business, or otherwise negatively affect
our business. Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, copyright, trademark, trade secret,
obscenity, libel and personal privacy is uncertain and developing. Any new
legislation or regulation, or application or interpretation of existing laws
could hamper the growth of the Internet and decrease its acceptance as a
communications and commercial medium. In addition, a number of proposals have
been made at the federal, state and local level that would impose additional
taxes on the sale of goods and services over the Internet and some states have
taken measures to tax Internet-related activities. Further, our strategy of
attracting and building a loyal user audience based upon equity sharing is new
and different. The novelty of this strategy and its duplication by other online
companies may result in heightened scrutiny of the concept and more stringent
regulations concerning its use, the rights of our users and our obligations to
them.
WE COULD GET SUED FOR INFORMATION APPEARING ON OUR WEB SITE. DEFENDING A LAWSUIT
COULD BE EXPENSIVE, TIME CONSUMING AND DAMAGING TO OUR REPUTATION.
We believe that our future success will depend in part upon our ability
to deliver compelling informational content to our users. As a publisher of
online content and because materials may be downloaded by users of our Web site
and subsequently distributed to others, there is a potential that claims will be
made against us for defamation, negligence, copyright or trademark infringement,
personal injury or other theories based on the nature, content, publication and
advertising of downloaded materials. In the past, plaintiffs have brought claims
based on Web site content and sometimes successfully litigated them against
online services. These claims might include, among others, that by directly or
indirectly providing hyperlink text links to Web sites operated by third
parties, or because our users can carry a portion of our site to another site
because of our frame-based technology, we are liable for copyright or trademark
infringement or other wrongful actions by third parties in their Web sites. It
is also possible that if any third-party content provided on our Web site
contains errors, third parties could make claims against us for losses incurred
in reliance on that content. Even to the extent claims based on third-party
content do not result in liability, we could incur significant costs in
investigating and defending against these claims. If we were found liable for
information carried on or disseminated through our Web site, we may be required
to implement measures to reduce our future exposure to liability, including the
expenditure of substantial resources, that may limit the attractiveness of our
services to users. Although we intend to carry general liability insurance, our
insurance may not cover claims of these types or may be inadequate to indemnify
us for all liability that may be imposed on us. If we face liability,
particularly liability that is not covered by our insurance or is in excess of
our insurance coverage, then our reputation and our business may suffer.
OUR SUCCESS DEPENDS ON THE PERFORMANCE OF EXISTING KEY PERSONNEL AND ON OUR
ABILITY TO ATTRACT AND RETAIN ADDITIONAL PERSONNEL
Our future success depends upon retaining the services of Joel W.
Cohen, our President and Chief Executive Officer, and attracting and retaining
executive officers, information systems personnel and other key sales, marketing
and support personnel, whom we will hire following our initial public offering.
The ability of executive management and these other key personnel, the majority
of whom will be newly hired, to effectively work together is critical to our
success. None of our officers or key employees, including Mr. Cohen, are bound
by an employment agreement for any specific term and we do not expect to bind
officers or key employees in the future. We anticipate that these current and
future officers will have an at-will employment relationship. We do not have
"key person" life insurance policies covering any of our employees.
YEAR 2000 RISKS MAY ADVERSELY AFFECT US AND OUR THIRD-PARTY SERVICE PROVIDERS,
VENDORS AND USERS
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. Our business
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<PAGE> 19
will be largely dependent on software and computer technology potentially
subject to year 2000 issues including the software we use to create and provide
our Web site's content, our interaction with warrant holders, database retrieval
and processing functions, firewalls, security, monitoring and back-up
capabilities. Because we are a young company still in the process of developing
our systems, we intend to obtain only software, computer technology and other
services from third-party providers that can guarantee year 2000 compliance.
However, guarantees of year 2000 compliance may be impossible or too costly to
obtain and we may find it necessary to obtain software or hardware which could
experience a failure due to year 2000 issues. We also anticipate being dependent
on telecommunications vendors to maintain connectivity to our network and,
potentially, traditional third-party carriers to deliver written communications
to our users.
OUR OFFICERS AND DIRECTORS WILL BE ABLE TO SUBSTANTIALLY INFLUENCE MATTERS
REQUIRING STOCKHOLDER APPROVAL
Executive officers, directors and entities affiliated with them will,
in the aggregate, beneficially own approximately 58.1% of our outstanding common
stock following the completion of our initial public offering. These
stockholders, if acting together, would be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions.
THE OWNERSHIP INTEREST OF A PURCHASER PARTICIPATING IN OUR INITIAL PUBLIC
OFFERING WILL BE IMMEDIATELY AND SUBSTANTIALLY DILUTED
The initial public offering price of our common stock is substantially
higher than the net tangible book value per share outstanding share. Purchasers
of common stock in our initial public offering will suffer immediate and
substantial dilution of $6.64 per share in the net tangible book value per share
of our common stock from the public offering price. After the completion of our
initial public offering, purchasers of our common stock will have contributed
95% of our capital, but will only own 18% of our outstanding common stock.
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<PAGE> 20
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 2,825,000 shares
of our common stock in our initial public offering will be $20.4 million ($23.6
million if the underwriters exercise their over-allotment option in full),
assuming an initial public offering price of $8 per share after deducting the
underwriting discount and estimated offering expenses payable by us. We intend
to use the net proceeds from our initial public offering approximately as
follows:
- $6.0 million for developing and acquiring content for our Web
site;
- $4.0 million for advertising and marketing;
- $1.5 million for production hardware and bandwidth;
- $2.0 million for advanced Web site development; and
- the remaining $6.9 million for general corporate purposes,
principally working capital and operating expenses (or $10.1
million if the underwriters exercise their over-allotment
option in full).
We may change the allocation of these amounts if market or competitive factors
change from those that we anticipate.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business, and do not anticipate paying any
cash dividends in the foreseeable future.
CAPITALIZATION
The following table shows our capitalization as of March 31, 1999 on an
actual basis and on an as adjusted basis to reflect the receipt and use of net
proceeds from the sale of 2,825,000 shares of our common stock at an assumed
public offering price of $8 per share:
<TABLE>
<CAPTION>
As of March 31, 1999
----------------------------------
Actual As Adjusted (1)
------------ ---------------
<S> <C> <C>
Stockholders' equity
Common stock, par value $0.001 per
share, 30,000,000 shares authorized,
12,900,000 issued and outstanding,
actual; 15,725,000 issued and
outstanding pro forma $ 12,900 $ 15,725
Additional paid-in-capital 1,165,718 21,580,893
Deficit accumulated during the
development stage (197,520) (197,520)
------------ ------------
Total stockholders' equity $ 981,098 $ 21,399,098
============ ============
</TABLE>
(1) The effects of the exercise of the 300,000,000 warrants by our Web site
users, the issuance of the 10,000,000 shares of common stock reserved for
issuance upon exercise of those warrants, the exercise by the underwriters
of their over-allotment option of 423,750 shares of common stock and the
exercise by the underwriters of their
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<PAGE> 21
warrants to purchase 282,500 shares of common stock have not been
presented on a pro forma basis because these amounts cannot be reasonably
estimated.
-19-
<PAGE> 22
DILUTION
Our net tangible book value as of March 31, 1999 was approximately $1.0
million or $0.08 per share. Net tangible book value per share represents the
amount of our total tangible assets reduced by the amount of our total
liabilities and divided by the total number of shares of common stock
outstanding. Dilution in net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in our initial public offering and the net tangible book value per share
of common stock immediately after the completion of our initial public offering.
After giving effect to the sale of the 2,825,000 shares of common stock offered
by us at an assumed initial public offering price of $8 per share, and after
deducting the underwriting discount and estimated initial public offering
expenses payable by us, our pro forma net tangible book value at March 31, 1999
would have been approximately $21.4 million or $1.36 per share of common stock.
This represents an immediate increase in net tangible book value of $1.28 per
share to existing stockholders and an immediate dilution of $6.64 per share to
new investors of common stock. The following table illustrates this dilution on
a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................................ $ 8.00
Net tangible book value per share before the offering..................... $ 0.08
Increase per share attributable to new investors.......................... 1.28
--------
Pro forma net tangible book value per share after the initial
public offering (1)........................................................... 1.36
--------
Dilution per share to new investors............................................ $ 6.64
========
</TABLE>
(1) The effects of the exercise of the 300,000,000 warrants by Web site our
users, the issuance of the 10,000,000 shares of common stock reserved
for issuance upon exercise of those warrants, the exercise by the
underwriters of their over-allotment option of 423,750 shares of common
stock and the exercise by the underwriters of their warrants to
purchase 282,500 shares of common stock have not been presented on a
pro forma basis because these amounts cannot be reasonably estimated.
The following table summarizes as of March 31, 1999, on the as adjusted
basis described above, the number of shares of common stock purchased from us by
existing stockholders and investors in our initial public offering, the total
consideration we received and the average price per share paid by existing
stockholders and by investors in our initial public offering (before deducting
the underwriting discount and estimated initial public offering expenses payable
by us):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
---------------------- ----------------------- Average Price
Number Percentage Amount Percentage Per Share
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Initial Public Offering Investors 2,825,000 18% $22,600,000 95% $8.00
Existing Stockholders 12,900,000 82 1,178,618 5 .09
---------- --- ----------- ---
Total 15,725,000 100% $23,778,618 100%
========== ==== =========== ===
</TABLE>
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<PAGE> 23
SELECTED FINANCIAL DATA
In the table below, we provide you with selected financial data of
takes.com. We have prepared this information using our historical financial
statements for the period from March 16, 1999 (inception) through March 31,
1999.
When you read this selected financial data, it is important that you
read along with it the historical financial statements and related notes
included in this prospectus, as well as the section of this prospectus titled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Historical results are not necessarily indicative of future
results.
<TABLE>
<CAPTION>
PERIOD FROM MARCH 16,
1999 (INCEPTION) THROUGH
MARCH 31, 1999
------------------------
<S> <C>
STATEMENT OF OPERATIONS DATA
Revenues $ --
Costs and expenses:
Selling, general and administrative $ 18,902
Research and development 178,618
------------
197,520
------------
Net loss $ (197,520)
============
Basic and diluted net loss per share $ (0.02)
============
Weighted average shares used in calculating
basic and diluted net loss per share 11,784,470
============
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1999
<S> <C>
BALANCE SHEET DATA
Cash $ --
Working capital 981,098
Total assets 1,004,228
Stockholders' equity 981,098
</TABLE>
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<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a newly formed development stage company poised to launch a
gateway to the Web with a strategy for attracting and sustaining a broad and
loyal base of Internet users. Our strategy is to award Internet users one
warrant exercisable for our common stock when they register with us. After
registering with us, members will receive one warrant each day they visit our
Web site. In the future, we may award warrants to members who use our Web site
for extended periods of time. Initially, we will award warrants exercisable for
our common stock on a 30 for one basis. By awarding our members an equity
interest in takes.com, we expect to foster a strong sense of personal loyalty
and corporate ownership among our members. Although our Web site is available to
users, we will not offer or issue warrants until our registration statement is
declared effective.
In January 1999, our founders began developing the business concept for
takes.com. Our founders subsequently contacted Silvervision Entertainment Group,
LLC to assist in developing our infrastructure and Web site. Since January 1999,
our operating activities have focused primarily on the development, acquisition
and configuration of the necessary software and computer infrastructure. We have
also focused on initial planning and development of our Web site, operations and
capital raising activities. In March 1999, we formally incorporated and our
founders contributed all of their intellectual property rights relating to our
business concept as well as the value of their services to us. Effective as of
March 31, 1999, Silvervision transferred to us all of its right, title and
interest in our Web site and the technology associated with it. Although we had
contracted with them to develop the Web site on our behalf, until the rights to
the site are formally assigned to us, the rights to the site could be claimed by
Silvervision as the Web site developer. Two of Silvervision's principals also
granted us an option to purchase their collective 33.4% interest in Illusion
Networks, LLC which owns interactive video technology for Internet applications
that could be of value to us in the future. The grant of this option is subject
to the consent of Silvervision, the third member of Illusion Networks. These
principals of Silvervision received 900,000 shares of our common stock in
exchange for their grant of the Illusion Networks option and Silvervision's
development of, and transfer of its interest in, our Web site. See "Related
Party Transactions." For the month of April 1999, we paid Silvervision in cash
for their continuing development services. Beginning on May 1, 1999, the
individual employees of Silvervision working on our site development became our
employees and were no longer employees of Silvervision. We have also engaged the
Jedi Group to develop our database architecture in exchange for cash payments.
Our Web site has been available since June 28, 1999. However, we will not offer
or issue warrants to users until our registration statement is declared
effective. To date, we have not generated any revenues.
We have funded our activities to date primarily from exchanges of our
common stock for services performed for us by our principals and through service
arrangements with Silvervision and private sales of our common stock. We sold
3,000,000 shares of our common stock for a total of $1.0 million in a private
placement in March 1999.
We may require substantial capital to continue development activities,
to deliver our concept and to commence sales and marketing efforts. While we
believe that the net proceeds from our initial public offering will be
sufficient to develop and deliver our product to Internet users, the continued
development and expansion of our Web site as well as the ongoing costs
associated with development of our computer systems and software, future
research, sales and marketing, funding of acquisitions or other strategic
arrangements, and the cost of attracting qualified personnel may require
additional funding. The costs associated with our continued expansion and
development are significant and may be in excess of our expectations. Our
continued expansion and development may be predicated upon our ability to access
additional capital or other strategic arrangements to fund our expansion and
development activities.
We expect our future revenues to be generated primarily from
arrangements and agreements with advertisers, sponsors and content providers. We
have entered into an agreement with GoTo.com to provide our users with Internet
search capabilities. Our relationship with GoTo.com is non-exclusive. We have
also entered
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into an agreement with InfoSpace.com, an integrator and aggregator of Internet
content, to provide us with content. In addition, we have entered into affiliate
relationships with approximately 40 online retailers and service providers who
will pay us either a commission or a flat fee for purchases of their products
and services made by persons accessing their Web sites from our site. We expect
to initially rely upon a third party to sell advertising space on our Web site.
We believe that our strategy for attracting new and repeat users to our Web
site, combined with data gathered about these users, will provide attractive
marketing opportunities for advertisers, sponsors, content providers and
electronic merchants. We base our business model on our ability to attract and
retain a loyal user base, and the generation of revenue from sources whose
sponsorship of our business is predicated upon user traffic. We believe we will
need to constantly expand and improve the content of and features offered by our
Web site to continue to attract users, and we will need to develop a significant
marketing and sales effort to reach our potential revenue sources. We anticipate
that revenue will not be sufficient to cover our operating costs in the near
future and we expect to incur significant losses. While we are cautious of
developing a corporate overhead structure in advance of generating any revenue
to cover costs, we believe the installation of a minimum level of infrastructure
components is necessary for our early stage growth. We can offer no assurance
that our business model will succeed or that sufficient revenue can be generated
to cover our costs of operations.
As of March 31, 1999, we had deficit accumulated during the development
stage of $197,520 and we anticipate that we will incur net losses for the
foreseeable future. The extent of these losses will depend, in part, on the
amount and rates of growth in our revenue from advertisers, sponsors, content
providers and electronic merchants. We expect our operating expenses to increase
significantly, especially in the areas of sales and marketing and brand
promotion. As a result, we will need to generate significant revenue if
profitability is to be achieved. We believe that our operating results since
inception are not meaningful and that the results for any period should not be
relied upon as an indication of future performance. To the extent that revenue
does not grow at anticipated rates or that increases in our operating expenses
precede or are not subsequently followed by commensurate increases in revenue,
or that we are unable to adjust operating expense levels accordingly, our
business, results of operations and financial condition will be materially and
adversely affected. There can be no assurance that our operating losses will not
increase in the future or that we will ever achieve or sustain profitability.
See "Risk Factors--We Cannot Predict Our Success Because We Lack an Operating
History" and "--We Anticipate Significant Losses and Negative Cashflow in the
Foreseeable Future."
RESULTS OF OPERATIONS
We have a limited operating history on which to base an evaluation of
our business and prospects. You must consider our prospects in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stage of development, particularly companies dependent upon the relatively
new and rapidly evolving Internet environment. Our risks include, but are not
limited to, an evolving and unpredictable business model and proper management
of growth. To address these risks, we must, among other things, maintain and
expand our user base, implement and successfully execute our business and
marketing strategy, continue to develop and upgrade our technology and our Web
site, provide superior customer service and convenience, respond to competitive
developments, and attract, retain and motivate qualified personnel. We cannot
assure anyone that we will be successful in addressing these risks, and our
failure to do so could have a material adverse effect on our business, financial
condition and results of operations.
Our losses from inception include $178,618 of costs incurred by our
founding stockholders in the form of direct expenses paid by them prior to our
inception through March 31, 1999. The $178,618 of direct expenses incurred by
our founding stockholders consisted primarily of payroll costs to begin the
development of our Web site and content based on the actual amounts that were
paid by our founders at their historic cost basis.
LIQUIDITY AND CAPITAL RESOURCES
To date, we have raised capital amounting to approximately $1,000,000
through a private placement of our common stock and received the benefit of cash
payments made by our founding stockholders amounting to approximately $178,618.
We do not expect to incur significant capital commitments until we have
successfully
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completed our initial public offering. We currently anticipate that the net
proceeds of our initial public offering will be sufficient to meet our
anticipated needs for working capital and capital expenditures through at least
the next 12 months. However, additional capital could be required in the next
twelve months if unexpected costs arise or if we pursue ventures that enhance or
accelerate our business development such as acquisitions of content providers,
search engines or other businesses. If additional capital requirements arise, we
may need to raise additional funds sooner than expected. If we raise additional
funds through the issuance of equity, equity-related or debt securities, these
securities may have rights, preferences or privileges senior to those of the
rights of our common stock holders, who would then experience dilution. We
cannot be certain that additional financing will be available to us on favorable
terms when required, or at all. We may require additional capital following the
twelve months after our initial public offering.
Concurrently with the closing of our initial public offering of our
common stock, we will begin issuing our members warrants to receive shares of
our common stock. The warrants will be issued under our membership award
program, and the warrants will first be exercisable at any time after 180 days
from the closing of our initial public offering. We estimate that the shares
underlying the warrants we have registered are sufficient to last at least 12
months from the closing of our initial public offering. Unexpectedly high
volumes of users visiting our site could materially alter our projections of the
sufficiency of the number of shares we have reserved for the conversion of
warrants. We anticipate registering additional warrants and shares of common
stock in the future to meet the needs of our model for issuing equity to users.
Registration of additional warrants and common stock will have a dilutive effect
on existing stockholders. We reserve the right to issue, or not to issue,
additional warrants and common stock, determine future conversion ratios of
warrants, or to abandon our membership award program.
WE DEPEND ON OUR MANAGEMENT INFORMATION SYSTEM; YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. Our business will be largely dependent on software and computer technology
potentially subject to year 2000 issues including the software we use to create
and provide our Web site's content, our interaction with warrant holders,
database retrieval and processing functions, firewalls, security, monitoring and
back-up capabilities. Because we are a young company still in the process of
developing our systems, we intend to obtain only software, computer technology
and other services from third-party providers that can guarantee year 2000
compliance. However, guarantees of year 2000 compliance may be impossible or too
costly to obtain and we may find it necessary to obtain software or hardware
which could experience a failure due to year 2000 issues. We also anticipate
being dependent on telecommunications vendors to maintain connectivity to our
network and, potentially, traditional third-party carriers to deliver written
communications to our users.
As we develop our Web site and our corporate infrastructure, we intend
to ensure that all software, hardware and proprietary operating code we develop
is year 2000 compliant. Substantially all of our hardware and software was
purchased subsequent to March 31, 1999. Prior to March 31, 1999, we used
hardware and software owned by one of our founding stockholders to begin the
development of our Web site. Our servers and their operating systems are
certified by their manufacturer, Sun Microsystems, as Tier 1 compliant, or year
2000 compliant at the time of their release. In addition, we have reasonable
assurances from the manufacturers that the software we used to develop our Web
site and database engine, including Oracle 8 and Apache Web Server, is year 2000
compliant. We will continue to pursue assurances of year 2000 compliance from
manufacturers of the hardware and software used to develop our site and
infrastructure. In addition, Verio, the third-party host of our network servers,
has provided us with reasonable assurances of its year 2000 compliance. We also
believe the proprietary operating code we developed is year 2000 compliant. We
do not anticipate spending material amounts on year 2000 compliance.
We will conduct a formal audit of our internal systems in August 1999
once they are more fully developed. After our internal year 2000 compliance
audit, we may be required to modify or replace significant portions of our
software so that our systems will function properly with respect to dates in
2000 and beyond. We may experience
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potential systems interruptions or delays in services if we are unable to make
required modifications or conversions in a timely and cost-effective manner or
if there is a malfunction in our systems. Further, if we fail to successfully
resolve these issues, some or all of our operations may shut down, which would
have a material adverse affect on our business.
We have not yet fully developed a comprehensive contingency plan to
address situations that may result if we are unable to achieve year 2000
readiness for our critical operations. We are developing a detailed contingency
plan which we expect to be completed and expanded as necessary during the second
half of 1999. However, our contingency plan may not adequately address all year
2000 issues we may face. Our failure to develop and implement, if necessary, an
appropriate contingency plan could materially adversely affect our business and
results of operations.
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THE COMPANY
takes.com is an early stage company that has developed the takes.com
Web site to serve as a portal to the World Wide Web. We believe we have
developed a portal which is unique, useful and customizable and for which we
have initiated our membership award program as a strategy for attracting and
sustaining a broad and loyal user base. Under our membership award program,
visitors to our Web site earn equity in takes.com for accessing and using our
takes.com Web site. Upon registering on our Web site, users will become members
and will be issued a warrant which is exchangeable for our common stock.
Subsequently, members may earn additional warrants each day that they visit
takes.com. In the future, we may award warrants to users who use our Web site
for extended periods of time. We also intend to hold periodic contests,
promotions and other events which will permit our members to receive additional
warrants. Warrants will initially be exercisable on the basis of 30 warrants for
one share of stock. We believe that by combining equity ownership in takes.com
with a high quality, content-rich portal site, we will build and sustain a large
cooperative community of users whose interests will be uniquely aligned with
ours and those of our advertisers, sponsors and other revenue generating
partners. We intend to encourage development of a cooperative community among
our users in the future by providing forums for moderated discussions of current
issues, soliciting content from our users and providing members-only promotions.
Although our Web site is available to users, we will not offer or issue
warrants until our registration statement is declared effective. Users may
access any Internet site from takes.com including leading sites and search
engines such as Yahoo!, Excite, Lycos and others. The initial roll out of the
takes.com Web site will serve as a platform for us to further expand our content
and service offerings, which we believe will further enhance our site. We
believe the takes.com Web site will become the home page of choice for our
users. The takes.com Web site includes, among other things, search capabilities,
useful and in-depth content and a customizable personal home page feature. Our
frame-based mechanism allows our users to carry a portion of our site's features
with them as they travel the Internet.
By issuing our users equity in takes.com, we expect to rapidly build
and sustain a large and loyal cooperative community of users and to develop
brand recognition around takes.com. We intend to educate our members that the
value of takes.com, and therefore their warrants, is largely dependent upon our
ability to generate advertising revenues and override revenues generated by
electronic commerce. We believe that by aligning our interests with those of our
members, we will be able to deliver a large audience to our advertisers,
sponsors and other revenue generating partners. Delivering a large audience is
essential to attracting advertising and sponsorship revenues. If we are
successful in creating a large and loyal user base with our membership award
program, we expect to be required to spend significantly less on advertising and
sales expenses related to promotion of our Web site.
GROWTH OF THE INTERNET
The Internet enables millions of people worldwide to interact, share
and access information, conduct business and be entertained electronically. The
online company eMarketer estimates that at year-end 1998, the number of
Americans using the Internet was approximately 47 million, and that
approximately 24.4 million, or 24.2%, of U.S. households were connected to the
Internet. Further, eMarketer estimates that the number of Americans using the
Internet will grow to approximately 85 million by the end of 2002 and that the
number of U.S. households connected to the Internet will increase to
approximately 43% of all U.S. households, or a total of approximately 44 million
households. According to eMarketer, the U.S. represented approximately 62% of
the estimated worldwide Internet users at mid-year 1998.
INTERNET AS AN ADVERTISING MEDIUM
The rapidly increasing popularity and acceptance of the Internet
represents an enormous opportunity for businesses to reach consumers and conduct
commerce over the Internet. The commercial potential of the Internet has
resulted in a proliferation of Web sites through which businesses, communities,
media companies, news services, affinity groups and individuals seek to inform,
entertain, communicate and conduct business with Internet
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users worldwide. According to eMarketer, there were approximately 2.2 million
registered domain names, or Web pages, registered at year-end 1998 and eMarketer
estimates that by the year 2000 there will be approximately 3.95 million
registered domain names. This rapid growth in the number of Web sites and the
wide array of content associated with them has caused the emergence of numerous
portals, integrated online services through which users can access a wide range
of information and service providers and Internet search engines and
directories.
The Internet provides a medium in which advertisers can develop
one-to-one relationships with potential customers worldwide without making
significant investments in traditional infrastructure such as retail outlets,
vendor networks and sales personnel. The Internet is distinguished from
traditional media outlets because of a lack of geographic or temporal
limitations, real-time access to dynamic and interactive content, and
instantaneous communication with a single individual or with groups of
individuals. To market their products and services, advertisers seek outlets
where they may obtain demographic information about the users and which provide
a large number of users who spend at least a minimum amount of time at a
particular site. According to eMarketer, online advertising spending exceeded
$1.5 billion in 1998 and is projected to rise to approximately $8.0 billion in
2002.
BUSINESS STRATEGY
By offering our Web site users an equity stake in takes.com, we believe
we will foster a sense of ownership and community and create a home page
environment that our members will regularly utilize as their Internet gateway.
With our membership award program allowing users to become owners of takes.com,
we intend to:
DEVELOP AND GROW OUR USER BASE. We believe that building awareness of
takes.com and the ability to become a stockholder in our company are critical to
our success. We intend to build our user base and, correspondingly, our brand
value aggressively. We will initially market our site with promotions including
traditional advertisement and press exposure. We also believe that our user base
will grow significantly by word-of-mouth. We believe that our membership award
program will generate a substantial amount of repeat traffic and new users.
PROVIDE TARGETED MARKET OPPORTUNITIES FOR SPONSORS AND ADVERTISERS. To
become a member and receive warrants, a visitor must register in our membership
award program and provide his or her name, address and other demographic
information. We expect this information to be valuable to us and to prospective
advertisers and sponsors in developing targeted marketing opportunities. In
addition, users may be asked for additional information each day prior to
receiving their warrant. As the number of our users grows, we believe we will be
able refine and categorize the data we collect about our users. We believe the
data will enable us to attract advertisers wishing to reach a large member base
to whom they can effectively target products and services. We also intend to
build a team of specialists experienced in sales and marketing to advertisers,
sponsors, electronic merchants and other revenue generating sources and we
believe we will be offering a large and loyal user base to these sources.
CREATE USER LOYALTY. We believe that the concept of earning equity in
takes.com for visiting our site will provide a powerful platform for developing
user loyalty. We intend to educate our users that the value of takes.com and,
therefore, their equity ownership, is largely dependent upon revenue generated
from advertisers, sponsors, content providers and others seeking our users'
audience and, thus, the advertising revenues they can provide. In addition, we
expect to generate significant revenue from fees generated pursuant to
arrangements with electronic shopping and fulfillment sites. The following are
necessary to attract revenue sources:
- high Web site traffic volume;
- a large base of registered members;
- growth in user base;
- repeat usage of Web site;
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- high volume of Web pages viewed;
- extended Web site visits;
- information about and preferences of our members; and
- information on results generated from advertising at our Web
site.
By educating our members of the importance of attracting revenue
sources and the factors important to those sources, we believe that we will
encourage our members to make our customizable home page site their gateway to
the Internet. Through their understanding of the importance of revenue
generation to the value of their interest in takes.com, we believe that we will
foster a sense of ownership and create a user community that will patronize our
advertisers and electronic commerce partners and maximize time spent at our
site. We expect our membership award program to be the initial draw which will
cause our users to use takes.com as a portal to the Internet. We expect our
future content and strategic partnerships to cause our users to use takes.com as
their home page of choice.
ENHANCE OUR WEB SITE'S FEATURES AND FUNCTIONALITY. We believe that a
combination of highly advanced functionality and performance and depth of
commercially available content is critical to the commercial success of our
takes.com site. We are committed to site reliability and accessibility, and
intend to make continuous enhancements to our technology, such as upgrading and
expanding server and networking infrastructure, increasing fault tolerance,
maintaining backup and storage capacity and improving Internet connections. We
believe our frame-based technology is a key feature of our site. In addition, we
intend to increase the efficiency of our database processing and the
sophistication of the marketing-specific information within our databases.
DEVELOP EXTRAORDINARY CONTENT. Initially, much of the content of
takes.com will be provided by third parties. Following the completion of our
initial public offering, we intend to develop and offer additional content and
to integrate this content with additional third-party content and services. We
intend to develop unique, extraordinary content which will further enhance the
appeal of takes.com, attract additional users and enhance the development of our
brand. This content will be designed with our user demographics in mind and we
expect that our users, in fostering the cooperative spirit of takes.com, will
contribute to this additional content. We expect to establish editorial boards
to review member contributed content.
USE BUSINESS MODEL FOR COMPANY EXPANSION. We believe that our business
model, making our members equity owners in takes.com, provides a number of
competitive advantages over other Internet sites and portals. We believe that we
can use this model to expand our business and our member base. We believe
possibilities for acquisition or development of content, services, search
capabilities, strategic partnerships and other avenues of growth are
significant, will further enhance the value of our Web site to our members and
will contribute to the development of our brand name and our member base. We
intend to immediately and aggressively pursue growth opportunities.
THE TAKES.COM SITE
Our takes.com Web site is designed to be a user friendly, content-rich,
customizable Internet portal. Portals are online sites from which Internet users
can access a wide range of information and services without having to navigate
through numerous other sites. Our site will offer traditional portal service
offerings including aggregated third-party content, search capabilities and
links to other Web sites. Initially, our Web site will include, among other
things:
- search capabilities through GoTo.com, a search engine, as part
of our "Explore the Web" section;
- content provided through InfoSpace.com, a third party aggregator
and integrator of content;
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- original editorial commentary or "takes" on specific subjects;
- content categories allowing our members and others to obtain
information regarding a broad range of subjects;
- a customizable personal home page containing features which will
allow members to personalize their page by using, among other
things, customized pull-down menus, hyperlinks to Web sites
selected by the member and information on their holdings of our
warrants and common stock; and
- a frame-based mechanism which provides our users with the
ability to carry a portion of the functionality of our Web site
with them as they travel the Web. The frame will carry our logo,
navigation buttons providing links to our site and two pull down
menus which will operate as a virtual briefcase, including a
daily planner, surf the Web feature and search engine box and
customizable links to favorite sites. The frame may also include
a banner advertisement.
Immediately following the closing of our initial public offering, the
content on our site will consist largely of information from InfoSpace.com, a
third-party provider of content, and will contain graphics and links pertinent
to the content categories. We intend to co-brand a portion of our Web site with
InfoSpace.com by including the InfoSpace.com logo and advertising secured by or
on behalf of InfoSpace.com on our site. Under the terms of our agreement, we
will begin sharing advertising revenue with InfoSpace.com once our users have
provided InfoSpace.com with 10,000 viewer impressions per day to co-branded
pages for 30 consecutive days. After this initial threshold is met, we will
receive 35% of the advertising revenue generated by InfoSpace.com and
InfoSpace.com will receive 35% of the advertising revenue generated by us on
co-branded pages. Once our user base has provided InfoSpace.com with one million
viewer impressions to co-branded pages, we will receive 40% of the advertising
revenue generated by InfoSpace.com and InfoSpace.com will receive 30% of the
advertising revenue generated by us on co-branded pages. In addition, we will
pay InfoSpace.com a monthly fee in the amount of $5,000.
We expect to develop an electronic magazine or "e-zine" and to allow
our members and others to provide original editorial commentary or "takes" on
specific subjects. This commentary will be screened and edited by editorial
boards that we intend to establish for each area. Immediately following the
closing of our initial public offering, the content for these areas will consist
of links to other Web sites. Initially, our Web site e-zine will include:
- Take of the Day - Users' opinions on current headlines and
articles pertaining to national and world events, finance,
entertainment, technology, sports and other topics.
- Life's Cutting Edge - Content focused on technology and creative
and innovative ideas including games, toys and interactive
television.
- Money Matters - Business and financial news and information
including stock quotes.
- Culture Club - Information on culture, art and literature from
around the world, including the visual and performing arts,
festivals, events and exhibits and galleries.
- The Human Machine - Content focused on health and fitness,
medicine, nutrition, psychology, herbal and natural health,
education and psychic/tarot readings.
- Going in Style - Content focused on fashion trends, travel and
leisure, food and wine and social graces.
- Screening Room - Information on movies, television, radio,
theatre and music with additional information regarding
musicians, actors, directors, writers and producers.
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- Short Takes - Information for our younger users including
children's stories, games and toys and what's cool and popular
among teens.
The takes.com Web site will have two other main sections: a
customizable "My Personal Page" and an "Explore the Web" section. "My Personal
Page" will include such features as a personal information management section,
with calendar, address book, reminders and similar features, a photo gallery on
which a user may load photos of their choice from the hard drive of the user's
computer, a drop down window with links to Web pages of the user's choice, news
and weather information, warrant information and "I Want To . . .," another
means of linking to Web sites. The "Explore the Web" section will include quick
links to research and news information, "Our Takes - Best of the Web" which will
include our choice of interesting sites covering various topics, public resource
information, current news and shopping links as well as "I Want to . . ."
COOPERATIVE ENVIRONMENT. We intend to evolve our site into a
cooperative environment as our user community expands. Through our membership
award program, we expect to build a loyal and expanding user base, which we
believe we can use to:
- command purchasing discounts at retailers, leading merchants
and electronic commerce sites interested in targeting our
members;
- create a community atmosphere where members participate in an
interactive format to share information and contribute ideas and
opinions, or "takes," on specific topics of discussion such as
current events, sports, arts and culture, and others; and
- provide member-only promotions and services.
Within our cooperative environment, we intend to foster a sense of
community and ownership similar to traditional retail or other business
cooperative models. We intend to disseminate current information about takes.com
to our members, as we view our members as owners of our cooperative. We believe
that our members will develop a strong sense of ownership and will, therefore,
make use of our site, patronize our sponsors and advertisers, and will
participate in and contribute, provide their "Takes", to the available online
editorial areas related to our content section.
Anyone visiting the takes.com Web site may view and use our site as a
guest, but must register with us as a member to earn and accumulate our
warrants. Once users become members, they will begin to accumulate warrants
daily upon visiting the site. Members may earn a maximum of one warrant per day
except if we offer additional warrants in connection with special promotions or
contests. In the future, we may award additional warrants to users who use our
Web site for extended periods of time. Once users have registered as members,
they will gain access to features of our Web site designated for members only.
Membership is free, but is a formality which is necessary to track and register
users as stock and warrant holders as well as to provide us with demographic
information about our users.
REGISTRATION PROCESS. Non-members can register and existing members
will sign in each time they access our Web site. Upon clicking "New Member," a
registration page will be displayed, where new members will fill in all of their
pertinent information. Membership will be limited to United States residents who
have Social Security numbers. The database and questionnaire process will be
also be designed to gathering pertinent data which will be useful for attracting
targeted advertising and sponsorship opportunities. A registered member will
merely sign in with a user name and password to access the site and earn
warrants.
REVENUE SOURCES
SPONSORSHIP AND ADVERTISING. We intend to aggressively pursue and
generate revenue from the sale of sponsorships and advertisements. Our strategy
is focused in part on generating a significant portion of our revenue from
advertisers and sponsors who seek a cost effective means to reach our targeted
user base. Revenue from
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advertisers and sponsors will be generated from advertisements that are
prominently displayed at the top of pages throughout the takes.com site along
with other advertising displays throughout the site. From these advertisements,
we expect members to be able to hyperlink directly to the advertiser's own Web
site, thus providing the advertiser the opportunity to directly interact with an
interested customer. While we will seek advertising and sponsorship agreements
through third-party consolidator sources, we also intend to hire an internal
sales force to sell advertising. We expect revenue from these sources to be
generated based on a cost per thousand impressions, or CPM's, and we expect that
the advertising rates will be dependent on whether the impressions are from
general rotation throughout our Web site or from targeted audiences and
properties within specific areas of our Web site.
Sponsorship and advertising revenues may also include barter revenues,
which represent our exchange of advertising space on our takes.com Web site for
reciprocal advertising space or traffic on other Web sites.
SEARCH ENGINE. We have signed an agreement with GoTo.com under which we
will receive $0.02 each time one of our visitors or members uses GoTo.com via
hyperlinks from our pages to conduct an Internet search. We will be paid
quarterly by GoTo.com if our visitors and members have executed a minimum number
of searches during the quarter using GoTo.com. This agreement, which is
non-exclusive, may be canceled by us or GoTo.com at any time.
STRATEGIC ALLIANCES. We plan to increase traffic and market share
through strategic alliances with content providers or other sites characterized
by high user traffic and retention statistics. We will also seek strategic
alliances with other companies that will allow us to leverage our brand while
incorporating content that is consistent with our Web site. We may also seek to
expand our revenue opportunities through alliances with electronic retailers,
online service and content providers, and advertisers.
GENERATE ELECTRONIC COMMERCE REVENUE. We plan to identify new commerce,
revenue and acquisition opportunities that enhance the takes.com Web site by
offering transaction services that are consistent with and complement our Web
site. We intend to generate electronic commerce revenue through agreements with
leading merchants interested in targeting our members. These merchants will
receive exposure through banner advertising and the integration of advertising
with promotional offers. We expect most of our electronic commerce revenues to
result from fixed fees collected per transaction or from a share of the revenues
from sales to our members. Currently, we have agreements with approximately 40
online retailers and service providers. Our agreements with these retailers and
service providers provide that they will pay us either a flat fee per sale,
ranging from $1.00 to $10.00, or a percentage of a sale, ranging from 1% to 50%,
for transactions originating from our site. We expect the number of online
retailers and service providers with whom we have agreements to grow. Through
our cooperative environment, we intend to use existing relationships and form
additional relationships with major retailers and merchants to offer our members
discounts and other values on goods and services.
TECHNOLOGY AND INFRASTRUCTURE
We anticipate high user traffic at our Web site as a result of our
membership award program. Our operating infrastructure has been designed and
implemented to accommodate the large traffic volumes we are expecting to
generate initially as well as the increased traffic volumes we expect in the
future as our user base grows. We also expect our infrastructure to be capable
of supporting the delivery of millions of page views per day. In addition, we
intend to develop our capacity to significantly enhance the features, pages and
content within our site. Key attributes of our infrastructure include
scalability, performance and service availability. See "Risk Factors--Our
Success is Dependent on Our Ability to Develop, Maintain and Rapidly Scale Our
Web Site, Network Infrastructure and Systems Without any Interruption in
Features and Services." Because we are a young company and only recently
purchased our hardware and software systems, we benefitted by obtaining advanced
systems at a lower cost than was available in prior years.
Our site will require integrated database and Web serving capabilities.
Therefore, our system's hardware framework will consist of separate but
integrated servers; one designed for the database functions and one designed for
the Web serving environment. We have chosen to use Sun Sparc servers using the
Sun Solaris operating system.
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Our database servers will use Oracle 8 data and query engine software and our
Web server will use Apache Web Server software. Because we expect to have a very
large database of user information to maintain, particularly regarding the
warrants held by our members, our database system will employ Secure Socket
Layer protocol to provide the required security, and all of our servers will
have firewalls designed to restrict outside access at the operating level except
via special secure channels. We also intend to employ third-party computer
security personnel from time to time to address security risks and
vulnerabilities.
Verio, Inc. is our data center host and we have co-located our
equipment on their premises. Verio's national data centers are state-of-the-art
facilities providing comprehensive facilities management services including
human and technical monitoring of our production servers 24 hours per day, seven
days per week. Verio provides connectivity services which link our servers to
end-users via the Internet through multiple connections. The facility is powered
by multiple uninterruptible power supplies and Verio observes strict physical
security measures and password access management. Verio's customers include
America Online, Inc., The Boeing Company, Microsoft Corporation, the National
Football League and Netscape Communications Corporation.
All of our data will be copied to backup tapes each night and stored at
a third-party, off-site storage facility and will facilitate data recovery and
mirroring capabilities. We intend to keep all of our production servers behind
firewalls for security purposes and will not allow outside access at the
operating level, except via special secure channels. Strict password management
and physical security measures will be followed. We intend to deploy computer
security personnel and consultants to address and take action towards security
risks and vulnerabilities.
COMPETITION
The market for Internet products, services and advertising is new,
rapidly evolving and intensely competitive. We will compete for consumer
attention and advertising expenditures with other portals and other providers of
Web content, directories and search engines such as Yahoo!, Excite and Lycos as
well as traditional media companies investing in the Internet such as NBC's
investment in CNET's Snap service and Disney's investment in Infoseek. We expect
competition to further intensify in the future. Barriers to entry are low. We
believe that the principal competitive factors for Web sites like ours include
the quality and quantity of content, brand recognition, a unique business model,
strategic partnerships and, with respect to advertisers and sponsors, the number
of users, the duration and frequency of user visits and user demographics. There
can be no assurance that our Web site will be equal or superior to our
competitors and potential competitors' sites or even that our Web site will
achieve market acceptance.
Nearly all of our existing and potential competitors, including Web
directories and search engines and large traditional media companies, have
longer operating histories in the Internet market, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than we have. Existing established competitors are able to
undertake more extensive marketing campaigns for their brands and services, and
make more attractive offers to potential employees, vendor affiliates, commerce
companies and third-party content providers. Many large media companies have
announced that they are contemplating developing Internet navigation services
and are attempting to become gateways or portals to the Internet. In the event
these companies develop portal sites, we could lose a substantial portion of our
user traffic. Further, entities that sponsor or maintain high-traffic Internet
sites or Internet service providers, such as America Online, provide an initial
point of entry for Internet users that may be competitive with takes.com. There
can also be no assurance that we will be able to compete successfully against
our current or future competitors or that competition will not have a material
adverse effect on our business, financial condition and results of operations.
See "Risk Factors--The Internet is Extremely Competitive and We Cannot Assure
You that We Will Be Able to Compete Effectively."
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard our technology as proprietary and attempt to protect it by
relying on trademark, service mark, copyright and trade secret laws,
restrictions on disclosure and transferring title, and other methods. Currently,
we do not have patents and we do not anticipate that patents will become a
significant part of our intellectual property
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in the foreseeable future. We have entered into and will continue to
enter into confidentiality or license agreements with our employees and
consultants, and we will attempt to limit vendor access to our proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use our proprietary information without
authorization or to develop similar technology independently. Policing
unauthorized use of our proprietary information is difficult. Legal standards
relating to the validity, enforceability and scope of protection of some
proprietary rights in Internet-related businesses are uncertain and still
evolving, and no assurance can be given as to the future viability or value of
any of our proprietary rights.
EMPLOYEES
As of June 18, 1999, we had 13 full time employees, three part time
employee and several independent contractors. Four of our independent
contractors are employed by the Jedi Group, with whom we have an arrangement to
assist us in developing our database architecture. Our future success will
largely depend on our ability to continue to attract, retain and motivate highly
qualified technical and management personnel in an intensely competitive
employment market. From time to time, we may also employ independent contractors
to support our research and development, marketing, sales, and support and
administrative organizations. Our employees are not covered by any collective
bargaining agreement, and we have never experienced a work stoppage. We believe
our relations with our employees are good.
FACILITIES
Our headquarters are located in a leased facility at 3655 Nobel Drive,
Suite 550, San Diego, California 92122. Our servers are located at Verio in
Irvine, California.
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MANAGEMENT
The following table sets forth information regarding our executive
officers, directors and director nominees as of June 18, 1999. Shortly following
the closing of our initial public offering, we intend to increase the size of
our board of directors to seven, including at least two independent directors.
We expect to add one board member prior to the closing of our initial public
offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Peter L. Ax 40 Chairman of the Board
Joel W. Cohen 54 President, Chief Executive Officer and Director
David S. Bellino 36 Vice President of Production
Dale L. Sokolov 38 Vice President of Business Development
Todd D. Sims 29 Director
Donald R. Diamond 71 Director Nominee
</TABLE>
PETER L. AX co-founded takes.com and has been Chairman of our board of
directors since inception. Mr. Ax has been chief executive officer of SpinCycle,
Inc. since January 1998 and chairman of SpinCycle's board of directors since
March 1998. From December 1996 to January 1998, Mr. Ax was chief financial
officer and until March 1998 was vice chairman of SpinCycle's board of
directors. From March 1995 to December 1996, Mr. Ax served as head of the
private equity division and senior vice president of Lehman Brothers. From March
1994 to March 1995, Mr. Ax was responsible for the private placement of fixed
income securities on the fixed income syndicate desk at Lehman Brothers. Mr. Ax
received an M.B.A. from The Wharton School at the University of Pennsylvania and
a J.D. and B.S. from the University of Arizona. Mr. Cohen is Mr. Ax's first
cousin.
JOEL W. COHEN co-founded takes.com and has been President, Chief
Executive Officer and a director since inception. From 1992 to April 1999, Mr.
Cohen was chief executive officer of MicroWorks, Inc., a systems integration
concern involved in the development of custom information systems. In 1976, Mr.
Cohen founded Micrognosis Inc., a seller of turnkey information distribution
systems for Wall Street trading operations. Mr. Cohen was chief executive
officer and controlling stockholder of Micrognosis until he sold it to Control
Data Corporation in 1987. Mr. Cohen subsequently served as a consultant to, and
a board member of, Micrognosis through 1990. Prior to founding Micrognosis, Mr.
Cohen spent four years as a field applications engineer for Intel Corporation.
Mr. Cohen received a BSEE from City College of New York and a Masters in
Computer Science from Brooklyn Polytechnic Institute. Mr. Ax is Mr. Cohen's
first cousin.
DAVID S. BELLINO has been our Vice President of Production since April
1999. From September 1997 to April 1999, Mr. Bellino was president and chief
executive officer of Silvervision Entertainment Group, LLC, a multimedia
entertainment company. From 1987 through August 1997, Mr. Bellino was self
employed at DSB Entertainment. While at Silvervision and DSB Entertainment, Mr.
Bellino used his knowledge of high technology, computer engineering and film
production to complete an award winning short film and to produce and direct
several videos and interactive CD-ROM titles for BMG Music, Universal
Pictures/Bubble Factory, MCA Records, Virgin Records, EMI-Capitol Entertainment
Properties and Hasbro Interactive. Some of Mr. Bellino's projects included the
"Flipper" enhanced CD, "The Rolling Stone's Voodoo Lounge" CD-ROM, and 3-D
"Yahtzee" and "Boggle" interactive CD-ROMs. Mr. Bellino received a B. S. in
Electrical Engineering from the University of Rhode Island and has attended
programs at the University of California at Los Angeles and American Film
Institute.
DALE L. SOKOLOV has been our Vice President of Business Development
since April 1999. As chief operating officer of Silvervision from November 1997
to April 1999, Mr. Sokolov oversaw the management and financial operations of
Silvervision's multimedia, film and video projects for music companies, game
developers and Fortune 500 corporations. From May 1989 to November 1997, Mr.
Sokolov was the managing partner of Lakme Partnership, a venture capital and
real estate investment partnership. Mr. Sokolov is involved with numerous
charitable organizations and is a published author in the field of data
communications. Mr. Sokolov
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<PAGE> 37
received a Masters of Science with a concentration in Management Information
Systems and a B.S. in Accounting and Finance from the University of Arizona.
TODD D. SIMS has been a director of takes.com since June 1999. Since
May 1998, Mr. Sims has been director of league sites for ESPN Internet Ventures,
responsible for production and programming of the official Web sites of the
National Football League, National Basketball Association, Women's Basketball
Association and National Association of Stock Car Automobile Racing. From
October 1995 until May 1998, Mr. Sims was employed by Starwave Corp., most
recently as manager of business development for technology and the advertising
producer for ESPN.com, NFL.com, NBA.com, ABCnews.com, and NASCAR Online. From
November 1994 until October 1995, Mr. Sims was the general manager and a
co-founder of Sun Valley Internet. From July 1994 through October 1995, Mr. Sims
was the marketing director of The Environmental News Network. Mr. Sims has also
been involved in Internet advertising industry groups, including acting as
chairman of the Audit Bureau of Circulations' Interactive Committee from August
1996 until August 1997 and as a member of the Internet Advertising Bureau from
May 1996 until July 1997. Mr. Sims has been a panelist at numerous
Internet-related conferences. Mr. Sims is a graduate of The Colorado College.
DONALD DIAMOND has agreed to become a director as of the closing of our
initial public offering. Since August 1998, Mr. Diamond has been chairman of
Diamond Ventures, Inc., an investment and real estate development company. Prior
to becoming chairman, Mr. Diamond was a director of Diamond Ventures and its
predecessor Diamond Management, Inc. Mr. Diamond was a founder, vice president
and owner of the Phoenix Suns Professional Basketball Club from 1968 to 1987 and
is currently a general partner of the Arizona Diamondbacks. From 1971 to 1982,
Mr. Diamond was owner and president of the KVOA television station, the NBC
affiliate in Tucson, Arizona. Mr. Diamond is a director of the Sonoran
Institute, the Rincon Institute and numerous charitable organizations.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors will have an audit committee and a compensation
committee. We expect to appoint members of our audit committee at the time of
the closing of our initial public offering. A majority of the members of our
audit committee will be independent directors. The audit committee will be
responsible for reviewing the scope of our independent auditors' examinations of
our financial statements and receiving and reviewing the auditors' reports. Our
audit committee will meet with our independent auditors, receive recommendations
or suggestions for changes in accounting procedures, and initiate and supervise
any special investigations it may choose to undertake. We expect to appoint
members of our compensation committee at the time of the closing of our initial
public offering. The compensation committee will determine our policies with
respect to the nature and amount of compensation we pay our executive officers
and employees and administer our stock option plans.
DIRECTOR COMPENSATION
Our directors do not currently receive cash compensation for serving on
the board of directors. However, we do reimburse directors for expenses
reasonably incurred in connection with their service as directors. In addition,
our non-employee directors are entitled to receive options to purchase our
common stock under our Non-Employee Director Stock Option Plan.
1999 STOCK OPTION PLAN
Our 1999 Stock Option Plan was adopted by our board of directors and
stockholders in May 1999 to attract, retain and motivate selected employees and
officers. We currently have 2,800,000 shares of common stock reserved for
issuance upon the exercise of options granted under this plan. As of the date of
this prospectus, no options were outstanding under the plan. Options granted
under the plan may be either "incentive stock options," as that term is defined
in Section 422(b) of the Internal Revenue Code of 1986 or non-qualified stock
options. Our compensation committee will administer the plan and determine the
persons who are to receive options and the number of shares included in each
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<PAGE> 38
option. The compensation committee will also determine the per share exercise
price of the options which in the case of non-qualified stock options shall be
not less than 85% of the fair market value, and in the case of incentive stock
options, must be not less than the fair market value, of our common stock on the
grant date.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Our Non-Employee Director Stock Option Plan was adopted by our board of
directors and stockholders in May 1999 to attract and compensate our
non-employee directors. We currently have 150,000 shares of common stock
reserved for issuance upon the exercise of options granted under the plan. As of
the date of this prospectus, no options were outstanding under the plan. Under
the plan, each non-employee director appointed or elected to the board of
directors on or after the date the plan was approved by the stockholders will be
granted an option to purchase 15,000 shares of our common stock at the public
offering price on the closing date of our initial public offering. These initial
grants to directors will vest immediately and will have an exercise price equal
to the fair market value of the common stock on the grant date. Beginning in
2000, we will grant our eligible non-employee directors serving as directors as
of the date of the adjournment of the annual stockholders meeting an option to
purchase 7,500 shares of our common stock. These options will vest over three
years on each anniversary of the grant date. All options granted under the plan
will have an exercise price equal to the fair market value of the common stock
on the grant date. Options granted under the plan will not be incentive stock
options.
INDEPENDENT CONTRACTOR STOCK OPTION PLAN
Our Independent Contractor Stock Option Plan was adopted by our board
of directors and stockholders in May 1999 to provide us with a non-cash
alternative for compensating our third-party service providers. We currently
have 150,000 shares of common stock reserved for issuance upon the exercise of
options granted under the plan. As of the date of this prospectus, no options
were outstanding under the plan. Options granted under the plan are not
incentive stock options. Our compensation committee will administer the plan and
determine the persons who are to receive options and the number of shares
included in each option. The compensation committee will also determine the per
share exercise price of the options which must not be less than the fair market
value of our common stock on the grant date. Options granted under the plan will
not be incentive stock options.
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<PAGE> 39
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to
the beneficial ownership of the 12,900,000 shares of our common stock
outstanding as of the date of this prospectus, and as adjusted to reflect the
sale 2,825,000 shares of common stock in our initial public offering, by:
- each stockholder known by us to own beneficially more than 5%
of our common stock;
- each of our directors and director nominees;
- each of our named executive officers; and
- all directors, director nominees and executive officers as
a group.
Beneficial ownership is determined under the rules of the Securities
and Exchange Commission. Except as indicated in the footnotes to this table and
as provided by applicable community property laws, the stockholders named in the
table have sole voting and investment power with respect to the shares shown
opposite each stockholder's name. Unless otherwise indicated, the address of our
directors, officers and 5% stockholders is 3655 Nobel Drive, Suite 550, San
Diego, California 92122.
<TABLE>
<CAPTION>
Percent of Shares
Beneficially Owned
------------------------------
Shares Prior to the After the
Beneficially Initial Public Initial Public
Name and Address Owned Offering Offering
- ---------------- ------------ -------------- --------------
<S> <C> <C> <C>
Directors and Executive Officers:
Peter L. Ax (1) .................................... 4,500,000 34.9% 28.6%
Joel W. Cohen ...................................... 2,100,000 16.3 13.4
Todd D. Sims (2) ................................... 15,000 * *
Donald R. Diamond (3) .............................. 15,000 * *
David S. Bellino (4) ............................... 300,000 2.3 1.9
Dale L. Sokolov .................................... 600,000 4.7 3.8
Total for directors, director nominees and executive
officers (6 persons): 7,530,000 58.2 47.8
Other Beneficial Owners:
SpinCycle, Inc. (5) ................................ 3,000,000 23.3 19.1
Canfield Corporation (6) ........................... 2,848,485 22.1 18.1
Peter L. Ax Gift Trust (7) ......................... 1,500,000 11.6 9.5
Michael Cohen ...................................... 900,000 7.0 5.7
</TABLE>
*Less than 1%
(1) Includes 1,500,000 shares of common stock held by Mr. Ax. Also includes
3,000,000 shares of common stock owned by SpinCycle, Inc., of which Mr.
Ax is chairman and chief executive officer. Mr. Ax disclaims beneficial
ownership with respect to the shares owned by SpinCycle.
(2) Includes 15,000 shares of common stock issuable upon the exercise of
vested options under the Non-Employee Director Stock Option Plan. Mr.
Sims' address is 13810 SE Eastgate Way, Suite 400, Bellevue, Washington
98005.
(3) Includes 15,000 shares of common stock issuable upon the exercise of
vested options under the Non-Employee Director Stock Option Plan. Mr.
Diamond's address is 2200 East River Road, Suite 115, Tucson, Arizona
85718.
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<PAGE> 40
(4) Shares are owned jointly by Mr. Bellino and his spouse.
(5) SpinCycle's address is 15990 North Greenway-Hayden Loop, Suite 400,
Scottsdale, Arizona 85260. Mr. Ax is the chairman and chief executive
officer of SpinCycle.
(6) Canfield Corporation's address is Road Town, Tortola, British Virgin
Islands. Ms. Yolanda Hellmund is the owner of Canfield.
(7) The Peter L. Ax Gift Trust is for the benefit of Mr. Ax's spouse and
their children. Mr. Ax does not possess voting or investment power with
respect to the Ax Gift Trust.
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<PAGE> 41
RELATED PARTY TRANSACTIONS
In March 1999, we issued 3,000,000 shares of our common stock to Mr.
Peter L. Ax, the Chairman of our board of directors, and 2,100,000 shares of our
common stock to Mr. Joel W. Cohen, our Chief Executive Officer, for founding
takes.com and for services rendered, amounts expended and costs incurred by them
prior to our incorporation.
In March 1999, we issued 3,000,000 shares of our common stock to
SpinCycle for services rendered by its employees on our behalf and for
relinquishing any and all right, title or interest in the business concept for
takes.com. Mr. Ax is the chairman and chief executive officer of SpinCycle.
In March 1999, we issued a total of 900,000 shares of our common stock
to two principals of Silvervision, 600,000 to David S. Bellino and 300,000 to
Dale L. Sokolov, for Web site development services rendered by Silvervision
through March 31, 1999. Mr. Bellino is our Vice President of Production and Mr.
Sokolov is our Vice President of Business Development. Silvervision agreed to
assign to us all of its right, title and interest in our Web site as of March
31, 1999. Messrs. Bellino and Sokolov also granted us an option to purchase, for
no cash consideration, an option to acquire their collective 33.4% interest in
Illusion Networks, LLC which owns interactive video technology for Internet
applications. The grant of this option is subject to the consent of
Silvervision, the third member of Illusion Networks. Mr. Bellino was the
president and chief executive officer of Silvervision and Illusion Networks.
Under an arrangement with the stockholders of Silvervision, Mr. Sokolov will
transfer to them 300,000 shares of our common stock. As of June 18, Mr. Sokolov
still owns the shares.
In March 1999, we assumed Silvervision's lease of office space which
currently serves as our principal office. This assumption is subject to the
landlord's consent, which we have not yet received in writing. Under the terms
of the lease, we pay monthly rent of approximately $5,500. The lease expires on
March 31, 2000.
In March 1999, we issued 900,000 shares of our common stock to Mr.
Michael Cohen, for consulting services rendered prior to and since our
incorporation. Mr. Cohen is the son of Mr. Joel Cohen, our Chief Executive
Officer.
In March 1999, we sold a total of 3,000,000 shares for $1 million to
two investors in our private offering. Canfield purchased 2,848,485 of those
shares for $950,000.
In our opinion, the transactions described above were on terms no less
favorable than those which could have been obtained from unaffiliated third
parties.
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DESCRIPTION OF CAPITAL STOCK
As of June 18, 1999, we had 12,900,000 shares of common stock
outstanding and no shares of preferred stock are outstanding. As of the closing
of our initial public offering, our authorized capital stock will consist of
60,000,000 shares of common stock having a par value of $0.001 per share and
20,000,000 shares of preferred stock having a par value of $0.001 per share.
The following summary describes our capital stock and related
provisions of our certificate of incorporation and bylaws as they will be in
effect as of the date of this prospectus, but does not purport to be complete
and is subject to, and qualified in its entirety by, the provisions of our
certificate of incorporation as amended through the closing date of the initial
public offering, bylaws and applicable law.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share
held on all matters submitted to a vote of our stockholders and do not have
cumulative voting rights. Thus, the owners of a majority of our common stock
outstanding may elect all of the directors if they choose to do so, and the
owners of the balance of our common stock would not be able to elect any
directors. Subject to the rights of holders of any future series of preferred
stock that may be designated, each share of outstanding common stock is entitled
to participate equally in any distribution of net assets made to our
stockholders in a liquidation, dissolution or winding up of takes.com and is
entitled to participate equally in dividends if, as and when declared by our
board of directors. Holders of our common stock have no preemptive,
subscription, redemption or conversion rights. All outstanding shares of common
stock are fully paid and nonassessable. The rights, preferences and privileges
of holders of common stock are subject to, and may be adversely affected by,
shares of preferred stock which we may issue in the future.
PREFERRED STOCK
Our board of directors is authorized, subject to limitations prescribed
by law, without further stockholder approval, to issue from time to time up to
20,000,000 shares of preferred stock and to determine the price, rights,
preferences and privileges of those shares. The terms of our preferred stock and
the rights of our holders of preferred stock may adversely affect the rights of
our common stockholders. While we have no present intention to issue shares of
preferred stock, an issuance of preferred stock with special voting or other
rights could have the effect of making it more difficult for a third party to
acquire a majority of our outstanding voting stock. In addition, preferred stock
may have other rights that could negatively impact the market value of our
common stock.
WARRANTS
We have reserved 10,000,000 shares of common stock to be issued upon
the exercise of warrants we will award to members through our membership award
program. Warrant holders, as such, are not entitled to vote on matters submitted
to a vote of our stockholders or to receive notice as stockholders in connection
with any stockholders meeting. Further, warrant holders are not entitled to any
distribution of net assets made to the stockholders in a liquidation,
dissolution or winding up of takes.com or in any distribution of dividends.
Finally, warrant holders have no preemptive, subscription or redemption rights.
ISSUANCE. We intend to issue warrants to persons in exchange for
visiting our Web site. All persons visiting our Web site will be given the
opportunity to register with us as members. New members will receive one warrant
for registering with us. After registering with us, members will receive one
warrant each day that they visit our Web site. From time to time, members may be
required to answer a question or give an opinion in order to earn their daily
warrant for visiting our site. In addition, we may award warrants to users who
use our Web site for extended periods of time. Currently, members may earn a
maximum of one warrant per day. In addition, we intend to hold periodic contests
and other events which will permit our members to earn additional warrants.
Warrants earned in contests, promotions and other events will not be included in
the one warrant per day limit.
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<PAGE> 43
Warrants will exist in book entry form only and will not be
certificated. Members will be able to verify the number of warrants they have
accumulated on our Web site. We will only issue warrants to individuals that are
United States residents possessing Social Security numbers. We reserve the right
to cease issuing warrants to users at any time.
TERMS OF EXERCISE. The warrants that we initially issue may be
exercised for one share of our common stock once a holder has accumulated at
least 30 warrants. We may alter the exercise ratio from time to time in the
future. However, any change in the exercise ratio will affect only warrants
issued following notice of the change and will not affect any warrants then
outstanding. To exercise their warrants, holders will be required to tender a
request to us. Warrants may not be exercised for common stock until 180 days
after the closing of our initial public offering and may only be exercised once
a holder has accumulated the number of warrants required for a single share of
stock. Fractional shares of common stock will not be issued upon exercise of our
warrants and tenders of other than round lots will be rounded down to the
nearest whole share.
EXPIRATION. Warrants will have a term which expires on the tenth
business day of the calendar year following the calendar year after the calendar
year in which the warrants were earned. At our election, we may terminate
warrants prior to that date if a member has not accessed our Web site at least
once during any period of 60 consecutive days and if the member has earned less
than 30 warrants. Warrants not exercised prior to expiration will be canceled
and may be reissued under our membership award program.
TRANSFER. Our warrants will not be publicly traded and are not
transferable under any circumstances except upon the death of a warrant holder.
TRANSFER AGENT
The transfer agent for our common stock is Norwest Shareowner Services,
Minneapolis, Minnesota.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation limits the liability of directors to
the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (1) any
breach of their duty of loyalty to the corporation or its stockholders, (2) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) unlawful payments of dividends or unlawful stock
repurchases or redemptions or (4) any transaction from which the director
derived an improper personal benefit. This limitation of liability does not
apply to liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission. Our certificate of incorporation and bylaws provide that we shall
indemnify our directors and executive officers and may indemnify our other
officers and employees and other agents to the fullest extent permitted by law.
We believe that indemnification under our bylaws covers at least negligence and
gross negligence on the part of indemnified parties. Our bylaws also permit us
to secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in that capacity, regardless
of whether the bylaws would permit indemnification. We believe that these
provisions are necessary to attract and retain qualified persons as directors
and executive officers. At present, we are not aware of any pending or
threatened litigation or proceeding involving a director, officer, employee or
agent in which indemnification would be required or permitted.
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<PAGE> 44
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of material U.S. federal income
tax considerations applicable to holders of warrants issued under our membership
award program and those who acquire common stock upon exercise of warrants. This
summary is based on provisions of the Internal Revenue Code of 1986, Treasury
Regulations, including temporary and proposed Regulations, rulings and decisions
currently in effect, all of which may be changed with possible retroactive
effect. This discussion does not encompass all of the aspects of federal
taxation that may be relevant to our investors in light of their personal
investment circumstances, nor does it discuss federal income tax considerations
applicable to investors receiving special treatment under the federal income tax
laws. Investors receiving special treatment may include life insurance
companies, tax exempt organizations and financial institutions. Further, this
discussion does not consider the effect of any foreign, state, local, gift,
estate or other tax laws that may be applicable to a particular investor. Our
discussion assumes that investors will hold our warrants and common stock as
capital assets within the meaning of Section 1221 of the Code. Prospective
investors are strongly urged to consult their tax advisors regarding the
particular tax consequences that may apply to them as a result of purchasing,
holding and disposing of our warrants and common stock.
We will only offer and issue our warrants to individuals that are U.S.
Holders. A "U.S. Holder" means a citizen or resident of the United States or
individuals otherwise subject to U.S. federal income taxation on a net income
basis with respect to our warrants. This discussion does not consider the tax
consequences applicable to non-U.S. Holders. Holders may not sell our warrants
and the warrants are not transferable except upon the death of a holder. In
addition, our warrants are not redeemable by us.
TAX TREATMENT OF WARRANTS
CHARACTERIZATION OF OUR WARRANTS. We expect the warrants that holders
receive when they register with us to be characterized as warrants or options,
and not as equity, for federal income tax purposes. It is possible, however,
that the warrants will be characterized for federal income tax purposes as
shares of equity due to, among other things, their nominal (zero) exercise price
and lack of any meaningful contingency regarding issuance of the underlying
shares. The following discussion assumes that the warrants we are offering will
be properly characterized as warrants but also describes, as appropriate, any
differing federal income tax treatment if the warrants are treated as common
stock.
ISSUANCE. We will issue each holder one warrant for registering with us
on our Web site in exchange for personal information provided by the holder. The
value of these warrants will be includible in the holder's gross income as an
item of ordinary income under Code Sections 61 and 1221(3). This income will not
be subject to self-employment taxes under Code Section 1401. After their initial
registration with us, we will issue to holders one warrant for each day they
visit our Web site. In the future, we may award warrants to holders who use our
Web site for extended periods of time. We will issue these warrants to holders
in exchange for the services they are providing to us, specifically, logging
onto, and remaining on, our Web site. The value of the warrants received by
holders for their services will be includible in their gross income as an item
of ordinary income under Code Section 61(a)(1). This income will be subject to
self-employment taxes under Code Section 1401. However, because the fair market
value of the warrants will not be readily ascertainable when issued, the holder
will not be required to recognize any income until the warrants are exercised
and a value can be assigned to them.
EXERCISE. Initially, we will be offering to members warrants which may
be exercised for shares of our common stock on a 30 for one basis. Upon
exercise, a holder's warrants will have a readily ascertainable fair market
value equal to 1/30th of the value of one share of our common stock on the
exercise date. With respect to each warrant, holders will recognize ordinary
income equal to the value of 1/30th of one share of our common stock on the
exercise date. The fair market value of our common stock on the exercise date
will be determined by the closing price for the shares on the Nasdaq National
Market or other applicable trading market on that date. For tax purposes, the
holding period of the common stock acquired upon a holder's exercise of warrants
will not include the holding period of the warrants. Upon a sale of the common
stock by the holder, the holding period determines whether long or short term
capital gain treatment is applicable.
-42-
<PAGE> 45
CONSTRUCTIVE EXERCISE. Because, among other things, the exercise price
of each warrant issued is nominal (zero), the Internal Revenue Service could
consider the warrants to be constructively exercised for federal income tax
purposes on the day they become exercisable. If the warrants are deemed
constructively exercised,
- the holder will recognize ordinary income equal to the value of
1/30th of the fair market value of one share of our common stock
on the date of constructive exercise;
- the adjusted tax basis of the common stock deemed to be received
will equal the fair market value of the common stock on the date
of constructive exercise;
- the holding period of the common stock will begin on the day
after the warrant becomes exercisable; and
- the federal income tax consequences of the ownership and
disposition of the warrant will be the same as if the warrant
was actually common stock.
TAX BASIS IN OUR COMMON STOCK. When a warrant is exercised, a holder
will acquire basis in our common stock equal to the amount of income the holder
is required to recognize upon exercise of the warrant.
LAPSE. If a warrant received is not exercised and is allowed to expire,
the holder will not recognize any gain or loss in connection with the expiration
of the warrant.
TAX TREATMENT TO TAKES.COM OF WARRANT ISSUANCE AND EXERCISE. We will
not recognize a taxable gain or loss upon the issuance or exercise of warrants
issued upon registration. Upon exercise of warrants issued for services, we
expect to be allowed a deduction for ordinary and necessary business expenses
under Code Section 162(a)(1) in an amount equal to the amount of income
recognized by holders on their exercise of the warrants. We will not recognize a
gain or loss upon the expiration of any of our warrants.
Because, among other things, each issuance of a warrant may require the
holder to answer questions of personal preference, the IRS could characterize
the issuance of warrants for logging onto and remaining on our Web site as an
exchange for personal information. If the issuance of these warrants is
characterized as an exchange for personal information, the issuance of the
warrants will be taxable to both the holders and to us in the same manner as the
warrants issued to holders for initially registering with us. The holders would
not be subject to self-employment taxes under Code Section 1401 on the value of
the warrants. We would not be allowed a deduction equal to the value of the
warrants under Code Section 162(a)(1).
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under federal income tax law, a holder of warrants or common stock may,
under some circumstances, be subject to "backup withholding" unless the holder
provides a correct taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. The withholding rate is 31% of
"reportable payments," which include dividends or proceeds from a sale or
redemption. In the event any holder exercises warrants received for visiting and
remaining on our Web site with a cumulative value of $600 or more at the time of
exercise during any calendar year, we will issue the holder a Form 1099-Misc
reporting the value of these warrants.
REFUNDS
Any amounts withheld under the backup withholding rules from a payment
to a holder will be allowed as a refund or a credit against the holder's United
States federal income tax liability, provided that the required information is
furnished to the IRS.
-43-
<PAGE> 46
OTHER TAX CONSIDERATIONS
There may be other federal, state, local or foreign tax considerations
applicable to a particular holder or prospective purchaser of our warrants and
common stock. ACCORDINGLY, EACH HOLDER OR PROSPECTIVE PURCHASER OF OUR WARRANTS
AND COMMON STOCK SHOULD CONSULT HIS, HER OR ITS TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO THE HOLDER OR PROSPECTIVE PURCHASER OF PURCHASING, HOLDING
AND DISPOSING OF OUR WARRANTS AND COMMON STOCK.
-44-
<PAGE> 47
UNDERWRITING
Subject to the terms and conditions of our underwriting agreement, the
underwriters named below have agreed to purchase from us the number of shares of
common stock shown opposite their names below.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Paradise Valley Securities, Inc.
----------------
Total 2,825,000
================
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters to purchase and accept delivery of the shares of common stock
offered by this prospectus are subject to approval of legal matters by their
counsel and to other conditions. The underwriters are obligated to purchase and
accept delivery of all the shares of common stock offered by us for cash (other
than those shares covered by the over-allotment option described below) if any
are purchased.
The underwriters initially propose to offer the shares of common stock
offered by takes.com for cash in part directly to the public at the initial
public offering price shown on the cover page of this prospectus and in part to
some dealers (including the underwriters) at this price less a concession not in
excess of $____ per share. The underwriters may allow, and these dealers may
re-allow, to other dealers a concession not in excess of $____ per share. After
the initial public offering of the common stock, the public offering price and
other selling terms may be changed by the representative of the underwriters at
any time without notice. The underwriters do not intend to confirm sales to any
accounts over which they exercise discretionary authority.
We have granted to the underwriters an option, exercisable within 45
days after the date of this prospectus, to purchase, from time to time, in whole
or in part, up to an aggregate of 423,750 additional shares of common stock at
the initial public offering price less underwriting discounts and commissions.
The underwriters may exercise their option solely to cover over-allotments, if
any, made in connection with the initial public offering. To the extent that the
underwriters exercise their option, each underwriter will become obligated,
subject to conditions contained in the underwriting agreement, to purchase its
pro rata portion of the additional shares based on the underwriter's percentage
of the underwriting commitment as indicated above.
We have agreed to indemnify the underwriters against some liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments that the underwriters may be required to make in connection with these
liabilities.
The following table summarizes the compensation to be paid to the
underwriters by takes.com.
<TABLE>
<CAPTION>
Total
------------------------------
Per Without With
Share Over-allotment Over-allotment
----- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
paid by takes.com....................................
Non-accountable expense allowance......................
</TABLE>
We will also grant the underwriters warrants to purchase up to 282,500
shares of our common stock at an exercise price per share equal to 165% of the
initial per share public offering price. The underwriters' warrants are
exercisable for a period of four years beginning one year from the close of our
initial public offering.
The holders of the underwriters' warrants will have no voting, dividend
or other stockholder rights until the underwriters' warrants are exercised. The
terms of the underwriters' warrants were established as the result of
-45-
<PAGE> 48
negotiations between the representative of the underwriter and us. If the
underwriters' warrants are exercised, the underwriters may realize additional
compensation. By their terms, the underwriters' warrants will be restricted from
sale, transfer, assignment or hypothecation, except to persons that are officers
of the underwriters. The number of shares covered by the underwriters' warrants
and the exercise price may be adjusted to prevent dilution. In addition, we have
granted rights to the holders of the underwriters' warrants to register the
underwriters' warrants and the common stock underlying the warrants under the
Securities Act.
We estimate that the total expenses of our offering will be
approximately $600,000, excluding underwriting discounts and commissions and the
non-accountable expense allowance payable to the underwriters.
Our directors and officers have entered into lock-up agreements with
the underwriter which provide that they will not offer, sell or otherwise
dispose of any common stock for a period of 180 days after the commencement of
the offering without the prior written consent of Paradise Valley Securities.
Paradise Valley Securities has no present intention to release the locked-up
shares prior to expiration of the 180-day period although Paradise Valley
Securities may release the locked-up shares prior to the expiration of this
period. The granting of any release would be conditioned, in the judgment of
Paradise Valley Securities, on the sale not materially adversely impacting the
prevailing trading market for the common stock on the Nasdaq National Market.
Specifically, factors including average trading volume, recent price trends, and
the need for additional public float in the market for the common stock would be
considered in evaluating a request to sell securities prior to the end of the
lock-up period.
Prior to the initial public offering, there has been no established
trading market for our common stock. The initial public offering price for the
shares of common stock offered by us for cash will be determined by negotiation
among us and the representative of the underwriters. Among the factors to be
considered in determining the initial public offering price will be:
- the history of and the prospects for the industry in which we
compete;
- our limited prior operations;
- our lack of historical results of operations;
- our prospects for future earnings;
- the recent market prices of securities of generally comparable
companies; and
- the general condition of the securities markets at the time of
the initial public offering.
Other than in the United States, no action has been taken by takes.com
or the underwriters that would permit a public offering of the shares of common
stock offered in any jurisdiction where action for that purpose is required. The
shares of common stock offered may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any shares of common
stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of that jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of any offer to buy any
shares of common stock included in the offering in any jurisdiction where that
would not be permitted or legal.
The underwriters have advised us that, under Regulation M of the
Securities Act, some persons participating in the offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the shares of common stock at a level above that
which might otherwise prevail in the open market. A "stabilizing bid" is a bid
for or the purchase of shares of common stock on behalf of the underwriters for
the purpose of fixing or maintaining the price of the common stock. A "syndicate
covering transaction" is the bid for or purchase of
-46-
<PAGE> 49
common stock on behalf of the underwriters to reduce a short position incurred
by the underwriters in connection with the offering. A "penalty bid" is an
arrangement permitting the representative to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with the
offering if the common stock originally sold by that underwriter or syndicate
member was purchased by the representative in a syndicate covering transaction
and has therefore not been effectively placed by the underwriter or syndicate
member. The representative has advised us that the transactions described above
may be effected on the Nasdaq National Market or otherwise and, if commenced,
may be discontinued at any time.
The underwriting agreement provides that we will indemnify the
underwriters and their controlling persons against liabilities under the
Securities Act or will contribute to payments the underwriters and their
controlling persons may be required to make with respect to these liabilities.
-47-
<PAGE> 50
LEGAL MATTERS
The validity of the common stock and warrants offered by this
prospectus will be passed upon for us by Pedersen & Houpt, P.C., Chicago,
Illinois. Legal matters specified by the underwriters in connection with our
initial public offering will be passed upon by Bryan Cave LLP, Phoenix, Arizona.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the financial
statements of America's Home Page, Inc., (known as takes.com effective June 17,
1999) as of March 31, 1999 and for the period from March 16, 1999 (inception)
through March 31, 1999, as described in their report. We have included our
financial statements in this prospectus and registration statement in reliance
on Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
common stock and warrants we are offering. This prospectus does not contain all
of the information contained in the registration statement and the exhibits and
schedules to the registration statement. For further information with respect to
takes.com and the common stock and warrants we are offering , reference is made
to the registration statement and to the attached exhibits and schedules.
Statements made in this prospectus concerning the contents of any document are
not necessarily complete. With respect to each document filed as an exhibit to
the registration statement, reference is made to the exhibit for a more complete
description of the matter involved. The registration statement and the attached
exhibits and schedules may be inspected without charge at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of all or any part of the
registration statement may be obtained from the SEC upon payment of prescribed
fees. Reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission may also be inspected
without charge at a Web site maintained by the SEC at http://www.sec.gov.
-48-
<PAGE> 51
AMERICA'S HOME PAGE, INC.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF AMERICA'S HOME PAGE, INC.
<TABLE>
<CAPTION>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors ..................................... F-2
Balance Sheet as of March 31, 1999 .................................................... F-3
Statement of Operations for the period from March 16, 1999 (inception)
through March 31, 1999 .......................................................... F-4
Statement of Changes in Stockholders' Equity for the period from March 16, 1999
(inception) through March 31, 1999 .............................................. F-5
Statement of Cash Flows for the period from March 16, 1999 (inception)
through March 31, 1999 .......................................................... F-6
Notes to Financial Statements ......................................................... F-7
</TABLE>
F-1
<PAGE> 52
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
America's Home Page, Inc.
We have audited the accompanying balance sheet of America's Home Page, Inc. (a
development stage company) and the related statements of operations, changes in
stockholders' equity and cash flows for the period from March 16, 1999
(inception) through March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of America's Home Page, Inc. at
March 31, 1999 and the results of its operations and its cash flows for the
period from March 16, 1999 (inception) through March 31, 1999 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Phoenix, Arizona
May 5, 1999
F-2
<PAGE> 53
AMERICA'S HOME PAGE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Current assets:
Receivable from stockholder $ 1,000,000
Prepaid offering costs 4,228
-----------
Total current assets
1,004,228
Other assets --
-----------
Total assets $ 1,004,228
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,130
-----------
Total current liabilities 23,130
Stockholders' equity:
Common stock, par value $0.001:
Authorized shares - 30,000,000
Issued and outstanding shares - 12,900,000 12,900
Additional paid-in capital 1,165,718
Deficit accumulated during the development stage (197,520)
-----------
Total stockholders' equity 981,098
-----------
Total liabilities and stockholders' equity $ 1,004,228
===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 54
AMERICA'S HOME PAGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
PERIOD FROM MARCH 16, 1999 (INCEPTION) TO MARCH 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Net revenues $ --
Costs and expenses:
Selling, general and administrative 18,902
Research and development 178,618
------------
197,520
------------
Net loss $ (197,520)
============
Net loss per share-basic and diluted $ (0.02)
============
Number of shares used in per share calculation-basic and diluted 11,784,470
============
</TABLE>
See accompanying notes.
F-4
<PAGE> 55
AMERICA'S HOME PAGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
MARCH 31, 1999
<TABLE>
<CAPTION>
Deficit Accum-
Common Stock Additional ulated During Total
Paid-In the Development Stockholders'
Date Shares Amount Capital Stage Equity
---- ------ ------ ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance - $ - $ - $ - $ -
Issuance of common
stock to founders for
services March 16, 1999 9,900,000 9,900 168,718 - 178,618
Sale of common stock
for cash March 21, 1999 151,515 152 49,848 - 50,000
Sale of common stock
for cash March 22, 1999 2,848,485 2,848 947,152 - 950,000
Net loss - - - (197,520) (197,520)
---------- ------- ---------- --------- ---------
Balance at March 31, 1999 12,900,000 $12,900 $1,165,718 $(197,520) $ 981,098
========== ======= ========== ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE> 56
AMERICA'S HOME PAGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 16, 1999 (INCEPTION) TO MARCH 31, 1999
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net loss $ (197,520)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Increase in accounts payable 18,902
Expenses paid by stockholders 178,618
-----------
Net cash provided by operating activities --
INVESTING ACTIVITIES --
FINANCING ACTIVITIES
-----------
Net increase in cash --
Cash at beginning of period --
-----------
Cash at end of period $ --
===========
NON-CASH ACTIVITY
Stock subscribed by stockholders $ 1,000,000
Prepaid offering costs in accounts payable 4,228
</TABLE>
See accompanying notes.
F-6
<PAGE> 57
AMERICA'S HOME PAGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
America's Home Page, Inc. (the "Company") is a development stage
company formed on March 16, 1999. The Company's fiscal year ends on
December 31 of each year. The Company plans to launch a gateway to the
World Wide Web which management expects to attract and sustain a broad
and loyal base of Internet users by giving these users warrants that
when accumulated are convertible into a share of common stock in
exchange for qualifying activity at the Company's Web site.
BASIS OF PRESENTATION
To date, the Company's operations have consisted primarily of the
development of an Internet Web site. To be successful, the Company
needs to develop and test its Web site as well as its database and
network capabilities to meet the demands of its anticipated future
users. The Company may also need to raise additional capital to carry
out its business plans. In addition, there is some uncertainty about
whether the Company's business model will be accepted by potential
users as well as future advertisers and business partners. The Company
has not generated any revenue to date. To achieve viability, the
Company must ultimately generate sufficient revenue from its Web site
to cover its expenses.
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 amounts reported in the financial
statements and accompanying notes. Actual results could differ
significantly from those estimates.
RECEIVABLE FROM STOCKHOLDER
Receivable from stockholder represents two subscriptions to purchase
3,000,000 shares of the Company's common stock for $1,000,000. These
subscriptions were collected on April 6, 1999 and accordingly, the
receivable is classified as a current asset. The subscribers are not
related to the Company other than as stockholders.
MEMBERSHIP AWARD PROGRAM
The Company expects to incur non-cash costs with respect to warrants to
be issued as incentives to qualifying users of its Web site. Users of
the Web site are issued warrants that are exercisable for shares of the
Company's common stock as is described in Note 2. Expense will be
recognized at the time of warrant issuance for the estimated fair value
of the number of warrants issued that the Company expects will
ultimately be converted into shares of common stock. Until the Company
establishes reasonably predictable information with which to estimate
the number of warrants issued that will ultimately be converted, it
will only reduce warrant issuance expenses for the actual expense
previously recorded for warrants issued that have expired.
F-7
<PAGE> 58
AMERICA'S HOME PAGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RESEARCH AND DEVELOPMENT COSTS
Research and development costs include expenses incurred by the Company
to develop, enhance, manage, monitor and operate the Company's Web
site. Such costs are expensed as incurred.
INTERIM FINANCIAL INFORMATION
Operating results for the period from March 16, 1999 (inception) to
March 31, 1999 are not necessarily indicative of results that may be
expected for any future periods.
RECIPROCAL ARRANGEMENTS
The Company has entered into several arrangements whereby it provides a
presence on its Web site for a third party in exchange for reciprocal
treatment on that party's Web site. Such agreements vary as to
formality of the agreement and term, if any. The Company does not
record revenue or expense with respect to such arrangements since such
services are similar in nature. The Company also does not have a basis
upon which it could otherwise objectively measure such amounts.
2. WARRANT ISSUANCE, CONVERSION AND VALUATION
The Company has reserved 10 million shares of common stock for issuance
under its membership award program. Under the present program, the
Company plans to issue warrants to users of its Web site that are
initially convertible into common stock on the basis of 30 warrants
being convertible into one share of common stock for no additional
consideration. Once an Internet user registers with the Company, the
user will earn one warrant each day they visit the Company's Web site.
Warrants may also be earned in connection with contests and other
events periodically held by the Company. In the future, warrants may be
awarded to users who use the Company's Web site for extended periods of
time.
Warrants held by users will be maintained by the Company on its books
in uncertificated form and will be displayed on the user's individual
home page. Warrants expire at the earlier of the tenth business day of
the calendar year following the calendar year after the warrants were
earned or at the end of 60 days if the site has not been accessed for
60 days and the user has earned fewer than 30 warrants.
The Company estimates that the fair value of the warrants will be an
amount discounted from the related share of common stock into which
they may be converted, adjusted for the conversion ratio, initially set
at 30 for one. Accordingly, the related costs for the issuance of
warrants by the Company will be based upon the estimated fair value of
the total warrants issued each day based upon the closing market price
of the underlying common stock on the date the warrants are awarded. As
is discussed in Note 1, the Company may change the number of issued
warrants upon which expense will be computed when it has developed
information from which it can reasonably estimate the number of
warrants which will be ultimately converted.
The Company will not permit warrants to be exercised until 180 days
after its initial public offering.
F-8
<PAGE> 59
AMERICA'S HOME PAGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' EQUITY
On March 16, 1999, the Company issued 9,900,000 shares of common stock
to the founding stockholders of the Company in consideration for
services provided on behalf of the Company substantially all of which
was prior to its formation. The founding stockholders' historic cost
basis in the consideration given was $178,618 which related principally
to previously performed research and development activities relating to
the development of the Company's Web site and content. The amounts were
determined based upon the respective stockholders' actual costs
incurred through March 31, 1999.
4. LEASES
The Company assumed a lease from one of its stockholders from where it
conducts its primary business operations. Under the terms of the lease,
the Company must pay monthly rent of $2,256 through March 31, 2000.
5. INCOME TAXES
The Company has not yet determined whether the expense it will record
through the warrant issuance program will be deductible for federal
income tax purposes. Until such time as it obtains a favorable ruling
from the Internal Revenue Service, or otherwise determines that such
amounts will be deductible for income tax purposes, the Company does
not intend to account for such amounts as tax deductible.
At March 31, 1999, the Company had no net operating loss carryforwards
since its initial operating expenses are presently expected to be
capitalized for income tax purposes as start-up costs. Such start-up
costs generated approximately $70,000 of deferred tax assets which are
fully reserved for financial reporting purposes based on the Company's
initial losses.
The Company's income tax provision differs from the federal statutory
rate by such rate given that the Company incurred operating losses and
any related deferred tax benefits are fully reserved.
6. SUBSEQUENT EVENTS
1999 STOCK OPTION PLAN
The 1999 Stock Option Plan was adopted by the Board of Directors and
stockholders in May 1999. The plan was established to attract, retain
and motivate selected employees and officers. The Company has reserved
2,800,000 shares of common stock for issuance under this plan.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Non-Employee Director Stock Option Plan was adopted by the Board of
Directors and stockholders in May 1999. The plan was established to
attract and compensate the Company's non-employee directors. The
Company has reserved 150,000 shares of common stock for future issuance
under this plan. It is presently anticipated that options to purchase
shares will be granted with an exercise price equal to the fair
F-9
<PAGE> 60
AMERICA'S HOME PAGE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
value of the related common stock. Under present accounting rules,
there would be no expense recorded relating to such options. However,
there are proposed changes in accounting rules covering non-employee
directors that, if adopted, could result in future charges to expense
under this plan.
INDEPENDENT CONTRACTOR STOCK OPTION PLAN
The Independent Contractor Stock Option Plan was adopted by the Board
of Directors and stockholders in May 1999. The plan was established to
provide the Company with a non-cash alternative for compensating
third-party service providers to the Company. The Company has reserved
150,000 shares of common stock for issuance under this plan. The
Company will record expense with respect to options granted under this
plan in accordance with Statement of Financial Accounting Standards
Number 123.
OFFICE LEASE AMENDMENT
Subsequent to March 31, 1999, the Company entered into an amendment to
its office lease whereby the Company leased additional space. The
monthly rent is now $5,345 for the remaining term of the lease (through
March 2000).
THIRD PARTY ARRANGEMENTS
Subsequent to March 31, 1999, the Company has entered into arrangements
with various providers of goods and services over the Internet. These
arrangements generally provide for the payment of commissions or fees
to the Company for goods purchased from such Web sites and/or the
payment of fees based on the number of site visits logged through the
Company's Web site. Revenues will be recorded at the time of the
product sale or the site visit, once collectibility is deemed probable.
NAME CHANGE
On June 17, 1999, the Company's stockholders agreed to change the
Company's name to takes.com, inc.
F-10
<PAGE> 61
takes.com, inc.
Until _______, 1999, all dealers that effect transactions in these securities,
whether or not participating in our initial public offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE> 62
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be borne by
the Company in connection with the registration, issuance and distribution of
the securities to be registered by this registration statement, other than
underwriting discounts and commissions. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq application fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee $ 8,129
NASD filing fee 3,424
Nasdaq application fee 95,000
Accounting fees 75,000
Printing and engraving expenses 125,000
Legal fees and expenses 250,000
Transfer agent fees 20,000
Miscellaneous expenses 23,447
--------
Total $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "Delaware
Act") authorizes indemnification of directors, officers, employees and agents of
the Company; allows the advancement of costs of defending against litigation;
and permits companies incorporated in Delaware to purchase insurance on behalf
of directors, officers, employees and agents against liabilities whether or not
in the circumstances such companies would have the power to indemnify against
such liabilities under the provisions of the statute.
The Company's certificate of incorporation provides for indemnification
of the Company's officers and directors to the fullest extent permitted by
Section 145 of the Delaware Act. The Company intends to obtain directors and
officers insurance covering its executive officers and directors.
The certificate eliminates, to the fullest extent permitted by Delaware
law, liability of a director to the Company of its stockholders for monetary
damages for a breach of such director's fiduciary duty of care except for
liability where a director: (a) breaches his or her duty of loyalty to the
Company or its stockholders; (b) fails to act in good faith or engages in
intentional misconduct or knowing violation of law; (c) authorizes payment of an
illegal dividend or stock repurchase; or (d) obtains an improper personal
benefit. While liability for monetary damages has been eliminated, equitable
remedies such as injunctive relief or rescission remain available. In addition,
a director is not relieved of his or her responsibilities under any other law,
including the federal securities laws.
Insofar as indemnification by the Company for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, the Company has
been advised that in the opinion of the Securities and Exchange Commission ,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In March 1999, we issued 100 shares of our common stock, par value
$.001 per share, to our co-founder, Peter L. Ax, in connection with our
incorporation. On March 16, 1999, we issued 2,999,900 shares of common stock to
Mr. Ax and 2,100,000 shares of common stock to Joel W. Cohen for founding the
Company and for services rendered, amounts expended and costs incurred by them
prior to the Company's incorporation. On March 16, 1999, we issued 900,000
shares to Michael Cohen for services rendered by him. On March 16, 1999, we also
II-1
<PAGE> 63
issued 3,000,000 shares of common stock to SpinCycle, Inc. for services rendered
by its employees on our behalf and for relinquishing its interest in the
business concept for takes.com.
In March 1999, we issued a total of 900,000 shares of our common stock
to two principals of Silvervision Entertainment Group, LLC, 300,000 to David S.
Bellino and 600,000 to Dale L. Sokolov, for Web site development services
rendered by Silvervision through March 31, 1999. Mr. Bellino is our Vice
President of Production and Mr. Sokolov is our Vice President of Business
Development. Silvervision agreed to assign to us all of its right, title and
interest in our Web site as of March 31, 1999. Messrs. Bellino and Sokolov also
granted us an option to purchase, for no cash consideration, an option to
acquire their collective 33.4% interest in Illusion Networks, LLC which owns
interactive video technology for Internet applications. The grant of this option
is subject to the consent of Silvervision, the third member of Illusion
Networks. Mr. Bellino was the president and chief executive officer of
Silvervision and Illusion Networks. Under an arrangement with the stockholders
of Silvervision, Mr. Sokolov will transfer to them 300,000 shares of our common
stock. As of June 18, Mr. Sokolov still owned these shares.
In March 1999, we commenced an offering of up to $1,500,000 of our
common stock at an offering price of approximately $.33 per share. We sold
3,000,000 shares of our common stock for an aggregate purchase price of
$1,000,000. We offered our common stock to "accredited investors" only. In
connection with our private offering of common stock, we rely upon the
exemptions from the Section 5 registration requirements contained in Section
4(2) of the Securities Act and the safe harbor provided in Rule 506 of
Regulation D. Our offering was conducted without any general solicitation and
the investors were required to represent that they were purchasing for
investment and not with a view toward resale.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits to the Registration Statement are listed in the Exhibit
Index which appears elsewhere in this Registration Statement and is incorporated
herein by this reference.
All schedules are omitted because of the absence of the condition under
which they are required or because the information is included in the
consolidated financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-2
<PAGE> 64
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) 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 421(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(5) 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 the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such 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 directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 14 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment no. 1 to its registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Diego, in the State of California, on June 22, 1999.
takes.com, inc.
By: /s/ JOEL W. COHEN
-------------------------------------
Joel W. Cohen
Chief Executive Officer
II-4
<PAGE> 66
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Peter L. Ax, as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
to act, for him and in his name, place and stead, in any and all capacities, to
sign any or all amendments (including post-effective amendments) to this
registration statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue hereof. Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed by the following persons in
the capacities indicated on June 22, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ JOEL W. COHEN President and Chief Executive Officer
------------------------ (Principal Executive, Financial and Accounting Officer)
Joel W. Cohen
/s/ PETER L. AX Chairman of the Board
------------------------
Peter L. Ax
/s/ TODD D. SIMS Director
------------------------
Todd D. Sims
</TABLE>
II-5
<PAGE> 67
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
<S> <C> <C>
1.1 Underwriting Agreement+
1.2 Warrant Agreement between Underwriters and the Company+
3.1 Certificate of Incorporation of the Company as filed on March 16, 1999*
3.2 Certificate of Amendment to the Certificate of
Incorporation as filed on June 17, 1999
3.3 Form of Amended and Restated Certificate of Incorporation of the Company
3.4 Bylaws of the Company
4.1 Form of Warrant Agreement between the Company and Members
5.1 Form of Legal Opinion of Pedersen & Houpt, P.C.
5.2 Form of Tax Opinion of Pedersen & Houpt, P.C.
10.1 Agreement with GoTo.com, Inc.*
10.2 Agreement with Verio, Inc.
10.3 Contractor Work Agreement dated April 7, 1999 between the Company and Jedi
Group, Inc.*
10.4 1999 Stock Option Plan
10.5 Non-Employee Director Stock Option Plan
10.6 Independent Contractor Stock Option Plan
10.7 Content Distribution Agreement dated May 19, 1999 between the Company and
InfoSpace.com, Inc.
23.1 Consent of Pedersen & Houpt, P.C.
23.2 Consent of Ernst & Young LLP
23.3 Consent of Donald R. Diamond
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule*
</TABLE>
- ----------
* Previously filed.
+ To be filed by amendment.
II-6
<PAGE> 1
EXHIBIT 3.2
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
---------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "AMERICA'S HOME PAGE, INC.", CHANGING ITS NAME FROM "AMERICA'S HOME PAGE,
INC." TO "TAKES.COM, INC.", FILED IN THIS OFFICE ON THE SEVENTEENTH DAY OF
JUNE, A.D. 1999, AT 1 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[STATE SEAL]
3017290 8100 AUTHENTICATION: 9812363
991244859 DATE: 06-18-99
<PAGE> 2
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AMERICA'S HOME PAGE, INC.
(A DELAWARE CORPORATION)
*****
AMERICA'S HOME PAGE, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST:
That the Shareholder and the Board of Directors of the Corporation,
PURSUANT TO SECTIONS 141, 242 AND 228 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE, adopted a resolution declaring the adoption
of the following amendment to the Certificate of Incorporation of the
Corporation:
ITEM FIRST OF THE CERTIFICATE OF INCORPORATION SHALL READ AS FOLLOWS
IN ITS ENTIRETY:
FIRST: THE NAME OF THE CORPORATION (HEREINAFTER CALLED THE
"CORPORATION") IS: takes.com, inc.
DATED: June 17, 1999
AMERICA'S HOME PAGE, INC.
/s/ Susan Hermann
-----------------------------------
By: Susan Hermann
Its: Assistant Secretary
<PAGE> 1
Exhibit 3.3
FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF TAKES.COM, INC.
(Incorporated on March 16, 1999)
TAKES.COM, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: Pursuant to Section 242 and 245 of the General Corporation Law of
the State of Delaware (the "Delaware Law"), the Certificate of Incorporation of
TAKES.COM, INC., a Delaware corporation (the "Corporation"), is hereby
restated and amended to read in its entirety as follows:
AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION
----------------
FIRST: The name of the Corporation is TAKES.COM, INC.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Eighty Million (80,000,000) shares consisting of:
Sixty Million (60,000,000) shares of common stock with a par
value of $.001 per Share (the "Common Stock"); and
Twenty Million (20,000,000) shares of preferred stock, with a par
value of $.001 per share (the "Preferred Stock").
Except as otherwise required by law or expressly provided herein, the
holder of each share of Common Stock shall have one vote on each matter
submitted to a vote of the stockholders of the Corporation.
The holders of the Common Stock shall be entitled to receive dividends at
such times and in such amounts as may be determined by the Board of Directors of
the Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation, the holders of
Common Stock, shall be entitled to share ratably in the remaining assets of the
Corporation.
<PAGE> 2
The holders of the Preferred Stock shall be entitled to such rights and
preferences as may be approved from time to time by the Board of Directors of
the Corporation as set forth in a Certificate of Designation filed pursuant to
the Delaware Law.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The following provisions are included for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
1. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-laws of the Corporation, subject to any limitation
thereof contained in the By-laws. The stockholders shall also have the power to
adopt, amend or repeal the By-laws of the Corporation; provided, however, that,
in addition to any vote of the holders of capital stock of the Corporation
required by law or by this Amended and Restated Certificate of Incorporation,
the affirmative vote of the holders of at least seventy-five percent (75%) of
the voting power of all of the then outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors shall be
required to adopt, amend or repeal any provision of the By-laws of the
Corporation.
2. The stockholders of the Corporation may not take any action by written
consent in lieu of a meeting.
3. Special meetings of stockholders may be called at any time only by the
Chairman of the Board of Directors, the President or a majority of the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting.
4. The books of the Corporation may be kept at such place within or
without the State of Delaware as the By-laws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
5. Election of directors need not be by written ballot unless the By-laws
of the Corporation so provide.
SEVENTH:
2
<PAGE> 3
1. Number of Directors. The number of directors which shall constitute
the whole Board of Directors shall be not less than three as determined by
resolution of a majority of the Board of Directors then in office. The number of
directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the Corporation.
2. Increases or Decreases in the Number of Directors. In the event of any
increase or decrease in the authorized number of directors, each director then
serving as such shall nevertheless continue as director until the expiration of
such director's current term or his or her prior death, retirement or
resignation. No decrease in the number of directors constituting the whole Board
of Directors shall shorten the term of an incumbent director.
3. Removal. Following the Initial Public Offering Date, any one or more
or all of the directors may be removed, with or without cause, by the holders of
at least a majority of the shares then entitled to vote at an election of
directors.
4. Stockholder Nominations and Introduction of Business, Etc. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided in the By-laws of the Corporation.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (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) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended 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. Any repeal or modification of this Article Eighth by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
NINTH: Each person who is or was a director or officer of the
Corporation, and each person who serves or served at the request of the
Corporation as a director or officer of another enterprise, shall be indemnified
by the Corporation in accordance with, and to the fullest extent authorized by,
the General Corporation Law of Delaware as it may be in effect from time to
time. The right of indemnity provided herein shall not be deemed exclusive of
any other rights to which any person may be entitled under any By-law,
agreement, vote of stockholders or directors, or otherwise. The Corporation may
provide indemnification to any such person, by agreement or otherwise, on such
terms and conditions as the Board of Directors may approve. Any agreement for
indemnification of any director, officer, employee or other person may provide
indemnification rights which are broader or otherwise differ from those set
forth herein. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the By-laws of the Corporation regarding the manner and conditions under
which indemnification shall be provided hereunder by the Corporation and the
extent thereof from time to time as deemed appropriate by the Board of
3
<PAGE> 4
Directors in the best interests of the Corporation.
TENTH: The Board of Directors of the Corporation, when evaluating any
offer of another party to (a) make a tender or exchange offer for any equity
security of the Corporation; (b) merge or consolidate the Corporation with
another Corporation; or (c) purchase or otherwise acquire all or substantially
all of the properties and assets of the Corporation may, in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration to all factors the
directors deem relevant, including without limitation (i) the effects upon the
employees, suppliers, customers, creditors and others having similar relations
with the Corporation, upon the communities in which the Corporation conducts its
business or on such other constituencies of the Corporation as the Board of
Directors considers relevant under the circumstances; (ii) not only the
consideration being offered (after taking into account taxes) in relation to the
then current market price for the Corporation's outstanding shares of capital
stock, but also the Board of Directors' estimate of the (A) future value of the
Corporation (including the unrealized value of its properties and assets) as an
independent going concern and (B) the current value of the Corporation in a
freely negotiated transaction; (iii) the purpose of the Corporation, and any of
its subsidiaries, to provide quality products and services on a long term basis;
(iv) whether the proposed transaction might violate federal or state laws; and
(v) the long-term as well as short-term interests of the Corporation and its
stockholders, including the possibility that such interests may be best served
by the continued independence of the Corporation. If, on the basis of such
factors, the Board of Directors so determines that a proposal or offer to
acquire or merge the Corporation, or to sell its assets, is not in the best
interests of the Corporation, it may reject the proposal or offer. If the Board
of Directors determines to reject any such proposal or sale, the Board of
Directors shall have no obligation to facilitate, to remove any barriers to, or
to refrain from impeding the proposal or offer except as may be required by
applicable law. Except to the extent required by applicable law, the
consideration of any or all of such factors shall not be a violation of the
business judgment rule or of any duty of the directors to the stockholders or a
group of stockholders, even if the directors reasonably determine that any such
factor or factors outweigh the financial or other benefits to the Corporation or
a shareholder or group of stockholders.
ELEVENTH: The Corporation has elected to be governed by Section 203 of
the Delaware Law.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon the stockholders herein are granted subject to this
reservation; provided, however, that, in addition to any vote of the holders of
the capital stock of the Corporation required by law or this Amended and
Restated Certificate of Incorporation, the affirmative vote of the holders of
shares of voting stock of the Corporation representing at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors shall be required to (i) reduce or
4
<PAGE> 5
eliminate the number of authorized shares of capital stock set forth in Article
Fourth or (ii) amend or repeal or adopt any provision inconsistent with Articles
Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, and this Article Twelfth of this
Amended and Restated Certificate of Incorporation."
SECOND: The Board of Directors of the Corporation, at a meeting duly
called at which a quorum existed, duly adopted resolutions proposing and
approving the Amended and Restated Certificate of Incorporation of the
Corporation and directing that such Amended and Restated Certificate of
Incorporation be submitted to the stockholders of the Corporation to consider
and adopt the same.
THIRD: Pursuant to Section 228 of the General Corporation Law of the
State of Delaware, the adoption of the Amended and Restated Certificate of
Incorporation was consented to in writing by a majority of the holders of the
voting power of all shares of capital stock of the Corporation entitled to vote
thereon.
FOURTH: The Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of the General Corporation Law of the
State of Delaware, including Sections 242 and 245 thereof.
IN WITNESS WHEREOF, TAKES.COM, INC. has caused this Certificate
to be signed by its President, and its corporate seal to be hereunto affixed and
attested by its Secretary this _____ day of ________________, 1999.
TAKES.COM, INC.
By:
-------------------------------------
Joel Cohen
President
SEAL
ATTEST:
By:
---------------------
Secretary
5
<PAGE> 1
Exhibit 3.4
BY-LAWS
OF
AMERICA'S HOME PAGE, INC.
(now known as TAKES.COM, INC.)
ARTICLE I
STOCKHOLDERS MEETINGS
Section 1.1 ANNUAL MEETINGS. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place as may be fixed
by resolution of the Board of Directors from time to time.
Section 1.2 SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be called at any time only by the Chairman of the Board,
if any, the President, or by a majority of the Board of Directors then in
office, and by no other person. The business transacted at a special meeting of
stockholders shall be limited to the purpose or purposes for which such meeting
is called, except as otherwise determined by the Board of Directors or the
chairman of the meeting.
Section 1.3 NOTICE OF MEETINGS. A written notice of each annual or special
meeting of stockholders shall be given stating the place, date and time of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the Certificate
of Incorporation or these By-laws, as such may be amended or restated from time
to time, such notice of meeting shall be given not less than ten (10) nor more
than sixty (60) days before the date of the meeting to each stockholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be given when deposited in the mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation.
Section 1.4 ADJOURNMENTS. Any annual or special meeting of stockholders
may be adjourned from time to time to reconvene at the same or some other place,
and notice need not be given of any such adjourned meeting if the date, time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than 30 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 adjourned meeting in accordance with Section 1.3.
Section 1.5 QUORUM. Except as otherwise provided by law, the Certificate
of Incorporation or these By-laws, as such may be amended or restated from time
to time, the presence in person or by proxy of the holders of stock having a
majority of the votes which could be cast by the holders of all outstanding
stock entitled to vote at the meeting shall constitute a quorum at each meeting
of stockholders. In the absence of a quorum, the stockholders so present may, by
the affirmative vote of the holders of stock having a majority of the votes
which could be cast by all
<PAGE> 2
such holders, adjourn the meeting from time to time in the manner provided in
Section 1.4 of these By-laws until a quorum is present. If a quorum is present
when a meeting is convened, the subsequent withdrawal of stockholders, even
though less than a quorum remains, shall not affect the ability of the remaining
stockholders lawfully to transact business.
Section 1.6 ORGANIZATION. Meetings of stockholders shall be presided over
by the Chairman of the Board, if any, or if there is none or in his or her
absence, by the Vice Chairman of the Board, if any, or if there is none or in
his or her absence by the President, or in his or her absence, by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his or her absence, the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 1.7 VOTING.
(a) Except as otherwise provided by the Certificate of Incorporation, as
such may be amended or restated from time to time, each stockholder entitled to
vote at any meeting of stockholders shall be entitled to one vote for each share
of stock held by such stockholder which has voting power on the matter in
question.
(b) Voting at meetings of stockholders need not be by written ballot and
need not be conducted by inspectors of election unless so required by Section
1.9 of these By-laws or so determined by the holders of stock having a majority
of the votes which could be cast by the holders of all outstanding stock
entitled to vote which are present in person or by proxy at such meeting. Unless
otherwise provided in the Certificate of Incorporation, as such may be amended
or restated from time to time, directors shall be elected by a plurality of the
votes cast in the election of directors. Each other question shall, unless
otherwise provided by law, the Certificate of Incorporation or these By-laws, as
such may be amended or restated from time to time, be decided by the vote of the
holders of stock having a majority of the votes which could be cast by the
holders of all stock entitled to vote on such question which are present in
person or by proxy at the meeting.
(c) Stock of the Corporation standing in the name of another corporation
and entitled to vote may be voted by such officer, agent or proxy as the by-laws
or other internal regulations of such other corporation may prescribe or, in the
absence of such provision, as the board of directors or comparable body of such
other corporation may determine.
(d) Stock of the Corporation standing in the name of a deceased person, a
minor, an incompetent or a debtor in a case under Title 11, United States Code,
and entitled to vote may be voted by an administrator, executor, guardian,
conservator, debtor-in-possession or trustee, as the case may be, either in
person or by proxy, without transfer of such shares into the name of the
official or other person so voting.
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(e) A stockholder whose voting stock of the Corporation is pledged shall
be entitled to vote such stock unless on the transfer records of the Corporation
the pledgor has expressly empowered the pledgee to vote such shares, in which
case only the pledgee, or such pledgee's proxy, may represent such shares and
vote thereon.
(f) If voting stock is held of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (i) if only
one votes, such act binds all; (ii) if more than one vote, the act of the
majority so voting binds all; and (iii) if more than one votes, but the vote is
evenly split on any particular matter each faction may vote such stock
proportionally, or any person voting the shares, or a beneficiary, if any, may
apply to the Court of Chancery of the State of Delaware or such other court as
may have jurisdiction to appoint an additional person to act with the persons so
voting the stock, which shall then be voted as determined by a majority of such
persons and the person appointed by the Court. If the instrument so filed shows
that any such tenancy is held in unequal interests, a majority or even split for
the purpose of this subsection shall be a majority or even split in interest.
(g) Stock of the Corporation belonging to the Corporation, or to another
corporation a majority of the shares entitled to vote in the election of
directors of which are held by the Corporation, shall not be voted at any
meeting of stockholders and shall not be counted in the total number of
outstanding shares for the purpose of determining whether a quorum is present.
Nothing in the Section 1.7 shall limit the right of the Corporation to vote
shares of stock of the Corporation held by it in a fiduciary capacity.
Section 1.8 PROXIES.
(a) Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by proxy filed
with the Secretary before or at the time of the meeting. No such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing with the Secretary an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date.
(b) A stockholder may authorize another person or persons to act for such
stockholder as proxy (i) by executing a writing authorizing such person or
persons to act as such, which execution may be accomplished by such stockholder
or such stockholder's authorized officer, director, partner, employee or agent
(or, if the stock is held in a trust or estate, by a trustee, executor or
administrator thereof) signing such writing or causing his or her signature to
be
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affixed to such writing by any reasonable means, including, but not limited to,
facsimile signature, or (ii) by transmitting or authorizing the transmission of
a telegram, cablegram, electronic mail message or other means of electronic
transmission (a "Transmission") to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such Transmission; provided that any such Transmission must either set
forth or be submitted with information from which it can be determined that such
Transmission was authorized by such stockholder.
(c) Any inspector or inspectors appointed pursuant to Section 1.9 of these
By-laws shall examine Transmissions to determine if they are valid. If no
inspector or inspectors are so appointed, the Secretary or such other person or
persons as shall be appointed from time to time by the Board of Directors shall
examine Transmissions to determine if they are valid. If it is determined a
Transmission is valid, the person or persons making that determination shall
specify the information upon which such person or persons relied. Any copy,
facsimile telecommunication or other reliable reproduction of such a writing or
Transmission may be substituted or used in lieu of the original writing or
Transmission for any and all purposes for which the original writing or
Transmission could be used; provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or Transmission.
Section 1.9 VOTING PROCEDURES AND INSPECTORS OF ELECTIONS.
(a) If the Corporation has a class of voting stock that is (i) listed on a
national securities exchange, (ii) authorized for quotation on an interdealer
quotation system of a registered national securities association or (iii) held
of record by more than 2,000 stockholders, the Board of Directors shall, in
advance of any meeting of stockholders, appoint one or more inspectors
(individually an "Inspector," and collectively the "Inspectors") to act at such
meeting and make a written report thereof. The Board of Directors may designate
one or more persons as alternate Inspectors to replace any Inspector who shall
fail to act. If no Inspector or alternate is able to act at such meeting, the
chairman of the meeting shall appoint one or more other persons to act as
Inspectors. Each Inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
Inspector with strict impartiality and according to the best of his or her
ability.
(b) The Inspectors shall (i) ascertain the number of shares of stock of
the Corporation outstanding and the voting power of each, (ii) determine the
number of shares of stock of the Corporation present in person or by proxy at
such meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the Inspectors and
(v) certify their determination of the number of such shares present in person
or by proxy at such meeting and their count of all votes and ballots. The
Inspectors may appoint or retain other persons or entities to assist them in the
performance of their duties.
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(c) The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
such meeting. No ballots, proxies or votes, nor any revocations thereof or
changes thereto, shall be accepted by the Inspectors after the closing of the
polls unless the Court of Chancery of the State of Delaware upon application by
any stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots, the
Inspectors shall be limited to an examination of the proxies, any envelopes
submitted with such proxies, any information referred to in paragraphs (b) and
(c) of Section 1.8 of these By-laws, ballots and the regular books and records
of the Corporation, except that the Inspectors may consider other reliable
information for the limited purpose of reconciling proxies and ballots submitted
by or on behalf of banks, brokers, their nominees or similar persons which
represent more votes than the holder of a proxy is authorized by a stockholder
of record to cast or more votes than such stockholder holds of record. If the
Inspectors consider other reliable information for the limited purpose permitted
herein, the Inspectors, at the time they make their certification pursuant to
paragraph (b) of this Section 1.9, shall specify the precise information
considered by them, including the person or persons from whom such information
was obtained, when and the means by which such information was obtained and the
basis for the Inspectors' belief that such information is accurate and reliable.
Section 1.10 FIXING DATE OF DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) In order that the Corporation may determine the stockholders entitled
(i) to notice of or to vote at any meeting of stockholders or any adjournment
thereof, (ii) to receive payment of any dividend or other distribution or
allotment of any rights, (iii) to exercise any rights in respect of any change,
conversion or exchange of stock or (iv) to take, receive or participate in any
other action, the Board of Directors may fix a record date, which shall not be
earlier than the date upon which the resolution fixing the record date is
adopted by the Board of Directors and which (1) in the case of a determination
of stockholders entitled to notice of or to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, be not more
than sixty (60) nor less than ten (10) days before the date of such meeting; (2)
in the case of a determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall be not more than ten (10)
days after the date upon which the resolution fixing the record date is adopted
by the Board of Directors; and (3) in the case of any other action, shall be not
more than sixty (60) days before such action.
(b) If no record date is fixed, (i) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (ii) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
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(c) 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,
but the Board of Directors may fix a new record date for the adjourned meeting.
Section 1.11 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall
prepare, 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 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 meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger,
the list of stockholders or the books of the Corporation, or to vote in person
or by proxy at any meeting of stockholders.
Section 1.12 STOCKHOLDER PROPOSALS AND BOARD NOMINATIONS.
(a) At any annual meeting of the Corporation's stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (iii) otherwise
properly brought before the meeting by a stockholder in accordance with these
By-laws. Business may be properly brought before an annual meeting by a
stockholder only if written notice of the stockholder's intent to propose such
business has been delivered, either by personal delivery, United States mail,
first class postage prepaid, or other similar means, to the Secretary of the
Corporation not later than 90 calendar days in advance of the anniversary date
of the release of the Corporation's proxy statement to stockholders in
connection with the preceding year's annual meeting of stockholders, except that
if no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than 30 calendar days from the anniversary of
the annual meeting date stated in the previous year's proxy statement, a
stockholder proposal shall be received by the Corporation a reasonable time
before the solicitation is made.
(b) Each notice of new business must set forth: (i) the name and address
of the stockholder who intends to raise the new business; (ii) the business
desired to be brought forth at the meeting and the reasons for conducting such
business at the meeting; (iii) a representation that the stockholder is a holder
of record of stock of the Corporation entitled to vote with respect to such
business and intends to appear in person or by proxy at the meeting to move the
consideration of such business; (iv) such stockholder's total beneficial
ownership of the Corporation's voting stock; and (v) such stockholder's interest
in such business. The chairman of the meeting may refuse to acknowledge a motion
to consider any business that he determines was not made in
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compliance with the foregoing procedures.
(c) An adjourned meeting, if notice of the adjourned meeting is not
required to be given to stockholders, shall be regarded as a continuation of the
original meeting, and any notice of new business must have met the foregoing
requirements as of the date of the original meeting. In the event of an
adjourned meeting where notice of the adjourned meeting is required to be given
to stockholders, any notice of new business made by a stockholder with respect
to the adjourned meeting must meet the foregoing requirements based upon the
date on which notice of the date of the adjourned meeting was given.
(d) Nominations for the election of directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of directors generally. However,
any stockholder entitled to vote in the election of directors may nominate one
or more persons for election as director(s) at a meeting only if written notice
of such stockholder's intent to make such nomination or nominations has been
delivered, either by personal delivery, United States mail, first class postage
prepaid, or other similar means, to the Secretary of the Corporation not later
than (i) with respect to an election to be held at an annual meeting of
stockholders, 90 calendar days in advance of the anniversary date of the release
of the Corporation's proxy statement to stockholders in connection with the
preceding year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the anniversary of the annual meeting
date stated in the previous year's proxy statement, a nominee proposal shall be
received by the Corporation a reasonable time before the solicitation is made,
and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the 10th
day following the date on which notice of such meeting is first given to
stockholders.
(e) Each such notice shall set forth: (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (v) the consent of each nominee
to serve as a director of the Corporation if so elected.
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ARTICLE II
BOARD OF DIRECTORS
Section 2.1 NUMBER. The Board of Directors shall initially consist of
three (3) directors as may be adjusted from time to time by resolution of the
Board of Directors.
Section 2.2 ELECTION; RESIGNATION; VACANCIES.
(a) Directors shall be elected at each annual meeting of stockholders at
which their term of office expires. Directors shall each hold office until the
annual meeting of stockholders at which their term of office expires and the
election and qualification of his or her successor, or until his or her earlier
death, resignation or removal.
(b) Any director may resign at any time by giving written notice to the
Chairman of the Board, if any, the President or the Secretary. Unless otherwise
stated in a notice of resignation, it shall take effect when received by the
officer to whom it is directed, without any need for its acceptance.
(c) Any newly created directorship or any vacancy occurring in the Board
of Directors for any reason may be filled by a majority of the remaining
directors, although less than a quorum, or by a plurality of the votes cast in
the election of directors at a meeting of stockholders. Each director elected to
replace a former director shall hold office until the expiration of the term of
office of the director whom he or she has replaced and the election and
qualification of his or her successor, or until his or her earlier death,
resignation or removal. A director elected to fill a newly created directorship
shall serve until the next annual meeting of the stockholders and the election
and qualification of his or her successor, or until his or her earlier death,
resignation or removal.
(d) The directors may elect a Chairman and/or Vice Chairman from time
to time to serve until such time as a majority of the directors select a
replacement for either or both of them. When present, the Chairman shall
preside at all meetings of the stockholders and of the Board of Directors. In
his absence, the Vice Chairman shall so preside.
Section 2.3 REGULAR MEETINGS. A regular annual meeting of the Board of
Directors shall be held, without call or notice, immediately after and at the
same place as the annual meeting of stockholders, for the purpose of organizing
the Board of Directors, electing officers and transacting any other business
that may properly come before such meeting. Additional regular meetings of the
Board of Directors may be held without call or notice at such times as shall be
fixed by resolution of the Board of Directors.
Section 2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if any, the President, the
Secretary, or by a majority of the Board of Directors then in office. Notice of
a special meeting of the Board of Directors shall be given by the person or
persons calling the meeting at least twenty-four (24) hours before the special
meeting. The purpose or purposes of a special meeting need not be stated in the
call or notice.
Section 2.5 ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or if there is none or in
his or her absence, by the Vice Chairman
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of the Board, if any, or if there is none or in his or her absence, by the
President, or in his or her absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting. A majority of the directors present at a meeting, whether or not they
constitute a quorum, may adjourn such meeting to any other date, time or place
without notice other than announcement at the meeting.
Section 2.6 QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the Board
of Directors a majority of the Board of Directors then in office shall
constitute a quorum for the transaction of business. Unless the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, otherwise provide, the vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
Section 2.7 COMPENSATION COMMITTEE. Two or more directors of the
Corporation shall be appointed by the Board of Directors to act as a
Compensation Committee, each of whom shall be a director who is not an employee
of the Corporation or any subsidiary thereof. The Compensation Committee shall
have the power and authority to set the compensation of the officers and other
employees and agents of the Company and shall possess the power and authority to
act with respect to the compensation, option and other benefit plans of the
Corporation. The Compensation Committee shall also recommend fees to be paid to
members of the Board of Directors for services to the Corporation.
Section 2.8 AUDIT COMMITTEE. Two or more directors of the Corporation
shall be appointed by the Board of Directors to act as an Audit Committee, each
of whom shall be a director who is not an employee of the Corporation or any
subsidiary thereof. The Audit Committee shall have general oversight
responsibility with respect to the Corporation's financial reporting. In
performing its oversight responsibility, the Audit Committee shall make
recommendations to the Board of Directors as to the selection, retention, or
change in the independent accountants of the Corporation, review with the
independent accountants the scope of their examination and other matters
(relating to both audit and non-audit activities), and review generally the
internal auditing procedures of the Corporation. In undertaking the foregoing
responsibilities, the Audit Committee shall have unrestricted access, if
necessary, to the Corporation's personnel and documents and shall be provided
with the resources and assistance necessary to discharge its responsibilities,
including periodic reports from management assessing the impact of regulation,
accounting, and reporting of other significant matters that may affect the
Corporation. The Audit Committee shall review the financial reporting and
adequacy of internal controls of the Corporation, consult with the internal
auditors and certified public accountants, and from time to time, but not less
than annually, report to the Board of Directors.
Section 2.9 OTHER COMMITTEES. The Board of Directors may from time to
time, in its discretion, by resolution passed by a majority of the Board of
Directors, designate other committees of the Board of Directors consisting of
such number of directors as the Board of
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Directors shall determine, which shall have and may exercise such lawfully
delegable powers and duties of the Board of Directors as shall be conferred or
authorized by such resolution. The Board of Directors shall have the power to
change at any time the members of any such committee, to fill vacancies and to
dissolve any such committee.
Section 2.10 ALTERNATES. The Board of Directors may from time to time
designate from among the directors alternates to serve on any committee of the
Board of Directors to replace any absent or disqualified member at any meeting
of such committee. Whenever a quorum cannot be secured for any meeting of any
committee from among the regular members thereof and designated alternates, the
member or members of such committee present at such meeting and not disqualified
from voting, whether or not constituting a quorum, may unanimously appoint
another director to act at such meeting in place of any absent or disqualified
member.
Section 2.11 QUORUM AND MANNER OF ACTING--COMMITTEES. A majority of the
members of any committee of the Board of Directors shall constitute a quorum for
the transaction of business at any meeting of such committee, and the act of a
majority of the members present at any meeting at which a quorum is present
shall be the act of such committee.
Section 2.12 COMMITTEE CHAIRMAN, BOOKS AND RECORDS, ETC. The chairman of
each committee of the Board of Directors shall be selected from among the
members of such committee by the Board of Directors.
Each committee shall keep a record of its acts and proceedings, and all
actions of each committee shall be reported to the Board of Directors when
required.
Each committee shall fix its own rules of procedure not inconsistent with
these By-laws or the resolution of the Board of Directors designating such
committee and shall meet at such times and places and upon such call or notice
as shall be provided by such rules.
Section 2.13 TELEPHONIC MEETINGS. Directors, or any committee of directors
designated by the Board of Directors, may participate in a meeting of the Board
of Directors or such 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 participation in a meeting pursuant to this
Section 2.13 shall constitute presence in person at such meeting.
Section 2.14 INFORMAL ACTION BY DIRECTORS. Unless otherwise restricted by
the Certificate of Incorporation or these By-laws, as such may be amended or
restated from time to time, 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 then in office of the Board of Directors or
such committee, as the case may be, consent thereto in writing (which may be in
counterparts), and the written consent or consents are filed with the minutes of
proceedings of the Board of Directors or such committee.
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Section 2.15 RELIANCE UPON RECORDS. Every director, and every member of
any committee of the Board of Directors, shall, in the performance of his or her
duties, be fully protected in relying in good faith upon the records of the
Corporation and upon such information, opinions, reports or statements presented
to the Corporation by any of its officers or employees, or committees of the
Board of Directors, or by any other person as to matters the director or member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation, including, but not limited to, such records, information, opinions,
reports or statements as to the value and amount of the assets, liabilities
and/or net profits of the Corporation, or any other facts pertinent to the
existence and amount of surplus or other funds from which dividends might
properly be declared and paid, or with which the Corporation's capital stock
might properly be purchased or redeemed.
Section 2.16 INTERESTED DIRECTORS. A director who is directly or
indirectly a party to a contract or transaction with the Corporation, or is a
director or officer of or has a financial interest in any other corporation,
partnership, association or other organization which is a party to a contract or
transaction with the Corporation, may be counted in determining whether a quorum
is present at any meeting of the Board of Directors or a committee thereof at
which such contract or transaction is considered or authorized, and such
director may participate in such meeting and vote on such authorization to the
extent permitted by applicable law, including Section 144 of the General
Corporation Law of the State of Delaware.
Section 2.17 COMPENSATION. Unless otherwise restricted by the Certificate
of Incorporation, as such may be amended or restated from time to time, the
Board of Directors shall have the authority to fix the compensation of
directors. The directors shall be paid their reasonable expenses, if any, of
attendance at each meeting of the Board of Directors or a committee thereof and
may be paid a fixed sum for attendance at each such meeting and an annual
retainer or salary for services as a director or committee member. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 2.18 PRESUMPTION OF ASSENT. Unless otherwise provided by the laws
of the State of Delaware, a director who is present at a meeting of the Board of
Directors or a committee thereof at which action is taken on any matter shall be
presumed to have assented to the action taken unless his or her dissent shall be
entered in the minutes of such meeting or unless he or she shall file his or her
written dissent to such action with the person acting as secretary of such
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary immediately after the adjournment of such
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
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ARTICLE III
OFFICERS
Section 3.1 NUMBER AND DESIGNATION. The officers of the Corporation shall
be a Chairman of the Board, a President, and Chief Executive officer one or more
Vice Presidents, a Secretary and a Treasurer, and such Assistant Secretaries,
Assistant Treasurers or other officers or agents as may be elected or appointed
by the Board of Directors. Any two or more offices may be held by the same
person unless the Certificate of Incorporation or these By-laws, as such may be
amended or restated from time to time, provide otherwise.
Section 3.2 ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after the election of directors. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Vacancies may be filled or new offices created
and filled at any meeting of the Board of Directors. Each officer shall hold
office until his or her successor shall have been duly elected and shall have
qualified or until his or her earlier death, resignation or removal.
Section 3.3 REMOVAL AND RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Any officer or agent may resign at any time by
giving written notice to the Board of Directors, to the Chairman of the Board or
to the Secretary. Any such resignation shall take effect at the time of receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, acceptance of such resignation shall not be necessary to make
it effective.
Section 3.4 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
Section 3.5 CHIEF EXECUTIVE OFFICER. The Chief Executive officer shall
be the chief executive officer of the Corporation and shall in
general supervise and control all of the business and affairs of the
Corporation. The Chief Executive Officer may execute, alone or
with the Secretary or any other officer of the Corporation authorized by the
Board of Directors, any deeds, mortgages, bonds, contracts or other instruments
which the Board of Directors or a committee thereof has authorized to be
executed, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or a committee thereof or by these By-laws
to some other officer or agent of the Corporation, or shall be required by law
to be otherwise executed, and in general he or she shall perform all duties
incident to the office of Chief Executive Officer and such other
duties as from time to time may be prescribed by the Board of Directors or a
committee thereof. In the absence of the Chairman or Vice Chairman, he or she
shall preside at all meetings of the stockholders and of the Board of Directors.
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Section 3.6 President. The President shall (if different from the Chief
Executive Officer) be the chief operating officer of the Corporation, second
only to the Chief Executive Officer. In the absence of the Chairman of the
Board, Vice Chairman of the Board and the Chief Executive Officer or in the
event of the inability of any of them to act as Chairman of the Board, the
President shall perform the duties of the Chairman of the Board and, when so
acting, shall have all the powers of, and be subject to all the restrictions
placed upon the Chairman of the Board or Chief Executive Officer. He or she may
execute, alone or with the Secretary or any other officer of the Corporation
authorized by the Board of Directors, any deeds, mortgages, bonds, contracts or
other instruments which the Board of Directors or a committee thereof has
authorized to be executed, except in cases where the execution thereof shall be
expressly delegated by the Board of Directors or a committee thereof or by these
By-laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise executed, and in general he or she shall perform all
duties incident to the office of President and such other duties as from time to
time may be prescribed by the Chairman of the Board, the Board of Directors or a
committee thereof.
Section 3.7 The Vice Presidents. In the absence of the President or in the
event of his or her inability to act, the Vice President (or in the event there
shall be more than one Vice President, the Vice Presidents in the order
determined by the Board of Directors or, if there shall have been no such
determination, 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 Board of Directors may also
designate certain Vice Presidents as being in charge of designated divisions,
plants or functions of the Corporation's business and add appropriate
descriptions to their titles. In addition, any Vice President shall perform such
duties as from time to time may be assigned to him or her by the Chairman of the
Board, the President or the Board of Directors.
Section 3.8 The Secretary. The Secretary shall (a) keep the minutes of
proceedings of the stockholders, the Board of Directors and any committee of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these By-laws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) affix the seal of the Corporation or a facsimile thereof,
or cause it to be affixed, and, when so affixed, attest the seal by his or her
signature, to all certificates for shares of capital stock of the Corporation
prior to the issue thereof and to all other documents the execution of which on
behalf of the Corporation under its seal is duly authorized by the Board of
Directors or otherwise in accordance with the provisions of these By-laws; (e)
keep a register of the post office address of each stockholder, director or
committee member, which shall be furnished to the Secretary by such stockholder,
director or member; (f) have general charge of the
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stock transfer books of the Corporation; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him or her by the Chairman of the Board, the President or the
Board of Directors.
Section 3.9 THE TREASURER. The Treasurer shall have charge and custody of
and be responsible for all funds and securities of the Corporation, receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever, deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article IV of these By-laws, disburse the funds of the
Corporation as ordered by the Board of Directors or the Chairman of the Board or
as otherwise required in the conduct of the business of the Corporation and
render to the Chairman of the Board, President or the Board of Directors, upon
request, an accounting of all his or her transactions as Treasurer and a report
on the financial condition of the Corporation. The Treasurer shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him or her by the Chairman of the Board,
President or the Board of Directors.
Section 3.10 ASSISTANT TREASURERS AND SECRETARIES. In the absence of the
Secretary or the Treasurer, as the case may be, or in the event of his or her
inability to act, the Assistant Secretaries and the Assistant Treasurers,
respectively, in the order determined by the Board of Directors (or if there
shall have been no such determination, then in the order of their election),
shall perform the duties and exercise the powers of the Secretary or the
Treasurer, as the case may be. In addition, the Assistant Secretaries and the
Assistant Treasurers shall, in general, perform such duties as may be assigned
to them by the Chairman of the Board, the President, the Secretary, the
Treasurer or the Board of Directors.
Section 3.11 SALARIES. The salaries of the officers and agents of the
Corporation shall be fixed from time to time by the Board of Directors or by
such officer as it shall designate for such purpose. No officer shall be
prevented from receiving such salary by reason of the fact that he or she is
also a director of the Corporation.
Section 3.12 APPOINTMENTS. In addition to the elected officers described
above, the Chairman of the Board may from time to time designate persons to be
appointed Vice Presidents or bear such other title or titles as the Chairman of
the Board shall specify. The powers and duties of each such appointed person
shall be as prescribed by the Chairman of the Board from time to time. Such
appointed persons shall not be deemed elected or executive officers of the
Corporation. Each such appointed person shall serve until the successor thereof
is appointed or until the earlier resignation or removal of such appointed
person.
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ARTICLE IV
STOCK CERTIFICATES AND TRANSFERS
Section 4.1 CERTIFICATE. Every holder of stock shall be entitled to have a
certificate signed by or in the name of the Corporation by the Chairman of the
Board, if any, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, of the Corporation, certifying the number of shares owned
by such stockholder in the Corporation. 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 officer, transfer agent, or registrar continued to be such at the
date of issue.
Section 4.2 LOST, STOLEN OR DESTROYED CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES. The Corporation may issue a new certificate for stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such stockholder's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 4.3 TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for stock of the Corporation
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer or, if the relevant stock certificate is claimed to have
been lost, stolen or destroyed, upon compliance with the provisions of Section
4.2 of these By-laws, and upon payment of applicable taxes with respect to such
transfer, and in compliance with any restrictions on transfer applicable to such
stock certificate or the shares represented thereby of which the Corporation
shall have notice and subject to such rules and regulations as the Board of
Directors may from time to time deem advisable concerning the transfer and
registration of stock certificates, the Corporation shall issue a new
certificate or certificates for such stock to the person entitled thereto,
cancel the old certificate and record the transaction upon its books. Transfers
of stock shall be made only on the books of the Corporation by the registered
holder thereof or by such holder's attorney or successor duly authorized as
evidenced by documents filed with the Secretary or transfer agent of the
Corporation. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of transfer
if, when the certificate or certificates representing such stock are presented
to the Corporation for transfer, both the transferor and transferee request the
Corporation to do so.
Section 4.4 STOCKHOLDERS OF RECORD. The Corporation shall be entitled to
treat the holder of record of any stock of the Corporation as the holder thereof
and shall not be bound to recognize
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any equitable or other claim to or interest in such stock on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise required by the laws of the State of Delaware.
ARTICLE V
NOTICES
Section 5.1 MANNER OF NOTICE. Except as otherwise provided by law, the
Certificate of Incorporation or these By-laws, as such may be amended or
restated from time to time, whenever notice is required to be given to any
stockholder, director or member of any committee of the Board of Directors, such
notice may be given by personal delivery or by depositing it, in a sealed
envelope, in the United States mails, first class, postage prepaid, addressed,
or by delivering it to a telegraph company, charges prepaid, for transmission,
or by transmitting it via telecopier, electronic mail or other electronic means,
to such stockholder, director or member, either at the address of such
stockholder, director or member as it appears on the records of the Corporation
or, in the case of such a director or member, at his or her business address;
and such notice shall be deemed to be given at the time when it is thus
personally delivered, deposited, delivered or transmitted, as the case may be.
Such requirement for notice shall also be deemed satisfied, except in the case
of stockholder meetings, if actual notice is received orally or by other writing
by the person entitled thereto as far in advance of the event with respect to
which notice is being given as the minimum notice period required by law or
these By-laws.
Section 5.2 DISPENSATION WITH NOTICE.
(a) Whenever notice is required to be given by law, the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, to any stockholder to whom (i) notice of two consecutive annual meetings
of stockholders, and all notices of meetings of stockholders or of the taking of
action by stockholders by written consent without a meeting to such stockholder
during the period between such two consecutive annual meetings, or (ii) all, and
at least two, payments (if sent by first class mail) of dividends or interest on
securities of the Corporation during a 12-month period, have been mailed
addressed to such stockholder at the address of such stockholder as shown on the
records of the Corporation and have been returned undeliverable, the giving of
such notice to such stockholder shall not be required. Any action or meeting
which shall be taken or held without notice to such stockholder shall have the
same force and effect as if such notice had been duly given. If any such
stockholder shall deliver to the Corporation a written notice setting forth the
then current address of such stockholder, the requirement that notice be given
to such stockholder shall be reinstated.
(b) Whenever notice is required to be given by law, the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, to any person with whom communication is unlawful, the giving of such
notice to such person shall not be required, and there shall be no duty to apply
to any governmental authority or agency for a license or permit to
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give such notice to such person. Any action or meeting which shall be taken or
held without notice to any such person with whom communication is unlawful shall
have the same force and effect as if such notice had been duly given.
Section 5.3 WAIVERS OF NOTICE. Any written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular special meeting of the stockholders, directors, or members of a
committee or directors need be specified in any written waiver of notice.
ARTICLE VI
INDEMNIFICATION
Section 6.1 RIGHT TO INDEMNIFICATION.
(a) The Corporation shall indemnify and hold harmless, to the fullest
extent permitted by law as in effect on the date of adoption of these By-laws or
as they may thereafter be amended or restated from time to time, any person who
was or is made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action by or in the right of the Corporation) (a
"proceeding") by reason of the fact that he or she, or a person for whom he or
she is the legal representative, is or was a director, officer or employee of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture or other enterprise, against any and all liability and loss (including
judgments, fines, penalties and amounts paid in settlement) suffered or incurred
and expenses reasonably incurred by such person (including attorneys' fees and
related expenses); provided that any standard of conduct applicable to whether a
director or officer may be indemnified shall be equally applicable to an
employee under this Article VI. The Corporation shall not be required to
indemnify a person in connection with a proceeding initiated by such person,
including a counterclaim or crossclaim, unless the proceeding was authorized by
the Board of Directors.
(b) For purposes of this Article VI: (i) any reference to "other
enterprise" shall include all plans, programs, policies, agreements, contracts
and payroll practices and related trusts for the benefit of or relating to
employees of the Corporation and its related entities ("employee benefit
plans"); (ii) any reference to "fines", "penalties", "liability" and "expenses"
shall include any excise taxes, penalties, claims, liabilities and reasonable
expenses (including reasonable legal fees and related expenses) assessed against
or incurred by a person with respect to any employee benefit plan; (iii) any
reference to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation or trustee
or administrator of
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any employee benefit plan which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants, beneficiaries, fiduciaries, administrators and service
providers; (iv) any reference to serving at the request of the Corporation as a
director, officer, employee or agent of a partnership or trust shall include
service as a partner or trustee; and (v) a person who acted in good faith and in
a manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" for purposes of
this Article VI.
Section 6.2 PREPAYMENT OF EXPENSES. The Corporation may pay or reimburse
the reasonable expenses incurred in defending any proceeding in advance of its
final disposition if the Corporation has received in advance an undertaking by
the person receiving such payment or reimbursement to repay all amounts advanced
if it should be ultimately determined that he or she is not entitled to be
indemnified under this Article VI or otherwise. The Corporation may require
security for any such undertaking.
Section 6.3 CLAIMS. If a claim for indemnification or payment of expenses
under this Article VI is not paid in full within 30 days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
Section 6.4 INSURANCE. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer
or employee of the Corporation or was serving at the request of the Corporation
as a director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise (including service with respect to any
employee benefit plan) against any liability asserted against him and incurred
by him in any such capacity, whether or not the Corporation would have the power
to indemnify such person against such liability under this Article VI.
Section 6.5 NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Article VI shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, agreement, vote of stockholders or disinterested directors or otherwise,
and shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of the heirs, executors, administrators
and personal representatives of such a person.
Section 6.6 OTHER INDEMNIFICATION. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director,
officer, employee, partner or agent of another corporation, partnership, joint
venture or other enterprise shall be reduced by any amount such person may
collect as indemnification from such other corporation, partnership, joint
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venture or other enterprise.
Section 6.7 AMENDMENT OR REPEAL. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
Section 6.8 MERGER OR CONSOLIDATION. For purposes of this Article VI,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees, so that any person who is or was a director,
officer or employee of such a constituent corporation, or is or was serving at
the request of such a constituent corporation as a director, officer or employee
of another corporation, partnership, joint venture, trust or other enterprise
(including service with respect to any employee benefit plan), shall stand in
the same position under this Article VI with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
Section 6.9 INDEMNIFICATION OF AGENTS. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification and to the advancement of expenses to any agent of the
Corporation to the fullest extent of the provisions of this Article VI with
respect to the indemnification and advancement of expenses of directors,
officers and employees of the Corporation.
ARTICLE VII
GENERAL
Section 7.1 FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors. Absent such determination,
the fiscal year of the Corporation shall end on December 31 of each year.
Section 7.2 SEAL. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 7.3 FORM OF RECORDS. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 7.4 AMENDMENT OF BY-LAWS BY THE BOARD OF DIRECTORS. These By-laws
may be
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altered, amended or repealed, or new By-laws may be adopted, by the affirmative
vote of a majority of the directors present at any regular or special meeting of
the Board of Directors at which a quorum is present.
Section 7.5 AMENDMENT OF THE BY-LAWS BY THE STOCKHOLDERS. These By-laws
may be altered, amended or repealed, or new By-laws may be adopted, by the
affirmative vote of the holders of seventy five percent (75%) of the shares of
the capital stock of the Corporation issued and outstanding and entitled to vote
at any regular meeting of the stockholders or at any special meeting of the
stockholders, provided notice of such alteration, amendment, repeal or adoption
of new By-laws shall have been stated in the notice of such meeting.
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Exhibit 4.1
FORM OF
WARRANT
TAKES.COM, INC.
This is to certify that ____________________ (the "Holder") is entitled to
exchange Warrants (as hereinafter defined) issued by Takes.com, Inc., a Delaware
corporation, its successors and assigns (the "Company"), at any time during the
Exercise Period for Common Stock of the Company subject to the terms hereinafter
set forth. The number of shares of Common Stock to be received upon the exercise
of Warrants may be adjusted from time to time at the sole discretion of the
Company as herein set forth.
1. Method of Earning Warrants. To earn Warrants, the Holder is required to
register with the Company on its Web site, www.takes.com (the "Web Site"), by
providing certain information requested by the Company.
(a) The Company will issue one (1) Warrant to the Holder upon completion
of the registration process.
(b) In addition, the Company will issue Holders one (1) Warrant per day
for logging on to the Web Site ("Daily Login Warrants"). From time to time
at the Company's discretion, the Holder may be required to answer a
question or give an opinion as a condition to receiving the Daily Login
Warrants. Except as provided in Section 1(c) below, the Holder may earn a
maximum of one (1) Warrant per day.
(c) The Company may from time to time at its discretion issue Warrants to
Holders that use the Web Site for extended periods of time or in
connection with promotions, contests or other events.
(d) Warrants will exist in book entry form only and will not be
certificated. The Holder will be able to review the number of Warrants
accumulated by such Holder on the Web Site.
2. Qualification of Holders. The Company will only issue Warrants to
United States residents possessing Social Security numbers. The Company reserves
the right to cease issuing Warrants at any time and in its sole discretion.
3. Term. Except as provided in Section 4 hereof, a Warrant shall have a
<PAGE> 2
term which expires on the tenth business day of the calendar year following the
calendar year after the calendar year in which it was issued. A Warrant shall so
expire without further notice to the Holder.
4. Cancellation of Warrants for Failure to Access the Web Site. Warrants
shall be canceled upon (a) the expiration of their term or (b) in the
discretion of the Company, failure of the Holder to log on to the Web Site
during a period of 60 consecutive days, provided, however, the Holder's Warrants
shall not be canceled if such Holder has earned thirty (30) or more unexpired
Warrants since registering with the Company.
5. Exercise of Warrants; Exercise Ratio; Exercise Price. Warrants may
only be exercised in round lots for whole shares of Common Stock. The exercise
ratio of this Warrant shall initially be ____ (the "Exercise Ratio"). The
Exercise Ratio for Warrants issued after this Warrant may be changed by the
Company at any time upon prior notice to users of the Web Site; however, any
Warrants earned by the Holder prior to the change in the Exercise Ratio shall be
governed by the Exercise Ratio in effect when such Warrants were issued. The
exercise price of this Warrant shall be $zero ($0) (the "Exercise Price").
6. Method of Exercise. Subject to the other provisions herein set forth,
Warrants may only be exercised during the Exercise Period by accessing the Web
Site and utilizing the Warrant exercise feature. The Holder shall be deemed to
be the Holder of record of the shares of Common Stock issuable upon completion
of such exercise as of the date of such exercise, or if such exercise was
completed after 2:00 p.m. Eastern time, then on the next business day, or if
such exercise was completed on a non-business day, then on the next business
day, notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
7. Payment of Taxes. All shares of Common Stock issuable upon the exercise
of Warrants pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable and without any preemptive rights. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges that
may be imposed with respect to, the issue or delivery thereof, unless such tax
or charge is imposed by law upon the Holder, in which case such taxes or charges
shall be paid by the Holder.
8. Reservation of Shares.
(a) Number of Shares. As of the date hereof, the Company has
reserved and shall at all times keep available for issuance and delivery
upon exercise of Warrants, Ten Million (10,000,000) shares of Common Stock
to permit the exercise of Warrants. All shares of Common Stock which shall
be so issuable, when issued upon exercise of Warrants in accordance with
the terms herein set forth, shall be duly and validly issued and fully
paid and nonassessable, and not subject to preemptive rights.
(b) Authorizations, Exemptions and Registration. Before taking any
<PAGE> 3
action which would result in an adjustment in the number of shares of
Common Stock for which Warrants are exercisable or if any shares of Common
Stock required to be reserved for issuance upon exercise of Warrants
require registration or qualification with any governmental authority
under any federal or state law (other than as provided elsewhere in this
Warrant) before such shares may be so issued, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.
9. Fractional Shares. No fractional shares of Common Stock shall be issued
upon exercise of Warrants. Any Warrants not exercised for Common Stock shall
remain in such Holder's account until the earlier of (i) the exercise of such
Warrants for Common Stock pursuant to the terms herein or (ii) the termination
or cancellation of such Warrants as provided herein.
10. Dilution. In order to prevent dilution of the exercise rights granted
hereunder, the Exercise Price will be subject to adjustment from time to time
pursuant to this Section 10.
(a) Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization
or otherwise) its outstanding shares of Common Stock into a greater number
of shares, the number of shares of Common Stock for which Warrants are
exercisable shall immediately be proportionately increased, and if the
Company at any time combines (by reverse stock split or otherwise) its
outstanding shares of Common Stock into a smaller number of shares, the
number of shares of Common Stock for which Warrants are exercisable shall
immediately be proportionately adjusted.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale.
Prior to the consummation of any Organic Change, the Company will make
appropriate provisions to insure that the Holder will thereafter have the
right to acquire and receive, in lieu of or in addition to the shares of
Common Stock immediately theretofore acquirable and receivable upon the
exercise of Warrants, such shares of Common Stock as the Holder would have
received in connection with such Organic Change if the Holder had
exercised Warrants immediately prior to such Organic Change. In any such
case, the Company will make appropriate provisions to insure that the
provisions of this Section 10 will thereafter be applicable to Warrants.
The Company will not effect any such consolidation, merger or sale, unless
prior to the consummation thereof, the successor corporation (if other
than the Company) resulting from consolidation or merger or the
corporation purchasing such assets assumes by written instrument the
obligation to deliver to each such Holder such shares of Common Stock as,
in accordance with the foregoing provisions, such Holder may be entitled
to acquire.
<PAGE> 4
(c) Certain Events. If any event occurs of the type contemplated by
the provisions of this Section 10 but not expressly provided for by such
provisions, then the Company's board of directors and the Company will
make an appropriate adjustment in the Exercise Price so as to protect the
rights of the Holder hereunder.
11. Definitions. As used herein, the following terms shall have the
meanings set forth below, unless the context otherwise requires:
"Common Stock" means, collectively, the Company's common stock,
$.001 par value, and any capital stock of any class of the Company
hereafter authorized which is not limited to a fixed sum or percentage of
par or stated value in respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
"Exercise Period" means any time one hundred eighty (180) days after
the closing of the Initial Public Offering until the tenth business day of
the calendar year following the calendar year after the calendar year in
which the Warrants were issued. As an example, if the closing of the
Initial Public Offering had been on June 30, 1999, any Warrants the Holder
receives in the calendar year 1999 may be exercised on or after December
27, 1999 until January 12, 2001.
"Initial Public Offering" means the initial offering by the Company
of its equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in
effect, or any comparable statement under any similar federal statute then
in force; provided an Initial Public Offering will not include an offering
made in connection with a business acquisition or an employee benefit
plan.
"Organic Change" means any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the Company's
assets to another Person which is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange
for Common Stock.
"Warrant" means the warrant to purchase Common Stock issued to the
Holder by the Company.
12. Notices. Except as otherwise expressly provided, all notices referred
to herein shall be done electronically through the Web Site.
13. Applicable Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
14. Covenants to Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
<PAGE> 5
15. Severability. In case any one or more of the provisions contained
herein shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby.
16. Section Headings. The section headings used herein are for convenience
of reference only, are not part of this Warrant and are not to affect the
construction of or be taken into consideration in interpreting this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed the
___ day of _________, _____.
TAKES.COM, INC., a
Delaware corporation
By
Its
<PAGE> 1
Exhibit 5.1
FORM OF
LEGAL OPINION OF PEDERSEN & HOUPT, P.C.
(Pedersen & Houpt, P.C. Letterhead)
[Date]
takes.com, inc.
3655 Nobel Drive
Suite 550
San Diego, California 92122
Re: takes.com, inc.
SEC File No. 333-78261
Gentlemen:
We have acted as counsel to takes.com, inc., a Delaware corporation
(the "Company"), in connection with the preparation of a Registration Statement
on Form S-1, Registration No. 333-78261 and all amendments thereto (the
"Registration Statement"), which has been filed by the Company with the
Securities and Exchange Commission (the "Commission") for the purpose of
registering under the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations thereunder (i) the sale of up to 3,248,750 shares
(the "Shares") of the Company's Common Stock, $0.001 par value per share (the
"Common Stock"), (ii) 300,000,000 Warrants (the "Warrants") to purchase Common
Stock (the "Warrant Offering") and (iii) 10,000,000 shares of Common Stock
issuable upon the exercise of the Warrants (the "Warrant Shares"). The Shares
will be offered and sold (the "Offering") pursuant to an underwriting agreement
(the "Underwriting Agreement") to be entered into between the Company and
Paradise Valley Securities, Inc., as the [representative of] the underwriters.
The Warrants will be offered and issued from time to time to persons who
register with and use the Company's Internet Web site. We are rendering this
opinion as of the time the Registration Statement becomes effective in
accordance with Section 8(a) of the Securities Act.
<PAGE> 2
takes.com, inc.
[Date]
Page 2
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement; (ii) the form of the Warrants; (iii) the proposed form of
Underwriting Agreement; (iv) the form of the Company's Amended and Restated
Certificate of Incorporation; (v) the Company's Bylaws and (vi) resolutions of
the Company's Board of Directors. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such other records of
the Company and such agreements, certificates or records of public officials,
certificates of officers or representatives of the Company, respectively, and
such other documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures (including endorsements), the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such copies. In making our
examination of executed documents, we have assumed that the parties thereto
(including the Company) had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and that such documents constitute valid and binding
obligations of such parties.
We are members of the Bar of the State of Illinois, and we express no
opinion with respect to laws other than the laws of the State of Illinois, the
General Corporation Law of the State of Delaware and federal laws of the United
States of America.
<PAGE> 3
takes.com, inc.
[Date]
Page 3
With respect to the issuance of any Shares and Warrant Shares, we have
assumed that the issuance of such Shares and Warrant Shares will have been duly
authorized and the certificates, if any, evidencing the same will have been duly
executed and delivered, against receipt of consideration approved by the Company
which will be no less than the par value thereof.
Based upon and subject to the limitations, qualifications, exceptions
and assumptions set forth herein, we are of the opinion that when (i) the
Registration Statement becomes effective under the Securities Act, (ii) the
Amended and Restated Certificate of Incorporation of the Company has been filed
with the Secretary of State of the State of Delaware, (iii) the final terms of
the Underwriting Agreement and the Offering have been approved by the Board of
Directors of the Company, (iv) the Underwriting Agreement has been duly executed
and delivered by each of the parties thereto and (v) the Shares have been issued
and delivered in accordance with the terms of the Underwriting Agreement
(including the receipt by the Company of the consideration for the Shares
described therein), the Shares will be validly issued, fully paid and
non-assessable.
Based upon and subject to the limitations, qualifications, exceptions
and assumptions set forth herein, we are also of the opinion that when issued,
the Warrants will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm in the Registration Statement and in the related prospectus as the same
appears under the caption "Legal Matters." We also consent to the incorporation
by reference of this consent into a subsequent registration
<PAGE> 4
takes.com, inc.
[Date]
Page 4
statement filed pursuant to Rule 462(b) under the Securities Act in connection
with the Warrant Offering. In giving this consent, we do not thereby admit that
we are included in the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Commission.
Very truly yours,
<PAGE> 1
Exhibit 5.2
FORM OF TAX OPINION OF
PEDERSEN & HOUPT, P.C.
[Date]
takes.com, inc.
3655 Noble Drive, Suite 550
San Diego, CA 92122
Ladies and Gentlemen:
You have requested our opinion regarding certain material United States
federal income tax considerations discussed under the heading "Federal Income
Tax Consequences" in the Registration Statement on Form S-1 (the "Registration
Statement") filed by takes.com, inc. (the "Issuer") on the date hereof with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"). The Registration Statement relates
to the offer, made by the Issuer, to issue warrants to users of its Web site.
These warrants will be convertible into common stock of the Issuer. The common
stock underlying the warrants is also being registered pursuant to the
Registration Statement. This opinion is delivered in accordance with the
requirements of Item 601(b)(8) of Regulation S-K under the Securities Act.
We have reviewed the Registration Statement and such other materials as
we have deemed necessary or appropriate to form a basis for our opinion
described herein, and have considered the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated
thereunder, pertinent judicial authorities, interpretive rulings of the Internal
Revenue Service and such other authorities as we have considered relevant, all
as in effect on the date hereof. It should be noted that statutes, regulations,
judicial decisions and administrative interpretations are
<PAGE> 2
[Date]
Page 2
subject to change at any time and, in some circumstances, with retroactive
effect. A change in the authorities upon which our opinion is based could affect
our conclusions. All references contained herein refer to terms defined in the
Registration Statement.
Based upon the foregoing, it is our opinion that:
A. The issuance of warrants for registering with the Issuer's Web site
will be characterized as an exchange of property for intellectual
property for federal income tax purposes. The Issuer will not recognize
any gain or loss on the issuance of these warrants.
B. The issuance of warrants for logging on to the Issuer's Web site and
the issuance of warrants for remaining on the Web site for an extended
period of time should be characterized as an exchange of property for
services for federal income tax purposes.
C. Since the fair market value of the warrants will not be readily
ascertainable at the time they are issued, users of the Web site will
not be required to recognize any income until they exercise the
warrants and a value can be assigned to the warrants. Likewise, the
Issuer will not be allowed an ordinary and necessary business deduction
for the value of the warrants issued until they are exercised and a
value can be assigned to the warrants.
D. Upon exercise of each warrant, users of the Web site will recognize
ordinary income equal to that fraction of the value of one share of
common stock of the Issuer for which the warrant could be exercised on
the date of such exercise. Income recognized from the exercise of
warrants received for registering with the Web site will not be subject
to self-employment taxes. Income recognized from the exercise of
warrants issued for logging on to and remaining on the Web site for an
extended period of time should be subject to self- employment taxes.
E. Upon exercise of each warrant that was issued to a user for logging on
to or remaining on the Web site for an extended period of time, the
Issuer should be allowed a deduction for ordinary and necessary
business expenses equal to that fraction of the value of one share of
common stock of the Issuer for which the warrant could be exercised on
the date of such exercise.
F. Users of the Web site will have a basis in the common stock they
receive upon exercise of the warrants equal to the amount
<PAGE> 3
[Date]
Page 3
of ordinary income they recognize upon the exercise of the warrants.
G. The holding period of any common stock acquired upon the exercise of
warrants for the purpose of determining whether any gain or loss on the
sale of such common stock is long term or short term gain will begin on
the date of such exercise.
H. Neither the Issuer nor the holder of a warrant will recognize any gain
or loss on the expiration of any warrant.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement. In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations of the Commission promulgated
thereunder.
Sincerely,
<PAGE> 1
Exhibit 10.2
QUOTE FOR PRODUCTS AND SERVICES
[VERIO LOGO]
<TABLE>
<CAPTION>
---Order Status------------
[ ] Quote Only
- --Quote Prepared By---------- Date: May 7, 1999 [X] New Customer Order
[X] Rep [ ] Referral Partner [ ] ASP ------------ [ ] Existing Customer Order
- ----------------------------- ------------------------------ ---------------------------
<S> <C> <C> <C>
Verio Company Customer America's Home Page
8001 Irvine Center Dr. Suite 1200 St. Address St. Address 3655 Nobel Dr. Suite 550
Irvine, Ca 91618 City/State/Zip City/State/Zip San Diego, Ca 92122
(949) 453-2344 Phone Phone 619-677-0500 ext. 18
(949) 450-8410 Fax Fax 619-457-1922
Tim Prucha Contact Contact David Bellino
=======================================================================================================
</TABLE>
VERIO INTERNET SERVICES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
SERVICE DESCRIPTION NO PRICING MONTHLY ONE-TIME(1) PRODUCT CODE SITE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
None 1 Auto 1
- --------------------------------------------------------------------------------------------
VSC 1.5M Ethernet Colocation 1 Auto $1,500.00 $500.00 VMC-EC-01500 1
- --------------------------------------------------------------------------------------------
None 1 Auto 1
- --------------------------------------------------------------------------------------------
None 1 Auto 1
- --------------------------------------------------------------------------------------------
None 1 Auto 1
- --------------------------------------------------------------------------------------------
1.5M Burst to 2.5M $500.00
- --------------------------------------------------------------------------------------------
1/2 Rack 10 AMPS $500.00 $500.00
--------- ---------
TOTAL VERIO INTERNET SERVICES $2,500.00 $1,000.00
============================================================================================
</TABLE>
VERIO NETWORKING EQUIPMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
ITEM DESCRIPTION NO SERVICE COST TOTAL HARDWARE ORDER CODE SITE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
None 1 1
- --------------------------------------------------------------------------------------------
None 1 1
- --------------------------------------------------------------------------------------------
None 1 1
- --------------------------------------------------------------------------------------------
None 1 1
- --------------------------------------------------------------------------------------------
None 1 1
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL VERIEO NETWORKING EQUIPMENT
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
FEATURES OF THE SELECTED VERIO INTERNET SERVICES IP ITEM
- --------------------------------------------------------------------------------------------
<S> <C>
1
- --------------------------------------------------------------------------------------------
CrossConnect Bandwidth 2
- --------------------------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------------------
5
============================================================================================
</TABLE>
ASSOCIATED TELCO SERVICES REQUIRED(2)
<TABLE>
<CAPTION>
SITE TELCO CONNECTIVITY SERVICE NO CARRIER MONTHLY ONE-TIME VERIO POP NPA/nxx
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 None VSC Irvine 1 949-221
- --------------------------------------------------------------------------------------------
1 None
- --------------------------------------------------------------------------------------------
1 None
- --------------------------------------------------------------------------------------------
1 None
- --------------------------------------------------------------------------------------------
1 None
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL TELCO SERVICES(4)
============================================================================================
</TABLE>
Page 1
<PAGE> 2
EXECUTIVE SUMMARY
[VERIO LOGO] [VERIO WORLD LOGO]
<TABLE>
<CAPTION>
<S> <C>
Verio America's Home Page
8001 Irvine Center Dr. Suite 1200 3655 Nobel Dr. Suite 550
Irvine, CA 91618 San Diego, Ca 92122
Tim Prucha David Bellino
</TABLE>
SUMMARY PRICING FOR SELECTED VERIO SERVICES AND PRODUCTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MONTHLY ONE-TIME COMMENTS
- --------------------------------------------------------------------------------------------
Verio Total Internet Charges $2,500.00 $1,000.00
- ------------------------------------------------------------------------------------
Total Telco Charges
- ------------------------------------------------------------------------------------
Total Network Equipment
- ------------------------------------------------------------------------------------
Other Charges or Credits (VERIO)
- --------------------------------------------------------------------------------------------
Other Charges or Credits Tax %
- --------------------------------------------------------------------------------------------
Tax 7.75%
- --------------------------------------------------------------------------------------------
Totals $2,500.00 $1,000.00
============================================================================================
</TABLE>
===============================================================================
TERMS AND CONDITIONS
This quote for Verio services and products is valid for 30 days (promotions may
expire earlier). After 30 days, this quote may be honored by Verio at its sole
discretion. To accept this quote and order the services and/or products
represented here, you must sign this quote, choose a payment method, and
return this document to Verio or one of its authorized agents. Signature
indicates acceptance of Verio's "ACCESS SERVICE AGREEMENT TERMS AND CONDITIONS"
(attached), as well as the pricing, products, and services indicated on this
quote. Telephone company pricing included in this quote is believed to be
accurate, but is not guaranteed by Verio.
===============================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Joel W. Cohen Accepted For: President and Chief Executive Officer
- ------------------------------ --------------------------- --------------------------------------
Signature Title of Customer Representative
America's Home Page
3655 Nobel Dr. Suite 550
Joel W. Cohen San Diego, Ca 92122 May 13, 1999
- ----------------------------------------------------------------------------------------------
------------------------------------------- Date
Contract Term
[ ] Month [X] 1 Year [ ] 3 Years [ ] 5 Years [ ] Other
-------------------------------------------
==============================================================================================
</TABLE>
ADDITIONAL COMMENTS OR SPECIAL CONDITIONS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Verio: UPS Generator Backup, Multihomed Backbone, Class C of Addresses.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE SIGN THIS AGREEMENT AFTER READING THE TERMS AND CONDITIONS AND
ADDITIONAL STIPULATIONS BELOW.
(1) Set-up includes installation fees and associated set-up and configuration of
equipment.
(2) Any interruption in any Service(s) that is caused by the malfunction or
interruption of any telecommunications services or facility (including, but not
limited to, cables and fiber optic lines) order by Verio on behalf of Customer
or purchased directly by Customer in connection with the Service(s) will not be
deemed a breach of Verio's obligations under this Agreement.
(3) VERIO is acting only as a reseller of the hardware and software offered
under this Agreement, which was manufactured by a third party ("Manufacturer").
Verio shall not be responsible for any changes in Service(s) that cause hardware
or software to become obsolete, require modification or alteration, or otherwise
affect the performance of the Services. Any malfunction or manufacturer's
defects of equipment either sold or provided by VERIO to Customer or purchased
directly by Customer in connection with the Service(s) will not be deemed a
breach of VERIO's obligations under this Agreement. Customer shall use its best
efforts to protect and keep confidential all intellectual property provided by
VERIO to Customer through any hardware or software and shall make no attempt to
copy, alter, reverse-engineer, or tamper with such intellectual property or to
use it other than in connection with the Services. Prices do not include the
cost of shipping and handling of equipment.
(4) Customer may incur early termination charges from the Telephone Company in
the event services are cancelled prior to completion of the contract term.
Page 2
<PAGE> 3
The New World of Business(TM)
www.verio.net.
Phone: 800-273-5600 Fax: 949-450-8410 VERIO(TM)
ACCESS SERVICE AGREEMENT TERMS AND CONDITIONS
1. This Agreement applies to the purchase of all services (collectively, the
"Services") ordered by Customer under this Agreement.
2. Customer shall pay the fees and other charges for each Service as provided in
this Agreement. VERIO reserves the right to change rates by notifying Customer
sixty (60) days in advance of the effective date of the change; provided that
VERIO shall not change any rates during the term of any Term Commitment. Billing
for Services will commence when a VERIO hub and a telephone circuit/line are
prepared to route IP packets to Customer's location. Service charges shall be
invoiced monthly, and payment shall be due on the date specified in the invoice
("Due Date"). Set-Up and equipment charges shall be invoiced upon acceptance of
this Agreement by VERIO. Customer will pay a late payment charge equal to 1.5%
(or the highest amount permitted by law, whichever Is lower) per month or
portion thereof on the outstanding balance of any invoice remaining unpaid
thirty (30) days after the Due Date. Accounts unpaid thirty (30) days after the
Due Date may have service suspended or terminated. Such suspension or
termination shall not relieve Customer of its obligation to pay the monthly fee.
Customer agrees to pay VERIO its reasonable expenses, including attorney's fees
and collection agency fees, incurred in enforcing its rights under this
Agreement. Customer shall pay all federal, state, and local sales, use, value
added, excise, duty and any other taxes assessed with respect to the Services
and the sale of equipment to Customer, except that taxes based on VERIO's net
income shall be the responsibility of VERIO.
3. This Agreement will be automatically renewed on a month to month basis at the
end of the Term Commitment unless Customer provides ninety (90) days written
notice to VERIO of termination of this Agreement. In the event of early
cancellation of a Term Commitment, Customer will be required to pay 75% of
VERIO's standard monthly charge for each month remaining in the Term Commitment.
4. Customer shall at all times adhere to the VERIO Acceptable Use Policy located
at http://www.verio.net/isite/policy.html, as amended from time to time by VERIO
effective upon posting of the revised policy at the URL. Notwithstanding
anything to the contrary contained herein, VERIO may immediately take corrective
action, including disconnection or discontinuance of any and all Services, or
terminate this Agreement in the event of notice of possible violation by
Customer of the VERIO Acceptable Use Policy.
5. VERIO exercises no control over, and accepts no responsibility for, the
content of the information passing through VERIO's host computers, network hubs
and points of presence (the "VERIO Network"). VERIO MAKES NO WARRANTIES OF ANY
KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT FOR THE
SERVICES OR ANY EQUIPMENT VERIO PROVIDES. NEITHER VERIO, ITS EMPLOYEES,
AFFILIATES, AGENTS, THIRD-PARTY INFORMATION PROVIDERS, MERCHANTS, LICENSORS OR
THE LIKE, WARRANT THAT THE SERVICES WILL NOT BE INTERRUPTED OR ERROR FREE; NOR
DO ANY OF THEM MAKE ANY WARRANTY AS TO THE RESULTS THAT MAY BE OBTAINED FROM THE
USE OF THE SERVICES OR AS TO THE ACCURACY, RELIABILITY OR CONTENT OF ANY
INFORMATION SERVICED OR MERCHANDISE CONTAINED IN OR PROVIDED THROUGH THE
SERVICES. VERIO IS NOT LIABLE FOR THE CONTENT OF ANY DATA TRANSFERRED EITHER TO
OR FROM CUSTOMER OR STORED BY CUSTOMER OR ANY OF ITS CUSTOMERS VIA THE
SERVICE(S) PROVIDED BY VERIO.
6. Customer will indemnify, save harmless, and defend VERIO and all employees,
officers, directors and agents of VERIO (collectively "indemnified parties")
from and against any and all claims, damages, losses, liabilities, suits,
actions, demands, proceedings (whether legal or administrative) and expenses
(including but not limited to reasonable attorneys' fees) threatened, asserted,
or filed by a third party against any of the indemnified parties arising out of
or relating to the use of the Services, including any violation of the VERIO
Acceptable Use Policy.
7. IN NO EVENT SHALL VERIO BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, OR LOSS OF PROFITS, REVENUE, DATA OR USE, BY CUSTOMER OR
ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT OR STRICT LIABILITY OR
OTHER LEGAL THEORY, EVEN IF VERIO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. In no event will VERIO's liability for any damages, losses and causes
of actions whether in contract or tort (including negligence or otherwise)
exceed the actual dollar amount paid by Customer for the Service which gave rise
to such damages, losses and causes of actions during the 12-month period prior
to the date the damage or loss occurred or the cause of action arose. VERIO
shall not be liable for failure or delay in performing its obligations hereunder
if such failure or delay is due to circumstances beyond its reasonable control,
including, without limitation, acts of any governmental body, war, insurrection,
sabotage, embargo, fire, flood, strike or other labor disturbance, interruption
of or delay in transportation, interruption or delay in telecommunications
services or inability to obtain raw materials, supplies, or power used in or
equipment needed for provision of the Services.
8. The validity, interpretation, enforceability, and performance of this
Agreement shall be governed by and construed in accordance with the law of the
State of Colorado. This Agreement may not be amended except upon the written
consent of the parties; provided that the VERIO Acceptable Use Policy may be
amended from time to time by VERIO. No failure to exercise and no delay in
exercising any right, remedy, or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or in equity. The waiver
by any party of the time for performance of any act or condition hereunder shall
not constitute a waiver of the act or condition itself. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors, and assigns. Customer may not assign this Agreement without the
prior written consent of VERIO. If any provision of this Agreement shall be held
by a court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement shall remain in full force and effect.
This Agreement supercedes all previous representations, understandings or
agreements and shall prevail notwithstanding any variance with the terms and
conditions of any order submitted. Acceptance of this Agreement by VERIO may be
subject, in VERIO'S absolute discretion, to satisfactory completion of a credit
check. Activation of service shall indicate VERIO'S acceptance of this
Agreement. Use of the VERIO Network constitutes acceptance of this Agreement.
1 of 1 Customer Initials __________
<PAGE> 1
Exhibit 10.4
AMERICA'S HOME PAGE, INC.
1999 STOCK OPTION PLAN
A. PURPOSE AND SCOPE
The purposes of this 1999 America's Home Page, Inc. Stock Option Plan
are to encourage stock ownership by key management employees of America's Home
Page, Inc., a Delaware corporation (the "Company"), or its Affiliates, to
provide an incentive for employees to expand and improve the profits and
prosperity of the Company, and to assist the Company in attracting and retaining
qualified employees through the grant of Options to purchase shares of the
Company's common stock.
B. DEFINITIONS
Unless otherwise required by the context herein:
1. "Affiliate" shall mean any corporation controlling, controlled
by, or under common control with the Company.
2. "Board" shall mean the Board of Directors of the Company.
3. "Cause", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any
Participant employed under a written contract with the Company
or an Affiliate of the Company which contract includes a
definition of "cause," "cause" as defined in such contract and
(ii) with respect to any other Participant, the failure to
perform adequately in carrying out such Participant's
employment responsibilities, including any directives from the
Board, or engaging in such behavior
<PAGE> 2
in his personal or business life, as to lead the Committee in
its reasonable judgment to determine that it is in the best
interests of the Company to terminate his employment.
4. "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any future Federal income tax law.
5. "Committee" shall mean the Compensation Committee of the Board
or any other committee of the Board designated by the Board to
administer this Plan composed of not less than two (2) members
of the Board, each of whom are not eligible to participate in
this Plan and who have not been eligible to participate in the
Plan for one year prior to serving on the Committee. In the
event the Company has issued any class of common stock
required to be registered under Section 12 of the Exchange
Act, the Committee shall be composed of "outside directors" as
described in Section 162(m) of the Code, and the Committee
shall be so constituted so as to comply with the disinterested
administration requirements under Rule 16b-3 of the Exchange
Act. Members of the Committee shall service at the pleasure of
the Board.
6. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
7. "Fair Market Value" shall mean with respect to the Stock, as
of any date, (i) the last reported sales price on the New York
Stock Exchange, or, if not reported for the New York Stock
Exchange on the Composite Tape, or, in case no such reported
sale takes place on such day, the average of the reported
closing bid and asked quotations on the New York Stock
Exchange; (ii) if the Stock are not listed on the New York
Stock Exchange or no such quotations are available, the
closing price of the Stock as reported
-2-
<PAGE> 3
by the National Market System, or similar organization, or, if
no such quotations are available, the average of the high bid
and low asked quotations as quoted in the National Association
of Securities Dealers' Automated Quotation System, or similar
organization; or (iii) in the event that there shall be no
public market for the Stock, the fair market value of the
Stock as determined (which determination shall be conclusive)
in good faith by the Committee, based upon the value of the
Company as a going concern, as if such Stock were publicly
owned stock, but without any discount with respect to minority
ownership.
8. "Option" shall mean a right to purchase Stock, granted
pursuant to the Plan.
9. "Option Price" shall mean the purchase price per share of
Stock subject to an Option, as determined in Section F below.
10. "Participant" shall mean an employee of the Company to whom an
Option is granted under the Plan.
11. "Plan" shall mean this America's Home Page, Inc. 1995 Amended
and Restated Stock Option Plan.
12. "Stock" shall mean the common stock of the Company, par value
$.001 per share.
C. STOCK TO BE OPTIONED
Subject to the provisions of Section L of the Plan, the maximum number
of shares of Stock that may be optioned or sold under the Plan is 2,800,000
shares of Stock. If any Option is canceled, terminates, or expires for any
reason without having been exercised in full, the Stock subject thereto shall
-3-
<PAGE> 4
again be available for all purposes of the Plan. Options on not more than 10% of
Stock reserved for issuance under the Plan may be awarded to any individual
Participant.
D. ADMINISTRATION
The Plan shall be administered by the Committee. Two members of the
Committee shall constitute a quorum for the transaction of its business. The
Committee shall be responsible to the Board for the operation of the Plan. The
interpretation and construction of any provision of the Plan by the Committee
shall be final. No member of the Board or the Committee shall be liable for any
action or determination made by him in good faith. The Committee has discretion
to (i) determine the employees to whom and at the time or times at which Options
may be granted (subject to the provisions of this Plan), (ii) determine the
number of shares of Stock of the Company to be subject to each Option, (iii) in
the case of each option awarded, determine whether the same shall be an
incentive stock option (as described below) or an option which does not qualify
as an incentive stock option (a non-qualified option), (iv) prescribe the form
or forms of the instruments evidencing any Options awarded under the Plan, (v)
prescribe the vesting period (which may be immediate) with respect to any Option
and to accelerate the vesting of any Option previously granted for any reason,
and (vi) prescribe such other terms and conditions, consistent with the terms of
this Plan, as the Committee deems appropriate.
E. ELIGIBILITY
The Committee may grant Options to any key management employee
(including any officer of the Company) or any other employee of the Company, or
an Affiliate of the Company who has
-4-
<PAGE> 5
contributed to or is expected to contribute materially to the success of the
Company or its Affiliates. Options may be granted by the Committee at any time,
and from time to time, to new or current Participants, and may include or
exclude previous Participants, the Committee, shall determine. Options granted
under this Plan need not contain similar provisions, even if granted at the same
time. Either incentive stock options ("ISO's") to purchase common stock of the
Company within the meaning of Section 422A of the Code, or any non-qualified
options to purchase common stock of the Company may be granted under the Plan.
F. OPTION PRICE
The Option Price for all Options which are non-qualified stock options
shall be the price determined by the Committee, but in no event shall it be less
than 85% of the Fair Market Value at the time the Option is granted. The Option
Price for each Option which is intended to qualify as an ISO shall be 100% of
the fair market value of the Stock at the time the Option is granted (110% if
the Participant owns at least 10% of the Stock immediately before the ISO is
granted).
G. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by the
Committee and shall be evidenced by agreements in such form as the Committee,
shall from time to time approve. Such agreements shall comply with and be
subject to the following terms and conditions:
1. Employment Agreement. The Committee may, in its discretion, include
in any Option granted under the Plan, a condition that the Participant
shall agree to remain in the employ of, and
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<PAGE> 6
to render services to, the Company for a period of time (specified in
the agreement) following the date the Option is granted. No such
agreement shall impose upon the Company or any of its subsidiaries,
however, any obligation to employ the Participant for any period of
time.
2. Time and Method of Payment. The Option Price shall be paid in full
at the time an Option is exercised under the Plan, by delivery of any
combination of cash or Stock having a Fair Market Value equal to the
Option Price. Promptly after the exercise of an Option and the payment
of the full Option Price, the Participant shall be entitled to the
issuance of a stock certificate evidencing his ownership of such Stock.
A Participant shall have none of the rights of shareholder until shares
of Stock are issued to him, and no adjustment will be made for
dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
3. Number of Shares. Each agreement shall state the total number of
shares of Stock to which the Option pertains.
4. Option Period and Limitations on Exercise of Options. The agreement
shall specify a term of years during which the Option shall be
exercisable ("Term"). However, the Term of any Option may not be longer
than ten years from the date of grant (5 years if the Participant is a
10% or more owner of the Company and the Option is intended to be an
ISO). The Board may, in its discretion, provide that an Option may not
be exercised in whole or in part for any period or periods of time
specified in the agreement. Except as provided in the agreement, an
Option may be exercised in whole or in part at any time during its
Term.
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H. TERMINATION OF EMPLOYMENT
If a Participant is terminated by the Company or any Affiliate for
Cause, his Options shall terminate immediately. Except as provided in Section I,
if a Participant's cessation of employment with the Company or an Affiliate is
due to any reason other than a termination for Cause, the Participant may, at
any time within ninety (90) days after such cessation of employment, exercise
his Options to the extent that he was entitled to exercise them on the date of
cessation of employment, provided further, that in no event shall any Option be
exercisable after the expiration of its Term. The Committee may cancel an Option
during the three month period referred to in this paragraph if the Participant
engages in employment or activities which are, in the opinion of the Committee,
directly or indirectly in competition with, or contrary to the best interests of
the Company. The Committee may extend the exercise period (but not later than
the expiration of the Term) in its sole discretion.
I. RIGHTS IN EVENT OF DEATH OR DISABILITY
If a Participant dies while employed by the Company or within three
months after cessation of employment other than a termination for Cause, or if a
Participant retires due to disability (as determined by the Committee), without
having fully exercised his Options, the Participant or the duly appointed
executor or administrator of the Participant's estate shall have the right to
exercise such Options within 180 days of the date of the Participant's death or
disability retirement to the extent that such deceased or disabled Participant
was entitled to exercise the Options on the date of his death or disability
retirement; provided, however, that in no event shall the Option be exercisable
after the expiration of its Term.
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<PAGE> 8
The Committee may extend the exercise period (but not later than the expiration
of the Term) in its sole discretion.
J. NO OBLIGATIONS TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the
Participant to exercise such Option.
K. NONASSIGNABILITY
No Option shall be transferable other than by will or by the laws of
descent and distribution, and during a Participant's lifetime, an Option shall
be exercisable only by the Participant or, in the case of incapacity, the legal
guardian of the Participant's estate.
L. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
The aggregate number of shares of Stock available for Options under the
Plan, the stock subject to any Option, and the Option Price, shall all be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Stock subsequent to the effective date of the Plan
resulting from (1) a subdivision or consolidation of shares or any other capital
adjustment, (2) the payment of a stock dividend, or (3) other increase or
decrease in such shares effected without receipt of consideration by the
Company. If the Company shall be the surviving corporation in any merger or
consolidation, any Option shall pertain, apply, and relate to the securities to
which a holder of the number of shares of Stock subject to the Option would have
been entitled after the merger or consolidation. Upon
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<PAGE> 9
dissolution or liquidation of the Company, or upon a merger or consolidation in
which the Company is not the surviving corporation, all Options outstanding
under the Plan shall terminate; provided, however, that each Participant (and
each other person entitled under Section I to exercise an Option) shall have the
right, for thirty (30) days prior to such dissolution or liquidation, or such
merger or consolidation, to exercise such Participant's Options in whole or in
part, but only to the extent that such Options are otherwise exercisable under
the terms of the Plan.
M. AMENDMENT AND TERMINATION
The Board, by resolution, may terminate, amend, or revise the Plan with
respect to any Stock as to which Options have not been granted. Neither the
Board nor the Committee may, without the consent of the holder of an Option,
alter or impair any Option previously granted under the Plan, except as
authorized herein. Unless sooner terminated, the Plan shall remain in effect
until December 31, 2009. Termination of the Plan shall not affect any Option
previously granted.
N. AGREEMENT AND REPRESENTATION OF PARTICIPANTS
As a condition to the exercise of any portion of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of such exercise that any shares of Stock acquired at exercise are being
acquired only for investment and without any present intention to sell or
distribute such shares, if, in the opinion of counsel for the Company, such a
representation is required under the Securities Act of 1933 or any other
applicable law, regulation, or rule of any governmental agency.
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O. RESERVATION OF SHARES OF STOCK
The Company, during the term of this Plan, will at all times reserve
and keep available, and will seek or obtain from any regulatory body having
jurisdiction any requisite authority necessary to issue and to sell the number
of shares of Stock that shall be sufficient to satisfy the requirements of this
Plan. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority deemed necessary by counsel for the Company for the
lawful issuance and sale of its Stock hereunder shall relieve the Company of any
liability in respect of the failure to issue or sell Stock as to which the
requisite authority has not been obtained.
P. EFFECTIVE DATE OF PLAN
The Plan shall be effective from the date that the Plan is approved by
the Board, but any Options granted under this Plan after Board adoption shall be
conditioned upon approval of a majority of the stockholders of each class of
stock entitled to vote thereon. Nothing in this Section P shall be deemed to
impair any Options granted under this Plan.
The Plan was adopted by the Board on May 1, 1999 and approved by
written consent of the Stockholders on May 20, 1999.
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<PAGE> 1
Exhibit 10.5
AMERICA'S HOME PAGE, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
SECTION 1. PURPOSE. The purpose of this Stock Option Plan for
Non-Employee Directors (the "Plan") is to attract and retain persons of
exceptional ability to serve as members of the Board of Directors of America's
Home Page, Inc. (the "Company"), and to align the interests of the Company's
non-employee directors with that of the stockholders in enhancing the value of
the Company's capital stock.
SECTION 2. ADMINISTRATION. The Plan shall be administered by the Board
of Directors of the Company (the "Board") or such committee of the Board that is
designated by the Board to administer the Plan (the "Administrator"). Such
committee shall be constituted to permit the Plan to comply with Rule 16(b) of
the Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule.
The Administrator shall have responsibility finally and conclusively to
interpret the provisions of the Plan and to decide all questions of fact arising
in its application. No member of the Administrator shall be liable for any
action or determination made in good faith with respect to the Plan. The
Administrator may delegate to an officer or officers of the Company the
authorization to execute and deliver on behalf of the Company any document or
instrument required to be delivered under this Plan.
SECTION 3. TYPE OF OPTIONS. Options granted pursuant to the Plan shall
be nonstatutory options which are not intended to meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 4. ELIGIBILITY. Directors of the Company who are not employees
of the Company or any of its affiliates ("Non-employee Directors") and who are
appointed or elected to the Board on or after the date this Plan is approved by
a majority of the shareholders of the Company shall be eligible to participate
in the Plan. Each eligible Non-employee Director to whom stock options are
granted shall be a participant ("Participant") under the Plan.
SECTION 5. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as
provided in Section 10 below, an aggregate of 150,000 shares of common stock of
the Company, par value $.001, (the "Common Stock") shall be available for
issuance pursuant to the provisions of the Plan. Such shares may be authorized
and unissued shares or may be shares issued and thereafter acquired by the
Company. If an option granted under the Plan shall expire or terminate for any
reason without having been exercised in whole or in part, the unpurchased shares
subject to such option shall again be available for subsequent option grants
under the Plan.
<PAGE> 2
SECTION 6. AUTOMATIC GRANT OF OPTIONS.
6.1 Each eligible Non-Employee Director serving on the Board
as of the date of closing of the Company's initial public offering shall receive
an option to purchase shares of Common Stock with an exercise price equal to
the initial public offering price. The grant shall provide for an option to
purchase 15,000 shares of Common Stock per Director.
6.2 On an annual basis thereafter, each Non-Employee Director
in office on the date of the adjournment of the annual meeting of stockholders
of the Company shall be granted as of such date automatically and without
further action by the Board an option to purchase 7,500 shares of Common
Stock.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
7.1 Exercise of Options.
(a) Each option granted under Section 6.1 of the Plan shall be
100% vested as of the date of grant. Each option granted under Section 6.2 of
the Plan shall be exercisable at the rate of one-third (1/3) per year commencing
on the first anniversary of the date of grant, subject to the provisions of
Section 9 hereof.
(b) Notwithstanding the provisions of paragraph (a) above, an
option granted to any Participant under Section 6.2 of the Plan shall become
immediately exercisable in full upon the first to occur of:
(i) the death of the Participant, in which case
the option may be exercised by the Participant's executor or
administrator, or if not so exercised, by the legatees or
distributees of his or her estate or by such other person or
persons to whom the Participant's rights under the option
shall pass by will or by the applicable laws of descent and
distribution;
(ii) such time as the Participant ceases to be a
director of the Company by reason of his or her permanent
disability as determined in good faith by the Board or the
Administrator;
(iii) such time as the Participant ceases to be a
director of the Company as a result of retirement from the
Board of Directors on or after attaining age 65; or
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<PAGE> 3
(iv) such time as a Participant ceases to be
eligible to participate in this Plan by reason of his or her
becoming an employee of the Company or any of its
subsidiaries.
(c) Options granted under the Plan shall expire ten years from
the date on which the option is granted, unless terminated earlier in accordance
with the Plan; provided, however, that in the event a Participant ceases to be a
director of the Company by reason of an event described in Section 7.1(b), any
option granted to such Participant hereunder shall expire eighteen months from
the date the Participant ceases to be a director of the Company, but in no event
later than the day preceding the tenth anniversary of the date of the grant of
such option.
(d) In the event that the Participant ceases to be a director
of the Company for any reason other than those specified in paragraph 7.1(b):
(i) if prior to the time a Participant's option
becomes fully exercisable, such option will terminate on the
date the Participant ceases to be a director of the Company
with respect to the shares as to which the option is not then
exercisable without further obligation or action on the part
of the Company.
(ii) if after a Participant's option has become
exercisable in whole or in part, such option shall remain
exercisable in whole or in part, as the case may be, in
accordance with the terms hereof for a period of three months
from the date the Participant ceases to be a director, but in
no event later than the day preceding the tenth anniversary of
the date of grant of such option.
7.2 Exercise Price. The exercise price of each share of Common Stock
subject to an option shall be the "Fair Market Value" of a share of Common Stock
on the date the option is granted. "Fair Market Value" for purposes of the Plan
shall mean as of any date, (i) the last reported sales price on the New York
Stock Exchange, or, if not reported for the New York Stock Exchange on the
Composite Tape, or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked quotations on the New York Stock
Exchange; (ii) if the Common Stock is not listed on the New York Stock Exchange
or no such quotations are available, the closing price of the Common Stock as
reported by the National Market System, or similar organization, or, if no such
quotations are available, the average of the high bid and low asked quotations
as quoted in the National Association of Securities Dealers' Automated Quotation
System, or similar organization; or (iii) in the event that there shall be no
public market for the Common Shares, the fair market value of the Common Stock
as determined (which determination shall be conclusive) in good faith by the
Board or the Administrator, based upon the value of the Company as a going
concern, as if such Common Stock was publicly owned stock, but without any
discount with respect to minority ownership. Under no circumstances shall Fair
Market Value be less than the par value of the Common Stock.
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<PAGE> 4
7.3 Payment of Exercise Price; Tax Withholding.
(a) Subject to the terms and conditions of the Plan and the
documentation of the options pursuant to Section 7.5 hereof, an option granted
hereunder shall, to the extent then exercisable, be exercisable in whole or in
part by giving written notice to the Company's Secretary stating the number of
shares with respect to which the option is being exercised, accompanied by
payment in full for such shares; provided, however, that there shall be no such
exercise at any one time for fewer than one hundred (100) shares, except that if
fewer than one hundred (100) shares are then purchasable by the person
exercising the option, then said person may exercise for all of the remaining
shares.
(b) Options granted under the Plan may be paid for by delivery
of cash in an amount equal to the exercise price of such options, or by delivery
to the Company of shares of Common Stock already owned by the Participant having
a Fair Market Value equal in amount to the exercise price of the option being
exercised or by any combination of such methods of payment.
(c) The Participant shall pay the Company in an amount of cash
sufficient to cover withholding required by law for any federal, state, local or
foreign taxes in connection with an exercise of options herewith. A Participant
may also elect, in lieu of paying cash, to deliver shares of Common Stock or to
direct the Company to withhold shares of Common Stock purchased upon exercise of
an option (to be valued at Fair Market Value as of the exercise date) to satisfy
any required tax withholding and the Board shall determine the timing and other
terms and conditions in which the use of shares of Common Stock to satisfy tax
withholding may take place.
7.4 Rights as a Shareholder. Except as specifically provided by the
Plan, the grant of an option will not give a Participant any rights as a
shareholder of the Company. The Participant will obtain such rights, subject to
any limitations imposed by the Plan, only upon actual receipt of the certificate
or certificates representing the Common Stock.
7.5 Documentation of Option Grants. Option grants shall be evidenced by
written instruments prescribed by the Board or the Administrator from time to
time. The instruments may be in the form of agreements to be executed by both
the Participant and the president or any vice president of the Company or in the
form of certificates, letters or similar instruments, which need not be executed
by the Participant but acceptance of which will evidence agreement to the terms
of the grant.
7.6 Nontransferability of Options. No option granted under the Plan
shall be assignable or transferable by the Participant to whom it is granted,
either voluntarily or by operation of law, except (a) by will or the laws of
descent and distribution or (b) during the
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<PAGE> 5
lifetime of the Participant, to the Participant's spouse, lineal ancestors or
lineal descendants or to trusts or family partnerships for the benefit of the
foregoing ("Permitted Transferees"). During the life of the Participant, the
option shall be exercisable only by the Participant or a transferee who is a
Permitted Transferee (or in the event of incapacity, by the person or persons
properly appointed to act on his or her behalf).
7.7 Approvals. The effectiveness of the Plan is subject to the approval
by affirmative vote of a majority of the shares of the Common Stock present in
person or by proxy and entitled to vote at an annual or special meeting of the
stockholders. In the event that the Plan is not approved by the stockholders,
the Plan and any options granted hereunder shall be void and of no effect.
The Company's obligation to sell and deliver shares of Common Stock
under the Plan is subject to the approval of any governmental authority required
in connection with the authorization, issuance or sale of the Common Stock.
SECTION 8. REGULATORY COMPLIANCE AND LISTING
(a) The issuance or delivery of any shares of Common Stock
subject to exercisable options hereunder may be postponed by, the Board for such
period as may be required to comply with any applicable requirements under
Federal securities laws, any applicable listing requirements of any national
securities exchange or any requirements under any law or regulation applicable
to the issuance or delivery of such shares. The Company shall not be obligated
to issue or deliver any such shares if the issuance or delivery thereof would
constitute a violation of any provision of any law or of any regulation of any
governmental authority or any rule of any national securities exchange.
(b) No discretion concerning decisions regarding the Plan
shall be afforded to a person who is not a "disinterested person" within the
meaning of Section 16 of, and Rule 16b-3 promulgated under, the Securities
Exchange Act of 1934, as amended (the "1934 Act"). Section 4 and 6 hereof shall
not be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act, or the rules
thereunder. Should any provision of this paragraph require modification or be
unnecessary to comply with the requirements of Section 16 or Rule 16b-3 under
the 1934 Act, the Board may waive such provision and/or amend this Plan to add
to or modify the provisions hereof accordingly.
SECTION 9. CHANGE IN CONTROL. Notwithstanding anything to the contrary
in the Plan, the following shall apply to all outstanding options granted under
the Plan:
(a) Definitions - The following definitions shall apply to
this Section:
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<PAGE> 6
A "Change in Control" shall mean:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) of the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the 1934 Act) of 50% or more
of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly
from the Company or any of its subsidiaries, (B) any
acquisition by the Company or any of its subsidiaries, (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its
subsidiaries, (D) any acquisition by any corporation with
respect to which, following such acquisition, more than 50%
of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by individuals,
entities or groups who were the beneficial owners,
respectively, of at least 50% of the Outstanding Voting
Securities immediately prior to such acquisition in
substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding
Voting Securities, or (E) the acquisition by any individual,
entity or group which on the date this Plan was adopted by the
Board owned 50% or more of the Outstanding Voting Securities.
(ii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Voting Securities immediately prior to such
reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions
as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Voting Securities;
or
(iii) Approval by the shareholders of the Company of
(A) a complete liquidation or dissolution of the Company or
(B) the sale or other disposition of all or substantially all
of the assets of the Company other than to a corporation, with
respect to which following such sale or other disposition,
more than 50% of, respectively, the then outstanding shares of
common stock of such corporation
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<PAGE> 7
and the combined voting power for the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Voting Securities.
"CIC Price" shall mean the higher of (1) the highest price
paid for a share of Common Stock in the transaction or series of transactions
pursuant to which a Change in Control of the Company shall have occurred, or (2)
the highest reported sales price of a share of Common Stock during the 60 day
period immediately preceding the date upon which the event constituting a Change
in Control shall have occurred.
(b) Acceleration of Vesting and Payment of Stock Options.
(i) Upon the occurrence of an event constituting a
Change in Control, all stock options outstanding on such date
shall become 100% vested and shall be purchased from the
Participant by the Company in cash as soon as may be
practicable. Upon such purchase, such stock options shall be
cancelled.
(ii) The purchase price for the stock options to be
paid by the Company shall be determined by multiplying the
number of such options by the difference between the exercise
price per share and the CIC Price, if higher.
(iii) Notwithstanding the foregoing subsections (i)
and (ii), if the exercise price of a stock option exceeds the
CIC Price, such stock option shall be 100% vested but shall
not be cancelled.
SECTION 10. ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION. In the
event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution with respect to holders of the Common Stock (other than normal cash
dividends), automatic adjustment shall be made in the number and kind of shares
as to which outstanding options or portions thereof then unexercised shall be
exercisable and in the available shares set forth in Section 5 hereof, such that
the proportionate interest of the option holder shall be maintained as before
the occurrence of such event. Such adjustment in outstanding options shall be
made with a corresponding adjustment in the option price per share and without a
change in the total price applicable to the unexercised portion of such options.
Automatic adjustment shall also be made in the number and kind of shares subject
to options subsequently granted under the Plan.
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SECTION 11. NO RIGHT TO REELECTION. Nothing in the Plan shall be deemed
to create any obligation on the part of the Board to nominate any Non-employee
Director for reelection by the Company's shareholders, nor confer upon any
Non-employee Director the right to remain a member of the Board for any period
of time, or at any particular rate of compensation.
SECTION 12. AMENDMENT AND TERMINATION.
(a) Except as provided in Section 8(b), the Board shall have
the right to amend, modify or terminate the Plan at any time and from time to
time; provided, however, that unless required by law, no such amendment or
modification shall (a) affect any right or obligation with respect to any grant
theretofore made; (b) in any manner affect the requirements set forth in Section
8(b) hereof, or (c) unless previously approved by the shareholders, increase the
number of shares of Common Stock available for grants as provided in Section 5
hereof other than an adjustment pursuant to Section 10 hereof. In addition, no
such amendment or modification shall, unless previously approved by the
shareholders (where such approval is necessary to satisfy then applicable
requirements of federal securities laws, the Code or rules of any stock exchange
on which the Company's Common Stock is listed) (i) in any manner affect the
eligibility requirements set forth in Section 4 hereof, (ii) increase the number
of shares of Common Stock subject to any option, (iii) change the purchase price
of the shares of Common Stock subject to any option, (iv) extend the period
during which options may be granted under the Plan, or (v) materially increase
the benefits to Participants under the Plan.
(b) Unless earlier terminated by the Board, or the shares
reserved under the Plan shall have all been committed for options granted
pursuant to the Plan, the Plan shall terminate on December 31, 2009; provided,
however, that options which are granted on or before this date shall remain
exercisable in accordance with their respective terms after the termination of
the Plan.
SECTION 13. SUCCESSORS AND ASSIGNS. The Plan shall be binding on all
successors and permitted assigns of a Participant, including but not limited to,
the estate of such Participant, the executor, administrator or trustee of such
estate, and the guardian or legal representative of the Participant.
SECTION 14. GOVERNING LAW. The validity, construction and effect of the
Plan and any action taken or relating to the Plan shall be determined in
accordance with the laws of the State of Arizona and applicable Federal law.
SECTION 15. SEVERABILITY. Whenever possible, each provision of this
Plan will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Plan is held to be invalid, illegal
or unenforceable in any respect under any
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<PAGE> 9
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
but this Plan will be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision had never been contained
herein.
America's Home Page, Inc.
By:
--------------------------------
Its:
-------------------------------
This Stock Option Plan for Non-Employee Directors was adopted by the Board on
May 1, 1999 and approved by written consent of the Stockholders on May 20, 1999.
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<PAGE> 1
Exhibit 10.6
AMERICA'S HOME PAGE, INC.
INDEPENDENT CONTRACTOR STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
ARTICLE I
ESTABLISHMENT............................................................................................1
ARTICLE II
DEFINITIONS .............................................................................................1
ARTICLE III
ADMINISTRATION ..........................................................................................4
3.1 Committee Structure and Authority...............................................................4
ARTICLE IV
STOCK SUBJECT TO PLAN ...................................................................................6
4.1 Number of Shares................................................................................6
4.2 Release of Shares...............................................................................7
4.3 Restrictions on Shares..........................................................................7
4.4 Stockholder Rights..............................................................................7
4.5 Anti-Dilution...................................................................................7
ARTICLE V
ELIGIBILITY..............................................................................................8
5.1 Eligibility.....................................................................................8
ARTICLE VI
GRANT OF STOCK OPTIONS ..................................................................................9
6.1 General.........................................................................................9
6.2 Grant and Exercise..............................................................................9
6.3 Terms and Conditions............................................................................9
6.4 Exercise Upon Death............................................................................10
6.5 Other Termination..............................................................................10
6.6 Cashing Out of Option..........................................................................10
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN .................................................11
7.1 Transfer of Shares.............................................................................11
7.2 Limited Transfer During Offering...............................................................11
ARTICLE VIII
MISCELLANEOUS ..........................................................................................11
8.1 Amendments and Termination.....................................................................11
8.2 General Provisions.............................................................................12
8.3 Rights with Respect to Continuance of Distribution Agreement...................................13
8.4 Delay..........................................................................................13
8.5 Headings.......................................................................................14
8.6 Severability...................................................................................13
8.7 Successors and Assigns.........................................................................14
8.8 Effectiveness of Plan and Stock Option Grants..................................................14
</TABLE>
(ii)
<PAGE> 4
AMERICA'S HOME PAGE, INC.
INDEPENDENT CONTRACTOR STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT
The America's Home Page, Inc. Independent Contractor Stock Option Plan
("Plan") is hereby established by America's Home Page, Inc. ("Company"). The
purpose of the Plan is to grant equity compensation to consultants, service
providers and other independent contractors ("Independent Contractors") who
perform services for the Company or its "Affiliates" (as hereinafter defined),
to give Independent Contractors an incentive to provide quality service and
thereby increase the value number of the Company and its Affiliates and to
promote the identification of the interests of such Independent Contractors with
those of the stockholders of the Company.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth
below:
"AFFILIATE" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company including, without limitation, any member of an affiliated group of
which the Company is a common parent corporation as provided in Section 1504 of
the Code.
"AGREEMENT" or "OPTION AGREEMENT" means, individually or collectively,
any agreement entered into pursuant to the Plan pursuant to which a Stock Option
is granted to a Participant.
"BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of the
Company.
"CAUSE" means (a) any act or omission which permits the Company to
terminate its relationship immediately with an Independent Contractor which is
the Participant or in which the Participant has an ownership interest; (b) any
act of gross negligence or willful misconduct on the part of the Participant or
the Independent Contractor in which the Participant has an ownership interest
which has, or in the opinion of the Committee may have, an adverse affect on the
Company's customer accounts or the business of the Company or an Affiliate; or
(c) any failure to cure a breach of the obligations of the Participant or the
Independent Contractor in
<PAGE> 5
which the Participant has an equity interest under its Independent Contractor
Agreement within ten (10) days after the Company or an Affiliate has given
written notice of such breach to the Participant or the Participant's
Independent Contractor.
"CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.
"COMMISSION" means the Securities and Exchange Commission or any
successor agency.
"COMMITTEE" means the Compensation Committee of the Board, or such
other committee of the Board appointed by the Board of Directors to administer
the Plan, as further described in the Plan.
"COMMON STOCK" means the shares of the Common Stock, $0.001 par value,
of the Company whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of the Plan.
"COMPANY" means America's Home Page, Inc., a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company are exchanged; and any assignee of or
successor to substantially all of the assets of the Company.
"EFFECTIVE DATE" means ____________, 1999.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FAIR MARKET VALUE" means the value determined on the basis of the good
faith determination of the Committee, without regard to whether the Common Stock
is restricted or represents a minority interest, pursuant to the applicable
method described below:
(a) if the Common Stock is listed on a national securities
exchange or quoted on the Nasdaq National Market ("NASDAQ"), the closing price
of the Common Stock on the relevant date, as reported by the principal national
exchange on which such shares are traded (in the case of an exchange) or by the
NASDAQ, as the case may be;
(b) if the Common Stock is not listed on a national securities
exchange or quoted on the NASDAQ, but is actively traded in the over-the-counter
market, the average of the closing bid and asked prices for the Common Stock on
the relevant date, or the most recent preceding date for which such quotations
are reported; and
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<PAGE> 6
(c) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (a) or (b), the value determined in good
faith by the Committee.
"GRANT DATE" means the date that as of which a Stock Option is granted
pursuant to the Plan.
"INDEPENDENT CONTRACTOR" means a Person providing consulting, advisory,
or other services to the Company or any of its Affiliates pursuant to an
Independent Contractor Agreement, and which Person is not an employee or
Non-Employee Director of the Company or any of its Affiliates.
"INDEPENDENT CONTRACTOR AGREEMENT" means a written agreement between
the Company or one or more of its Affiliates and a Person engaging such Person
to be an Independent Contractor.
"NON-EMPLOYEE DIRECTOR" has the meaning set forth in Rule 16b-3, or any
successor definition adopted by the Commission, provided the person is also an
"outside director" under Section 162(m) of the Code.
"NON-QUALIFIED STOCK OPTION" means an Option to purchase Common Stock
in the Company granted under the Plan other than an incentive stock option
within the meaning of Section 422 of the Code.
"OPTION PERIOD" means the period during which the Option will be
exercisable in accordance with the Option Agreement and Article VI.
"OPTION PRICE" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3.
"PARTICIPANT" means a Person who satisfies the eligibility conditions
of Article V and to whom a Stock Option has been granted by the Committee under
the Plan, and if a Representative is appointed for a Participant, then the term
"PARTICIPANT" means such appointed Representative, successor Representative, or
spouse as the case may be.
"PERSON" means an individual, corporation, limited liability company,
partnership, joint venture, trust or other entity.
"PLAN" means the America's Home Page, Inc. Independent Contractor Stock
Option Plan, as herein set forth and as may be amended from time to time.
"REPRESENTATIVE" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the
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<PAGE> 7
date of the Participant's death; (b) the person or entity acting as the guardian
or temporary guardian of a Participant; (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death; or (d)
the person or entity acting as the receiver or trustee on behalf of a
Participant which is not a natural person.
"RULE 16b-3" means Rule 16b-3, as promulgated under the Exchange Act,
as amended from time to time, or any successor thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"STOCK OPTION" means a Non-Qualified Stock Option granted under this
Plan.
"TERMINATION" means the termination of the Distribution Agreement and
the end of the Independent Contractorship relationship for whatever reason
between the Company or one or more of its Affiliates and the Participant or the
Independent Contractor in which the Participant has an ownership interest.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan will be administered by
the Committee. In the absence of appointment of the Committee or a successor
committee of the Board, the entire Board of Directors will constitute the
Committee. A majority of the Committee will constitute a quorum at any meeting
thereof (thereof (including telephone conference) and the acts of a majority of
the members present, or acts approved in writing by a majority of the entire
Committee without a meeting, will be the acts of the Committee for purposes of
this Plan. The Committee may authorize any one or more of its members or an
officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee will not exercise any discretion respecting
himself, herself or any entity in which such member holds an ownership interest
under the Plan. The Board will have the authority to remove, replace or fill any
vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
Board. The Committee may allocate among one or more of its members, or may
delegate to one or more of its agents, such duties and responsibilities as it
determines.
Among other things, the Committee will have the authority, subject to
the terms of the Plan:
(a) to select those Persons to whom Stock Options may be
granted from time to time;
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<PAGE> 8
(b) to determine the number of shares of Common Stock to be
covered by each Stock Option granted hereunder;
(c) to determine the terms and conditions of any Stock Option
granted hereunder (including, without limitation, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise acceleration,
forfeiture or waiver regarding any Stock Option and the shares of Common Stock
relating thereto); provided, however, that no Stock Option may be exercised
earlier than one (1) year from the Grant Date;
(d) to adjust the terms and conditions, at any time or from
time to time, of any Stock Option, subject to the limitations of Section 8.1;
(e) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to the exercise of a Stock
Option will be deferred;
(f) to provide for the forms of Option Agreement to be
utilized in connection with the Plan;
(g) to determine what securities law requirements are
applicable to the Plan, Stock Options, and the issuance of shares of Common
Stock and to require of a Participant that appropriate action be taken with
respect to such requirements;
(h) to cancel, with the consent of the Participant or as
otherwise provided in the Plan or an Option Agreement, outstanding Stock
Options;
(i) to require as a condition of the exercise of a Stock
Option or the issuance or transfer of a certificate of Common Stock, the
withholding from a Participant of the amount of any federal, state or local
taxes as may be necessary in order for the Company or any other employer to
obtain a deduction or as may be otherwise required by law;
(j) to determine whether a Termination has occurred and what
effect such Termination has on a Participant;
(k) to determine the restrictions or limitations on the
transfer of Common Stock;
(l) to determine under what circumstances a Stock Option may
be transferred during the Participant's lifetime or existence and to impose
restrictions on such transfers;
(m) to determine whether a Stock Option is to be adjusted,
modified or purchased, or is to become fully exercisable, under the Plan or the
terms of an Option Agreement;
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<PAGE> 9
(n) to determine the permissible methods of Stock Option
exercise and payment, including cashless exercise arrangements;
(o) to adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of the Plan and to amend
or modify any Option Agreement accordingly; and
(p) to appoint and compensate agents, counsel, auditors or
other specialists to aid it in the discharge of its duties.
The Committee will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it may,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Stock Option issued under the Plan (and any Option Agreement) and
to otherwise supervise the administration of the Plan. The Committee's policies
and procedures may differ with respect to Stock Options granted at different
times.
Any determination made by the Committee pursuant to the provisions of
the Plan will be made in its sole discretion, and in the case of any
determination relating to a Stock Option, may be made at the time of the grant
of the Stock Option or, unless in contravention of any express term of the Plan
or an Option Agreement, at any time thereafter. All decisions made by the
Committee pursuant to the provisions of the Plan will be final and binding on
all persons, including the Company and Participants. No determination will be
subject to de novo review if challenged in court.
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Stock Options under the Plan will be 150,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
4.2 Release of Shares. If any shares of Common Stock that have been
optioned cease to be subject to a Stock Option, if any shares of Common Stock
that are subject to any Stock Option are forfeited or if any Stock Option
otherwise terminates without issuance of shares of Common Stock being made to
the Participant, such shares, in the discretion of the Committee, may again be
available for distribution in connection with Stock Options under the Plan.
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<PAGE> 10
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of a Stock Option will be subject to the terms and conditions specified herein
and to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Option Agreement. The Company will
not be required to issue or deliver any certificates for shares of Common Stock,
cash or other property prior to the satisfaction of any applicable withholding
obligation in order for the Company or an Affiliate to obtain a deduction with
respect to the exercise of a Stock Option. The Company may cause any certificate
for any share of Common Stock to be delivered to be properly marked with a
legend or other notation reflecting the limitations on transfer of such Common
Stock as provided in this Plan or as the Committee may otherwise require. The
Committee may require any person exercising a Stock Option to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares of Common Stock in
compliance with applicable law or otherwise. Fractional shares will not be
delivered, but will be rounded to the next lower whole number of shares.
4.4 Stockholder Rights. No Person will have any rights of a stockholder
as to shares of Common Stock subject to a Stock Option until, after proper
exercise of the Stock Option or other action required, such shares have been
recorded on the Company's official stockholder records as having been issued or
transferred. Upon exercise of the Stock Option or any portion thereof, the
Company will have thirty (30) days in which to issue the shares, and the
Participant will not be treated as a stockholder for any purpose whatsoever
prior to such issuance. No adjustment will be made for cash dividends or other
rights for which the record date is prior to the date such shares are recorded
as issued or transferred in the Company's official stockholder records, except
as provided herein or in an Option Agreement.
4.5 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, a partial or complete
liquidation, or any other corporate transaction or event involving the Company
and having an effect similar to any of the foregoing, then the Committee may in
its discretion adjust or substitute, as the case may be, the number of shares of
Common Stock available for Stock Options under the Plan, the number of shares of
Common Stock covered by outstanding Stock Options, the exercise price per share
of outstanding Stock Options, and any other characteristics or terms of the
Stock Options as the Committee deems necessary or appropriate to reflect
equitably the effects of such changes to the Participants; provided, however,
that any fractional shares resulting from such adjustment will be eliminated by
rounding to the next lower whole number of shares with appropriate payment for
such fractional share as will reasonably be determined by the Committee.
In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash
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<PAGE> 11
or other property of any other corporation or business entity (the
"Acquisition"), or in the event of a liquidation of the Company, the Board or
the board of directors of any corporation assuming the obligations of the
Company may, in its discretion, take any one or more of the following actions as
to outstanding Stock Options: (i) provide that such Stock Options shall be
assumed, or substantially equivalent Stock Options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof) on such terms as
the Board determines to be appropriate, (ii) upon written notice to
Participants, provide that all unexercised vested Stock Options will terminate
immediately prior to the consummation of such transaction unless exercised by
the Participant within a specified period following the date of such notice,
(iii) in the event of an Acquisition under the terms of which holders of the
Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the Acquisition (the "Acquisition Price"),
make or provide for a cash payment to Participants equal to the difference
between (A) the Acquisition Price times the number of shares of Common Stock
subject to vested outstanding Stock Options (to the extent then exercisable at
prices not in excess of the Acquisition Price) and (B) the aggregate exercise
price of all such outstanding vested Stock Options in exchange for the
termination of such Stock Options, and (iv) provide that all or any outstanding
Stock Options shall become exercisable or realizable in full prior to the
effective date of such Acquisition.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the Persons who will be
eligible to participate in the Plan and be granted Stock Options will those
Persons which are Independent Contractors and, if such Independent Contractors
are entities, to their stockholders, partners, members, joint venturers,
officers, or employees who are individuals and who provide the consulting,
advisory or other services to the Company or its Affiliates on behalf of the
Independent Contractor. Of those Persons described in the preceding sentence,
the Committee may, from time to time, select Persons to be granted Stock Options
and determine the terms and conditions with respect thereto. In making any such
selection and in determining the form of the Stock Option, the Committee may
give consideration to such factors deemed relevant by the Committee.
ARTICLE VI
GRANT OF STOCK OPTIONS
6.1 General. The Committee will have authority to grant Options under
the Plan at any time or from time to time. Stock Options granted under this Plan
shall be Non-Qualified
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<PAGE> 12
Stock Options. An Option will entitle the Participant to receive shares of
Common Stock upon exercise of such Option, subject to the Participant's
satisfaction in full of any conditions, restrictions or limitations imposed in
accordance with the Plan or an Option Agreement (the terms and provisions of
which may differ from other Option Agreements) including without limitation,
payment of the Option Price.
6.2 Grant and Exercise. The grant of a Stock Option will occur as of
the date the Committee determines. Each Option granted under this Plan will be
evidenced by an Option Agreement, in a form approved by the Committee, which
will embody the terms and conditions of such Option and which will be subject to
the express terms and conditions set forth in the Plan. Such Option Agreement
will become effective upon execution by the Participant. No Stock Options shall
be granted under this Plan after the tenth anniversary of the Effective Date of
this Plan.
6.3 Terms and Conditions. Stock Options will be subject to such terms
and conditions as will be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Stock Option will
be fixed by the Committee; provided that no Stock Option will be
exercisable more than 10 years after the Grant Date.
(b) Option Price. The Option Price per share of the Common
Stock purchasable under an Option will be not less than the Fair Market
Value per share on the Grant Date.
(c) Exercisability. Stock Options will vest and become
exercisable over such period and on such vesting schedule as the
Committee may determine beginning on the first anniversary of the Grant
Date, and on each subsequent anniversary thereafter until fully vested
and exercisable. The Committee may, in its discretion, accelerate at
any time the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this
Article VI, a Participant may exercise vested Stock Options, in whole
or in part, at any time during the Option Period by the Participant's
giving written notice of exercise on a form provided by the Committee
(if available) to the Company specifying the number of shares of Common
Stock subject to the Stock Option to be purchased. Such notice will be
accompanied by payment in full of the purchase price by cash or check
or such other form of payment as the Company may accept. If approved by
the Committee, payment in full or in part may also be made (i) by
delivering Common Stock already owned by the Participant having a total
Fair Market Value on the date of such delivery equal to the Option
Price; (ii) by authorizing the Company to retain shares of Common Stock
which would otherwise be issuable upon exercise of the Option having a
total Fair Market Value on the date of delivery equal to the Option
Price; (iii) by the delivery of cash by a broker-
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<PAGE> 13
dealer to whom the Participant has submitted a notice of exercise (in
accordance with Part 220, Chapter II, Title 12 of the Code of Federal
Regulations, so-called "cashless" exercise); or (iv) by any combination
of the foregoing. No shares of Common Stock will be issued until full
payment therefor has been made.
(e) Transferability of Options. The Committee, in its sole
discretion, may permit Stock Options granted to an individual
Participant to be transferred during the Participant's lifetime or
existence, subject to such conditions and limitations as the Committee
deems reasonable and proper, including transfers pursuant to a domestic
relations order which would be a "qualified domestic relations order"
as defined in Section 414(p) of the Code.
6.4 Exercise Upon Death. Unless otherwise provided in an Option
Agreement or determined by the Committee, if an individual Participant dies, any
unexpired and unexercised Stock Option held by such Participant will thereafter
be fully exercisable for a period of 90 days following the date of the
appointment of a Representative (or such other period or no period as the
Committee may specify) or until the expiration of the Option Period, whichever
period is the shorter.
6.5 Other Termination. Unless otherwise provided in an Option Agreement
or determined by the Committee, if there occurs a Termination with respect to a
Participant (but is not due to an event described in the immediately following
sentence), any Stock Option held by such Participant will thereupon terminate,
except that such Stock Option, to the extent then exercisable, may be exercised
for the lesser of (a) the 30-day period commencing with the date of such
Termination, or (b) until the expiration of the Option Period. If there occurs a
Termination with respect to a Participant due to Cause or if the Participant or
the Independent Contractor in which the Participant has an ownership interest
becomes bankrupt or insolvent or makes an assignment for the benefit of
creditors, the Option will terminate on the date of the Termination. The death
of a Participant after a Termination otherwise provided herein will not extend
the time permitted to exercise an Option.
6.6 Cashing Out of Option. Unless otherwise provided in the Option
Agreement, on receipt of written notice of exercise, the Committee may elect to
cash out all or part of the portion of any Stock Option to be exercised by
paying the Participant an amount, in cash or Common Stock, equal to the excess
of the Fair Market Value of the Common Stock that is subject to the Option over
the Option Price times the number of shares of Common Stock subject to the
Option on the effective date of such cash out.
ARTICLE VII
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
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<PAGE> 14
7.1 Transfer of Shares. Subject to the restriction in any Option
Agreement or any other transfer restriction contained in any agreement between a
Participant and the Company, a Participant may at any time make a transfer of
shares of Common Stock received pursuant to the exercise of a Stock Option. Any
transfer of shares received pursuant to the exercise of a Stock Option will not
be permitted or valid unless and until the transferee agrees to be bound by the
provisions of the Plan, and any provision respecting Common Stock under the
Option Agreement.
7.2 Limited Transfer During Offering. If there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock are offered for sale in an underwritten offering, a Participant may
not, during the period requested by the underwriters managing the registered
public offering, effect any public sale or distribution of shares received
directly or indirectly pursuant to an exercise of a Stock Option.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments and Termination. The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation may be made which would (a) impair the rights of a Participant
under a Stock Option theretofore granted without the Participant's consent
except such an amendment made to cause the Plan to qualify for an exemption
provided by the Exchange Act or the rules promulgated thereunder. In addition,
no such amendment may be made without the approval of the Company's stockholders
to the extent such approval is required by law or agreement.
The Committee may amend the terms of any Stock Option theretofore
granted, prospectively or retroactively, but no such amendment may impair the
rights of any Participant without the Participant's consent, except such an
amendment made to cause the Plan or Stock Option to qualify for the exemption
provided by Rule 16b-3. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher Option Prices but no such substitution may be made which would
impair the rights of the Participant under such Stock Options theretofore
granted without the Participant's consent.
Subject to the above provisions, the Board will have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments, and to grant Stock Options which qualify for
beneficial treatment under such rules without stockholder approval.
8.2 General Provisions.
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<PAGE> 15
(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to a Stock Option to represent
to and agree with the Company in writing that such person is acquiring
the shares without a view to the distribution thereof. The certificates
for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
(b) No Additional Obligation. Nothing in the Plan will prevent
the Company or an Affiliate from adopting other or additional
compensation arrangements for its Independent Contractors or their
owners.
(c) Withholding. If the relationship between the Participant
and the Company is such that the exercise of a Stock Option will result
in the requirement that the Company withhold income tax in respect of
the exercise, then no later than the date as of which an amount first
becomes includable in the gross income of the Participant for income
tax purposes with respect to any Stock Option, the Participant will pay
to the Company (or other entity identified by the Committee), or make
arrangements satisfactory to the Company or other entity identified by
the Committee regarding the payment of, any Federal, state, local or
foreign taxes of any kind required by law to be withheld with respect
to such Stock Option or exercise thereof. Unless otherwise determined
by the Committee, withholding obligations may be settled with Common
Stock, including Common Stock that is part of the Stock Option that
gives rise to the withholding requirement, provided that any applicable
requirements under Section 16 of the Exchange Act are satisfied. The
obligations of the Company under the Plan, will be conditional on such
payment or arrangements, and the Company and its Affiliates will, to
the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the Participant.
(d) Representation. The Committee will establish such
procedures as it deems appropriate for a Participant to designate a
Representative to whom any amounts payable in the event of the
Participant's death are to be paid.
(e) Controlling Law. The Plan and all Stock Options made and
actions taken thereunder will be governed by and construed in
accordance with the laws of the State of Delaware (other than its law
respecting choice of law) except to the extent the General Corporation
Law of the State of Delaware would be mandatorily applicable. The Plan
will be construed to comply with all applicable law and to avoid
liability to the Company, an Affiliate or a Participant, including,
without limitation, liability under Section 16(b) of the Exchange Act.
(f) Offset. Any amounts owed to the Company or an Affiliate by
the Participant of whatever nature may be offset by the Company from
the value of any shares of Common Stock, cash or other thing of value
under this Plan or an Option Agreement to be transferred to the
Participant, and no shares of Common Stock or other
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<PAGE> 16
thing of value under this Plan or an Option Agreement will be
transferred unless and until all disputes between the Company and the
Participant have been fully and finally resolved and the Participant
has waived all claims to such against the Company or an Affiliate.
8.3 Rights with Respect to Continuance of Distribution Agreement.
Nothing in this Plan will be deemed to alter the relationship between the
Company or an Affiliate and a Participant, or the contractual relationship
between a Participant and the Company or an Affiliate if there is a Distribution
Agreement regarding such relationship. Nothing in this Plan will be construed to
constitute a contract to appoint or continue to maintain a Independent
Contractorship arrangement or agreement between the Company or an Affiliate and
a Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the Independent Contractorship relationship at
any time for any reason, except as provided in a Distribution Agreement. There
will be no inference as to the length of a Independent Contractorship
relationship hereby, and the Company or an Affiliate reserves the same rights to
terminate the Participant or the Participant's Independent Contractor as
provided in the Distribution Agreement.
8.4 Delay. If at the time a Participant incurs a Termination (other
than due to Cause), the Participant is subject to "short-swing" liability under
Section 16 of the Exchange Act, any time period provided for under the Plan or
an Option Agreement to the extent necessary to avoid the imposition of liability
will be suspended and delayed during the period the Participant would be subject
to such liability, but not more than six months and one day and not to exceed
the Option Period as provided in the Option Agreement. The Company will have the
right to suspend or delay any time period described in the Plan or an Option
Agreement if the Committee determines that the action may constitute a violation
of any law or result in liability under any law to the Company, an Affiliate or
a stockholder of the Company until such time as the action required or permitted
will not constitute a violation of law or result in liability to the Company, an
Affiliate or a stockholder of the Company. The Committee will have the
discretion to suspend the application of the provisions of the Plan required
solely to comply with Rule 16b-3 if the Committee determines that Rule 16b-3
does not apply to the Plan.
8.5 Headings. The headings in this Plan are for reference purposes only
and will not affect the meaning or interpretation of this Plan.
8.6 Severability. If any provision of this Plan is for any reason held
to be invalid or unenforceable, such invalidity or unenforceability will not
affect any other provision of this Plan, and this Plan will be construed as if
such invalid or unenforceable provision were omitted.
8.7 Successors and Assigns. This Plan will inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
will be binding upon the Participant's heirs, legal representatives and
successors.
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8.8 Effectiveness of Plan and Stock Option Grants. This Plan and the
Stock Options granted hereunder are subject to approval of the Plan by the
stockholders of the Company. If the Plan has not been approved within twelve
(12) months of the adoption of the Plan by the Company's Board of Directors by
holders of a majority of the stock entitled to vote at a meeting of such
stockholders or by an action of the stockholders taken in accordance with the
General Corporation Law of the State of Delaware, the Plan and all Stock Options
previously granted thereunder shall be null and void.
Adopted by the Board of Directors on May 1, 1999
Approved by the written consent of the Stockholders of the Company on May 20,
1999
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Exhibit 10.7
[InfoSpace LETTERHEAD]
INTERNET INFOSPACE CONTENT (WORLD WIDE WEB SITE) DISTRIBUTION
AGREEMENT
THIS AGREEMENT, dated as of May 19, 1999 (the "Effective Date"), is made by
and between InfoSpace.com, Inc., a Delaware corporation, ("InfoSpace"), with
offices at 15375 NE 90th Street, Redmond, WA 98052, and America's Home Page,
Inc. ("Company"), with offices at 3655 Nobel Drive, Suite 550, San Diego, CA
92122.
RECITALS
This Agreement is entered into with reference to the following facts:
A. InfoSpace maintains on certain locations of its Web Sites (as defined
below) and makes available to Internet users certain content, resources,
archives, indices, catalogs and collections of information (collectively, such
materials are identified in Exhibit A and referred to herein as the "Content").
B. InfoSpace wishes to grant certain rights and licenses to Company with
respect to access to the Content and certain other matters, and Company wishes
to grant certain rights and licenses to InfoSpace with respect to the Company
Web Sites (as defined below) and certain other matters, as set forth in this
Agreement.
AGREEMENT
The parties agree as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms have the following defined meanings:
"ADVERTISING REVENUE" is defined on Exhibit C.
"BANNER ADVERTISEMENT" means a rotating banner advertisement of
approximately 468 x 60 pixels located at the top and/or bottom of a Web Page.
"CO-BRANDED PAGES" means, collectively, Query Pages and Results Pages.
"COMPANY MARKS" means those Trademarks of Company set forth on Exhibit B
hereto and such other TRADEMARKS (if any) as Company may from time to time
notify InfoSpace in writing to be "Company Marks" within the meaning of this
Agreement.
"COMPANY WEB SITES" means, collectively, all Web Sites maintained by or on
behalf of Company and its affiliates.
"GRAPHICAL USER INTERFACE" means a graphical user interface, to be designed
by Company and InfoSpace and implemented by InfoSpace pursuant to the terms of
this Agreement, that contains or implements branding, graphics, navigation,
content or other characteristics or features such that a user reasonably would
conclude that such interface is part of the Company Web Sites.
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"Impression" means a user's viewing of any discrete screen of a
Co-branded Page continuing any Banner Advertisement.
"InfoSpace Marks" means those Trademarks of InfoSpace set forth on
Exhibit B hereto and such other Trademarks (if any) as InfoSpace may from time
to time notify Company in writing to be "InfoSpace Marks" within the meaning
of this Agreement.
"InfoSpace Web Sites" means, collectively: (a) the Web Site the
primary home page of which is located at http://www.infospace.com; and (b)
other Web Sites maintained by InfoSpace and its affiliates.
"Intellectual Property Rights" means any parent, copyright, rights
in Trademarks, trade secret rights, moral rights and other intellectual
property or proprietary rights arising under the laws of any jurisdiction.
"Person" means any natural person, corporation, partnership, limited
liability company or other entity.
"Query Page" means any page hosted on the Company Web Sites which
incorporates the Graphical User Interface and on which users may input queries
and searches relating to the Content.
"Results Page" means any page hosted on the InfoSpace Web Sites
which incorporates the Graphical User Interface and displays Content in
response to queries and searches made on a Query Page.
"Trademarks" means any trademarks, service marks, trade dress, trade
names, corporate names, proprietary logos or indicia and other source or
business identifiers.
"Web Site" means any point of presence maintained on the Internet or
on any other public data network. With respect to any Website maintained on the
World Wide Web, such Website includes all HTML pages (or similar unit of
information presented in any relevant data protocol) that either (a) are
identified by the same second-level domain (such as infospace.com) or by the
same equivalent level identifier in any relevant address scheme, or (b)
contains branding, graphics, navigation or other characteristics such that a
user reasonably would conclude that the pages are part of an integrated
information or service offering.
2. CERTAIN RIGHTS GRANTED.
2.1 INFOSPACE GRANT. Subject to the terms and conditions of this
Agreement, InfoSpace hereby grants to Company the following rights:
(a) the right to include on the Company Web Sites
hypertext links (whether in graphical, text or other format) which enable
"point and click" access to locations of the InfoSpace Web Sites specified by
InfoSpace (and subject to change by InfoSpace from time to time); and
(b) the right to permit users to link to Results Pages
via Query Pages hosted on the Company Web Sites.
(c) the right to integrate weather, news headlines,
stock indexes and data into the front page of the America's Home Page, Inc. web
site in compliance with the terms of Section 3.1. If the contracts that
InfoSpace has with their providers change, InfoSpace reserves the right to
renegotiate this portion of the agreements.
Company acknowledges that InfoSpace is currently attempting to obtain the
rights from its providers necessary to grant the rights to Company specified in
Sections (c) above. Should InfoSpace be unable to
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do so within thirty (30) days following the Execution Date, InfoSpace agrees
that Company may terminate this Agreement upon written notice to InfoSpace.
2.2 COMPANY GRANT. Subject to the terms and conditions of this Agreement,
Company hereby grants InfoSpace the following rights:
(a) the right to include on the InfoSpace Web Sites hypertext links
(whether in graphical, text or other format) which enable "point and click"
access to locations of the Company Web Sites specified by Company (and subject
to change by Company from time to time),
(b) the right to sell and serve Banner Advertisements directly on the
Co-branded Pages as provided in Section 4; and
(c) the right to track the number of Impressions.
2.3 LIMITATIONS. Company and its affiliates shall have no right to
reproduce or sub-license, re-sell or otherwise distribute all or any portion of
the Content to any Person via the Internet (including the World Wide Web) or
any successor public or private data network. This Agreement and delivery of
the Content or any portion hereunder to Company shall not cause InfoSpace to be
in violation of any law of any jurisdiction or third party agreement, and
InfoSpace may at any time modify its grant of rights to the extent necessary to
ensure compliance. In addition, neither party shall have any right to: (a) edit
or modify any Banner Advertisements submitted for a Co-branded Page (but
without limiting InfoSpace's right to reject any Banner Advertisements pursuant
to this Agreement); or (b) remove, obscure or alter any notices of
Intellectual Property Rights appearing in or on any materials (including Banner
Advertisements) provided by the other party.
2.4 COMPANY MARKS LICENSE. Subject to Section 2.6, Company hereby grants
InfoSpace the right to use, reproduce, publish, perform and display the Company
Marks: (a) on the InfoSpace Web Sites in connection with the posting of
hyperlinks to the Company Web Sites, (b) in and in connection with the
development, use, reproduction, modification, adaptation, publication, display
and performance of the Graphical User Interface and Results Pages, and (c) in
promotional and marketing materials, content directories and indexes, and
electronic and printed advertising, publicity, press releases, newsletters and
mailings about InfoSpace.
2.5 INFOSPACE MARKS LICENSE. Subject to Section 2.6, InfoSpace hereby
grants the right to use, reproduce, publish, perform and display the InfoSpace
Marks: (a) on the Company Web Sites in connection with the posting of
hyperlinks to the InfoSpace Web Sites; (b) in and in connection with the
development, use, reproduction in promotional and marketing materials, content
directories and indexes, and electronic and printed advertising, publicity,
press releases, newsletters and mailings about Company.
2.6 APPROVAL OF TRADEMARK USAGE. InfoSpace shall not use or exploit in any
manner any of the Company Marks, and Company shall not use or exploit in any
manner any of the InfoSpace Marks, except in such manner and media as the other
party may consent to in writing, which consent shall not be unreasonably
withheld or delayed. Either party may revoke or modify any such consent upon
written notice to the other party.
2.7 NONEXCLUSIVITY. Each party acknowledges and agrees that the rights
granted to the other party in this Section 2 are non-exclusive, and that,
without limiting the generality of the foregoing, nothing in this Agreement
shall be deemed or construed to prohibit either party from participating in
similar business arrangements as those described herein including soliciting
third party advertisements or other materials, serving advertisements or other
materials to third parties' Web Sites, or hosting or
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permitting third parties to place advertisements on such party's Web Site,
whether or not, in each such case, such advertisements are competitive with the
products, services or advertisements of the other party.
3. CERTAIN OBLIGATIONS OF THE PARTIES
3.1 GRAPHICAL USER INTERFACE AND CO-BRANDED PAGES. Company and InfoSpace
will cooperate to design the user-perceptible elements of the Graphical User
Interface, with the goals of: (a) conforming the display output of the "look
and feel" associated with the applicable Company Web Sites; and (b) maximizing
the commercial effectiveness thereof. Following agreement by the parties upon
the design specifications thereof, InfoSpace will use commercially reasonable
efforts to develop the Graphical User Interface and to implement the same on
Co-branded Pages. On the page that the Company displays the content as
described in 2.1.C, the company will pass to InfoSpace variables (city, state,
zip, and up to five (5) stock symbols) and InfoSpace will return the appropriate
information in an agreed upon format. InfoSpace shall have no liability or
obligation for failure to develop or implement the Graphical User Interface or
any Co-branded Pages as contemplated by this Section 3.1, or for any
nonconformity with the design specifications agreed upon by the parties,
provided InfoSpace has used commercially reasonable efforts to develop and
implement the same as provided in this Section 3.1.
3.2 COMPANY OBLIGATIONS. Company shall integrate links to pages of the
InfoSpace Web Sites determined by InfoSpace (and subject to change by InfoSpace
from time to time) on the primary home page for each of the Company Web Sites.
In addition, the InfoSpace logo and at least one other link pointing to pages
of the InfoSpace Web Sites specified by InfoSpace (and subject to change by
InfoSpace from time to time) will be present on all Co-branded Pages. Each link
contemplated by this Section 3.2 shall be, (a) prominent in relation to links
to other Web Sites on the applicable page (and in any event at least as
prominent as any link to any third party Web Site), and (b) above-the-fold
(i.e., immediately visible to any user accessing the applicable page without
the necessity of scrolling downward or horizontally).
3.3 ACCESSIBILITY OF WEB SITES. Each party will use commercially
reasonable efforts to ensure accessibility of its Web Sites (including, in the
case of InfoSpace, the accessibility of the Content).
3.4 IMPRESSION INFORMATION. InfoSpace shall track and allow the Company
to remotely access in electronic form information maintained by InfoSpace
concerning the number of Impressions.
3.5 PUBLICITY. The parties may work together to issue publicity and
general marketing communications concerning their relationship and other
mutually agreed-upon matters, provided, however, that neither party shall have
any obligations to do so. In addition, neither party shall issue such publicity
and general marketing communications concerning their relationship without the
prior written consent of the other party (not to be unreasonably withheld and
within two (2) business days). Neither party shall disclose the terms of this
Agreement to any third party other than its outside counsel, auditors, and
financial advisors, except as required by law.
4. ADVERTISING AND REVENUE SHARE.
4.1 PLACEMENT OF BANNER ADVERTISEMENTS. In addition to the terms and
conditions otherwise set forth in this Agreement, Banner Advertisements on the
Co-branded Pages shall be governed by the terms and conditions set forth on
Exhibit C.
4.2 RENUMERATION; COLLECTION. Each party will pay to the other party the
amounts as set forth on Exhibit C. Any amounts not paid when due, or as
invoiced, will be subject to a finance charge equal to one and one-half percent
(1.5%) per month or the highest rate allowable by law, whichever is less,
determined and compounded daily from the date due until the date paid. Payment
of such finance charges will not excuse or cure any breach or default for late
payment. Each party may accept any check
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or payment without prejudice to its rights to recover the balance due or to
pursue any other right or remedy. No endorsement or statement on any check or
payment or letter accompanying any check or payment or elsewhere will be
construed as an accord or satisfaction. Unless explicitly stated on Exhibit C,
all amounts payable under this Agreement are denominated in United States
dollars and each party will pay all amounts payable under this Agreement in
lawful money of the United States. Other than as explicitly stated on Exhibit C,
InfoSpace shall have no obligation to share with, allow Company to sell, or
account to Company regarding, any sums received by InfoSpace or any of its
affiliates from any advertisements or promotions on any of the InfoSpace Web
Sites (including, without limitation, any of the Co-branded Pages), including
without limitation, any Banner Advertisements thereon.
Advertising Revenue share payments will be reconciled and paid within
thirty (30) days following the calendar quarter in which the applicable
Advertising Revenues are received. The Selling Party (as defined in Exhibit C)
will provide with each such payment a report setting forth Advertising Revenues
received by it for such quarter and the percentage thereof payable to the other
party. In the event Company fails to make timely payment, InfoSpace shall have
the right, in addition to all other remedies, to remove all links, content, or
services provided by InfoSpace under the Agreement. Company will be
responsible for all reasonable expenses (including attorney fees) incurred by
InfoSpace in collecting such amounts. In the event InfoSpace fails to make
timely payments, the Company shall have the right, in addition to all other
remedies, to terminate the contract as a material breach as per Section 6.2.
4.3 RECORDS AND AUDIT. During the Term, each party shall maintain
accurate records of Advertising Revenues received and calculations of the fees
payable to the other party pursuant to this Agreement. Either party, at its
expense, and upon ten (10) days' advance notice to the other party, shall have
the right once during the Term to examine or audit such records in order to
verify the figures reported in any quarterly report and the amounts owned to
such party under this Agreement. Any such audit shall be conducted, to the
extent possible, in a manner that does not interfere with the ordinary business
operations of the audited party. In the event that any audit shall reveal an
underpayment of more than ten percent (10%) of the amounts due to the auditing
party for any quarter, the other party will reimburse such party for the
reasonable cost of such audit.
5. WARRANTIES, INDEMNIFICATION AND LIMITATIONS OF DIRECT LIABILITY.
5.1 WARRANTIES
Each party to this Agreement represents and warrants to the other party
that:
a) it has the full corporate right, power and authority to enter into
this Agreement and to perform the acts required of it hereunder;
b) its execution of this Agreement by such party and performance of its
obligations hereunder, do not and will not violate any agreement to
which it is a party or by which it is bound,
c) when executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of such party, enforceable
against it in accordance with its terms; and
d) its Web Sites and the content contained therein, and all Banner
Advertisements served or submitted by it to the Co-branded Pages, as
the case may be, will not contain any material that is obscene,
libelous or defamatory, or infringing of any Intellectual Property
Rights or other rights of any third party.
5.2 INDEMNIFICATION. Each party (the "Indemnifying Party") will
defend, indemnify and hold harmless the other party (the "Indemnified Party"),
and the respective directors, officers, employees
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and agent of the Indemnified Party, from and against any and all claims, costs,
losses, damages, judgments and expenses (including reasonable attorneys' fees)
arising out of or in connection with any third-party claim alleging any breach
of such party's representations or warranties or covenants set forth in this
Agreement. The Indemnified Party agrees that the Indemnifying Party shall have
sole and exclusive control over the defense and settlement of any such third
party claim. However, the Indemnifying Party shall not acquiesce to any
judgment or enter into any settlement that adversely affects the Indemnified
Party's rights or interests without prior written consent of the Indemnified
Party. The Indemnified Party shall promptly notify the Indemnifying Party of
any such claim of which it becomes aware and shall: (a) at the Indemnifying
Party's expense, provide reasonable cooperation to the Indemnifying Party in
connection with the defense or settlement of any such claim, and (b) at the
Indemnified Party's expense, be entitled to participate in the defense of any
such claim.
5.3 LIMITATION OF LIABILITY; DISCLAIMER.
(a) Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY
DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES), ARISING FROM ANY PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT
LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS.
INFOSPACE'S LIABILITY (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE AND
NOTWITHSTANDING ANY FAULT, NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED),
PRODUCT LIABILITY OR STRICT LIABILITY OF INFOSPACE) UNDER THIS AGREEMENT OR
WITH REGARD TO ANY OF THE PRODUCTS OR SERVICES RENDERED BY INFOSPACE UNDER THIS
AGREEMENT (INCLUDING ANY SERVERS OR OTHER HARDWARE, SOFTWARE AND ANY OTHER
ITEMS USED OR PROVIDED BY INFOSPACE OR ANY THIRD PARTIES IN CONNECTION WITH
HOSTING THE CO-BRANDED PAGES), THE INFOSPACE WEB SITES AND ANY OTHER ITEMS OR
SERVICES FURNISHED UNDER THIS AGREEMENT WILL IN NO EVENT EXCEED THE
COMPENSATION PAID BY COMPANY TO INFOSPACE UNDER THIS AGREEMENT.
(b) No Additional Warranties. EXCEPT AS SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED
WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE), AND EACH
PARTY HEREBY SPECIFICALLY DISCLAIMS ANY CLAIM IN TORT (INCLUDING NEGLIGENCE),
IN EACH CASE, REGARDING THEIR WEB SITES, ANY PRODUCTS OR SERVICES DESCRIBED
THEREON, ANY BANNER ADVERTISEMENTS, OR ANY OTHER ITEMS OR SERVICES PROVIDED
UNDER THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, COMPANY
ACKNOWLEDGES THAT THE INFOSPACE WEB SITES AND THE CONTENT (INCLUDING ANY
SERVERS OR OTHER HARDWARE, SOFTWARE AND ANY OTHER ITEMS USED OR PROVIDED BY
INFOSPACE OR ANY THIRD PARTIES IN CONNECTION WITH HOSTING THE INFOSPACE WEB
SITES OR THE CONTENT OR PERFORMANCE OF ANY SERVICES HEREUNDER) ARE PROVIDED "AS
IS" AND THAT INFOSPACE MAKES NO WARRANTY THAT IT WILL CONTINUE TO OPERATE ITS
WEB SITES IN THEIR CURRENT FORM, THAT ITS WEB SITES WILL BE ACCESSIBLE WITHOUT
INTERRUPTION, THAT THE SITES WILL MEET THE REQUIREMENTS OR EXPECTATIONS OF THE
OTHER PARTY, OR THAT THE CONTENT OR ANY OTHER ANY MATERIALS ON ITS WEB SITES OR
THE SERVERS AND SOFTWARE THAT MAKES ITS WEB SITES AVAILABLE ARE FREE FROM
ERRORS, DEFECTS, DESIGN FLAWS OR OMISSIONS.
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6. TERM AND TERMINATION.
6.1 TERM. The term of this Agreement is as set forth on Exhibit C.
6.2 TERMINATION. Either party may terminate the Term upon not less than
thirty (30) days' prior written notice to the other party of any material breach
hereof by such other party, provided that such other party has not cured such
material breach within such thirty (30) day period if Infospace fails to provide
service to industry standard levels of performance and availability then the
company will so inform Infospace in writing and Infospace will have 30 days to
remedy or the Company may terminate the contract at the end of the 30 day
period.
6.3 EFFECT OF TERMINATION. Upon termination or expiration of the Term for
any reason, all rights and obligations of the parties under this Agreement shall
be extinguished, except that: (a) all accrued payment obligations hereunder
shall survive such termination or expiration; and (b) the rights and
obligations of the parties under Sections 4.2, 4.3, 5, 6, 7 and 8 shall
survive such termination or expiration.
7. INTELLECTUAL PROPERTY.
7.1 COMPANY. As between the parties, Company retains all right, title and
interest in and to the Company Web Sites (including, without limitation, any
and all content, data, URLs, domain names, technology, software, code, user
interfaces, "look and feel", Trademarks and other items posted thereon or used
in connection or associated therewith; but excluding any Content or other items
supplied by InfoSpace) and the Company Marks along with all Intellectual
Property Rights associated with any of the foregoing. All goodwill arising out
of InfoSpace's use of any of the Company Marks shall inure solely to the
benefit of Company.
7.2 INFOSPACE. As between the parties, InfoSpace retains all right, title
and interest in and to the Content and the InfoSpace Web Sites (including,
without limitation, any and all content, data, URLs, domain names, technology,
software, code, user interfaces, "look and feel", Trademarks and other items
posted thereon or used in connection or associated therewith; but excluding any
items supplied by Company) and the InfoSpace Marks, along with all Intellectual
Property Rights associated with any of the foregoing. All goodwill arising out
of Company's use of any of the InfoSpace Marks shall inure solely to the benefit
of InfoSpace.
7.3 COPYRIGHT NOTICE. All Co-branded Pages will include the following
acknowledgement, along with the InfoSpace logo
"Powered by InfoSpace" or "Powered by InfoSpace.com"
InfoSpace and Company acknowledge that the Co-branded Pages may also contain
copyright and patent notices of copyrighted or copyrightable works, including
those of InfoSpace Content providers.
7.4 OTHER TRADEMARKS. InfoSpace shall not register or attempt to register
any of the Company Marks or any Trademarks which Company reasonably deems to
be confusingly similar to any of the Company Marks. Company shall not register
or attempt to register any of the InfoSpace Marks or any Trademarks which
InfoSpace reasonably deems to be confusingly similar to any of the InfoSpace
Marks.
7.5 FURTHER ASSURANCES. Each party shall take, at the other party's
expense, such action (including, without limitation, execution of affidavits or
other documents) as the other party may reasonably request to effect, perfect
or confirm such other party's ownership interests and other rights as set forth
above in this Section 7.
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8. GENERAL PROVISIONS.
8.1 CONFIDENTIALITY. Each party (the "Receiving Party") undertakes to
retain in confidence the terms of this Agreement and all other non-public
information and know-how of the other party disclosed or acquired by the
Receiving Party pursuant to or in connection with this Agreement which is
either designated as proprietary and/or confidential or by the nature of the
circumstances surrounding disclosure, ought in good faith to be treated as
proprietary and/or confidential ("Confidential Information"); provided that
each party may disclose the terms and conditions of this Agreement to its
immediate legal and financial consultants in the ordinary course of its
business. Each party agrees to use commercially reasonable efforts to protect
Confidential Information of the other party, and in any event, to take
precautions at least as great as those taken to protect its own confidential
information of a similar name. Company acknowledges that the terms of this
Agreement are Confidential Information of InfoSpace. The foregoing restrictions
shall not apply to any information that: (a) was known by the Receiving Party
prior to disclosure thereof by the other party; (b) was in or entered the
public domain through no fault of the Receiving Party; (c) is disclosed to the
Receiving Party by a third party legally entitled to make such disclosure
without violation of any obligation of confidentiality; (d) is required to be
disclosed by applicable laws or regulations (but in such event, only to the
extent required to be disclosed); or (e) is independently developed by the
Receiving Party without reference to any Confidential Information of the other
party. Upon request of the other party, or in any event upon any termination or
expiration of the Term, each party shall return to the other all materials, in
any medium, which contain, embody, reflect or reference all or any part of any
Confidential Information of the other party. Each party acknowledges that
breach of this provision by it would result in irreparable harm to the other
party, for which money damages would be an insufficient remedy, and therefore
that the other party shall be entitled to seek injunctive relief to enforce the
provisions of this Section 8.1.
8.2 INDEPENDENT CONTRACTORS. Company and InfoSpace are independent
contractors under this Agreement, and nothing herein shall be construed to
create a partnership, joint venture, franchise or agency relationship between
Company and InfoSpace. Neither party has any authority to enter into agreements
of any kind on behalf of the other party.
8.3 ASSIGNMENT. Neither party may assign this Agreement of any of its
rights or delegate any of its duties under this Agreement without the prior
written consent of the other party, not to be unreasonably withheld; except
that either party may, without the other party's comment, assign this Agreement
or any of its rights or delegate any of its duties under this Agreement: (a) to
any affiliate of such party, or (b) to any purchaser of all or substantially
all of such party's assets or to any successor by way of merger, consolidation
or similar transaction. Subject to the foregoing, this Agreement will be
binding upon, enforceable by, and inure to the benefit of the parties and their
respective successors and assigns.
8.4 CHOICE OF LAW; FORUM SELECTION. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Washington without
reference to its choice of law rules. Company hereby irrevocably consents to
exclusive personal jurisdiction and venue in the state and federal courts
located in King County, Washington with respect to any actions, claims or
proceedings arising out of or in connection with this Agreement, and agrees not
to commence or prosecute any such action, claim or proceeding other than in the
aforementioned courts.
8.5 NONWAIVER. No waiver of any breach of any provision of this Agreement
shall constitute a waiver of any prior, concurrent or subsequent breach of the
same or any other provisions hereof, and no waiver shall be effective unless
made in writing and signed by an authorized representative of the waiving party.
8.6 FORCE MAJEURE. Neither party shall be deemed to be in default of or
to have breached any provision of this Agreement as a result of any delay,
failure in performance or interruption of service,
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resulting directly or indirectly from acts of God, acts of civil or military
authorities, civil disturbances, wars, strikes or other labor disputes, fires,
transportation contingencies, interruptions in telecommunications or Internet
services or network provider services, failure of equipment and/or software,
other catastrophes or any other occurrences which are beyond such party's
reasonable control.
8.7 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be given in writing and delivered in
person, mailed via confirmed facsimile or e-mail, or delivered by recognized
courier service, properly addressed and stamped with the required postage, to
the individual signing this Agreement on behalf of the applicable party at its
address specified in the opening paragraph of the agreement and shall be
deemed effective upon receipt. Either party may from time to time change the
individual to receive notices or its address by giving the other party notice
of the change in accordance with this section. In addition, a copy of any
notice sent to InfoSpace shall also be sent to the following address:
InfoSpace com.Inc.
15375 NE 90th Street
Redmond, WA 98052
Fax (425) 883-1846
Attention General Counsel
8.8 SAVINGS. In the event any provision of this Agreement shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
the remaining provisions shall remain in full force and effect. If any
provision of this Agreement shall, for any reason, be determined by a court of
competent jurisdiction to be excessively broad or unreasonable as to scope or
subject, such provision shall be enforced to the extent necessary to be
reasonable under the circumstances and consistent with applicable law while
reflecting as closely as possible the intent of the parties as expressed herein.
8.9 INTEGRATION. This Agreement contains the entire understanding
of the parties hereto with respect to the transactions and matters contemplated
hereby, supersedes all previous agreements or negotiations between InfoSpace
and Company concerning the subject matter hereof, and cannot be amended except
by a writing signed by both parties.
8.10 COUNTERPARTS; ELECTRONIC SIGNATURE. This Agreement may be
executed in counterparts, each of which will be deemed an original, and all of
which together constitute one and the same instrument. To expedite the process
of entering into this Agreement, the parties acknowledge that Transmitted
Copies of the Agreement will be equivalent to original documents until such
time as original documents are completely executed and delivered. "Transmitted
Copies" will mean copies that are reproduced or transmitted via photocopy,
facsimile or other process of complete and accurate reproduction and
transmission.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the Effective Date.
<PAGE> 10
AMERICA'S HOME PAGE, INC. INFOSPACE.COM, INC.
("COMPANY") ("INFOSPACE")
By (signature) /s/ Joel W. Cohen By (signature) /s/ Naveen Jain
- -------------------------------- ------------------------------
Name Joel W. Cohen Name Naveen Jain
- -------------------------------- ------------------------------
Title President, CEO Title CEO
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EXHIBIT A
CONTENT
The Content consists of, but is not limited to, the following indexes,
directories and other items and services (as the same may be updated, revised
or modified by InfoSpace in its sole discretion from time to time).
1. Yellow Pages
2. White Pages
3. Classifieds
4. City Guides
5. Investing
6. News
7. Sports Scores
8. Community
9. Government
10. E-Shopping
11. International Listings
12. Business Services
13. ActiveShopper
14. Other items and services that may from time to time be added to the
InfoSpace Web Sites by InfoSpace (in its sole discretion)
Note: The actual name of these services may change.
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EXHIBIT B
TRADEMARKS
COMPANY MARKS
[CO-BRAND PARTNER TO SUPPLY LIST OF ITS APPLICABLE TRADEMARKS]
INFOSPACE MARKS
INFOSPACE
INFOSPACE.COM
[INFOSPACE LOGO] POWERED BY INFOSPACE
POWERED BY INFOSPACE.COM
THE ULTIMATE DIRECTORY
ACTIVESHOPPER
PAGEEXPRESS
SEARCH ENGINE FOR THE REAL WORLD
THE STUFF THAT PORTALS ARE MADE OF
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EXHIBIT C
1. DEFINITIONS. As used in this Agreement, the following terms have the
following defined meanings:
"ADVERTISING REVENUE" means the net revenues (i.e., gross revenues
less any taxes, commissions and any required fees payable to third parties)
received by a party for delivering Impressions.
"CO-BRAND FEE" means a monthly nonrefundable sum in the amount of
five thousand dollars ($5,000.00) and a one-time development sum in the amount
of five thousand dollars ($5,000.00)
"IMPRESSION THRESHOLD" means an average of 10,000 Impressions per day
for any thirty (30) consecutive days.
"IMPRESSION THRESHOLD DATE" means the first date on which the number
of Impressions meets or exceeds the Impression Threshold.
2. TERM. The term of this Agreement shall commence on the Effective Date
and, unless earlier terminated or extended as provided below, shall end upon
the SECOND anniversary of this Agreement, provided that the Term shall be
automatically renewed for successive one (1) year periods unless either party
provides written notice of termination to the other party at least Sixty (60)
days prior to the end of the then-current Term.
3. CO-BRAND FEE. The Company will pay to InfoSpace the Co-brand Fee as
follows:
(a) the Co-brand fee shall be payable as follows: monthly, and the
initial payment shall be when the contract is signed and be applied to the June
1999 fee; and
(b) the Co-brand Fee for any subsequent time periods shall be payable on
or before the first day of each month.
4. BANNER ADVERTISEMENTS. InfoSpace shall have the exclusive right to
serve Banner Advertisements on the Co-branded Pages. The appearance of the
Banner Advertisements will be as reasonably determined by InfoSpace, provided,
that InfoSpace may reject any Banner Advertisement if such Banner Advertisement
would materially adversely affect the download time or performance of such
Co-branded page. Neither party will submit for any Co-branded Page any Banner
Advertisement which: contains any material that is libelous or defamatory or
that infringes any Intellectual Property Right or other right of any third
party. In the event InfoSpace sells a Banner Advertisement that the Company
finds objectionable for any reason InfoSpace will be required to remove the
Banner within twenty-four (24) hours of being notified in writing by the Company
unless the Companies notification is less twenty-four (24) hours before the
weekend or a holiday in which case, InfoSpace will remove the Banner within
twenty-four (24) hours of the start of the next official business day. If the
company requires InfoSpace to remove an objectionable banner, the company will
commence paying an extra fee of two thousand dollars ($2,000) per month. The
company will provide InfoSpace with banners for the advertisements it sells as
agreed to in Exhibit C Part 5.
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5. COMPANY RIGHT TO SELL BANNER ADVERTISEMENTS. The Company shall have the
right to sell Banner Advertisements for the Co-branded Pages, provided that
InfoSpace shall not be obligated to serve any Banner Advertisement sold by the
Company to any Co-branded Page until the first day of the first month following
the Impression Threshold Date. All Banner Advertisements sold by the Company
for the Co-branded Pages shall be "run of site" (e.g., not targeted to any
specific type or area of the Co-branded Pages). The Company shall provide the
content for any Banner Advertisements sold by the Company to InfoSpace at the
Company's sole expense and in a form and format designated by InfoSpace. Prior
to each quarterly payment period The Company shall have the right to on at
least three (3) occasions for a minimum of thirty (30) days during the term of
the contract, but not twice in any thirty (30) day period, to revert from the
Banner Advertising Revenue Sharing arrangement to an Inventory Sharing
arrangement which will allow the Company to sell fifty percent (50%) of the
Banner Advertisements at the same time InfoSpace is selling the remaining fifty
percent (50%) of the Banner Advertisements.
6. BANNER ADVERTISING REVENUE SHARE. The parties will share Banner
Advertising Revenues arising as of the first day of the first month following
the Impression Threshold Date] as follows: the party selling the applicable
Banner Advertisement for the Co-branded Page (the "Selling Party") shall remit
to the other party thirty-five percent (35%) of the Advertising Revenue
received by the Selling Party for such Banner Advertisement on the Co-branded
page. At the time when the number of impressions exceeds one million
(1,000,000) the Company, when it is the Selling Party, will receive seventy
percent (70%) of Banner Advertising Revenue or the Company will receive forty
percent (40%) when InfoSpace is the Selling Party. Advertising Revenue share
payments will be reconciled and paid within thirty (30) days following the
calendar quarter in which the applicable Advertising Revenues are received. The
Selling Party will provide with each such payment a report setting forth
Advertising Revenues received by it for such quarter and the percentage thereof
payable to the other party. During the Term, each party shall maintain accurate
records of Advertising Revenues received and calculations of the fees payable
to the other party. Either party, at its expense, and upon ten (10) days'
advance notice to the other party, shall have the right once during the Term to
examine or audit such records in order to verify the figures reported in any
quarterly report and the amounts owned to such party under this Agreement. Any
such audit shall be conducted, to the extent possible, in a manner that does
not interfere with the ordinary business operations of the audited party. In
the event that any audit shall reveal an underpayment of more than ten percent
(10%) of the amounts due to the auditing party for any quarter, the other party
will reimburse such party for the reasonable cost of such audits.
7. RECORDS AND AUDIT; LATE PAYMENTS. During the Term, the Company shall
maintain accurate records of Click-Through Revenues earned and calculations of
the fees payable to InfoSpace pursuant to paragraph ___ of this Exhibit C.
InfoSpace, at its expense, and upon ten (10) days' advance notice to Company,
shall have the right once during the Term to examine or audit such records in
order to verify the figures reported in any quarterly report and the amounts
owned to InfoSpace under this Agreement. Any such audit shall be conducted, to
the extent possible, in a manner that does not interfere with the ordinary
business operations of the Company. In the event that any audit shall reveal an
underpayment of more than ten percent (10%) of the amounts due to InfoSpace for
any quarter, the Company will reimburse InfoSpace for the actual costs of such
audit.
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EXHIBIT 23.1
CONSENT OF PEDERSEN & HOUPT, P.C.
Pedersen & Houpt, P.C. hereby consents to all references made to it in
Amendment No. 1 to the Registration Statement on Form S-1 of America's Home
Page, Inc., as filed with the Securities and Exchange Commission on June 22,
1999.
/s/ Pedersen & Houpt, P.C.
Pedersen & Houpt, P.C.
Chicago, Illinois
June 22, 1999
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EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated May 5, 1999 in Amendment No. 1 to
the Registration Statement (Form S-1) and related Prospectus of America's Home
Page, Inc. for the registration of 3,248,750 shares of its common stock and
300,000,000 warrants to purchase 10,000,000 additional shares of its common
stock.
/s/ Ernst & Young LLP
Phoenix, Arizona
June 18, 1999
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EXHIBIT 23.3
CONSENT OF DONALD R. DIAMOND
Donald R. Diamond hereby consents to all references made to him in
Amendment No. 1 to the Registration Statement on Form S-1 of takes.com, inc.,
as filed with the Securities and Exchange Commission on June 22, 1999.
/s/ Donald R. Diamond
Donald R. Diamond
Tucson, Arizona
June 18, 1999
