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As filed with the Securities and Exchange Commission on September 3, 1999
REGISTRATION NO. 333-82203
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------
BONUSBOULEVARD, INC.
(Exact name of small business issuer as specified in its charter)
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<S> <C> <C>
New York 7375 13-4064085
(State or jurisdiction (Primary standard industrial (I.R.S. Employer
of incorporation) classification code number) Identification Number)
</TABLE>
55 West 19th Street, 4th Floor, New York, New York 10011
(212) 414-2115
(Address and telephone number of principal executive offices and
principal place of business)
------------------------------
David Brous, Jr.
55 West 19th Street, 4th Floor, New York, New York 10011
(212) 414-2115
(Address and telephone number of agent for service)
-------------------------
Copy to:
Sarah Hewitt, Esq.
J. Chistopher Giancarlo, Esq.
Brown Raysman Millstein Felder & Steiner LLP
120 West 45th Street, New York, New York 10036
(212) 944-1515
-----------------------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
-------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Per Share(1) Aggregate Offering Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Class A Common Stock, 20,000,000 $0.0001 $2,000.00 $.56*
$0.0001 par value
Total 20,000,000 $2,000.00 $.56*
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</TABLE>
* Previously paid.
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 (o) under the Securities Act of 1933, as amended.
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>
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1999
PROSPECTUS
20,000,000 SHARES
BONUSBOULEVARD, INC.
CLASS A REDEEMABLE CONVERTIBLE COMMON STOCK
BonusBoulevard, Inc., hereby offers up to 20,000,000 shares of Class A
redeemable, convertible common stock, par value $.0001 per share, to persons
that become members of, and consumers in, our online shopping mall. We are
offering the shares subject to various conditions set forth elsewhere in this
prospectus.
AN INVESTMENT IN THESE SECURITIES IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
We will distribute the 20,000,000 shares for deemed consideration of
$0.0001 per share but will receive no cash proceeds from the offering. We will
distribute up to 1,000,000 shares to new members and up to 1,000,000 shares as
rewards to members for referrals of new members. We will also distribute up to
4,000,000 shares to the first 200,000 members to make a purchase in any amount
through our online shopping mall and up to 12,500,000 shares to members as
rewards for making certain minimum purchases, thereby accruing discounts we
grant to them for making purchases. We will distribute up to 500,000 shares to
certain members selected by us to assist in testing our web site and up to
another 500,000 shares as prizes in sweepstakes contests. To be entered in the
sweepstakes, individuals must be members of our site at the time the sweepstakes
is announced. In addition, we will distribute up to 500,000 shares to the first
100,000 members who complete survey questionnaires at our web site.
No Class A shares being offered through this prospectus are being listed on
any stock exchange.
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Per Share Total
Price to the Non-Cash Proceeds to
Public BonusBoulevard
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<S> <C> <C>
$0.0001(1) $2,000(1)
Total $2,000
</TABLE>
- --------------------
(1) 20,000,000 shares will be distributed to members for a deemed consideration
of $0.0001 per share.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
___________, 1999
RED HERRING LEGEND:
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 Is Not Soliciting An Offer To Buy These Securities
In Any State Where The Offer Or Sale Is Not Permitted.
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TABLE OF CONTENTS
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Page Page
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<S> <C> <C> <C>
Prospectus Summary...................... 3 Plan of Distribution .................... 42
Risk Factors............................ 6 Shares Eligible For Future Sale ......... 43
Capitalization.......................... 17 Disclosure of Commission Position on
Use of Proceeds ........................ 17 Indemnification For Securities Act
Dividend Policy......................... 17 Liabilities ............................. 44
Dilution................................ 18 Legal Matters ........................... 45
Plan of Operation ...................... 19 Experts.................................. 45
Business................................ 23 Index To Financial Statements............ F-1
Management.............................. 35
Certain Transactions ................... 37
Principal Shareholders ................. 38
Description of Capital Stock ........... 39
</TABLE>
We are not making an offer of these securities in any state where the offer
is not permitted. You should not assume that the information in this prospectus
or the prospectus supplement is accurate as of any date other than the date on
the front of the document.
2
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PROSPECTUS SUMMARY
BonusBoulevard, Inc., a New York corporation, is a development stage
company in the process of establishing an Internet-based shopping mall. Through
our shopping mall, web users that register as our members will be able to make
purchases from a carefully selected group of retailers. Our business is intended
to capitalize on the extraordinary growth in online retailing which is currently
taking place and projected to continue. The number of Americans, for example,
that made at least one purchase online was 16.8 million in 1998 and is expected
to increase to approximately 36 million in 1999.
To attract Internet users to become members of our shopping mall and make
purchases through our affiliated retailers, we will offer members rewards, or
discounts, for each purchase made by them through our web site. These rewards
will be expressed as BBBucks. Members who shop through our web site will earn
BBBucks equal to the dollar amount of any discounts on purchases. We expect that
the amount of BBBucks earned by our members on most purchases made will be
between 3% and 15% of the purchase price, excluding sales tax and handling
fees, depending upon the commissions offered to us by our affiliated retailers.
Information relating to member purchases, including the amount of BBBucks
earned, will be posted in our members' online accounts. Each member's account
information will be accessible to that member through our web site and will be
protected by security measures that are standard in the industry. BBBucks will
be redeemable by members, at their option, in cash, gift certificates, or
charitable donations.
We began pre-incorporation activities in February 1999 and were
incorporated in the State of New York on June 10, 1999. Our principal executive
offices are located at 55 West 19th Street, 4th Floor, New York, New York 10011,
and our telephone number at this address is (212) 414-2115. We maintain a web
site at www.BonusBlvd.com. The web site is currently under development and will
be operational by the time that the shares in this offering are distributed.
Nothing contained on such web site should be construed as a part of this
prospectus.
This prospectus includes statistical data regarding the Internet industry.
Such data is taken or derived from information published by sources including
Jupiter Communications, LLC, Ziff-Davis Inc., Forrester Research, Inc. and Nua
Ltd. Although we believe that the data is generally indicative of the matters
reflected therein, the data may be imprecise and investors are cautioned not to
place undue reliance on it.
3
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THE OFFERING
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Shares Offered to the Public: 20,000,000 shares of Class A redeemable,
convertible common stock, par value
$.0001 per share. We are distributing up
to 1,000,000 Class A shares to the first
1,000,000 members of our online shopping
program and up to another 1,000,000
Class A shares to members for referring
new members to our web site at the rate
of one share per new member referred. We
will distribute up to another 4,000,000
Class A shares in lots of 20 shares to
each of the first 200,000 members who
make a purchase, in any amount, through
our online shopping mall. We will issue
up to another 10,000,000 Class A shares
in lots of 100 shares to the first
100,000 members to accumulate $10 of
BBBucks and another 2,500,000 Class A
shares in lots of 500 shares to the
first 5,000 members to accumulate $25 of
BBBucks, as described elsewhere in this
prospectus. We will also distribute up
to 500,000 Class A shares in lots of
1,000 shares to up to 500 members who
assist us in testing our web site. We
will distribute up to 500,000 Class A
shares as prizes in sweepstakes contests
as described elsewhere in this
prospectus. We will also distribute up
to 500,000 Class A shares in lots of 5
shares to the first 100,000 members who
complete survey questionnaires at our
web site.
Class A Shares Outstanding Prior to Offering: None
Class A Shares Outstanding After Offering: 20,000,000 shares
Expenses of the Offering: $90,000 (estimated)
</TABLE>
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SUMMARY FINANCIAL INFORMATION
You should read the summary financial information presented below as of
June 29, 1999, and for the period from inception on February 1, 1999 to June 29,
1999. We derived the summary financial information from our audited financial
statements appearing elsewhere in this prospectus. You should read this summary
financial information in conjunction with our plan of operation, financial
statements and related notes to the financial statements, each appearing
elsewhere in this prospectus.
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<CAPTION>
PERIOD FROM
FEBRUARY 1, 1999 (INCEPTION)
THROUGH JUNE 29, 1999
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<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ......................................... $ --
Gross profit ..................................... --
Selling, general & administrative expenses ....... 9,695
Net loss ......................................... (9,695)
Weighted average shares outstanding .............. 80,000,000
<CAPTION>
ACTUAL AS OF JUNE 29, 1999
--------------------------
<S> <C>
SELECTED BALANCE SHEET DATA:
Cash.............................................. $ 100
Working capital (deficiency) ..................... (43,908)
Total assets ..................................... 72,044
Total debt........................................ 45,000
Total shareholders' equity ....................... 27,044
</TABLE>
5
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RISK FACTORS
You should carefully consider the following risk factors and other
information in this prospectus before deciding to become a holder of our Class A
common stock. If any of the following risks actually occurs, our business and
financial results could be negatively affected to a significant extent.
RISKS RELATED TO OUR OPERATIONS
WE HAVE NO OPERATING HISTORY THAT YOU CAN USE TO EVALUATE US.
We began our business in February 1999, and we have not generated any
revenue to date. We have been devoting our efforts to various organizational
activities. Our organizational activities include entering into an arrangement
for the development of our proprietary web site design and preliminary
negotiations with prospective retail affiliates. As a result, we have no
operating history that you can use to evaluate us. Our business must be
considered in light of the risks, expenses, and problems frequently encountered
by companies in the early stages of development, particularly companies, like
ours, in new and rapidly evolving markets such as Internet commerce.
WE HAVE AN ACCUMULATED DEFICIT AND NO REVENUES AND EXPECT FUTURE LOSSES.
We have an accumulated deficit of $9,695.00 as of June 29, 1999, and we
expect negative cash flow and operating losses to continue for the foreseeable
future. We expect our operating costs to increase, but because we have no
operating history, we have no meaningful financial historical data to use as a
basis for determining future operating expenses. The principal costs of
expanding our business will include:
substantial direct and indirect marketing, advertising and promotional
costs;
costs incurred in connection with hiring staff to meet our anticipated
growth; and
costs incurred to accommodate changes in technology.
As a result, we expect that it will take some time before we begin generating
net income.
If net operating revenue does not grow at the rate we anticipate, and we
are unable to adjust our operating expenses accordingly, then our business and
financial results could be substantially and adversely affected. We cannot
assure you that we will ever achieve or sustain profitability.
Our anticipated operating expenses are based in part on our expectations as
to future revenue from sales commissions to be paid by our affiliated retailers
on sales generated by our online shopping program, as well as the anticipated
growth in our membership. We cannot assure you that we have accurately predicted
our net revenue, particularly in light of the intense competition for consumers
among online shopping networks and direct retailers.
WE CANNOT PREDICT OUR SUCCESS BECAUSE OUR BUSINESS MODEL IS UNPROVEN.
Our success depends on continued growth in the use of the Internet for the
purchase of merchandise and services. Although Internet commerce has grown
substantially and is projected to increase, we cannot be certain that this
growth will continue to increase at the present rate, or at all. Critical issues
concerning the increased use of the Internet, including security, reliability,
cost, ease of
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access and quality of service, remain unresolved and are likely to
affect further development of electronic commerce generally, as well as the
market for our online shopping mall.
The success of our business will ultimately depend on acceptance of our
online shopping mall by our potential affiliated retailers and by Internet users
generally. Our success will also depend on our ability to compete with other
online retailers, including direct retailers, and aggregators that provide
consumers with electronic links to a network of direct retailers, on the basis
of quality and range of merchandise and membership rewards. As we have not yet
begun operations and have no members or retail affiliates, we cannot reliably
predict the future success of our business and we cannot assure you that we
will be successful in attracting members or securing relationships with
affiliated retailers.
OUR BUSINESS AND BUSINESS PROSPECTS WILL SUFFER SIGNIFICANTLY IF OUR WEB SITE
DESIGN IS NOT COMPLETED ADEQUATELY AND ON TIME.
InfoStream Solutions, LLC ("Infostream") is currently developing the design
of our web site, www.BonusBlvd.com, which includes the design of all software
required to operate our online shopping mall during the first six months of
operations, as described in this prospectus. Under our agreement with
InfoStream, InfoStream is required to complete our web site design in fully
operational form no later than October 15, 1999. The timely completion and
proper performance of our web site is critical to our business and our ability
to attract members and retailers alike. Any failure by InfoStream to complete
our web site design on time with all features operating properly will
substantially hurt our business and business prospects. Even if InfoStream
completes our web site design on time, any subsequent system failure that
interrupts its functioning or the functioning of any of its features, or
decreases response time will impair our ability to attract and retain members
and retailers, and disrupt purchasing through our online shopping mall and
consequently reduce our revenues.
SYSTEM DISRUPTIONS COULD HAVE A SUBSTANTIVE NEGATIVE EFFECT ON OUR BUSINESS.
We will use the web site design and related software developed for us by
InfoStream in substantially all aspects of our online shopping mall, including
all connections to members, retail affiliates and tracking services. Reliability
and efficiency of our system remains untested because our system is under
development. Our agreement with InfoStream requires InfoStream to make
adjustments and modifications to our web site for a period of six months after
the web site begins to operate. If, during this six-month period or later on,
InfoStream or another third party is unable to modify our web site as may be
necessary to accommodate increased traffic or increases in the volume of
information processed through our systems from members, retailers and tracking
services, we could experience system disruptions, slow response times, impaired
quality and speed of downloading information and delays in updating member
accounts. Any of these events could have a substantial negative effect on our
business and financial results.
OUR ABILITY TO ATTRACT AND RETAIN MEMBERS DEPENDS ON FACTORS WE CANNOT CONTROL.
Our success will depend, to a great extent, on our ability to attract and
retain members. Our ability to attract and retain members will depend, in turn,
on a number of factors, many of which are beyond our control. These factors
include:
our ability to attract enough quality retail affiliates;
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competition from direct retailers and other aggregators and web sites
offering similar merchandise, lower prices, free stock and/or additional
rewards;
the date on which we commence operations, particularly if our web site
design is not fully operational on the expected delivery date;
the extent to which our web site design, when developed, is easy for
members and prospective members to use and understand;
the success of our promotional activities, including the distribution of
stock in this offering;
our ability to fund advertising and other promotional activities;
the quality of customer support and services provided to members by our
retail affiliates;
whether our discount percentage on all purchases remains competitive with
the discounts offered by other online retailers and aggregators; and
the date by which we commence operations, since prospective members may
make purchases from our competitors during any delay in the start of our
operations.
Because of these and other factors, we cannot accurately predict our
membership growth rate or our future revenues.
OUR ABILITY TO ATTRACT AND RETAIN RETAIL AFFILIATES OFFERING QUALITY MERCHANDISE
COULD HAVE A SIGNIFICANT EFFECT ON OUR BUSINESS AND FINANCIAL RESULTS.
We will be dependent on our affiliated retailers for most of our revenue
and for all product and service fulfillment. We will not sell any products or
services directly to members, as we have no fulfillment operations or facilities
of our own. Instead, we will provide an electronic link from our members to our
retail affiliates. Only our retail affiliates will sell products or services
through our online shopping mall.
Our success depends, to a great extent, on our ability to attract and
retain retailers offering the types of merchandise and services in demand by
online customers. Our ability to attract and retain such retailers will depend
on a number of factors, many of which are beyond our control. These factors
include:
our ability to attract and retain a significant number of members;
the amount our members spend;
competition for retailers from other online aggregators and others; and
the ease with which our web site design, when developed, interfaces with
the web sites and software systems of participating retailers, tracking
services and others.
We cannot assure you that we will be able to establish or maintain
relationships with quality retail affiliates. Even if we are able to establish
and maintain these relationships, we cannot assure you that we will be able to
do so on terms favorable to us or in the numbers we need to become profitable.
In addition, our failure to affiliate with a large number of quality online
retailers shortly after we begin operations may result in our members and
prospective members shopping online with our competitors. Our failure to
affiliate with a sufficient number of quality retailers in a timely manner could
have a substantial negative effect on our business and financial results.
Although we plan to monitor the types of products and services our members
and prospective members seek to purchase online and to offer links to retailers
selling these products and services online, we cannot assure you that our
decisions in this regard will be accurate. Our ability to build a substantial
membership base on a timely basis will depend upon the ability of our affiliated
retailers to supply the
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requested products and services in the ordinary course of business. If our
affiliated retailers fail to meet their commitments to our members, our business
and financial results would be substantially, adversely affected.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY BE
BELOW EXPECTATIONS OF INVESTORS AND ANALYSTS.
Our revenues and expenses, and in particular our quarterly revenues,
expenses and operating results, may fluctuate significantly due to a variety of
factors, many of which are outside of our control. These factors include:
the seasonal nature of consumer spending;
the pace at which Internet users become members of our shopping program;
the rate at which we enter into affiliate relationships with online
retailers;
changes in commission rates paid to us by our retail affiliates;
price competition in electronic commerce;
capital expenditures and costs related to expanding and improving our web
site design;
our ability to protect our web site from power loss and software-related
system failures;
changes in our operating expenses including, in particular, costs of
personnel, marketing, advertising and promotion;
the introduction of rewards by us or our competitors; and
economic conditions specific to the Internet and retail industries, as well
as general economic and market conditions.
Because of the potential for significant fluctuations in our quarterly
results, you should not rely on quarter-to-quarter comparisons of our future
results of operations as an indication of subsequent performance.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH AS PLANNED.
To manage our anticipated growth, we must:
implement and continually improve our operational, financial and management
information systems;
hire, train and retain additional qualified personnel;
expand and upgrade core technologies; and
effectively manage relationships with our members, retail affiliates, their
tracking services and other third parties.
Our expansion could place a significant strain on our services and support
operations, sales and administrative personnel, and other resources.
Our web site design, when completed by InfoStream, may not be adequate to
meet our growth plans, even though our contract with InfoStream requires
InfoStream to provide us with adequate controls and procedures for our
operations. This potential inadequacy could result in our inability to provide
our services on a timely basis and a consequent loss of members and revenues. We
cannot assure you that our systems, procedures or controls will be adequate to
support our operations or services. Nor can we assure you that our management,
the members of which have no experience with an Internet-based, development
stage company, will be capable of fully exploiting the market for our
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services. Our failure to manage growth effectively could have a substantial,
negative effect on our business and financial results.
IF WE DO NOT CONTINUALLY UPGRADE OUR TECHNOLOGY, WE MAY NOT BE ABLE TO COMPETE
IN OUR INDUSTRY.
We will need to expand and upgrade our web site on a continuing basis, as
our membership and affiliate program expand. We are totally dependent on the
services of third parties, such as InfoStream, to upgrade our technology and
ensure a high level of service and reliability. We cannot assure you that
services of these parties will be available, or adequate for our purposes, when
we need them. Our inability to secure adequate services from these third
parties, when needed, could have a substantial, negative effect on our business
and financial results.
OUR NETWORK MAY BE VULNERABLE TO SECURITY RISKS.
Although our agreement with InfoStream requires InfoStream to include
standard security measures in our web site design, our online system may
nevertheless be vulnerable to unauthorized access, computer viruses and other
disruptions. The web sites of our retail affiliates, their tracking service or
our members may be similarly vulnerable. Internet service providers have in the
past experienced and may experience in the future interruptions in service as a
result of the accidental or intentional actions of Internet users. We have no
control over the security measures that Internet service providers or our retail
affiliates, members, or web site visitors adopt, although we regard the security
measures adopted by online retailers as one factor in deciding whether to
affiliate with them. Unauthorized access could also potentially jeopardize the
security of confidential information, such as member account information stored
in computer systems maintained by us, our retail affiliates or their tracking
services. These events may result in liability to us or harm to our members or
retail affiliates.
Eliminating computer viruses and alleviating other security problems may
require interruptions, delays or cessation of service to our members, which
could have a substantial adverse effect on our business and financial results.
In addition, the threat of these and other security risks may deter prospective
visitors from becoming members or deter members from shopping through our online
mall. These deterrents could have a substantial adverse effect on our business
and financial results.
Our security measures will be designed to prevent any physical or
electronic break-ins and attacks on our facilities and system and to minimize
the effect of any such event if it were to occur. Any security breach, however,
could result in interruptions, delays or cessations in service which could have
a substantial adverse effect on our business and financial results. Although we
will have business interruption insurance covering interruptions of our
operations resulting from physical damage to our property, we will not have data
loss insurance to cover losses from, and recovery and data reconstruction costs
related to, certain security breaches on our web site, if no interruption has
occurred. In addition, in the event of an interruption of our operations, our
business interruption insurance may not be sufficient to cover our expenses
resulting from any such occurrence. This could also damage our reputation and
the value of the BonusBoulevard brand name.
OUR SERVICES ARE SUSCEPTIBLE TO DISRUPTIONS DUE TO PHYSICAL CAUSES.
Our systems and operations are also vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failures and similar events.
Any such interruptions or delays at our facilities would have a substantial
adverse effect on our business and financial results. We have no formal disaster
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recovery plan, and our business interruption insurance may not adequately
compensate us for losses that may occur. The occurrence of any or all of these
events could also damage our reputation and brand name, thus impairing our
business substantially.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS FOR PRODUCTS SOLD BY AFFILIATED
RETAILERS THROUGH OUR WEB SITE.
Members may sue us if any product sold to them by our affiliated retailers
through our web site fails to perform properly or injures the user. Liability
claims could require us to spend significant time and money in litigation and/or
pay significant damages. As a result, any of these claims, whether or not valid
or successfully prosecuted, could have a substantial, adverse effect on our
business and financial results.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND IT MAY NOT BE AVAILABLE ON
ACCEPTABLE TERMS.
We currently have no revenue and do not expect to generate any revenues
until some time after we commence operations following the development of our
web site. We anticipate that commissions from our affiliated retailers on
purchases by our members, together with funds contributed by our Chief Executive
Officer and the Chief Operating Officer and the proceeds from the financing of
our accounts receivable will satisfy our working capital requirements for at
least the next 12 months. After that, we may need to raise additional funds in
order to finance our operations while we develop our membership base and
relationships with retailers. We cannot assure you that financing will be
available on terms favorable to us, or at all. If adequate funds are not
available on acceptable terms, we may be forced to curtail or cease our
operations. Even if we are able to continue our operations, the failure to
obtain financing could have a substantial adverse effect on our business and
financial results, and we may need to delay full deployment of our online
shopping program.
WE FACE RISKS FROM POTENTIAL YEAR 2000 PROBLEMS.
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. As a result, software
that records only the last two digits of the calendar year may not be able to
distinguish whether "00" means 1900 or 2000. This may result in software
failures or errors. We believe that our products and internal systems will be
year 2000 compliant.
Our systems will be built upon multiple layers of third party software and
hardware components. A system failure that originates in one or more of these
layers may affect the performance and accuracy of computations carried out by
our systems as a whole. No assurances have been given to us by our affiliated
retailers or other parties regarding year 2000 compliance.
Any failure of our material systems or those of our retail affiliates or
the Internet to be year 2000 compliant would have material adverse effect on our
business and financial results. Such consequences would include difficulties in
operating our web site effectively, communicating with our retail affiliates or
conducting other fundamental aspects of our business. We are currently assessing
the year 2000 readiness of the software, computer technology and other services
that we may use. At this time, we have not yet developed a contingency plan to
address situations that may result if we or our retail partners or their
tracking services are unable to achieve year 2000 compliance. The cost of
developing and implementing such a plan, if necessary, could be material. We
also depend on year 2000 compliance of the computer systems and financial
services used by consumers. A significant disruption in the ability of
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consumers to reliably access the Internet or portions of it or to use their
credit cards would adversely affect demand for our services and, consequently,
our business and financial results.
RISKS RELATED TO THE MARKET FOR ELECTRONIC COMMERCE
GENERALLY AND ONLINE RETAILING IN PARTICULAR
OUR SUCCESS IS DEPENDENT ON THE CONTINUED GROWTH OF ONLINE COMMERCE.
Our future success is substantially dependent upon continued growth in the
use of the Internet to purchase merchandise and services, as well as the
continued reliability of the Internet generally. Use of the Internet as a means
of commerce is at an early stage of development, and demand and market
acceptance for retail marketing over the Internet is uncertain. We will be
dependent on revenue from electronic commerce as our sole source of revenue. We
cannot predict the extent to which consumers will be willing to shift their
purchasing habits from traditional retailers to online retailers. The Internet
may not prove to be a viable commercial marketplace for a number of reasons,
including lack of acceptable security technologies, inconsistent quality of
service, and the lack of cost-effective, high-speed service. The viability of
the Internet could decline as a result of, among other things, delays in the
adoption of standards and protocols to handle increased activity. If Internet
use does not continue to grow or grows more slowly than expected, our business
and financial results may be adversely affected.
WE MAY BE HELD LIABLE FOR ONLINE CONTENT PROVIDED BY THIRD PARTIES.
Although InfoStream will represent to us that our web site design will not
infringe upon the proprietary rights of others, no assurance can be given that
such infringement claims will not be asserted against us. Such claims and any
resulting litigation may subject BonusBoulevard to significant liability for
damages, and result in invalidation of our proprietary rights. Claims and
litigation would also be time consuming and expensive to defend, and result in
the diversion of management time and attention, any of which might have a
significant adverse effect on our business and financial results.
In part, our business involves supplying information to Internet users,
members and retail affiliates via the Internet. Accordingly, we face the same
types of risks that apply to all businesses that publish or distribute
information, such as potential liability for defamation, libel, invasion of
privacy, copyright or trademark infringement and similar claims. A number of
third parties have claimed that they hold patents covering various forms of
online transactions or online technologies. In addition, our liability insurance
may not cover potential patent or copyright infringement claims and may not
adequately indemnify us for any liability that may be imposed.
WE DEPEND ON KEY PERSONNEL AND WILL REQUIRE ADDITIONAL SKILLED EMPLOYEES TO
EXECUTE OUR GROWTH PLANS.
Our potential for success depends significantly on our two executive
officers, our Chief Executive Officer, David Brous, Jr., and Chief Operating
Officer, Jonathan Morgenstern. We do not carry key-man life insurance on either
executive, and do not have employment agreements that would assure us of their
services for a stated period of time. Given the early stage of our development
and our plans for rapid expansion, the loss of the services of either executive
or the services of any other key employees we may hire in the future would have
a substantial, adverse effect on our business. We believe that our future
success will depend in large part on our ability to attract and retain highly
skilled
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technical, marketing and management personnel. If we are unable to hire the
necessary personnel, the development of our business would likely be delayed or
prevented. Competition for these highly-skilled employees is intense. As a
result, we cannot assure you that we will be successful in retaining our key
personnel or in attracting and retaining the personnel we require for expansion.
WE FACE SIGNIFICANT COMPETITION IN THE ONLINE RETAILING INDUSTRY.
The market for the retail goods and services provided via the Internet is
new and rapidly evolving. Competition for online consumers is intense and
expected to increase significantly. We believe that the principal competitive
factors for companies seeking to develop Internet shopping malls are:
number of members;
functionality;
quality of merchandise and retailers;
discounts and rewards;
brand recognition;
member loyalty;
broad demographic focus; and
open access for visitors.
We could also face competition from all offline and online retailers,
including direct retailers, aggregators, web directories, search engines,
content sites, commercial online service providers, sites maintained by Internet
service providers, traditional media companies and other entities that engage in
electronic commerce by developing their own networks of retail affiliates and
members or acquiring one of our competitors. We cannot assure you that our
competitors and potential competitors will not develop electronic commerce
networks that are equal or superior to ours or that will achieve greater market
acceptance.
Nearly all of our existing and potential competitors have longer operating
histories, greater experience in online retailing, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than we do. Because of their greater resources, our
competitors are able to undertake more extensive marketing campaigns for their
brands and services, and make more attractive offers to potential employees,
retail affiliates, and others.
Our competitors may experience greater growth in online traffic than we do,
making their online retail programs more attractive to our retail affiliates,
some of whom might sever or decide not to renew their relationships with us. We
cannot assure you that we will be able to compete successfully against our
current or future competitors or that our business and financial results will
not suffer from competition.
WE ARE HEAVILY DEPENDENT ON OUR PROPRIETARY TECHNOLOGY AND THE DEVELOPMENT OF
OUR BRAND NAME.
We regard the technology being developed by InfoStream as proprietary to
BonusBoulevard, and we will attempt to protect it by relying on trademark,
service mark and trade secret laws and other methods. We also intend to enter
into confidentiality agreements with our employees and consultants. Despite
these precautions, third parties may be able to copy or otherwise use our
proprietary information without authorization or develop similar technology
independently. We cannot assure you that the steps we take have prevented or
will prevent misappropriation or infringement of our proprietary information.
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The web site design being developed for us may incorporate certain software
licensed by us from third parties. As our business matures and we enhance our
technology, we may require licenses for additional technology. We cannot assure
you that technology licenses from third parties will be available to
BonusBoulevard on commercially reasonable terms or at all. Our inability to
obtain any of these technology licenses could result in delays or reductions in
the introduction of new services or adversely affect the performance of our
existing program until equivalent technology is identified, licensed and
integrated.
In addition, we believe that establishing and maintaining the
BonusBoulevard brand name will be critical to attracting members and retail
affiliates and expanding traffic at our web site. Brand recognition is
particularly important given the low barriers to entry into online retailing and
the growing number of retail networks, shopping malls and direct retailers. If
visitors to our web site, members and retailers do not perceive our service 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
such parties, the value of our brand name could be diluted, thereby decreasing
the attractiveness of our online shopping mall. We recently registered our
servicemarks, BonusBoulevard, BonusBlvd.com and BBBucks with the United States
Patent and Trademark Office.
RISKS RELATED TO THE OFFERING
WE WILL NOT RECEIVE ANY CASH PROCEEDS FROM THE DISTRIBUTION OF OUR CLASS A
SHARES.
We will receive no cash proceeds from the distribution of our Class A
shares pursuant to this prospectus. Although we will receive no cash
consideration for the shares, we will treat the distribution of the shares as
generating consideration of $0.0001 per share, or an aggregate of $2,000.00.
Even in the absence of cash proceeds of this offering, we currently
anticipate that we will have sufficient funds to meet our working capital needs
for the next 12 months. After that, we may need to raise additional funds
through a private or public offering of our securities in order to fund our
operations while we build our membership. We cannot assure you that financing
will be available in amounts or on terms acceptable to us, or at all.
OUR REDEMPTION OF YOUR CLASS A SHARES MAY ADVERSELY AFFECT YOU.
BonusBoulevard is entitled to buy back the Class A shares if a liquidity
event occurs at any time during the three-year period following the effective
date of the registration statement of which this prospectus is a part. Liquidity
events are:
a sale of all or substantially all of our assets;
our merger into another entity other than a merger undertaken for the
purposes of changing the state of our incorporation;
the listing of any class of our common stock on a stock exchange; or
our obtaining outside funding, whether privately or through a public
offering of securities, in the minimum amount of $500,000.
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Even though we would be required to redeem the Class A shares for a redemption
price based on the market value of our company at the time of the liquidity
event as described elsewhere in this prospectus, upon redemption of your shares,
you will lose your right to convert your shares into shares of Class B common
stock and to participate in any increase in the market value of BonusBoulevard.
YOUR ABILITY TO SELL OR TRANSFER YOUR CLASS A SHARES IS SUBJECT TO SUBSTANTIAL
LIMITATIONS.
We have no current plans to list the Class A shares for trading on any
exchange and our securities do not now, and may not for some period of time,
qualify for listing on any such exchange. In addition, there is a three-year
prohibition on your right to sell or otherwise transfer Class A shares, with
certain limited exceptions, such as the right to transfer the shares upon death
of the holder. The three-year restriction on transfer, which is referred to in
this prospectus as a lock-up, begins at the time of the effectiveness of the
registration statement of which this prospectus is a part. It will be difficult
for you to dispose of your Class A shares, even after the lock-up period
expires, if they are not listed on a securities exchange or quoted on the
Over-The-Counter Bulletin Board.
THE FUTURE SALE OF SHARES MAY HURT OUR MARKET PRICE.
If Class A shares are not redeemed by us and the lock-up period expires, a
market for these shares may develop. At such time, the market price of Class A
shares could decline if our executive officers, who hold all of the currently
outstanding Class B shares, sell a substantial number of such shares or the
perception develops that these sales could occur. Sales of Class B shares by our
executive officers could also make it more difficult for us to sell equity
securities in the future at a time and at a price that we deem appropriate.
RECIPIENTS OF CLASS A SHARES HAVE NO EFFECTIVE VOICE IN MANAGEMENT BECAUSE
MANAGEMENT HAS SUBSTANTIAL CONTROL.
Our two executive officers together own beneficially all of our issued and
outstanding Common Stock. As a result, these shareholders control
BonusBoulevard, giving them the ability, among other things, to elect all of our
directors and approve significant corporate transactions. This concentration of
voting stock ownership in our two executive officers may also have the effect of
delaying or preventing a change in control, impeding a merger, consolidation,
takeover or other business combination involving us or discouraging a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
us, even if any of these transactions would benefit you as holders of Class A
shares.
REGULATION OF SWEEPSTAKES.
The sweepstakes industry is subject to extensive regulation on the local,
state and federal levels. This regulation applies whether sweepstakes are
promoted over the Internet, through the mail or otherwise. Accordingly, the same
regulations that apply to traditional sweepstakes promotions will apply to our
planned online sweepstakes. Regulations governing the conduct of sweepstakes
vary from state to state and from country to country. Although state and federal
sweepstakes laws and regulations generally are similar in nature, they and their
application vary. We use various methods to achieve compliance with these laws.
We intend to protect BonusBoulevard from liability for violation of
sweepstakes laws by restricting the persons who may enter our sweepstakes. We
intend to prohibit minors from entering our
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sweepstakes and limit them to United States residents. Residents of Florida
typically are prohibited from entering certain sweepstakes to comply with local
laws, regulations or administrative rulings.
Deceptive practices in direct mail sweepstakes promotions have recently
been the subject of hearings in the United States Senate and certain states.
While these hearings did not focus on online sweepstakes, it is unclear whether
any new laws or regulations will result from these hearings and whether or not
these laws or regulations will affect online sweepstakes. Similar attention is
expected from state legislatures and regulators.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Risk Factors," "Plan of Operation,"
"Business," and elsewhere in this prospectus constitute forward-looking
statements. These statements involve known and unknown risks, uncertainties, and
other factors that may cause our or our industry's results, levels of activity,
performance, or achievements to be significantly different from any future
results, levels of activity, performance, or achievements expressed or implied
by such forward-looking statements. Such factors include, among others, those
listed under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "intends," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance, or achievements. We do not assume responsibility for the
accuracy and completeness of the forward-looking statements. We do not intend to
update any of the forward-looking statements after the date of this prospectus
to conform them to actual results.
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CAPITALIZATION
The following table sets forth the historical capitalization of
BonusBoulevard as of June 29, 1999. You should read this table in conjunction
with our financial statements and the related notes thereto, and the other
financial information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of June 29, 1999
-------------------
Actual
------
<S> <C>
Stockholders' equity:
Preferred stock, par value $0.0001 per share, 150,000,000 shares authorized;
no shares issued and outstanding.................................................... $ --
Class A common stock, par value $.0001 per share, 25,000,000 shares
authorized; no shares issued and outstanding........................................ --
Class B common stock, par value $.0001 per share, 275,000,000 shares
authorized; 80,000,000 shares issued and outstanding................................ 8,000
Paid-in-capital 28,739
Accumulated deficit (9,695)
------
Total shareholders' equity 27,044
------
Total capitalization $27,044
------
------
</TABLE>
USE OF PROCEEDS
Although the 20,000,000 Class A shares in this offering are being
distributed at a deemed consideration of $0.0001 per share, we will not receive
any cash proceeds from the offering. The purpose of the offering is not to raise
capital directly but to create interest in, traffic to, and purchases through,
our online shopping mall.
DIVIDEND POLICY
To date, we have not declared or paid any dividends on our outstanding
Class B shares. We currently do not anticipate paying any cash dividends in the
foreseeable future on the Class B shares or the Class A shares, when issued
pursuant to this offering. Although we intend to retain our earnings to finance
our operations and future growth, our board of directors will have discretion to
declare and pay dividends in the future. Payment of dividends in the future will
depend upon our earnings, capital requirements and other factors which our board
of directors may deem relevant.
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DILUTION
Our members who receive Class A shares in this offering will experience
no dilution since they will receive their shares for no cash consideration. Net
tangible book value per share is determined by dividing the net tangible book
value or total tangible assets less total liabilities by the number of
outstanding Class A shares. As of June 29, 1999, we had a net tangible book
value of $27,044, or approximately $.00 per share.
If we give effect to the distribution of 20,000,000 of Class A shares
for no cash payment, as of June 29, 1999 the pro forma net tangible book value
on that date would have been ($62,956), or $.00 per Class A share. This
represents an immediate decrease in the net tangible book value of approximately
$90,000 to existing shareholders and an immediate dilution of $.00 per share to
members receiving Class A shares in the offering.
The following table illustrates the per share dilution assuming the
distribution of 20,000,000 Class A shares for no monetary consideration.
<TABLE>
<S> <C>
Initial public offering
price per share for Class A shares ............................. $ 0.00
Net tangible book value
per share as of June 29, 1999
and before this offering........................................ $ 0.00
Increase in pro forma net tangible
book value per share attributable
to new investors ............................................... $ 0.00
Pro forma net tangible book value
per Class A share after this offering........................... $ 0.00
Dilution per share to new investors
in this offering ............................................... $ 0.00
</TABLE>
The following table summarizes on a pro forma basis, as of June 29,
1999, the number shares of common stock purchased from us, the total
consideration paid, and the average price per share paid by existing
shareholders and by new investors.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
PER SHARE
NUMBER PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C>
Existing
shareholders........ 80,000,000 80% $36,739 100% $.00
New
investors........... 20,000,000 20% 0 0.0% $.00
Total............... 100,000,000 100% $36,739 100%
=========== === ======= ===
</TABLE>
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In the future, we may issue options, warrants, or additional stock in
connection with our efforts to expand our membership or our group of retail
affiliates. In addition, under our agreement with InfoStream, we have agreed to
compensate InfoStream for its services by a combination of cash and warrants to
purchase Class B shares, as described elsewhere in this prospectus. Shareholders
could face dilution from our issuance of these warrants or from any other future
issuance of securities.
PLAN OF OPERATION
The following discussion and analysis of our plan of operation should
be read in conjunction with, and is qualified in its entirety by, the more
detailed financial information contained in the summary financial information
and our financial statements and the notes thereto included elsewhere in this
prospectus. This prospectus contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from the
results discussed in the forward-looking statements. Factors that may cause or
contribute to such differences include those discussed under the heading "Risk
Factors" beginning at page 6 and those discussed elsewhere in this prospectus.
OVERVIEW
We are a development stage company, which is establishing an online,
incentive-based shopping mall. Consumers who become our members will be able to
access our shopping mall through our web site, www.BonusBlvd.com. Our online
shopping mall will offer our members access to a broad range of retailers
offering quality merchandise. Members will be able to earn discounts in the form
of BBBucks on most purchases they make through our online shopping program. Our
web site is currently under development and, although operational offline, will
not be accessible to potential members through the Internet until the offering
described in this prospectus is commenced.
We began pre-incorporation activities on February 1, 1999 and were
incorporated on June 10, 1999, but we have not yet begun operating our shopping
mall. We expect to launch our web site and become operational upon commencement
of the offering described in this prospectus. Since our inception, we have been
engaged primarily in planning our operations, negotiating agreements with
prospective retail affiliates and capital raising activities. We have no
operating revenue to date and do not expect to be able to generate revenue until
the launch of our web site.
During the next twelve months, we expect to take the following steps in
connection with the development of our business and the implementation of our
plan of operations:
complete technical development of our web site and the design of the
web site user interface;
develop and maintain relationships with affiliated retailers;
add any additional functionality to our web site that may be warranted
in order to remain competitive;
generate traffic to our web site through promotional activities;
hire and train additional staff, including marketing staff,
administrative personnel and technical developers; and
identify new facilities for our business, if necessary.
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Each of these steps pose significant risks with respect to our ability to
implement our plan of operations which are discussed in the "Risk Factors"
section of this prospectus. You should carefully review these risks prior to
participating in the offering.
CASH REQUIREMENTS AND ADDITIONAL FUNDING
As of August 1, 1999, our principal commitments consisted of our
agreement with our web site designer, InfoStream, as described below under the
headings "Summary of Additional Research and Development" and "Certain
Transactions," and our liability for the legal fees of our counsel in connection
with this offering. Although we have no material commitments for capital
expenditures, we anticipate a substantial increase in our capital expenditures
consistent with anticipated growth in operations, infrastructure and personnel.
Additionally, we will continue to evaluate expanding our sales and marketing
programs. Our capital requirements will depend on many factors, including:
the rate of market acceptance of our online shopping program;
the amount of expenditures that will be needed for marketing and promoting
our shopping program and our brand name;
the costs required to maintain and upgrade our technology; and
potential changes in economic, regulatory or competitive conditions of our
planned business.
We believe that capital already contributed and to be contributed by
our current executive officers and directors, together with any accounts
receivable financing we may secure, will be sufficient to meet our anticipated
needs for working capital, capital expenditures and business development for the
next 12 months. During this period, we will try to raise capital from third
parties, by selling debt or equity securities. The sale of additional equity
securities, if accomplished, may result in dilution to our shareholders. We
cannot assure you, however, that financing will be available in amounts or on
terms acceptable to us, or at all.
SUMMARY OF ADDITIONAL RESEARCH AND DEVELOPMENT
We do not believe that we will have significant research and
development expenses during the next 12 months. Even though we have retained
InfoStream to develop our web site design, this development will be achieved
through modifications of available technologies. Expenditures on activities of
this type do not constitute research and development expenses.
We have agreed to compensate InfoStream in a combination of cash and
securities, some of which may be redeemed by us under circumstances described
elsewhere in this prospectus. Through June 29, 1999, we have incurred costs of
$15,000 for our web site design, including related software and system
architecture. For a period of six months from the date of delivery of our web
site design in fully operational form, InfoStream is required to maintain,
monitor and make adjustments to our web site design and handle any disruptions
in the operation of the web site, at no additional cost to us.
Until we have sufficient funds to hire our own technical personnel,
which we expect to occur following ten months from the date our web site begins
to operate, we will be required to engage the services of a third party to
develop and implement any enhancements to our web site. We anticipate that the
total cost to us of such services will be $80,000 and that we will engage
Infostream to do so.
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EXPECTED PURCHASES OF SIGNIFICANT EQUIPMENT
Our significant equipment purchases are limited to computer hardware.
Our agreement with InfoStream and the cash and non-cash compensation described
above include the purchase of a single computer. This computer is required for
the development of our web site and thereafter, for operation of our web site.
Within the next 12 months, we expect to purchase up to $50,000 worth of
additional computers to operate our web site. We will also purchase personal
computers, at a cost of $1,500 per machine, for each additional employee we
hire after June 1999.
SIGNIFICANT CHANGES IN NUMBER OF EMPLOYEES
As of June 29, 1999, we had two full-time employees, our Chief Executive Officer
and our Chief Operating Officer. We may hire up to nine additional employees by
the end of our first 12 months of operations. These additional employees, if
hired, may serve in any of the following capacities: upper management; marketing
and promotion; administration; and web site technicians.
NO PROCEEDS FROM THE SALE OF SHARES
We will receive no cash proceeds from the sale of our Class A shares.
Up to 20,000,000 Class A shares will be distributed to members for deemed
consideration of $.0001 per share, or a total of $2,000. The purpose of the
offering is not to raise capital directly but to create interest in, traffic to,
and purchases through, our online shopping mall.
YEAR 2000 COMPLIANCE
We are currently assessing the year 2000 readiness of the software,
computer technology and other services we may use which may not be year 2000
compliant. We expect to become year 2000 compliant by the time we launch our web
site and become operational. We have not yet developed a contingency plan to
address situations that may result if we or any of our affiliated retailers or
their tracking services is unable to achieve year 2000 compliance. The cost of
developing and implementing such a plan, if necessary, could be substantial in
relation to our limited financial resources, particularly if such a plan is
needed during the first 12 months of operations of our shopping mall. We will
also depend on the year 2000 compliance of the computer systems and financial
services used by our affiliated retailers and by our members. A significant
disruption in the ability of members to access the Internet or any portions of
it reliably or to use their credit cards online would have a substantial adverse
effect on the use of our shopping program, our business and our financial
results. We expect the total cost of the development of our web site to be
approximately $105,000, inclusive of the cost of ensuring that the software and
other technology used in the web site is year 2000 compliant.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 is effective for all fiscal periods beginning after June 15, 1999. SFAS No.
133 requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether
the derivative is designated as part of a hedge transaction and, if it is the
type of hedge transaction. We anticipate that, due to our limited use of
derivative instruments,
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the adoption of SFAS No. 133 will not have a material impact on our financial
position or results of operations.
In April 1998, the American Institute of Certified Public Accountants,
in conjunction with the Financial Accounting Standards Board, issued SOP 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5, which is
effective for fiscal years beginning after December 15, 1998, provides guidance
on the financial reporting of start-up costs and organization costs. It requires
costs of start-up activities and organization costs to be expensed as incurred.
Because we have expensed these costs historically, we do not expect the adoption
of this standard to have a significant impact on our results of operations, cash
flows or financial position.
In March, 1998, the American Institute of Certified Public Accountants,
in conjunction with the Financial Accounting Standards Board, issued SOP No.
98-1, "Accounting for Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). SOP 98-1, which is effective for fiscal years
beginning after December 15, 1998, requires that computer software costs that
are incurred in the preliminary project stage (as defined) be expensed as
incurred. Costs incurred subsequent to this stage, meeting certain criteria, are
to be capitalized. Since most of these costs will be capitalized, we do not
expect the adoption of this standard to have a significant impact on our results
of operations, cash flows or financial position.
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BUSINESS
BonusBoulevard, Inc. is a corporation that was incorporated in the
State of New York on June 10, 1999. We are developing an Internet-based shopping
mall through which consumers will be able to make purchases from a carefully
selected group of retailers that offer the products and services most in demand
among online shoppers. We will offer discounts on merchandise purchased through
our web site from our affiliated retailers to those who register as members of
our shopping program. Accumulated discounts, or BBBucks, will be redeemable at
the option of each member of our shopping mall for rewards of cash, gift
certificates, or charitable donations. Our web site and related software are
being designed to feature ease of use, privacy and security. In developing our
shopping mall, we intend to capitalize on the extraordinary growth in consumer
shopping online that is currently taking place and is projected to continue over
the next several years.
OVERVIEW OF INTERNET-BASED RETAILING
GROWTH OF ONLINE RETAILING
Our online shopping mall is being developed to take advantage of the
enormous growth currently taking place in electronic consumer commerce. This
growth parallels the growth in Internet access generally. According to
IntelliQuest, Inc., the number of Americans with Internet access in November
1997 was 56 million, for example, or approximately 21% of the U.S. population.
This number grew to approximately 73 million, or 26% of the population, in
October 1998 according to IntelliQuest, Inc. and then to approximately 93
million, or roughly 34% of the population, in April 1999, according to Nielsen
Media Research.
Dramatic growth in online consumer purchasing is likewise predicted for
1999. According to eMarketer, in 1998, approximately 16.8 million Americans made
at least one purchase via the Internet. This figure is expected to increase more
than two-fold in 1999, to 36 million. Similarly, the number of consumers making
purchases during the October through December holiday period is estimated by
Ziff-Davis Inc. to increase more than three-fold, from 7.8 million in 1998, to
approximately 24 million in 1999. Total dollars spent by consumers shopping
online during the 1999 holiday season is expected to increase substantially from
the estimated $3 to $4 billion consumers spent during the 1998 holiday season.
Estimates of subsequent growth in retail purchases online are even more
dramatic. Industry sources, including eMarketer, predict that by the year 2002,
over 63 million Americans, or approximately 24%, of American consumers at least
14 years old, will be making purchases online.
INTERNET RETAIL CHANNELS
In order to meet this growing demand, both the number of retailers and
the variety of goods and services they offer have grown substantially. The
primary types of online retailers may be referred to as direct retailers and
aggregators.
Direct retailers are companies that sell merchandise from their own web
sites directly to consumers. These retailers include companies with established
brand names, such as Amazon.com, Inc. and R.H. Macy & Co., Inc., and new
entrants, whose brand names have yet to be established. Direct retailers include
those that sell merchandise or services only on the Internet, such as CDNow,
Inc., as well as retailers that sell online and offline, such as Borders, Inc.
(which conducts online retail through an affiliate, Borders Online, Inc.) and
Staples, Inc.
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Aggregators, such as BonusBoulevard, do not sell merchandise directly
to consumers. Instead, aggregators provide consumers access to a network of
direct retailers. Aggregators offer access to their network through their own
web sites. These web sites are linked electronically to the web sites of the
direct retailers in an aggregator's network. Aggregators do not carry inventory
or take orders from their members. Instead, their members place orders with the
direct retailers participating in the network, and it is the participating
retailers that carry inventory, process purchase orders and ship goods to the
aggregators' members.
The primary types of aggregators include:
Internet malls, which offer access to direct retailers, but may
lack a recognized brand name of their own. Internet malls include
ShopNow.com and Shops.com, which is maintained by Mall.com, Inc.;
Portals, which are Internet companies that typically have powerful
brand names and exceptionally large numbers of online customers.
Portals include such well-known web sites as America On-Line,
Yahoo! and Microsoft Network. Because of the sheer size of each
portal's user base, portals are typically able to command
multi-year tenancy fees from retailers. Tenancy fees are fees
payable by online retailers to owners of other web sites, such as
portals and Internet malls, that electronically link their web
sites to that of the retailer. These fees are payable whether or
not any sales are generated as a result of the linking of the web
sites;
Affiliate malls, such as BonusBoulevard, which are Internet malls
that set up revenue sharing arrangements with each direct retailer
participating in their online shopping malls. Some affiliate malls
offer rewards to consumers for purchases made or for completing
surveys. Affiliate malls, like Internet malls, may lack recognized
brand names or offer a limited variety of merchandise. Examples of
affiliate malls are Mypoints.com and ClickRewards; and
Charity malls, which are affiliate malls that pass on a portion of
their commission revenues to charities.
RETAILER ADVERTISING AND MARKETING ONLINE
The market for online consumers is highly competitive. As a result,
many online retailers have relied on relatively expensive advertising and
marketing budgets to compete for customers. A substantial portion of a
retailer's advertising and marketing budget may be allotted to offline
advertising through print media and television, or to online tenancy fees paid
to one or more portals. Tenancy fees, which may cost as much as millions of
dollars, are payable by retailers over the life of the tenancy, whether or not
the tenancy actually generates revenue for the retailer. Tenancy relationships
may have certain drawbacks for retailers. The web sites of certain portals, for
example, may feature advertisements for competitors of a tenant-retailer, or
portals may offer competing products directly.
Affiliate relationships, on the other hand, involve a form of marketing
based on revenue sharing between a retailer and other web site owners known as
affiliates. When an affiliate relationship is established, the affiliate's web
site is linked electronically to the web site of a retailer. When prospective
customers visit the affiliate's web site, they may choose to be linked to, and
then may make purchases at, the retailer's web site. The retailer then pays the
affiliate a commission, which ordinarily equals a
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percentage of the amount of the purchases made. Such purchases are referred to
as sales generated by the affiliate for the retailer. Affiliate relationships
function as a form of both marketing and advertising because affiliates may
post, on their web sites, information about the retailers and their products in
a manner designed to entice visitors to hyperlink from the affiliate's web site
to those of the retailers for shopping. In contrast to tenancy fees, commissions
are payable by retailers to their affiliates only on revenues generated by the
affiliate relationship.
Because of their low cost relative to tenancy fees and other forms of
advertising, affiliate relationships have become commonplace on the Internet and
are sometimes used in conjunction with other online marketing tools. Amazon.com,
for example, is not only a direct retailer but also has approximately 230,000
affiliate relationships.
Certain prospective retail affiliates currently have non-U.S.
customers. If these retailers enter into affiliate relationships with us, their
customers may purchase goods and services through our online shopping mall. In
addition, we may, in the future, consider opportunities for international
expansion by entering affiliate relationships with online retailers based
overseas. International operations would subject us to the risks of conducting
business internationally. If we expand internationally, we will also be subject
to general geopolitical risks, such as changes in diplomatic and trade
relationships.
BUSINESS STRATEGY
BonusBoulevard's goal is to become a leading online shopping mall
featuring goods and services of quality retailers. We intend to achieve our goal
by:
Offering Products Most In Demand. We intend to affiliate with
retailers offering the types of merchandise which are most
commonly purchased online and known as core products. Currently,
core products include books, CDs/music, clothing, computer
hardware and software, videos and DVDs.
Breadth and Depth in Product Offerings. In addition to core
products, we intend to offer as many types of products and as
great a variety within each product category as possible.
Offering Merchandise and Services of Leading Retailers. We intend
to offer the goods and services of a leading retailer in each
category of products most in demand by online shoppers. By leading
retailers, we mean retailers with well-respected brand names.
Initially, such retailers will participate in our online mall
through affiliate relationships. Based on preliminary discussions
with many retailers, we believe that we can secure sufficient
participation by them to effect our business strategy.
Continually Investing in Web Site Infrastructure. We intend to
invest in our web site infrastructure on a continuing basis as
needed for upgrades, incorporating new features, and keeping pace
with developments in Internet technology.
Offering Substantial Rewards Program to Members. We believe, that
to be successful, our online mall must offer substantial benefits
to the online consumer as compared to the benefits of buying
online from other aggregators or direct retailers. In order to
achieve this, we intend to offer the following benefits:
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Rewards/Discounts. Under our rewards program, we will offer
discounts directly to consumers on most items available
through our shopping mall. Initially, we expect to offer
discounts between 3% and 15% on most purchases made through us
from affiliated retailers, depending upon the commissions
offered to us by our affiliated retailers. With respect to
retailers that pay comparatively low commission rates but sell
core products, we may pass along to the consumer a discount
equal to the full amount of the commission we receive. We
believe that our discount percentage is competitive.
Member Accounts & Redemption Options. Under our rewards
program, each member will have a BonusBoulevard account, and
discounts earned by that member will be credited to the
member's account in the form of BBBucks. Members will have the
option of redeeming their BBBucks in cash, gift certificates,
or charitable donations.
Adopting Features that Attract and Retain Customers. In order to
promote shopping through BonusBoulevard, we intend to incorporate
certain features in our online shopping mall in addition to
offering the most popular products. In order to do so, we have
included the following requirements in the design specifications
for our web site:
Ease of Use. The web site should be easy for consumers to use
and understand. We intend to affiliate only with those
retailers whose web sites are also easy to use.
Quick Access Time. Given that one of the main reasons
consumers shop online is to save time, all information on our
web should be quickly accessible.
Frequent Updates. Our web site is to be updated frequently to
provide timely information concerning members' accounts,
additional products and services offered, newly added
retailers, and special rewards.
Security and Privacy. Information provided by consumers to
BonusBoulevard should have a level of security from outsiders
which meets industry standards. We will not make information
provided to us by consumers available to third parties without
the consumers' prior authorization.
Sponsoring Stock Distribution. As a means of introducing a large
number of prospective customers to our online shopping mall, we
intend to distribute an aggregate of 20,000,000 Class A shares. Of
these shares, 6,000,000 will be given to those who register as
members, those members who refer other members and as a reward for
making an initial purchase through our web site. Additionally,
12,500,000 shares will be given as rewards to those who become
members of our online shopping mall and achieve preset spending
levels, thereby accruing discounts or BBBucks. In each case,
shares will be awarded on a first come, first served basis. We
will distribute up to 500,000 shares to certain members selected
by us to assist in testing our web site and up to another
1,000,000 shares as prizes in sweepstakes contests and to members
who complete survey questionnaires at our web site. All shares
subject to our stock distribution are being registered with the
SEC pursuant to the Registration Statement of which this
prospectus is a part.
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Adopting Features that Attract and Retain Quality Retailers. After
careful consideration of the needs of online retailers, we plan to
include the following features in our online mall:
Exclusivity. We will grant each participating retailer the
opportunity to be promoted on an exclusive basis by us at our
web site in the affiliate's main product category. Retailers
offering competitive products will not be permitted to sell
through BonusBoulevard or to purchase advertising space at our
web site.
Size of Customer Base. By using the stock distribution plan
set forth in this prospectus and providing a quality online
shopping experience to consumers, we believe we will develop a
substantial customer base which will benefit participating
retailers.
Discounts Offered by Us, Not Retailers. Retailers will not
have to offer or keep track of rebates or discounts, as all
rewards will be offered and managed by BonusBoulevard. Because
we will keep track of discounts earned and provide all
rewards, retailers will not appear to be undercutting
themselves by participating in our online mall.
Comparatively Inexpensive Advertising. Tenancy fees, which are
charged by portals and certain other web site owners, are
payable by retailers regardless of the amount of business
generated by the tenancy. In order to participate in our
online mall, on the other hand, retailers need only pay
commissions on sales we generate for them.
The features of our business strategy described above are intended to
be implemented during the first stage of our operations. Once our customer base
and revenues are substantial, we intend to enhance our online shopping program
by taking the following steps:
Advertising Online and Offline. We intend to advertise online and
through other media in order to build our brand name and further
increase our membership and revenues.
Providing Enhanced Discounts. As our customer base and revenues
grow, we will consider offering enhanced discounts and rewards.
Forming Strategic Alliances. We intend to enter into strategic
alliances with providers of online services beneficial to our
customers.
Sponsoring Special Promotions. We intend to sponsor special
promotions for both members and non-members.
It is unlikely that we will be able to implement these potential enhancements to
our online shopping program unless we secure substantial funds from third
parties.
MEMBERSHIP IN BONUSBOULEVARD
REGISTRATION; COMPANY WEB SITE; MEMBER ACCOUNTS
When a prospective customer visits our web site, www.BonusBlvd.com, the
customer should find a clear, user friendly display identifying the
participating retailers along with instructions for registering as one of our
members. At the time of registration, a user name and password will be
established for each member and an account will be opened in the member's name.
To be eligible to receive rewards,
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each member will be required to input his user name and password when visiting
our web site. This information will make it possible to track each member's
purchases, discounts accrued and rewards earned and claimed. After inputting his
user name and password, a member will be able to make purchases from
participating retailers, check his account, select rewards, review his detailed
account history, and view all other information available at our web site.
We intend to make available to members an array of additional
information at our web site. This information will include: Member account
history; instructions for redeeming rewards; a description of our stock
distribution plan and any other promotional programs; general information about
BonusBoulevard; descriptions of our participating retailers; and copies of our
filings with the SEC.
When a member qualifies to receive Class A shares as part of our stock
distribution plan, the number of shares for which the member qualifies will be
recorded in his account. This information will be updated each time the member
qualifies for additional shares. No person will be required to acquire any
shares of our stock as a condition to becoming a member or making purchases
through our online shopping program.
SHOPPING THROUGH BONUSBOULEVARD; DISCOUNTS; REDEMPTION
Once a consumer registers as a member of BonusBoulevard, we will keep
records of all transactions between the member and our participating retailers.
Each time a member makes a purchase through BonusBoulevard's website, the
following information will be entered in the member's account:
Identity of purchasing member
Date of purchase
Dollar amount of purchase
Retailer from whom purchased
Order/tracking number
Member accounts will also show the dollar amount of all discounts
accrued. This dollar amount will be reflected in the member's account as
BBBucks. The discount on any given purchase will equal a percentage of the
purchase price, exclusive of taxes and shipping and handling charges. If, for
example, a member were to purchase an item for $100, and the applicable discount
were 5%, then the member's account would reflect $5 in BBBucks.
A member will be entitled to redeem BBBucks after the member's account
reaches the minimum amount of $10 in BBBucks, which such minimum amount will be
subject to adjustment, upward or downward, by us from time to time in our
discretion. Each member will have the option to continue accruing BBBucks before
redeeming them for rewards. BBBucks will be redeemable by each member, for any
of the following rewards, at the member's option: Cash; gift certificates; or
charitable donations to be made in the member's name. BBBucks will be redeemable
at any time after the member's accrued BBBucks have equaled or exceeded the
specified minimum amount for a period of at least 45 consecutive days. Any
member who chooses to use BBBucks to make a charitable donation will be able to
select from a list of charities participating in our rewards program. We are not
now, and will not be, affiliated with any of these charities. In contrast to
charitable donations made by certain charity malls, each charitable donation
made under our rewards program will constitute a charitable donation made by the
member, rather than BonusBoulevard. We will arrange for members to receive
documentation required for income tax purposes in electronic form.
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Based on our research, we believe that our rewards program, including
our discount percentage, is competitive with the rewards available from other
online shopping malls. It is our intention to monitor the discounts offered by
our competitors on a continuing basis so that we can, if feasible, keep our
discount rate at a competitive level. We intend to enhance our rewards program
as our customer base and revenues grow.
TRACKING MEMBER INFORMATION
To ensure that all members receive the proper discounts on a timely
basis and that we receive the correct amount of commissions due to us from our
participating retailers, we will need to receive certain information as to each
purchase made by a member through BonusBoulevard. In some cases, BonusBoulevard
will obtain this information directly from some of the participating retailers.
Instead of keeping track of such information themselves, other online retailers
contract with third party service providers to track and report such
information. In either case, the information may not be available to us for up
to five days after a purchase is completed. A purchase is completed when the
member's credit card is charged or some other form of payment is accepted by the
retailer or the retailer confirms shipment of the merchandise. Because the speed
with which we will be able to credit our members with discounts will depend, in
part, on the payment policies of our affiliated retailers, we plan to display
the payment policies of our affiliated retailers on our web site.
In order for us to receive all required information concerning member
purchases on a daily basis, the software developed for our web site must be able
to communicate with the web sites of our participating retailers and their
tracking services.
We do not expect to incur any costs of communicating online with
retailers or tracking services other than the development costs of the related
web site software.
With respect to the exchange by a member of merchandise purchased
through our online shopping mall, we expect to pass along to the member the same
exchange policy as the relevant affiliated retailer then has in effect with
respect to the merchandise in question. Accordingly, we do not expect exchanges
of merchandise to have any effect on our reporting system, the commissions paid
to us from our affiliated retailers, or the BBBucks earned by our members in
connection with the relevant purchases. With respect to a refund requested by a
member making a purchase through our web site, the member's account will be
debited by an amount of BBBucks equal to the BBBucks earned on the initial
purchase for which the refund is requested. Issuances of Class A shares as
rewards for purchases will not be awarded until 45 days after the purchase in
order to give effect to any requested refunds prior to any grant of shares.
Similarly, the redemption of BBBucks for cash, gift certificates and charitable
donations will not be effected until the relevant member's accrued BBBucks have
exceeded the requisite minimum amount for a period of at least 45 consecutive
days.
WEBSITE AND SOFTWARE DEVELOPMENT
In May 1999, our executive officers entered into an agreement with
InfoStream Solutions, LLC ("InfoStream"). This agreement, which was assigned to
us in June 1999, provides for Infostream to design our web site and related
software, including system architecture. InfoStream is a privately-held company
that specializes in providing development and consulting services for computer
systems and related software. InfoStream's professional staff has substantial
experience in developing computer systems using database technologies for
businesses in a variety of industries, including telecommunications,
biotechnology, financial services and manufacturing. InfoStream was organized in
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the State of New Jersey in December 1997. Its principal offices are located in
Philadelphia, Pennsylvania. Except pursuant to the relationship described in
this prospectus, we are not in any manner affiliated with InfoStream.
The agreement between BonusBoulevard and Infostream, as assigned to us
and amended in June 1999 (the "InfoStream Agreement"), requires InfoStream to
develop a web site that will link BonusBoulevard's web site to the web sites of
our affiliated retailers, be easy for members to use, and quickly load on any
commercially available Internet browser. Under the InfoStream Agreement, "easy
to use" encompasses ease in:
Linking to BonusBoulevard's affiliated retailers;
Accessing information about each of our affiliated retailers;
Accessing information summarizing our rewards program;
Accessing member account information, including purchasing history,
redemption options and ownership of shares in BonusBoulevard; and
Accessing information about our stock distribution plan.
The InfoStream Agreement also requires InfoStream to deliver a software
system that credits BBBucks, or discounts, to each member's account, after that
member makes a purchase from any of our affiliated retailers. For this to be
accomplished, our software design is required to have the capacity to
incorporate detailed information provided by our affiliated retailers or their
tracking services.
We will be the sole owner of the web site design and all related
software developed for us by InfoStream.
We have agreed to compensate InfoStream for the design and development
of our web site in a combination of cash and securities, some of which can be
redeemed by us. The InfoStream Agreement requires that the web site design and
related software be completed and operational no later than October 15, 1999.
SOURCES OF REVENUE
COMMISSIONS
During the first stage of our operations, our revenues will be derived
primarily from commissions paid by participating retailers. Commissions will be
payable to us only if a member links from our web site to that of a
participating retailer and completes a purchase while at the retailer's web
site. If a member makes a purchase after going to a participating retailer's web
site directly, without having been linked to that web site from our web site, we
will not be entitled to receive a commission.
Not all online retailers have the same commission structure. Some
retailers pay affiliates a single commission rate on all sales generated by the
affiliate, regardless of the total amount of such sales. Other online retailers
pay commissions on a sliding scale, with the rates increasing in accordance with
the dollar amount of sales generated by the affiliate relationship. CDNow, for
example, currently pays commissions ranging from 7%, for single sales generated
by an affiliate during any month, to 15%, for monthly sales generated in excess
of $17,000. With the different commission structures in mind, we estimate that
average commissions payable to BonusBoulevard by its affiliated retailers will
initially be 7.5% of the amount of member purchases, excluding sales tax and
shipping and handling charges. Our estimates are based on our review of the
commission rates currently available from online retailers, the exclusive
opportunity we will provide to each of our affiliated retailers to be promoted
by us in its main
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product category, and the average number and average dollar amount of purchases
that each member makes from affiliated retailers.
Our income derived from commissions will be net of the "discount" to be
credited by us to members on most purchases. To date, we have entered into
written agreements with approximately 15 affiliated retailers.
FUTURE SOURCES OF REVENUE
Tenancy/Placement Fees. Tenancy or placement fees are fees payable
by online retailers to the owners of other web sites, such as
Internet shopping malls, that electronically link their web sites
to the web site of the retailer. Whereas commissions are payable by
online retailers only on sales generated by an affiliate, tenancy
fees are payable whether or not any sales are generated as a result
of the linking of the web sites. Tenancy fees are less common than
affiliate commissions. Only the web sites that have the greatest
amount of Internet traffic are able to command substantial tenancy
fees. BonusBoulevard will not be able to charge tenancy fees unless
and until we establish a large and loyal membership base. We cannot
assure you that we can accomplish this quickly, if at all,
following commencement of our operations.
Advertising Revenue. Currently, the most prevalent form of
advertising on the Internet is the use of banner ads. Banner ads
take the form of a small window dedicated to the advertiser at the
web site of another party. At the window, a message or other
advertisement is displayed for visitors to the web site. In
exchange for the right to place an advertisement at the dedicated
window, the advertiser pays a fee to the web site owner. Fees
payable for banner ads are based either on the number of
impressions, that is, the number of visitors to the web site that
view the ad, or the number of visitors that click on the banner ad,
thus connecting to another web site, typically a web site of the
advertiser. We do not expect to collect revenue for banner ads
during the first stage of our operations, as we will not have a
large enough customer base. We may provide free banner ads to
online retailers that enter into affiliate relationships with us
upon commencement of our operations, as a means of rewarding
retailers that participate in our Internet shopping mall from the
outset.
Sales of Compiled Information. We may in the future use for our own
purposes or sell to third parties compiled information including in
many instances personal information obtained from our members upon
their authorization. If, however, a large number of our members
instruct us that we cannot transfer or sell their information to
third parties, our ability to generate revenues from such sales
will be significantly curtailed. Further, personal information of
users is restricted in many domestic and foreign jurisdictions,
including the European Union, with which the United States
government is currently negotiating a data privacy accord to permit
information sharing across borders.
MARKETING
BonusBoulevard's Chief Executive Officer and our Chief Operating
Officer currently handle all of our marketing activities. In the event that we
are able to raise at least $350,000 in venture capital or other third-party
financing, we intend to hire two additional employees who will share
responsibility for marketing our online shopping mall to prospective members and
participating retailers.
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During the initial phase of our operations, we will select
participating retailers based on a number of criteria. The most important of
these criteria are the value of the retailer's brand name, the quality and price
of each retailer's merchandise, the commission structure offered by each
retailer to prospective affiliates, and the quality of the retailer's web site
and policies concerning customer service, merchandise returns and privacy and
security.
We intend to attract online retailers on the basis of free advertising,
the opportunity to be promoted by us exclusively in the retailer's main product
category, and the fact that we will offer and manage all discounts and rewards
to consumers. At the same time, we will market our online shopping program to
prospective members through the quality of our web site, the quality of our
rewards program, our stock distribution and special promotions.
Once we have a substantial number of members generating a significant
amount of revenues to participating retailers, we expect to retain our retail
affiliates and attract new affiliates based on the size of our membership and
the revenues our members generate. We expect to retain existing members and
attract new ones based on ease and security of use of our online services and
rewards program, special promotions, and the expanded number of products
available for purchase from quality retailers.
COMPETITION
Although relatively new and rapidly evolving, retailing through the
Internet is intensely competitive. Competition for members and purchasers is not
only intense, but expected to increase significantly in the future. At the same
time, barriers to entry are low, if not insubstantial. We will compete not only
with direct retailers, but with all types of aggregators as well.
We believe that the principal competitive factors for companies seeking
to create online shopping malls utilizing affiliate relationships are:
a large membership base;
web site functionality;
brand recognition for the mall and its affiliated retailers;
member loyalty; and
open access for visitors.
We will compete for customers and members not only with other online shopping
malls, but also with portals and to some extent, direct retailers.
We may also face competition in the future from Web directories, search
engines, content sites, commercial online service providers, sites maintained by
Internet service providers, traditional media companies and other entities that
attempt to or establish online shopping malls by developing their own
communities or acquiring malls of a competitor.
In contrast to BonusBoulevard, our competitors have longer operating
histories in the Internet marketplace, greater name recognition, larger customer
bases and significantly greater financial, technical and marketing resources
than we do. Our competitors are able to undertake more extensive marketing
campaigns for their brands and services and make more attractive offers to
potential employees, affiliated retailers, and third-party content providers. We
cannot assure you that we will be able to compete successfully against our
competitors either upon commencement of our operations or thereafter or that our
competition will not have a material adverse effect on our business prospects,
results of operations and financial condition.
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GOVERNMENT REGULATION
We are not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally or directly
applicable to electronic commerce. Although there are few laws and regulations
at the present time applicable to commerce on the Internet, as the Internet
becomes increasingly popular, it is possible that a number of laws and
regulations may be adopted with respect to the Internet. These laws and
regulations, if adopted, may cover issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and security of information. Continued
growth of electronic commerce may also prompt calls for more stringent consumer
protection laws. Several states have proposed legislation to limit the uses of
personal user information gathered online or require online services to
establish privacy policies. While the Federal Trade Commission has also
initiated action against at least one online service regarding the manner in
which personal information is collected from users and provided to third
parties, we have adopted a policy against providing personal information
regarding our members to third parties without members' prior authorization. The
adoption of such consumer protection laws could create uncertainty in Internet
usage and reduce the use of our online shopping program.
A number of proposals have been made at the federal, state and local
levels that could impose additional taxes on the sale of goods and services over
the Internet, and several states have taken measures to tax Internet-related
activities. The imposition of additional taxes on Internet commerce could have a
substantial, adverse effect on our business and financial results.
We are not certain how our business may be affected by the application
of existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. Most of these laws were adopted prior to creation
of the Internet. As a result, they do not contemplate or address the unique
issues of the Internet and related technologies. Changes in laws intended to
address such issues could create uncertainty in the Internet market place. Such
uncertainty could reduce use of our online shopping program or increase the cost
of doing business as a result of increased service delivery and/or litigation
costs.
The feature of our rewards program that allows members to apply
discounts accrued in their accounts to charitable donations may subject us to
the laws and regulations of several states governing the solicitation of
charitable contributions. We do not believe that compliance with such laws and
regulations will have a material, adverse effect upon our business or financial
results.
EMPLOYEES
We currently have two full-time employees, our Chief Executive Officer
and our Chief Operating Officer. We do not currently plan to hire additional
employees until we receive venture capital or other third party financing in the
amount of at least $350,000. At such time, we intend to hire at least two
additional employees.
INTELLECTUAL PROPERTY RIGHTS
Under the terms of the InfoStream Agreement, we will own the web site
design and related software being developed by InfoStream for our online
shopping mall. We have registered with the United States Patent and Trademark
Office our service marks, BonusBoulevard, BonusBlvd.com and BBBucks.
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FACILITIES
We lease approximately 100 square feet on a month-to-month basis at 55
West 19th Street, 4th floor, New York, New York 10011 for a monthly rent of
$500. This space is the location of our principal executive offices. We will be
required to acquire larger space in the event that we hire additional employees.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act of 1933 with respect to the Class A shares offered pursuant
to this prospectus. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. Descriptions
contained in this prospectus relating to any contract or other document are not
necessarily complete, and these descriptions are qualified in all respects by
reference to the full text of the related contract or document.
Our registration statement, and the exhibits and schedules thereto, may
be inspected and copied at the SEC's Public Reference Section located at 450
Fifth Street, N.W., Washington, D.C. 20549 or at the regional offices of the SEC
at Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 or by
calling the SEC at 1-800 SEC-0300. The SEC also maintains a World Wide Web site
on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.
Following this offering, we will be subject to the reporting and other
requirements of the Securities Exchange Act of 1934, and we intend to furnish to
our shareholders annual reports containing audited financial statements. We may
also furnish to our shareholders interim reports as we deem appropriate.
When we qualify statements in this prospectus with the word "believe,"
unless otherwise indicated, we are basing our belief on the knowledge and
experience of our personnel and advisers. We have obtained the statistical
information included in this prospectus from publications we deem reliable and
with which we have no relationship.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Our directors and executive officers and their respective ages as of
July 2, 1999 are as follows:
<TABLE>
<CAPTION>
POSITIONS
NAME AGE HELD SINCE POSITION(S)
---- --- ---------- ----------
<S> <C> <C> <C>
David Brous, Jr. 30 June 1999 Director and Chief Executive Officer
Jonathan F. Morgenstern 30 June 1999 Director, President and Chief Operating Officer
</TABLE>
DAVID BROUS, JR. Together with Jonathan F. Morgenstern, Mr. Brous
co-founded BonusBoulevard in February 1999. He has served as a Director and as
our Chief Executive Officer since incorporating BonusBoulevard in June 1999.
Prior to co-founding BonusBoulevard, Mr. Brous was a Director at VT
International, Ltd. ("VT International"), a privately held wholesale concern,
from June 1994 to January 1999, where he managed three of VT International's top
customer accounts, accounting for approximately 47% of its annual revenue.
During the last half of 1998, Mr. Brous was involved in structuring the sale of
VT International. Mr. Brous received a Masters of Business Administration degree
from Columbia University in 1994 with a concentration in Finance, Marketing and
Management. From 1990 to 1992, Mr. Brous participated in the Management Program
at Saks Fifth Avenue. He holds a Bachelor of Arts degree from the University of
Pennsylvania.
JONATHAN F. MORGENSTERN Mr. Morgenstern co-founded BonusBoulevard with
David Brous, Jr. in February 1999. He has served as a Director and as our
President and Chief Operating Officer since incorporating BonusBoulevard in June
1999. Prior to co-founding BonusBoulevard, Mr. Morgenstern served as a
consultant at Synygy, Inc., an incentive compensation consulting company, from
March 1998 to May 1999. At Synygy, Mr. Morgenstern was responsible for Synygy's
largest client, Schering-Plough Corporation, and focused primarily on client and
database management. From 1996 to 1998, Mr. Morgenstern served as an analyst at
each of Canus Corporation and Altman Development Corporation, two related real
estate development companies. While there, Mr. Morgenstern was instrumental in
the development of a 284 unit low-income tax credit project valued at
approximately $20 million. Mr. Morgenstern received both a Juris Doctor degree
and a Master of Business Administration degree from Villanova University in
1995. He also holds a Bachelor of Arts degree from the University of
Pennsylvania.
DIRECTOR COMPENSATION
Our directors receive no cash compensation for their services as Board
members or committee members and are not reimbursed for expenses incurred in
connection with attending Board and committee meetings.
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<PAGE>
EXECUTIVE COMPENSATION
The following table shows total compensation expected to be paid for
the year ended December 31, 1999 to our Chief Executive Officer and Chief
Operating Officer. We do not expect to commence paying salaries to these
officers until October 1, 1999. We have no other employees.
<TABLE>
<CAPTION>
1999 ANNUAL COMPENSATION TOTALS
------------------------ ------
NAME AND PRINCIPAL POSITION SALARY BONUS
--------------------------- ------ -----
<S> <C> <C> <C>
David Brous, Jr.
Chief Executive Officer $18,750 $0 $18,750
Jonathan F. Morgenstern, President and
Chief Operating Officer $18,750 $0 $18,750
</TABLE>
EMPLOYMENT AND CHANGE OF CONTROL CONTRACTS
We do not currently have any employment agreements with our employees
or key personnel. However, Mr. Brous and Mr. Morgenstern have entered into a
shareholders' agreement pursuant to which they have granted to each other the
option to purchase each other's shares in BonusBoulevard under certain
circumstances, including upon the receipt by either shareholder from an
independent third party of an offer to purchase his shares, or upon the death or
disability of either shareholder. The agreement also provides that, in the event
a shareholder sells more than 50% of his shares in BonusBoulevard, the other
shareholder will have the right to participate in the sale under certain
circumstances. In addition, in the event that Mr. Brous proposes to sell all of
his shares in BonusBoulevard, he will be entitled to compel Mr. Morgenstern to
do the same.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation limits the liability to BonusBoulevard
of individual directors for certain breaches of their fiduciary duty to us. The
effect of this provision is to eliminate the liability of directors for monetary
damages arising out of their failure, through negligent or grossly negligent
conduct, to satisfy their duty of care, which requires them to exercise informed
business judgment. The liability of directors under the federal securities laws
is not affected by this provision of our certificate of incorporation. A
director may be liable for monetary damages only if a claimant can show a breach
of the individual director's duty of loyalty to BonusBoulevard, a failure to act
in good faith, intentional misconduct, a knowing violation of the law, an
improper personal benefit or an illegal dividend or stock purchase. There is no
pending litigation or proceeding involving any of our directors, officers,
employees or agents in which we are required or permitted to provide
indemnification. We are not aware of any threatened litigation or proceeding
that may result in a claim for such indemnification. Our certificate of
incorporation also provides that we will indemnify and hold harmless each of our
directors and officers to the fullest extent authorized by the Business
Corporation Law of New York (the "NYBCL"), against all expenses, liabilities and
losses (including attorneys' fees, judgments, fines, Employee Retirement Income
Security Act excise taxes and penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith. To the extent that indemnification for liabilities arising under the
Securities Act permitted to directors, officers or controlling persons pursuant
to our certificate of incorporation and for New York law, we have been informed
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is consequently unenforceable.
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<PAGE>
CERTAIN TRANSACTIONS
Mr. Brous and Mr. Morgenstern, both of whom are executive officers and
directors of BonusBoulevard, were issued 48,000,000 and 32,000,000 shares,
respectively, of our Class B common stock, par value $.0001 per share, in
consideration for their funding our operations to date in the total amount of
$36,739. Mr. Brous and Mr. Morgenstern have reached an agreement in principle as
shareholders of BonusBoulevard with regard to options to purchase each other's
shares in BonusBoulevard under certain circumstances and other matters. Under
the terms of this shareholders' agreement, if either of them leaves
BonusBoulevard's employ or resigns as officer and director of BonusBoulevard, he
will be prohibited from competing with BonusBoulevard for a period of one year.
In May 1999, Mr. Brous and Mr. Morgenstern, our executive officers and
directors, entered into an agreement with InfoStream. This agreement was
assigned by these officers to us, with InfoStream's consent, in return for our
assuming the officers' obligations under this agreement, immediately after we
were incorporated. At the time the agreement was assigned, it was also modified.
We refer to this agreement, as assigned to us and modified, as the InfoStream
Agreement.
Under the InfoStream Agreement, we have agreed to compensate InfoStream
for its services by a combination of cash and warrants to purchase Class B
shares. We have paid InfoStream $15,000 in cash to date and are obligated to pay
InfoStream another $10,000 in cash 30 days following InfoStream's completion of
our web site design in fully operation form. If InfoStream completes our web
site design in fully operational form no later October 15, 1999, we will be
obligated to issue to InfoStream non-redeemable warrants to purchase Class B
shares having a value of $35,000 and redeemable warrants to purchase Class B
shares having a value of $56,250. The number of shares equaling these amounts
will be determined as follows: If we receive third party equity financing on a
date which is no later than six months following InfoStream's completion of our
web site, then the number of shares issuable pursuant to warrants to be issued
to InfoStream will be determined on the basis of the terms of that financing.
If we do not receive third party equity financing by that date, the number of
shares issuable pursuant to warrants will be determined on the basis of the
amount of all expenses incurred by us since our inception. The warrants to be
issued to InfoStream will be exercisable for a period of ten years commencing
on the date which is two years following the date of InfoStream's completion of
our web site, provided that the warrants have not been previously redeemed. We
will have the right to redeem the redeemable warrants issued to InfoStream, in
whole or in part, at our election, at any time prior to their exercise. If we
elect to redeem any or all of these warrants, we will be required to pay $56,250
plus interest accrued thereon at a rate of 25% per year commencing at the date
InfoStream completed our web site as described above.
Because our two directors at the time of the foregoing transactions
were also our only officers, these transactions were not ratified by any
independent members of our board of directors. However, we have now adopted a
policy pursuant to which any forgiveness of loans and any future transactions
with affiliates must be approved by a majority of our independent directors who
do not have an interest in the transaction or loan and who have access, at our
expense, to either our counsel or independent counsel. In addition, all future
material transactions and loans with any of our affiliates will be made or
entered into on terms that are no less favorable to us than those that can be
obtained from an unaffiliated third party.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to us with
respect to beneficial ownership of our common stock as of June 29, 1999 and as
adjusted for the sale of the securities offered by this prospectus, the number
and percentage of outstanding shares of common stock beneficially owned by:
each of our officers and directors; and
all of our officers and directors as a group; and
each person that owns beneficially more than 5% of the outstanding
shares of our Class B common stock.
Beneficial ownership is determined in accordance with the rules and
regulations of the SEC. Shares of common stock subject to warrants and options
that are currently exercisable or exercisable within 60 days of June 29, 1999
are deemed to be outstanding and beneficially owned by the person holding such
warrants or options for the purpose of computing the number of shares
beneficially owned and the percentage ownership of such person, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person.
Except as otherwise noted below, the persons named in this table have
sole voting and investment power with respect to all shares of Class B common
stock owned by them.
Unless otherwise indicated below, the address of each beneficial owner
is c/o BonusBoulevard, Inc., 55 West 19th Street, 4th Floor, New York, New York
10011.
<TABLE>
<CAPTION>
Shares of
Class B Common Stock
Beneficially Owned(1) Percentage of Total Voting Shares(1)
---------------------- ---------------------------------------
Name of Beneficial Owner Before Offering After Offering
- ------------------------ ---------------------------------------
<S> <C> <C> <C>
David Brous, Jr. 48,000,000 60% 48%
Jonathan F. Morgenstern 32,000,000 40% 32%
</TABLE>
- --------------------
(1) Does not give effect to (a) the potential issuance by BonusBoulvard to
InfoStream of certain warrants to purchase Class B shares that are issuable
to InfoStream upon completion by InfoStream of certain work to be performed
under the InfoStream Agreement and (b) the issuance of certain warrants to
purchase Class B shares issued to Brown Raysman Millstein Felder & Steiner
LLP as compensation for certain legal services to be provided by that firm
in connection with this offering.
38
<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue up to 25,000,000 shares of Class A
redeemable, convertible common stock, par value $.0001 per share, 275,000,000
shares of Class B common stock, par value $.0001 per share, and 150,000,000
shares of preferred stock, par value $.0001 per share. The following summary of
certain provisions of our common and preferred stock 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 and restated, and our by-laws, which
are included as exhibits to our registration statement.
CLASS A COMMON STOCK
As of June 29, 1999, there were no shares of Class A common stock
outstanding.
Voting Rights. The holders of Class A shares are entitled to one vote
for each share held of record on all matters submitted to a vote of our
shareholders. Holders of Class A shares are not entitled to cumulative voting
rights with respect to the election of directors.
Dividends. Subject to preferences that may be applicable to any shares
of preferred stock issued and outstanding in the future, holders of our Class A
shares are entitled to receive ratably such dividends as may be declared from
time to time by our board of directors out of funds legally available for
payment.
Liquidation. In the event of our liquidation, dissolution or winding
up, holders of our Class A shares are entitled to share ratably in all of our
assets remaining after payment of liabilities and subject to any preferences
that may be applicable to any shares of preferred stock then issued and
outstanding.
Preemptive and Other Rights. Holders of Class A shares have no
preemptive or other subscription or conversion rights. All Class A shares
outstanding upon completion of this offering will by fully paid and
non-assessable, subject to the provisions of Section 630 of the Business
Corporation Law of New York. Under this Section, our ten largest shareholders
will be personally liable for unpaid wages and debts to our employees if our
capital stock is not listed on a national securities exchange or an affiliated
securities association. We have agreed to indemnify our ten largest shareholders
in the event they incur personal liability under this provision of New York law.
Lock-Up and Redemption. Any Class A shares that you receive in the
offering will be subject to a lock-up for a period of three years. During this
period, you may not, directly or indirectly, sell, transfer, offer, pledge,
grant any option to purchase or otherwise dispose of your Class A shares. The
three-year lock-up period begins on the effective date of our registration
statement and expires three years following this effective date. The lock-up
period could terminate earlier under the following circumstances: The period
will terminate (1) on the date on which we list our Class B shares either on any
national securities exchange or on NASDAQ; or (2) on the date on which we elect
to redeem any Class A shares, after a liquidity event has occurred. If we redeem
some, but not all, of the Class A shares, the lock-up period will expire only as
to the Class A shares that we redeem. Liquidity events are:
a sale of all or substantially all of our assets;
our merger into another entity other than a merger undertaken for the
purposes of changing the state of our incorporation;
39
<PAGE>
the listing of any class of our common stock on a stock exchange; or
our obtaining outside funding, whether privately or through a public
offering of securities, in the minimum amount of $500,000.
We will have the option, when a liquidity event occurs, to redeem all or any
portion of the Class A shares at a price per share based upon the total
consideration payable in connection with the liquidity event as follows:
If the liquidity event is a sale of all or substantially all of our
assets, the redemption price will be determined by dividing the net
purchase price for the sale of the assets by the total number of
shares of common stock of all classes outstanding on the date of such
sale.
If the liquidity event is our merger into another entity, the
redemption price will be the per share purchase price paid to our
shareholders in the merger.
If the liquidity event is the listing of our common stock on a stock
exchange, the redemption price will be the price per share of our
common stock on the date of such listing.
If the liquidity event is an outside funding, the redemption price
will be determined by dividing the aggregate proceeds received by us
in such funding by the total number of shares of common stock of all
classes outstanding on the date of such sale.
In the event that we redeem some but not all of the Class A shares, we
will redeem shares from each Class A shareholder on a pro rata basis. If we
elect to redeem your shares, we will pay you cash in the amount of the
redemption price for each Class A share redeemed by us from you at the time of
such redemption. If we do not elect to redeem all of your Class A shares upon
the occurrence of a liquidity event, we may elect to redeem any remaining
portion of your Class A shares upon the occurrence of one or more additional
liquidity events up until the expiration of the three-year lock-up period. If we
have not redeemed all of your Class A shares upon expiration of the lock up
period, the restrictions on the transferability of your shares set forth above
will expire. All members who register at our web site will be required to
acknowledge, upon registration, that they accept and agree to the lock-up and
redemption provisions applicable to their Class A shares.
We will give notice of any redemption of Class A shares by e-mail not
less than 30 days prior to the applicable date of redemption, to each holder of
record of Class A shares at the close of business on the day before the date of
the redemption notice at the e-mail address last provided to us by the holder.
The redemption notice will specify the percentage and number of Class A shares
to be redeemed, the date fixed for redemption, the redemption price per share
and the address to which payment of the redemption price will be mailed. When we
give a redemption notice, we will be required to redeem the Class A shares
covered by the notice on the date for redemption stated in the notice. If we
redeem less than all outstanding Class A shares, we will redeem a set percentage
of shares from each holder determined by resolution of our board of directors.
At any time on or after a redemption date, holders of record of Class A shares
will be entitled to receive the redemption price per share upon cancellation of
their shares on our book-entry share register. If less than all outstanding
Class A shares are redeemed, the number of Class A shares of each holder will be
reduced to reflect the number of Class A shares held of record by that holder
after we redeem shares. All Class A shares redeemed by us will become authorized
but unissued Class A shares.
40
<PAGE>
If we have not previously redeemed all Class A shares and we list our
Class B shares on any national securities exchange or on NASDAQ, each Class A
share will be (i) automatically converted into one Class B share and (ii) listed
on that exchange. As a result, you will have shares that are listed for trading.
CLASS B COMMON STOCK
As of June 29, 1999, there were 80,000,000 shares of Class B common
stock outstanding. All of these shares were held of record by our two executive
officers. We will also issue Class B shares to InfoStream upon the occurrence of
certain events, as described more fully elsewhere in this prospectus. We also
have reserved 150,000,000 Class B shares for issuance upon conversion of our
preferred stock in the event that any shares of preferred stock are issued in
the future.
Voting Rights. The holders of Class B shares are entitled to one vote
for each share held of record on all matters submitted to a vote of our
shareholders. Holders of Class B shares are not entitled to cumulative voting
rights with respect to the election of directors.
Dividends. Subject to preferences that may be applicable to any shares
of preferred stock issued in the future, holders of Class B shares are entitled
to receive ratably such dividends as may be declared from time to time by our
board of directors out of funds legally available for payment.
Liquidation. In the event of our liquidation, dissolution or winding
up, holders of both our Class A shares and our Class B shares are entitled to
share ratably in all of our assets remaining after payment of liabilities,
subject to any preferences applicable to any shares of preferred stock then
issued and outstanding.
Preemptive and Other Rights. Holders of Class B shares have no
preemptive or other subscription or conversion rights.
PREFERRED STOCK
We are authorized to issue up to 150,000,000 shares of preferred stock,
par value $.0001 per share. Our certificate of incorporation, as restated,
grants us the authority to issue, from time to time, any class or series of
preferred shares. Our board of directors has the authority, under our
certificate of incorporation, to establish and designate any series of preferred
shares and to fix the number of shares included in each such series.
Accordingly, our board has the discretion, without shareholder approval,
including your approval as a holder of Class A shares, to issue preferred stock
with dividend, liquidation, conversion, voting or other rights that could
negatively affect the liquidation, dividend and other rights applicable to your
Class A shares. In the event shares of our preferred stock are issued, these
shares could be used, under certain circumstances, as a way to discourage, delay
or prevent a change in control which, in turn, could discourage bids for our
shares and prevent shareholders from receiving the maximum value for their
shares as well as the variations in the relative rights, preferences, and
limitations as between series, subject to certain limitations. No shares of
preferred stock are issued and outstanding and no series of preferred stock
has been designated.
41
<PAGE>
TRANSFER AGENT AND REGISTRAR
We currently act as our own transfer agent and registrar for our common
stock. Our address is 55 West 19th Street, 4th Floor, New York, New York 10011
and our telephone number is (212) 414-2115. Record ownership of shares shall be
made by bookkeeping entry only. A member will receive confirmation of ownership
in our uncertificated securities by e-mail.
PLAN OF DISTRIBUTION
The securities are being offered by us through our web site. No selling
discounts, commissions or other form of remuneration will be paid in connection
with the offering. We intend to engage the services of a registered
broker/dealer in each state that requires that a registered broker or dealer act
on behalf of a company selling its own securities in that state.
The 20,000,000 Class A shares offered in this offering will be
distributed in the offering for a deemed consideration of $.0001 per share. We
will distribute one Class A share to each of the first 1,000,000 members of our
online shopping mall. We will also distribute 1,000,000 Class A shares to
members based upon their referrals of new members to our web site. Each time a
new member lists an existing member as the referring party in the new member's
registration at our web site, we will distribute one share to the referring
member.
Another 4,000,000 Class A shares will be distributed in lots of 20
shares each to the first 200,000 members who make a purchase of any amount
through our online shopping mall. In order to give effect to any requested
refunds prior to awarding shares as rewards for purchases, these 4,000,000
shares will not be distributed until 45 days after the purchase of merchandise
through our web site. In addition, up to 12,500,000 Class A shares will be
distributed to our members as rewards for making certain minimum purchases
through our web site and thereby accruing BBBucks, as follows: Each of the first
100,000 members to accrue $10 in BBBucks will receive 100 shares. Each of the
first 5,000 members to accrue $25 in BBBucks will receive 500 shares. In order
to give effect to any requested refunds prior to awarding shares as rewards for
purchases, these 12,500,000 shares will not be distributed until the relevant
members' accrued BBBucks have equaled or exceeded the preset levels for a period
of at least 45 consecutive days.
We will also distribute up to 500,000 Class A shares to our members at
no cost as prizes in a series of sweepstakes promotional events. The first such
sweepstakes contest will take place immediately after we have registered
1,000,000 members of our online shopping mall. When we reach this milestone, we
will distribute 250,000 Class A shares to certain of our members at no cost as
follows:
100,000 Class A shares will be awarded to one member who is selected
at random as the "grand prize" winner of our sweepstakes contest;
10,000 Class A shares will be awarded to each of 10 members who are
selected at random as the "runner up" winners of our sweepstakes
contest; and
1,000 Class A shares will be awarded to each of 50 members who are
selected at random as the "second-place runner up" winners of our
sweepstakes contest.
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<PAGE>
Beginning one month after the conclusion of the first sweepstakes
contest, we will conduct monthly sweepstakes contests for 10 months. In each
monthly contest, we will distribute 25,000 Class A shares to certain of our
members at no cost as follows:
10,000 Class A shares will be awarded to one member who is selected
at random as the "grand prize" winner of that monthly sweepstakes
contest; and
1,000 Class A shares will be awarded to each of 15 members who are
selected at random as the "runner up" winners of that sweepstakes
contest.
In addition, we will distribute up to 500,000 shares in lots of 1,000
shares to up to 500 members chosen by us to assist us in testing our web site.
These members will be selected by us to participate in a survey and to otherwise
assist us in testing the functionality of our web site. We will also distribute
up to 500,000 shares in lots of 5 shares to the first 100,000 members, on a
first come, first served basis, who complete a survey questionnaire at our web
site.
We plan to publish the final prospectus, as included in the
registration statement when it becomes effective, on the Internet at our web
site, www.BonusBlvd.com. We will only offer the Class A shares included in this
offering to those members who consent to electronic delivery of our final
prospectus in this manner.
The Class A shares will not be represented by share certificates. We
will record ownership of shares by bookkeeping entries only. Each member owning
shares will receive confirmation of ownership of our uncertificated securities
by e-mail. Information about share ownership will also appear in each member's
account, which will be accessible from our web site. We will only offer the
Class A shares included in this offering to those members who consent, to the
extent permitted by applicable law, to electronic delivery of all communications
between our company and its shareholders, including any redemption notice or
other communications in connection with any redemption of the Class A shares.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. The Class A shares to be distributed in this offering are subject to a
lock-up for a period which begins on the effective date of our registration
statement and expires three years after the effective date or on any earlier
date on which we redeem the Class A shares following the occurrence of a
liquidity event. The lock-up and our right to redeem the Class A shares are more
fully described elsewhere in this prospectus. During the lock-up period, you
will not be able, directly or indirectly, to offer, sell, transfer, pledge,
grant any option to purchase or otherwise dispose of your Class A shares. We do
not currently intend to list the Class A shares or any other BonusBoulevard
securities on any stock exchange. Accordingly, there will be no trading market
for the Class A shares during the lock-up period, and we cannot assure you that
an active trading market will develop for these securities, or if developed, be
sustained, after the lock-up period expires.
Upon completion of this offering, we will have 20,000,000 Class A
shares outstanding. The shares, if not redeemed by us, could be available for
resale immediately upon the expiration of the lock-up period described above. At
that time, the Class A shares will be freely transferable without restriction
under the Securities Act of 1933, except for any shares held by an "affiliate"
of BonusBoulevard (as the term affiliate is defined by the rules and regulations
issued under the Securities Act), which will be subject to the resale
limitations of Rule 144 promulgated under the Securities Act.
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<PAGE>
DISCLOSURE OF COMMISSION POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Under Sections 721 through 725 of the Business Corporation Law of New York
("NYBCL"), we have broad powers to indemnify our directors, officers and other
employees. These sections (1) provide that the provisions of the NYBCL regarding
statutory indemnification and advancement of expenses are not exclusive,
provided that no indemnification may be made to or on behalf of any director or
officer if a judgment or other final adjudication adverse to the director or
officer establishes that his acts were committed in bad faith or were the result
of active and deliberate dishonesty and were material to the cause of action as
adjudicated, or that he in fact personally gained a financial profit or other
advantage to which he was not legally entitled, (2) establish procedures for
indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the shareholders or directors of an
agreement providing for indemnification and advancement of expenses, (3) apply a
single standard for statutory indemnification for third-party and derivative
suits by providing that indemnification is available if the director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation, and, in criminal actions, had no reasonable
cause to believe that his conduct was unlawful, and (4) permit the advancement
of litigation expenses upon receipt of an undertaking from the director or
officer to repay such advance if the director or officer is ultimately
determined not to be entitled to indemnification or to the extent the expenses
advanced exceed the indemnification to which the director or officer is
entitled. Section 726 of the NYBCL permits the purchase of insurance to
indemnify a corporation or its officers and directors to the extent permitted.
As permitted by Section 721 of the NYBCL, our by-laws provide that we will
indemnify our officers and directors, as such, to the fullest extent permitted
by applicable law and that expenses reasonably incurred by any of our officers
or directors in connection with a threatened or actual action or proceeding will
be advanced or promptly reimbursed by us in advance of the final disposition of
such action or proceeding upon receipt by us of an undertaking by or on behalf
of such officer or director to repay such amount if and to the extent that it is
ultimately determined that such officer or director is not entitled to
indemnification.
Article SIXTH of our certificate of incorporation provides that (a) we
will, to the fullest extent permitted by Article 7 of the NYBCL, indemnify any
and all persons whom we have the power to indemnify under Article 7 of the NYBCL
from and against any and all of the expenses, liabilities, or other matters
referred to in or covered by Article 7 of the NYBCL and (b) the indemnification
provided for in Article SIXTH of our certificate of incorporation will not be
deemed exclusive of any other rights to which any person may be entitled under
any by-law, resolution of shareholders, resolution of directors, agreement, or
otherwise, as permitted by Article 7 of the NYBCL, as to action in any capacity
in which such person served at our request.
Article SEVENTH of our certificate of incorporation also provides that
the personal liability of our directors is eliminated to the fullest extent
permitted by the provisions of paragraph (b) of Section 402 of the NYBCL.
Section 402(b) of the NYBCL provides that a corporation's certificate of
incorporation may set forth a provision eliminating or limiting the personal
liability of directors to the corporation or its shareholders for damages for
any breach of duty in such capacity; provided that no such provision may
eliminate or limit: (i) the liability of any director if a judgment or other
final adjudication adverse to him establishes that his acts or omissions were in
bad faith or involved intentional misconduct or a knowing violation of law or
that he personally gained in fact a financial profit or other advantage to which
he was not legally entitled or that his acts violated Section 719 of the
44
<PAGE>
NYBCL, or (ii) the liability of any director for any act or omission prior to
the adoption of the relevant provision in the corporation's certificate of
incorporation.
We may also purchase and maintain insurance for the benefit of any
director or officer which may cover claims for which we could not indemnify such
person.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons pursuant to
the foregoing provisions or otherwise, we have been advised that in the opinion
of the SEC such indemnification is against public policy and is, therefore,
unenforceable.
LEGAL MATTERS
The legality of the common stock offered hereby will be passed upon for
BonusBoulevard by Brown Raysman Millstein Felder & Steiner LLP, New York, New
York.
EXPERTS
The financial statements of BonusBoulevard for the period from February
1, 1999 to June 29, 1999 included in this prospectus and registration statement
have been audited by Berenson & Company LLP, independent auditors, as stated in
their report appearing herein and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
45
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report.................................................F-2
Balance Sheet................................................................F-3
Statement of Operations......................................................F-4
Statement of Stockholders' Equity............................................F-5
Statement of Cash Flows......................................................F-6
Notes to Financial Statements ...............................................F-7
</TABLE>
F-1
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
FINANCIAL STATEMENTS
JUNE 29, 1999
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
TABLE OF CONTENTS
FOR THE PERIOD FROM FEBRUARY 1, 1999 (INCEPTION)
THROUGH JUNE 29, 1999
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7-F-10
</TABLE>
<PAGE>
[LETTERHEAD OF BERENSON & COMPANY LLP]
INDEPENDENT AUDITORS' REPORT
Board of Directors
BonusBoulevard, Inc.
New York, NY
We have audited the accompanying balance sheet of BonusBoulevard, Inc. (a
company in the development stage) as of June 29, 1999 and the related statements
of operations, stockholder's equity and cash flows for the period from February
1, 1999 (inception) through June 29, 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 BonusBoulevard, Inc. as of June
29, 1999 and the results of its operations and its cash flows for the period
then ended in conformity with generally accepted accounting principles.
New York, NY
September 2, 1999
F-2
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
BALANCE SHEET
JUNE 29, 1999
<TABLE>
<S> <C>
A S S E T S
Current assets:
Cash $ 100
Prepaid expenses 992
--------
Total current assets 1,092
Deferred offering costs (note 5) 50,000
Computer software costs (note 6) 15,000
Computer hardware 5,952
--------
Total assets $ 72,044
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 45,000
--------
Commitment (note 7)
Stockholders' equity:
Preferred stock, $.0001 par value, 150,000,000
shares authorized; none issued and outstanding -
Common stock, Class A, $.0001 par value, 25,000,000
shares authorized; none issued and outstanding -
Common stock, Class B, $.0001 par value, 275,000,000
shares authorized; 80,000,000 shares issued and outstanding 8,000
Additional paid-in capital 28,739
Deficit accumulated during development stage (9,695)
--------
27,044
--------
$ 72,044
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 1, 1999 (INCEPTION)
THROUGH JUNE 29, 1999
<TABLE>
<S> <C>
Costs and expenses:
General and administrative $ 8,342
Selling 1,353
-------
Net loss $(9,695)
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 1, 1999 (INCEPTION)
THROUGH JUNE 29, 1999
<TABLE>
<CAPTION>
Accumulated
Common stock, Common stock, deficit
Preferred stock Class A Class B Additional during
--------------- -------------- ------------------- paid-in development
Shares Amount Shares Amount Shares Amount capital stage Total
------ ------ ------ ------ ------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception, February 1, 1999 -- $ -- -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock
on June 10, 1999 -- -- -- -- 80,000,000 8,000 28,739 -- 36,739
Net loss -- -- -- -- -- -- -- (9,695) (9,695)
---- ---- ---- ---- ---------- ------- --------- --------- --------
Balance, June 29, 1999 -- $ -- -- $ -- 80,000,000 $ 8,000 $ 28,739 $ (9,695) $ 27,044
==== ==== ==== ==== ========== ======= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 1, 1999 (INCEPTION)
THROUGH JUNE 29, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (9,695)
Adjustments to reconcile net loss to
net cash used from operating activities:
Change in assets and liabilities:
Prepaid expenses (992)
-------
Net cash used by operating activities (10,687)
-------
Cash flows used by investing activities:
Capital expenditures (20,952)
-------
Cash flows from financing activities:
Issuance of common stock 36,739
Deferred offering costs (5,000)
-------
Net cash provided by financing activities 31,739
-------
Net increase in cash 100
Cash, beginning of period -
-------
Cash, end of period $ 100
=======
Supplemental disclosure of noncash financing activity:
The Company has incurred $50,000 of deferred offering costs as
of June 29, 1999, of which $45,000 has not been paid for.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 1999
1. Nature of business:
BonusBoulevard is developing an Internet-based shopping mall, through which
web users that register as members, will be able to make purchases from a
selected group of online retailers. These members will be entitled to earn
rewards on all purchases made. BonusBoulevard will earn commissions from
the retailers on these purchases. For financial reporting purposes, the
Company intends to report on a calendar year basis.
2. Development stage enterprise:
BonusBoulevard is in the development stage as its operations principally
involve the building of its website infrastructure, market analysis and
other business planning activities. No revenue has been generated. Since
the Company is in the development stage, the accompanying financial
statements should not be regarded as typical for normal operating periods.
3. Initial public offering:
BonusBoulevard is in the process of filing a Registration Statement with
the Securities and Exchange Commission for a proposed initial public
offering ("IPO") of common stock. In its proposed IPO, BonusBoulevard
plans to issue shares of its Class A common stock to new members of its
online shopping mall. BonusBoulevard is proposing to issue all 20,000,000
shares for no cash consideration. Offering costs are estimated to be
approximately $90,000.
4. Significant accounting policies:
a. Issuance of Class A shares:
BonusBoulevard will issue its Class A shares for no cash
consideration. These shares will be issued when an individual becomes
a member; a member makes a referral of a new member; a member earns a
reward for dollars spent in the shopping mall; and when a member
completes a survey for the benefit of the Company. As these shares are
issued, the Company will record a charge to earnings as promotional
expense and record a corresponding credit to stockholders' equity.
F-7
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 1999
4. Significant accounting policies (Continued):
b. Revenue and consumer rebate recognition:
BonusBoulevard will earn and record revenue when a consumer makes a
purchase through the Company's online shopping mall. Simultaneous with
this transaction, the Company will record a charge to income by
accruing the applicable rebate owed to the consumer.
c. Cash:
BonusBoulevard maintains its cash accounts in one commercial bank. The
balance is insured by the Federal Deposit Insurance Corporation (FDIC)
up to $100,000.
d. Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from these estimates.
e. Property and equipment:
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to operations in the period
incurred.
f. Start-up costs:
BonusBoulevard has adopted Statement of Position No. 98-5, requiring
companies to expense all start-up related expenses when incurred.
Start-up expenses incurred for the period ended June 29, 1999 were
$9,695.
F-8
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 1999
4. Significant accounting policies (Continued):
g. Software development costs:
BonusBoulevard has adopted Statement of Position 98-1 with regard to
the accounting for the costs of developing computer software for
internal use. Only costs incurred subsequent to the preliminary
project stage are to be capitalized.
h. Advertising:
BonusBoulevard expenses advertising costs when incurred. There were no
advertising expenses incurred for the period ended June 29, 1999.
5. Deferred offering costs:
Deferred offering costs represent costs incurred as of the balance sheet
date, as it relates to the proposed initial public offering.
6. Computer software costs:
Computer software costs consist of the ongoing construction of
BonusBoulevard's web site. BonusBoulevard has incurred no amortization
expense for the period ended June 29, 1999.
7. Commitment:
BonusBoulevard is obligated under an agreement for the construction and
design of its shopping mall web site. The total cost is expected to be
$105,000, of which $15,000 has been paid as of the balance sheet date. The
remaining amount is payable partially in cash and partially through the
issuance of BonusBoulevard's common stock and warrants.
F-9
<PAGE>
BONUSBOULEVARD, INC.
(a Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 1999
8. Subsequent events:
On June 30, 1999, BonusBoulevard amended its certificate of incorporation
to increase the number of common shares authorized from 100,000,000 shares
to 275,000,000 shares, and to authorize 150,000,000 shares of preferred
stock (previously unauthorized). On July 2, 1999, BonusBoulevard amended
and restated its certificate of incorporation to designate the shares of
common stock as Class A non-voting redeemable, convertible shares and Class
B voting shares, and to authorize an additional 25,000,000 shares of
common stock. All Class A shares are redeemable at the option of the
Company. BonusBoulevard intends to amend and restate its certificate of
incorporation to give the Class A shares voting rights. The redemption
price is based upon the market value of the Company at the time of a
liquidity event (as defined). These events are reflected retroactively in
the accompanying financial statements.
F-10
<PAGE>
- --------------------------------------------------------------------------------
You should rely on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. We are offering shares of common stock only in jurisdictions
where the offering is permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the common stock.
----------------------
20,000,000 SHARES
BONUSBOULEVARD, INC.
CLASS A REDEEMABLE CONVERTIBLE
COMMON STOCK
------------------
PROSPECTUS
------------------
______________ , 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Sections 721 through 725 of the Business Corporation Law of New York
("NYBCL"), we have broad powers to indemnify our directors, officers and other
employees. These sections (1) provide that the provisions of the NYBCL regarding
statutory indemnification and advancement of expenses are not exclusive,
provided that no indemnification may be made to or on behalf of any director or
officer if a judgment or other final adjudication adverse to the director or
officer establishes that his acts were committed in bad faith or were the result
of active and deliberate dishonesty and were material to the cause of action as
adjudicated, or that he in fact personally gained a financial profit or other
advantage to which he was not legally entitled, (2) establish procedures for
indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the shareholders or directors of an
agreement providing for indemnification and advancement of expenses, (3) apply a
single standard for statutory indemnification for third-party and derivative
suits by providing that indemnification is available if the director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation, and, in criminal actions, had no reasonable
cause to believe that his conduct was unlawful, and (4) permit the advancement
of litigation expenses upon receipt of an undertaking from the director or
officer to repay such advance if the director or officer is ultimately
determined not to be entitled to indemnification or to the extent the expenses
advanced exceed the indemnification to which the director or officer is
entitled. Section 726 of the NYBCL permits the purchase of insurance to
indemnify a corporation or its officers and directors to the extent permitted.
As permitted by Section 721 of the NYBCL, our by-laws, provide that we will
indemnify our officers and directors, as such, to the fullest extent permitted
by applicable law and that expenses reasonably incurred by any of our officers
or directors in connection with a threatened or actual action or proceeding will
be advanced or promptly reimbursed by us in advance of the final disposition of
such action or proceeding upon receipt by us of an undertaking by or on behalf
of such officer or director to repay such amount if and to the extent that it is
ultimately determined that such officer or director is not entitled to
indemnification.
Article SIXTH of our certificate of incorporation provides that (a) we
will, to the fullest extent permitted by Article 7 of the NYBCL, indemnify any
and all persons whom we have the power to indemnify under Article 7 of the NYBCL
from and against any and all of the expenses, liabilities, or other matters
referred to in or covered by Article 7 of the NYBCL and (b) the indemnification
provided for in Article SIXTH of our certificate of incorporation will not be
deemed exclusive of any other rights to which any person may be entitled under
any by-law, resolution of shareholders, resolution of directors, agreement, or
otherwise, as permitted by Article 7 of the NYBCL, as to action in any capacity
in which such person served at our request.
Article SEVENTH of our certificate of incorporation also provides that the
personal liability of our directors is eliminated to the fullest extent
permitted by the provisions of paragraph (b) of Section 402 of the NYBCL.
Section 402(b) of the NYBCL provides that a corporation's certificate of
incorporation may set forth a provision eliminating or limiting the personal
liability of directors to the corporation or its shareholders for damages for
any breach of duty in such capacity; provided that no such provision may
eliminate or limit: (i) the liability of any director if a judgment or other
final
II-1
<PAGE>
adjudication adverse to him establishes that his acts or omissions were in
bad faith or involved intentional misconduct or a knowing violation of law or
that he personally gained in fact a financial profit or other advantage to which
he was not legally entitled or that his acts violated Section 719 of the NYBCL,
or (ii) the liability of any director for any act or omission prior to the
adoption of the relevant provision in the corporation's certificate of
incorporation.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses (other than
underwriting discounts and commissions) payable by the Registrant in connection
with the issuance and distribution of the securities being registered. Except
for the SEC filing fees, all expenses have been estimated and are subject to
future contingencies.
<TABLE>
<S> <C>
SEC registration fee.......................................$184.60
Legal fees and expenses..................................50,000.00
Printing and engraving expenses...........................8,000.00
Accounting fees and expenses.............................10,000.00
Blue sky fees and expenses...............................20,000.00
Transfer agent registration fees and expenses.............1,000.00
Miscellaneous Expenses....................................1,000.00
Total..................................................$ 90,184.60
===========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
BonusBoulevard, Inc. was incorporated in the State of New York on June 10,
1999. Upon incorporation, Mr. Brous and Mr. Morgenstern, our two directors and
executive officers, were issued 48,000,000 and 32,000,000 shares, respectively,
of our Class B common stock at a price of $.00046 per share.
The foregoing transaction was a transaction not involving a public offering
and was exempt from the registration provisions of the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to Section 4(2) thereof. The
securities were sold pursuant to Regulation D, and the certificates evidencing
the Class B shares bear a restrictive legend permitting the transfer thereof
only upon registration of the securities or an exemption under the Securities
Act.
ITEM 27. EXHIBITS
3.1* Certificate of Incorporation of the Registrant (including
all amendments)
3.2* By-Laws of the Registrant
5* Opinion of Brown Raysman Millstein Felder & Steiner LLP with
respect to legality of the securities of the Registrant being registered
10.1 Shareholders' Agreement dated as of August 31, 1999 by and
among BonusBoulevard, Inc., David Brous, Jr. and Jonathan F. Morgenstern.
10.2* BonusBoulevard Web Site Development and Services Agreement
dated as of August ___, 1999 by and between BonusBoulevard, Inc. and InfoStream
Solutions LLC.
II-2
<PAGE>
23.1 Consent of Berenson & Company LLP
23.2* Consent of Brown Raysman Millstein Felder & Steiner LLP
(contained in opinion to be filed as Exhibit 5)
24.1 Power of Attorney (set forth on page II-5 of initial filing)
- ---------------------------
* To be filed by amendment
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(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 thereto) which, individually or
together, represent a fundamental change in the information set
forth in the Registration Statement; and
(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.
(2) That, for purposes of determining liability under the Securities Act,
Registrant will treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the securities at that
time to be the initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act, the
Registrant will treat 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 under Rule 424(b)(1), or (4), or
497(h) under the Securities Act as part of this registration statement as of the
time the Commission declares it effective.
(5) For purposes of determining any liability under the Securities Act,
Registrant will treat each post-effective amendment that contains a form of
prospectus as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering
thereof.
(6) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
II-3
<PAGE>
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer of 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 Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Registration
Statement or Amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York on the 2nd
day of September, 1999.
BonusBoulevard, Inc.
By: /s/ David Brous, Jr.
--------------------------------
David Brous, Jr.,
Chief Executive Officer
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1* Certificate of Incorporation of the Registrant (including all
amendments)
3.2* By-Laws of the Registrant
5* Opinion of Brown Raysman Millstein Felder & Steiner LLP with
respect to legality of the securities of the Registrant being
registered
10.1 Shareholders' Agreement dated as of August 31, 1999 by and among
BonusBoulevard, Inc., David Brous, Jr. and Jonathan F.
Morgenstern.
10.2* BonusBoulevard Web Site Development and Services Agreement dated
as of August ___, 1999 by and between BonusBoulevard, Inc. and
InfoStream Solutions LLC.
23.1 Consent of Berenson & Company LLP
23.2* Consent of Brown Raysman Millstein Felder & Steiner LLP
(contained in opinion to be filed as Exhibit 5)
24.1 Power of Attorney (set forth on p. II-5 of initial filing)
</TABLE>
- ---------------
* To be filed by amendment
II-6
<PAGE>
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, made as of this 31st day of August, 1999
(this "Agreement"), by and among BONUSBOULEVARD, INC., a New York corporation
with offices at 55 West 19th Street, 4th Floor, New York, New York 10011 (the
"Corporation"), DAVID BROUS, JR., residing at 336 West End Avenue, Apartment
#7D, New York, New York 10023 ("Brous"), JONATHAN F. MORGENSTERN, residing at 28
Hansen Court, Narbeth, Pennsylvania 19072 ("Morgenstern")(Brous and Morgenstern
being herein collectively referred to as the "Shareholders" and individually as
a "Shareholder").
WHEREAS, the Corporation is authorized to issue up to 275,000,000
shares of Class B Common Stock, par value $.0001 per share (the "Common Stock"),
80,000,000 shares of which are currently issued and outstanding;
WHEREAS, the Shareholders own all of the issued and outstanding shares
of the Class B Common Stock of the Corporation, in the amounts set forth on
Exhibit A annexed hereto; and
WHEREAS, the Shareholders and the Corporation desire to regulate the
management of the Corporation, the transfer of the shares of Common Stock now
owned or hereafter acquired by the Shareholders (such shares being hereinafter
referred to as the "Shares"), the purchase by the Corporation and/or the
Shareholders of the Shares in certain circumstances and certain other matters
relating to the Corporation, all in accordance with the terms and subject to the
conditions of this Agreement.
In consideration of the mutual promises and covenants set forth
herein, the parties hereto hereby agree as follows:
1. Representations of the Shareholders.
Each Shareholder represents to and agrees with the other Shareholders
and the Corporation that such Shareholder is the legal holder and beneficial
owner of the Shares currently owned by such Shareholder, that such Shares and
the Shares hereafter acquired by such Shareholder will be owned free and clear
of all liens, claims, charges, options and encumbrances other than restrictions
on transfer under this Agreement, and applicable federal and state securities
laws, and that such Shareholder will have the right to transfer such Shares upon
the terms and subject to the conditions of this Agreement.
2. Corporate Governance and Related Matters.
Each Shareholder hereby agrees, during the term of this Agreement, to
vote the Shares owned by such Shareholder in the following manner:
<PAGE>
(a) each of the Shareholders shall vote such Shareholder's Shares so
as to elect Brous and Morgenstern as directors of the Corporation. In the event
either Brous or Morgenstern shall be unable or unwilling to serve as a director
of the Corporation or the size of the Board is increased, the Shareholders shall
vote all of their Shares so as to elect such replacement or additional nominees
as the party who is unable to serve shall designate.
(b) each Shareholder shall vote such Shareholder's Shares in favor of
any amendment of the Certificate of Incorporation or By-laws of the Corporation
necessary to permit, effect and further carry out the transactions contemplated
hereby. In addition, Morgenstern agrees to vote his Shares as Brous shall
designate in connection with any other corporate action for which shareholder
approval is sought or required.
3. Restriction on Transfer of Shares.
(a) The Corporation and the Shareholders wish to avoid the transfer of
Shares to outside third parties who do not have a knowledge of the Corporation's
business and who may disrupt the management of the Corporation. Each Shareholder
hereby agrees that such Shareholder shall not, as long as this Agreement is in
effect, directly or indirectly sell, assign, mortgage, hypothecate, transfer,
pledge, lien, encumber, give or in any way otherwise dispose of (collectively, a
"Transfer") any of the Shares (or any interest therein) except as may be
expressly permitted by this Agreement. The Corporation shall not transfer on its
books any certificates for the Shares nor issue any certificate in lieu of the
Shares unless, in the opinion of counsel to the Corporation, there has been
compliance with all of the material conditions hereof affecting the Shares. Any
purported disposition of any Shares made other than in full compliance with the
terms of this Agreement shall be null and void and of no force or effect, and
shall not be recognized by the Corporation.
(b) Notwithstanding the general prohibition on Transfers contained in
Section 3(a) hereof, the Corporation and the Shareholders agree that any of the
following Transfers shall be permitted under this Agreement:
(i) a Transfer to a trust or custodial account for the benefit of
Shareholder or the spouse or children of any Shareholder (the "Trust"),
provided that such Shareholder is trustee of the Trust and retains sole
voting power with respect to the Shares held in trust and such Trust
documents provide for compliance with the provisions of this Agreement;
(ii) a Transfer in accordance with Sections 4, 5 or 6 hereof; or
(iii) a Transfer by Brous or Morgenstern of not more than one
percent (1%) of the Shares owned by them.
2
<PAGE>
(c) Upon the execution of this Agreement, each Shareholder shall
surrender to the Corporation his stock certificate representing the Shares,
which stock certificate shall be imprinted with the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and cannot be
offered or sold except pursuant to an effective registration statement
under such Act or an exemption from registration under such Act which,
in the opinion of counsel for the holder, which counsel and opinion
are reasonably satisfactory to counsel for the corporation, is
available.
The shares represented hereby are also subject to the terms of a
Shareholders' Agreement, dated as of August 31, 1999, by and among
BonusBoulevard Inc., David Brous, Jr., and Jonathan F. Morgenstern, a
copy of which is on file at the principal office of the corporation,
and any sale, pledge, gift, transfer, assignment, encumbrance or other
disposition of the shares represented by this certificate in violation
of said Agreement shall be void and of no effect."
(d) As a further condition of any Transfer pursuant to this Agreement,
each transferee shall, prior to such Transfer, agree in writing to be bound by
all of the provisions of this Agreement and no such transferee shall be
permitted to make any Transfer that the original transferor was not permitted to
make.
4. Right of First Refusal.
(a) In the event that (i) either Shareholder shall receive a bona fide
written offer or enter into an agreement (the "Offer") for the purchase of his
Shares (as hereinafter defined) or (ii) either Shareholder shall receive an
Offer for the purchase of some but not all of the Shares owned by such
Shareholder, in either case from an independent third party (the "Outside
Party"), such Shareholder (the "Offering Shareholder") shall, within three (3)
business days of receipt of the Offer by the Offering Shareholder, give notice
(the "Option Notice") to the Corporation and the other Shareholder (the
"Remaining Shareholder") containing the name and address of the Outside Party
and accompanied by a copy of the Offer or a summary thereof. The Shares subject
to such Offer are referred to herein as the "Offered Shares."
(b) Upon the giving by an Offering Shareholder of an Option Notice,
the Remaining Shareholder shall have the right (the "First Refusal Right") to
purchase, at the price less a discount of 15%, on the terms and subject to the
conditions specified in the Offer, any or all of the Offered Shares covered by
the Option Notice. Within twenty (20) days after the date of the Option Notice,
the Remaining Shareholder shall notify the Offering Shareholder and the
Corporation (the "First Refusal Notice") whether and to what extent the
Remaining Shareholder intends to exercise the First Refusal Right. Failure to
deliver the First Refusal Notice within such period shall constitute a waiver of
the First Refusal Right.
3
<PAGE>
(c) In the event that the Remaining Shareholder does not exercise the
First Refusal Right as to all of the Offered Shares, the Corporation, to the
extent permitted by law, shall have the right (the "Repurchase Right") to
purchase, at the price, on the terms and subject to the conditions specified in
the Offer, all or part of the remaining Offered Shares covered by the Option
Notice. Within thirty (30) days after the date of the Option Notice, the
Corporation shall notify each Shareholder (the "Repurchase Notice") whether and
to what extent it intends to exercise the Repurchase Right. Failure to deliver
the Repurchase Notice within such period shall constitute a waiver of the
Repurchase Right.
(d) Each Offering Shareholder shall have the obligation to sell to the
Remaining Shareholder and/or the Corporation, as the case may be, such Offered
Shares as are covered by the notices referred to in Sections 4(b) and 4(c)
hereof, and the Offering Shareholder may sell the balance of the Offered Shares
(or all of the Offered Shares if no such notices have been given) to the Outside
Party on terms not more favorable to such Outside Party than those contained in
the Offer. In the event that such terms are more favorable or if such sale to
the Outside Party is not consummated within the time period specified in Section
4(e) hereof, the Offered Shares shall again be subject to the restrictions
contained in this Agreement.
(e) The closing for any purchase of Shares by the Remaining
Shareholder and/or the Corporation shall be held at 10:00 a.m. at the offices of
the Corporation on the sixtieth (60th) day after the date of the Option Notice
or at such other time and place as the parties shall agree. The closing of a
purchase of Shares by an Outside Party shall occur within sixty (60) days after
the giving of the Option Notice. At the closing, the Remaining Shareholder, the
Corporation or the Outside Party, as the case may be, shall pay for the Shares
in accordance with the terms of the Offer, the Offering Shareholder shall
deliver certificates representing the Shares free and clear of all liens,
charges and encumbrances (other than those set forth herein or in any
subscription agreement relating to the Shares) and properly endorsed for
transfer and, if such Shares are being purchased by an Outside Party, such
person shall agree to be bound by the terms of this Agreement in accordance with
Section 3(d) hereof.
5. Rights of Inclusion; Rights to Compel Sale.
(a) Rights of Inclusion (Tag Along).
(i) Neither Shareholder shall, in any one transaction or any
series of similar transactions, directly or indirectly sell to any third party
or otherwise dispose of more than fifty percent (50%) of the Shares owned by him
unless the terms and conditions of such sale or other disposition to such third
party shall include an offer to the other Shareholder (the "Tag Along
Shareholder") to include, at the Tag Along Shareholder's option, in the sale or
other disposition to the third party, the Tag Along Shareholder's ratable share
of the Shares covered by such disposition. If either Shareholder receives a bona
fide offer from a third party to purchase or otherwise acquire more than fifty
percent (50%) of the Shares owned by him, such
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<PAGE>
Shareholder shall then cause the third party's offer to be reduced to writing
(which writing shall include an offer to purchase or otherwise acquire Shares
from the Tag Along Shareholder according to the terms and conditions of Section
5(a)(ii) below) and shall send written notice of the third party's offer (the
"Inclusion Notice") to the Tag Along Shareholder. The Inclusion Notice shall be
accompanied by a true and correct copy of the third party's offer. At any time
within thirty (30) days after receipt of the Inclusion Notice, the Tag Along
Shareholder may accept the offer included in the Inclusion Notice for up to his
proportionate share by furnishing written notice of such acceptance to the
selling Shareholder and delivering to the selling Shareholder the certificate or
certificates representing the Shares to be sold or otherwise disposed of
pursuant to such offer by the Tag Along Shareholder (which certificate or
certificates shall be held in escrow pending the consummation of the sale),
together with a limited power-of-attorney authorizing the selling Shareholder to
sell or otherwise dispose of such Shares pursuant to the terms of such third
party's offer.
(ii) The purchase from the Tag Along Shareholder pursuant to this
Section 5(a) shall be on the same terms and conditions, including the per Share
price (which shall in all events be paid directly to the Tag Along Shareholder
by bank cashier's or certified check or by wire transfer of immediately
available funds) and the date of sale or other disposition, as are received by
the selling Shareholder and stated in the Inclusion Notice provided to the Tag
Along Shareholder by the selling Shareholder.
(iii) Simultaneously with the consummation of the sale or other
disposition of the Shares of the selling Shareholder and the Tag Along
Shareholder to the third party pursuant to the third party's offer, the selling
Shareholder shall notify the Tag Along Shareholder of the consummation of the
sale, shall cause the purchaser to remit directly to the Tag Along Shareholder
the total consideration for the Tag Along Shareholder's Shares sold or otherwise
disposed of pursuant thereto and the selling Shareholder shall furnish such
other evidence of the completion and time of completion of such sale or other
disposition and the terms thereof as may be reasonably requested by the Tag
Along Shareholder.
(iv) If within thirty (30) days after the receipt of the Inclusion
Notice, the Tag Along Shareholder has not accepted the offer contained in the
Inclusion Notice, The Tag Along Shareholder shall be deemed to have waived any
and all rights with respect to the sale or other disposition of the Shares
described in the Inclusion Notice and the selling Shareholder shall have sixty
(60) days after receipt of the Inclusion Notice in which to sell or otherwise
dispose of not more than the amount of Shares described in the Inclusion Notice,
on terms not more favorable to the selling Shareholder than were set forth in
the Inclusion Notice. If the sale or disposition is not consummated within sixty
(60) days, the selling Shareholder shall comply with the provisions of this
Section 5(a) for all proposed future sales or dispositions that are described in
Section 5(a)(i). If, at the end of ninety (90) days following the receipt of the
Inclusion Notice, the selling Shareholder has not completed the sale or other
disposition of his Shares and those of The Tag Along Shareholder in accordance
with the terms of the third party's offer, the selling Shareholder shall return
all certificates of The Tag Along Shareholder representing the Shares
5
<PAGE>
which The Tag Along Shareholder delivered for sale or other disposition pursuant
to this Section 5(a), and all the restrictions on sale or other disposition
contained in this Agreement with respect to Shares owned by the selling
Shareholder shall again be in effect.
(b) Rights to Compel Sale (Drag Along).
(i) If Brous proposes to sell all of the Shares then owned by him
to a third party in an arms-length transaction in which the consideration to be
received for such Shares consists of cash and/or marketable securities, then
Brous may require Morgenstern to sell all of the Shares owned by Morgenstern
(the "Designated Shares") to the third party for the same consideration per
Share and otherwise on the same terms and conditions upon which Brous is selling
his Shares pursuant to the provisions set forth below.
(ii) Brous shall send written notice of the exercise of such
rights pursuant to this Section 5(b) to Morgenstern, setting forth the
consideration per Share to be paid by the third party and the other terms and
conditions of such transaction. Within twenty (20) days following the date of
the notice, Morgenstern shall deliver to Brous certificates representing the
Designated Shares held by him duly endorsed, together with all other transfer
documents reasonably required to be executed in connection with such
transaction. In the event that Morgenstern should fail to deliver such
certificates to Brous, the Corporation shall cause the books and records of the
Corporation to show that such Shares are bound by the provisions of this Section
5(b) and that such Shares shall be transferred only to the third party upon
surrender for transfer by the holder thereof.
(iii) If, within ninety (90) days after Brous gives such notice,
the sale of all of Morgenstern's Shares in accordance herewith has not been
completed, Brous shall return to Morgenstern all certificates representing
Shares that Morgenstern delivered for sale, and all the restrictions on sale or
other disposition contained in the Agreement with respect to Shares owned by
Brous shall again be in effect.
(iv) Simultaneously with the consummation of the sale of Shares of
Brous and Morgenstern pursuant to this Section 5(b), Brous shall notify
Morgenstern of the consummation of the sale, shall cause the purchaser to remit
directly to Morgenstern the total consideration for Morgenstern's Shares sold or
otherwise disposed of pursuant thereto and shall furnish such other evidence of
the completion and time of completion of such sale or other disposition and the
terms thereof as may be reasonably requested by Morgenstern.
6. Right to Purchase.
(a) Upon the death of either Shareholder (such deceased Shareholder
being referred to as the "Former Shareholder"), the other Shareholder shall be
obligated to purchase, and the representatives or estate of the Former
Shareholder shall be obligated to sell, fifty percent (50%) of the Shares owned
by such Former Shareholder, or, at the option of the representatives
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<PAGE>
or estate of the Former Shareholder exercised in writing to the purchasing
Shareholder within ninety (90) days of the date of death of the Former
Shareholder, all of the Shares owned by such Former Shareholder for the Section
6 Purchase Price (as hereinafter defined) and in accordance with the procedures
set forth in Section 4 hereof and this Section 6.
(b) Upon the termination of the employment of either Shareholder by
the Corporation for "Cause", as defined in the employment agreement between such
Shareholder and the Corporation as then in effect, (such terminated Shareholder
being referred to as the "Terminated Shareholder"), the other Shareholder shall
have the right, but not the obligation, to purchase, and Terminated Shareholder
shall be obligated to sell, any or all of the Shares owned by such Terminated
Shareholder for the Section 6 Purchase Price, less a discount of 15%, in
accordance with the procedures set forth in Section 4 hereof and this Section 6.
At the option of the purchasing Shareholder payment of the Section 6 Purchase
Price for the Shares purchased pursuant to this Section 6(b) may be made in up
to thirty-six (36) equal monthly installments as determined by the purchasing
Shareholder in his sole discretion, with the first such installment to be paid
at the closing of the purchase of such Shares and the remaining installments to
be paid on the first day of each month thereafter. The obligation to make the
installment payments shall be evidenced by a promissory note bearing interest at
a rate equal to the prime rate of interest set forth in The Wall Street Journal
at the time of issuance and delivery of such promissory note.
(c) In the event that either Shareholder becomes disabled and does not
work for 180 days in any 18 month period, the non-disabled Shareholder shall be
entitled, at his option exercised in writing to the disabled Shareholder within
sixty (60) days of the 180th day of non-work, to purchase, and the disabled
Shareholder shall be obligated to sell, any or all of the Shares owned by such
disabled Shareholder for the Section 6 Purchase Price (as hereinafter defined)
and in accordance with the procedures set forth in Section 4 hereof and this
Section 6. The non-disabled Shareholder shall be entitled to pay the Section 6
Purchase Price to the disabled Shareholder in twelve equal monthly installments
as determined by the purchasing Shareholder in his sole discretion, with the
first such installment to be paid at the closing of the purchase of such Shares
and the remaining installments to be paid on the first day of each month
thereafter. The obligation to make the installment payments shall be evidenced
by a promissory note bearing interest at a rate equal to the prime rate of
interest set forth in The Wall Street Journal at the time of issuance and
delivery of such promissory note.
(d) In the event the other Shareholder does not elect to purchase all
of the Shares owned by the Terminated Shareholder or the disabled Shareholder,
as the case may be, the Corporation shall have the right, but not the
obligation, to purchase, and the Terminated Shareholder or the disabled
Shareholder shall sell, the remaining Shares owned by such Terminated
Shareholder or disabled Shareholder for the Section 6 Purchase Price and in
accordance with the procedures set forth in Section 4(d) hereof and this Section
6. The Corporation shall have the right to pay the Section 6 Purchase Price in
installments as provided in Sections 6(b) and 6(c) with respect to the
purchasing Shareholder.
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<PAGE>
(e) The purchase price for the Shares purchased pursuant to this
Section 6 shall be determined by the Shareholders semi-annually. Such
determination shall be on a basis to be determined by the Shareholders. The
determination shall be recorded as a schedule to be attached hereto and made a
part hereof. If for any reason the Shareholders fail to redetermine the purchase
price for any particular six-month period, the last previously stipulated
purchase price shall control. In the event the purchase price has not been
redetermined for three consecutive six-month periods, then the purchase price
shall be equal to the last stipulated price multiplied by a fraction, the
numerator of which is the net asset value per share as of the close of the most
recent six-month period of the Corporation and the denominator of which is the
net asset value per share as of the close of the six-month period of the
Corporation ending immediately prior to the determination of the last stipulated
purchase price, both as reflected on the Corporation's balance sheet prepared by
the Corporation's then engaged independent certified public accountants prepared
in accordance with generally accepted accounting principles consistently
applied. The Shareholders hereby agree that, in the event that the Corporation
consummates an offering of its equity securities yielding aggregate proceeds to
the Corporation of $500,000 or more, the purchase price for the Shares purchased
pursuant to this Section 6 shall be determined by the Shareholders based upon
the valuation assigned to the Corporation by the investors in such equity
financing. The purchase price for the Common Stock purchased pursuant to this
Section 6 is hereinafter referred to as the "Section 6 Purchase Price."
(f) The closing for any purchase of Shares pursuant to this Section 6
shall be held at 10:00 a.m. at the offices of the Corporation on the ninetieth
(90th) day after the date that the remaining Shareholder and/or the Corporation
notifies the representatives of the Former Shareholder or disabled Shareholder
that he or it is exercising his or its right to purchase the Shares pursuant to
this Section 6 or at such other time and place as the parties shall agree. At
the closing, the purchasing Shareholder or the Corporation shall pay for the
Shares in full and the Former Shareholder or disable Shareholder, as the case
may be, shall deliver certificates representing the Shares free and clear of all
liens, charges and encumbrances and properly endorsed for transfer.
7. Insurance.
Either Shareholder, at his option, may purchase and cause to be
maintained life insurance policies in amounts determined by the Shareholder on
the life of the other Shareholder with the Shareholder purchasing such life
insurance named as owner and beneficiary thereof for the purpose of meeting his
obligations under Section 6 hereof. Either Shareholder may, from time to time,
purchase such additional amounts of insurance as he deems appropriate in light
of increases in the book value of the Common Stock of the Corporation. The
Shareholders shall cooperate in connection with the purchase and maintenance of
any such insurance policy, including without limitation, the submission to any
medical examinations reasonably required to obtain and maintain any such policy.
8. Injunctive Relief; Specific Performance.
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<PAGE>
Each of the Shareholders acknowledges that his interest in the
Agreement is unique to him, that his Shares cannot be readily purchased or sold
in the open market and that the other Shareholder and the Corporation will be
irreparably damaged in the event of a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by either Shareholder which
damages will not be measurable or compensable in money damages unless this
Agreement shall be specifically enforced. In addition to any other remedy to
which the other Shareholder or the Corporation may be entitled, the other
Shareholder or the Corporation shall be entitled to a preliminary and permanent
injunction, without showing any actual damage or threat of irreparable injury,
and/or a decree for specific performance, without any bond or other security
being required in connection therewith, in accordance with the provisions
hereof.
9. Corporate Surplus.
If the Corporation shall not have sufficient surplus to permit it to
lawfully make payment of the purchase price for the Shares purchased by it under
this Agreement, the entire available surplus shall be paid on account, and each
Shareholder or the legal representative of any Shareholder's estate shall
promptly take such measures to vote the respective holdings of Shares owned by
the Shareholder to reduce the capital of the Corporation or to take such other
steps as may be appropriate or necessary in order to enable the Corporation to
lawfully make payment of the purchase price for Shares purchased by it.
10. Shareholder Inspection of Corporate Books
The Corporation shall keep complete and correct books and records of:
shareholder proceedings board and committee meetings; and the names and
addresses of all shareholders, including the number and class of shares held by
each shareholder and the dates when they became owners thereof (collectively
called the "books and records").
Each Shareholder shall have the right to inspect the books and records
of the Corporation upon providing the Corporation or its designated agent with
ten (10) days written notice.
11. Miscellaneous.
(a) Each party hereto acknowledges that it or he has read this
Agreement, understands it, and agrees to be bound by its terms, and further
acknowledges and agrees that it is the complete and exclusive statement of the
agreement and understanding of the parties regarding the subject matter hereof,
which supersedes and merges all prior proposals, agreements and understandings,
oral and written, relating to the subject matter hereof. This Agreement may not
be changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
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<PAGE>
(b) No waiver of any breach or default hereunder shall be considered
valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
(c) If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein. In the event that any provision is declared invalid or unenforceable,
the Shareholders and the Corporation agree to substitute for such invalid or
unenforceable provision a new provision which reflects, to the closest extent
possible, the intent of the parties.
(d) Except as otherwise expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, estates, heirs, legal representatives and permitted
assigns and transferees.
(e) The section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of said
actions.
(f) This Agreement shall be governed by the laws of the State of New
York (without giving effect to principles of conflicts of law). The Shareholders
and the Corporation consent and agree that jurisdiction and venue for all legal
proceedings relating to the subject matter of this Agreement shall lie
exclusively with the appropriate federal or state court sitting within the State
of New York, County of New York.
(g) A copy of this Agreement shall be filed with the Secretary of the
Corporation and kept with the records of the Corporation.
(h) Any notice or other communication to be given hereunder shall be
in writing and delivered personally or sent by certified or registered mail,
postage prepaid, if to the Corporation, addressed to the Corporation at its
then-principal business address, and if to any Shareholder, addressed to him at
his address as it appears in the stock records of the Corporation, or to such
other address as any party may have furnished to the others in writing. Unless
otherwise provided in this Agreement, notice given pursuant to this section
shall be deemed given as of the date of its receipt.
(i) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) All representations, warranties and agreements contained herein
shall survive the execution and delivery of this Agreement.
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(k) This Agreement and the restrictions on transfer set forth herein
shall terminate upon the occurrence of any of the following events: (i)
cessation of the Corporation's business, (ii) bankruptcy, receivership or
dissolution of the Corporation, (iii) the voluntary agreement of all parties who
are bound by the terms hereof or (iv) consummation of a public offering of the
Corporation's Common Stock (other than the public offering described in the
registration statement initially filed with the Securities and Exchange
Commission on July 2, 1999). Upon termination of this Agreement, each
Shareholder shall surrender to the Corporation the certificates for his shares
and the Corporation shall issue to him, her or it, in lieu thereof, new
certificates for an equal number of shares without the second of the two legends
set forth in Section 3(c) hereof.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
BONUSBOULEVARD, INC.
By: /s/ David Brous, Jr.
-----------------------------
David Brous, Jr.
Chairman and
Chief Executive Officer
/s/ David Brous, Jr.
--------------------------------
David Brous, Jr.
/s/ Jonathan F. Morgenstern
--------------------------------
Jonathan F. Morgenstern
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EXHIBIT A
<TABLE>
<CAPTION>
Name of Number of
Shareholder Class of Stock Shares Owned
- ----------- -------------- ------------
<S> <C> <C>
David Brous, Jr. Class B Common Stock 48,000,000
Jonathan F. Morgenstern Class B Common Stock 32,000,000
</TABLE>
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Schedule 6(e)
<TABLE>
<CAPTION>
Date of Determination Stipulated Section 6 Purchase Price
--------------------- -----------------------------------
<S> <C>
Initial Valuation The Shareholders have initially agreed that
their combined equity position in the
Corporation is to be valued at an aggregate
stipulated value of $1,000,000.
</TABLE>
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[LETTERHEAD OF BERENSON & COMPANY LLP]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement, on Form SB-2, of
our report dated September 2, 1999, relating to the financial statements of
BonusBoulevard, Inc., and to the reference to our firm under the caption
"Experts" in the Prospectus.
New York, NY
September 2, 1999
