As filed with the Securities and Exchange Commission on April 20, 2000
Registration No. 333-92223
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 3 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Urban Cool Network, Inc.
(Name of Registrant in its charter)
Delaware 7375 75-2753953
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of incorporation Industrial Classification Identification No.)
or organization) Code Number)
1401 Elm Street, Suite 1955
Dallas, Texas 75202
(214) 752-5818
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Jacob R. Miles, III, Chief Executive Officer
Urban Cool Network, Inc.
1401 Elm Street, Suite 1955
Dallas, Texas 75202
(214) 752-5818
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Martin C. Licht, Esq. Jay M. Kaplowitz, Esq.
Silverman, Collura & Chernis, P.C. Gersten Savage & Kaplowitz, LLP
381 Park Avenue South 101 East 52nd Street
New York, New York 10016 New York, New York 10022
Telephone: (212) 779-8600 Telephone (212) 752-9700
Facsimile: (212) 779-8858 Facsimile (212) 980-5192
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Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this Form is filed to register additional securities pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
Preliminary Prospectus Dated April 20, 2000
Subject to Completion
[ICON] Logo of Urban Cool Network, Inc.
UCN
2,000,000 Shares
Urban Cool Network,Inc.
Common Stock
This is an initial public offering. No public market currently exists for
our shares. We anticipate that the initial public offering price of the common
stock will be between $9.00 and $11.00 per share. We have applied for listing of
our common stock on The American Stock Exchange under the symbol "UBN."
Per Share Total
--------- -----
Initial public offering price .................. $ $
Underwriting discount .......................... $ $
Proceeds, before expenses, to us ............... $ $
Please see the risk factors beginning on page 6 to read about factors you
should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The underwriters may purchase up to 300,000 additional shares from us at
the initial public offering price less the underwriting discount.
----------
Delivery of the shares of common stock will be made on or about _________,
2000, in New York, New York.
Kashner Davidson Securities Corp.
Nutmeg Securities, Ltd.
Prospectus dated , 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
[The inside front cover contains a graphic
showing pages from Urban Cool's website.]
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY ................................................... 3
RISK FACTORS ......................................................... 6
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ................. 10
USE OF PROCEEDS ...................................................... 11
DIVIDEND POLICY ...................................................... 12
DILUTION ............................................................. 13
PRIVATE FINANCINGS ................................................... 14
CAPITALIZATION ....................................................... 15
SELECTED FINANCIAL DATA .............................................. 16
PLAN OF OPERATION .................................................... 17
BUSINESS ............................................................. 22
MANAGEMENT ........................................................... 32
PRINCIPAL STOCKHOLDERS ............................................... 37
CERTAIN TRANSACTIONS ................................................. 38
DESCRIPTION OF SECURITIES ............................................ 39
SHARES ELIGIBLE FOR FUTURE SALE ...................................... 42
PLAN OF DISTRIBUTION ................................................. 43
LEGAL MATTERS ........................................................ 45
EXPERTS .............................................................. 45
HOW TO GET MORE INFORMATION .......................................... 45
Financial Statements ................................................. F-1
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You should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
<PAGE>
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PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. You should
carefully read the entire prospectus, including the "Risk Factors" section and
the financial statements and the notes to the financial statements. This summary
does not contain all of the information that investors should consider before
investing in our common stock.
Our business
We operate urbancool.com, an online network targeted to the urban consumer
that provides a forum for communications, information and electronic commerce.
Our online network, which has been operational since January 1999, consists of
15 channels with original content organized by subject matter, and includes a
search engine for users. The channels cover topics of interest to urban
consumers such as arts and literature, health and fitness, sports, education,
children, entertainment, finance, women's issues and travel. In addition, our
online network includes urbanmall.net, a shopping site, urbanjobs.com, a job
site and urbancoolnet.com and urbantrends.com, business-to-business sites.
Through our search engine, our online network of web sites is linked to more
than 2,000 web sites. According to Web Trends, page view impressions from
January 1999 through December 31, 1999 exceeded 500,000.
Our objective is to establish our online network as a leading online
destination of urban consumers and businesses who market their products to urban
consumers.
Our strategy
We plan to establish the Urban Cool brand name through advertising, and
through the use of NetStand kiosks and CyberCenters. NetStand kiosks are
individual kiosks that we intend to place in high-traffic locations, and will
contain computers that feature high-speed Internet access to use our online
network. CyberCenters are intended to be central meeting areas that will contain
between 10 and 20 computers, which will provide users with a place to access the
Internet through our online network. Our business strategy also includes web
site development, hosting, application services and marketing electronic
commerce capable web sites to urban-based small businesses.
Corporate background
We were incorporated in Delaware in January 1998. Our principal executive
office is located at 1401 Elm Street, Dallas, Texas 75202. Our telephone number
is (214) 752-5818. Our Internet address is urbancoolnet.com. Information
contained in our web sites is not intended to be part of this prospectus.
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3
<PAGE>
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The Offering
Shares offered by us .......... 2,000,000 shares of common stock.
Shares outstanding upon 6,225,000 shares of common stock. This
completion of this offering ... number excludes:
o an aggregate of 2,520,000 shares of
common stock reserved for issuance
upon the exercise of outstanding
options, warrants and contingent
shares, excluding options to
purchase 767,850 shares of common
stock issuable upon the exercise of
options granted under our stock
option plans, as discussed below;
o 500,000 shares of common stock
reserved for issuance upon the
exercise of options issuable
pursuant to our employee stock
option plan, of which options to
purchase 267,850 shares of common
stock have been granted;
o 500,000 shares of common stock
reserved for issuance upon the
exercise of options issuable under
our executive stock option plan,
all of which have been granted;
o 200,000 shares of common stock
reserved for issuance upon the
exercise of warrants granted to the
underwriters of this offering; and
o 300,000 shares reserved for
issuance upon exercise of the
underwriters' over-allotment
option.
Use of proceeds ............. We intend to use the net proceeds from the
sale of the common stock for:
o advertising, sales and marketing;
o capital expenditures;
o development and marketing of
electronic commerce capable web
sites and other services offered by
e-commerce solutions, our
subsidiary;
o development and acquisition of web
sites, content and procurement of
traffic;
o repayment of debt;
o accrued expenses and other
payments; and
o working capital and general
corporate purposes.
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4
<PAGE>
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Summary Financial Data
<TABLE>
<CAPTION>
Period From Period From
January 23, January 23,
1998 1998
Year (Inception) (Inception)
Ended Through Through
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Statement of operations data:
Revenues .............................................. -- -- --
----------- ----------- -----------
Costs and expenses:
Content costs for website ............................. $ 421,000 $ 130,000 $ 551,000
General and administrative ............................ 2,481,000 198,000 2,679,000
Amortization of software costs ........................ 126,000 -- 126,000
----------- ----------- -----------
Total costs and expenses .............................. (3,028,000) (328,000) (3,356,000)
Amortization of debt discounts ........................ 2,482,000 -- 2,482,000
Amortization of debt issuance costs ................... 142,000 -- 142,000
Interest and related costs ............................ 34,000 -- 34,000
----------- ----------- -----------
Loss before income tax benefit and minority interest .. (5,686,000) (328,000) (6,014,000)
Income tax benefit -- -- --
----------- ----------- -----------
Loss before minority interest ......................... (5,686,000) (328,000) (6,014,000)
Loss of investee attributable
to minority interest .................................. (17,000) -- (17,000)
----------- ----------- -----------
Net loss/comprehensive loss ........................... $(5,669,000) $ (328,000) $(5,997,000)
=========== =========== ===========
Loss per share -- basic and diluted ................... $ (1.98) $ (0.16)
=========== ===========
Weighted average number of shares
outstanding -- basic and diluted ...................... 2,858,559 2,066,082
=========== ===========
</TABLE>
The following table provides a summary of our balance sheet at
December 31, 1998 (on an actual basis) and at December 31, 1999:
o on an actual basis;
o on a pro forma basis to reflect:
o the borrowing of $315,000, pursuant to a loan of up to
$1,000,000 with The Elite Funding Group, Inc., in the first
quarter of 2000; and
o the issuance of 580,000 shares of common stock in connection
with the acquisition of all of the capital stock of
WilhelminaUrbanCool.com Inc. in March 2000.
o on a pro forma as adjusted basis to further reflect:
o the issuance of an aggregate of 15,000 shares of common stock
to three non-employee directors upon the consummation of this
offering;
o the capital contribution of $2,950,000 to e-commerce Solutions
and the resulting minority interest therein;
o the receipt of the net proceeds from our sale of 2,000,000
shares of common stock in this offering, at an estimated
initial public offering price of $10.00 per share,
representing the mid-point of the filing range, after
deducting underwriting discounts and commissions and our
estimated offering expenses and the anticipated application of
the estimated net proceeds, including repayment of debt. See
also "Use of Proceeds" and "Capitalization."
<TABLE>
<CAPTION>
Balance sheet data: December 31, 1998 At December 31, 1999
------------------ ------------------------------------------
(unaudited) (unaudited)
Actual Actual Pro Forma Pro Forma as Adjusted
---------- ---------- ----------- --------------------
<S> <C> <C> <C> <C>
Cash ..................................... $ 2,000 $ 118,000 $ 433,000 $15,311,000
Working capital (deficit) ................ $(220,000) $ (842,000) $ (527,000) $14,913,000
Total assets ............................. $ 88,000 $3,406,000 $9,521,000 $23,533,000
Total long-term debt ..................... -- -- -- --
Total liabilities ........................ $ 222,000 $ 972,000 $ 972,000 $ 410,000
Minority interest ........................ -- -- -- $ 983,000
Total stockholders' equity (deficiency) .. $(134,000) $2,434,000 $8,549,000 $22,140,000
</TABLE>
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5
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the following factors and other information in this prospectus before
deciding to invest in shares of our common stock.
We have a limited operating history and will face difficulties encountered
by early stage companies in new and rapidly evolving markets.
Because we have a limited operating history, we will face difficulties
encountered by early stage companies in new and rapidly evolving markets. Our
online network commenced operating in January 1999. Accordingly, an investor
must consider the risks and uncertainties we will face as an early stage
company. These risks include our ability to: o attract a larger audience to our
online network;
o increase awareness of our brand;
o attract a large number of advertisers from a variety of industries;
o manage growth and respond effectively to competitive pressures; and
o attract, retain and motivate qualified personnel.
See "Plan of Operation" for detailed information on our limited operating
history.
We may have to cease or curtail our operations if we are unable to obtain
sufficient financing or achieve profitability.
The independent auditor's report on our financial statements contains
explanatory language that substantial doubt exists about our ability to continue
as a going concern. The report states that we have incurred net losses, and have
a working capital deficiency. If we are unable to obtain sufficient financing in
the near term or achieve profitability, then we would, in all likelihood,
experience severe liquidity problems and may have to curtail or cease our
operations.
We may never be profitable since we have no revenues, have incurred net
losses since our inception and anticipate continuing losses.
To date, we have had no revenue. We expect to continue to incur
significant operating losses and net losses for at least the next 12 months. As
of December 31, 1999, our accumulated deficit was $5,997,000 and our working
capital deficit was $842,000. In addition, as of the date of this prospectus, we
have failed to make the monthly payments to Analysts International pursuant to a
promissory note in the principal amount of approximately $400,000. We intend to
expand our marketing of products and services, and expect that our operating
expenses will increase substantially. As a result, we will need to generate
substantial revenues to achieve profitability. We may never be profitable. If
profitability is achieved, we may not be able to sustain it.
If we are unable to raise additional capital in the future to implement
our plan to become a leading online destination for urban consumers, then we may
have to curtail or cease operations.
We anticipate that the net proceeds from the sale of the shares of our
common stock in this offering will be sufficient to satisfy our contemplated
cash requirements for the 12 month period following the consummation of this
offering. We may then require additional funding in order to implement our
business plan to become a leading online destination for urban consumers. We
have no current arrangements with respect to sources of additional financing,
which may not be available on commercially reasonable terms, or at all. If we do
not obtain necessary financing, then we may have to curtail or cease operations.
If any future financing involves the sale of our equity securities, the shares
of our common stock held by our stockholders would be substantially diluted. If
we incur indebtedness, then we may not be able to pay principal or interest.
6
<PAGE>
If we are unable to derive substantial revenues from sponsorship and
advertising, we may have to curtail operations and reevaluate our business
strategy.
We expect to derive a substantial portion of our revenues from
sponsorships and advertising on our online network and our NetStand kiosks.
Because we have not had revenues to date, demand and market acceptance for
sponsorships and advertising on our online network and NetStand kiosks is
uncertain. If we cannot derive substantial revenues from the sale of advertising
and sponsorships, our business may not succeed or we may have to curtail
operations and reevaluate our business strategy.
If we are unable to effectively manage our plan of rapid expansion, we
will not achieve profitability.
We plan to rapidly expand all aspects of our operations. As a result, we
need to expand our financial and management controls, reporting systems and
procedures. We will also have to expand, train and manage our work force for
marketing, sales and technical support, product development, site design, and
network and equipment repair and maintenance, and manage multiple relationships
with various customers, strategic partners and other third parties. We will need
to continually expand and upgrade our technology infrastructure and systems and
ensure continued high levels of service, speedy operation, and reliability. If
we are unable to manage our growth effectively, we may be unable to handle our
operations, control costs or otherwise function in a profitable manner, or at
all.
Because users seek out reliable web sites, system failures that interfere
with users' access to our online network could harm our reputation.
Our business depends on the efficient and uninterrupted operation of our
computer and communications hardware and software systems. Substantially all of
our computer and communications hardware operations are located in Dallas,
Texas. Fire, floods, earthquakes, power loss, telecommunications failures and
similar events could damage these systems. Computer viruses, electronic
break-ins or other similar disruptive problems could also adversely affect our
web sites. If our systems were shut down by any of these occurrences, our
reputation and ability to attract and retain users could be irreparably harmed.
Our insurance policies may not adequately compensate us for any losses that may
occur due to failures or interruptions in our systems. We do not presently have
any secondary "off-site" systems or a formal disaster recovery plan.
If we do not establish the Urban Cool brand name and reputation, then we
may not be able to attract and retain users.
We believe our success depends on our ability to successfully establish
and maintain our brand recognition and reputation with urban consumers. Growing
the popularity of our web sites and the Urban Cool brand name requires that we
are perceived as offering trendsetting and "cool" sites for urban consumers. We
believe that we need to invest heavily in our marketing and maintain high
standards to establish brand recognition. However, we cannot assure you that our
marketing efforts will attract urban consumers to our web sites. Even if our
marketing efforts are successful in attracting urban consumers, we may not be
able to retain users.
If we are unable to respond to rapid technological changes in our
industry, we may be unable to attract and retain users.
The Internet is characterized by rapidly changing technologies, frequent
new product and service introductions and evolving industry standards. We must
continue to develop, enhance and improve the responsiveness and features of our
web sites and develop new features to meet users needs. We also need to
integrate the various software programs and tools required to enhance and
improve our product offerings and manage our business. We may experience
difficulties that could delay or prevent the successful development,
introduction or marketing of new products and services. If we are unable to
respond to the rapid technological changes in our industry and integrate new
software products and services into our network, then we may be unable to
attract and retain users. We could also incur substantial costs if we need to
modify our services or infrastructure to adapt to these changes.
We must expand quickly or competitors may copy or block our strategy.
We believe we must rapidly establish Urban Cool as a leading online
destination for urban consumers in order to maximize traffic to our web sites
and increase our customer base. If we fail to do so, competitors may copy our
business strategy or take other steps to prevent us from achieving our goal. In
addition, a competing kiosk program could dilute our sales and the marketing
effectiveness of the NetStand kiosks, which are a central part of our business
strategy.
7
<PAGE>
If we are unable to complete the development of our proprietary software
to construct electronic commerce capable web sites on a timely basis, we may
lose all or a portion of our investment in e-commerce Solutions.
In November 1999, we acquired a 66 2/3% interest in e-commerce Solutions,
which is developing proprietary software to construct electronic commerce
capable web sites for small businesses. We have no experience with software
development. We cannot assure you that we will be able to complete development
of the software on a timely basis, or at all. If we do not complete development
of the software on a timely basis, we may lose all or a portion of our
investment in e-commerce Solutions.
If we are unable to successfully market low-cost electronic commerce
capable web sites, we may incur substantial losses.
The demand and market acceptance for low-cost electronic commerce capable
web sites is uncertain. We have no experience in marketing electronic commerce
capable web sites and we cannot predict if a market will develop, or if it will
develop more slowly than anticipated. If we are unable to market the electronic
commerce web sites, we may incur substantial losses.
If we are unable to develop a substantial sales force to market electronic
commerce capable web sites, we will not generate significant revenue.
We believe that we need to develop a substantial sales force to market
electronic commerce capable web sites. We currently do not have such a sales
force and we cannot assure you we will be able to build a substantial sales
force. Moreover, even if we build a substantial sales force, we cannot assure
you that our sales force will be able to attract customers and generate revenue,
or that our operations will achieve profitably.
We may be unable to successfully market web site design services in the
face of competition from many proven, well-established companies.
We have no experience in web site design services, but we expect to
compete with IBM, EDS, and many other local, regional and national competitors
for web site design services that we will offer through e-commerce solutions. We
have limited marketing and sales capabilities and name recognition. Many of our
competitors have well established, large and experienced marketing and sales
capabilities and greater name recognition. As a result, our competitors may be
in a stronger position to respond quickly to new or emerging technologies and
changes in client requirements. They may also develop and promote their services
more effectively than we do. In addition, since barriers to entry into our
market are low, we expect additional competitors to enter our market.
If we are unable to license third-party content on our web sites, we may
not be able to attract and retain users.
We intend to license third-party content, including news reports and
features. We believe that in order to attract and retain web site users we will
need to significantly increase the content on our web sites. If we are unable to
obtain desirable content, it could reduce visits to our web sites. If we are not
able to attract and retain users for our web site, we will not be able to
generate sponsorship and advertising revenue. If we are unable to obtain content
at an acceptable cost, it could materially harm our ability to compete and
operate profitably. In addition, even if we are able to license third party
content, we could be subject to possible copyright infringement actions based
upon such content since third-party sites may not have licenses for the use of
the intellectual property they display. Any such claim, with or without merit
could subject us to costly litigation.
If we are unable to protect our domain names our brand recognition may be
harmed.
We currently utilize various web domain names relating to our brand,
including urbancoolnet.com urbancool.com, urbantrends.com and urbanmall.net. The
acquisition and maintenance of domain names generally is regulated by
governmental agencies and their designees. The regulation of domain names in the
United States and in foreign countries is expected to change in the near future.
As a result, we may be unable to acquire or maintain relevant domain names in
all places in which we may conduct business. If our ability to acquire or
maintain domain names is limited, it could harm our ability to establish brand
recognition, which we believe is essential to our success.
8
<PAGE>
Our reliance on third parties to provide NetStand kiosks and other
computer hardware may impair our ability to operate and maintain our network and
fulfill our commitments to advertisers.
Although our computer and network hardware and our NetStand kiosks are
assembled from standard components which may be outsourced from a number of
manufacturers and distributors, we have no equipment manufacturing capacity and
we have no agreements with any manufacturers or distributors. We rely upon the
timely delivery of quality equipment by third-party manufacturers and
distributors. We also depend upon third-parties for the timely, cost-effective,
and proper installation, maintenance, and repair of our NetStand kiosks and for
the maintenance and repair of our equipment and network infrastructure. Failure
by any of these third-parties to perform as we require could impair our ability
to operate and maintain our network, and to fulfill our commitments to
advertisers.
Possible infringement by others of our intellectual property rights could
Iharm our business.
Although we have filed for trademark protection for the Urban Cool brand
name, we cannot be certain that the steps we have taken to protect the Urban
Cool brand name, or any other intellectual property rights, will be adequate or
that third parties will not infringe or misappropriate our proprietary rights.
Any such infringement or misappropriation could result in a significant claim
for damages which, whether or not successful, could seriously damage our
reputation and our business.
We may be subject to future government regulation and legal liabilities
that may be costly and may interfere with our ability to conduct business.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. These laws and regulations
could expose us to compliance costs and substantial liability. In addition, the
growth of the Internet, coupled with publicity regarding Internet fraud, may
lead to the enactment of more stringent consumer protection laws. These laws
would also be likely to impose additional burdens on our business.
Several members of senior management have only recently joined us and may
not work together effectively.
Several members of our senior management joined us in 1999, including our
Chief Operating Officer and Chief Financial Officer. These individuals have not
previously worked together and are becoming integrated as a management team. As
a result, our senior managers may not work together effectively as a team to
successfully manage our growth.
Management will control approximately 39% of Urban Cool after completion
of this offering; management's interests may differ and conflict with yours.
Upon completion of this offering, our directors and executive officers
will own approximately 39% of the then outstanding shares of our common stock.
Accordingly, these stockholders will possess substantial control over our
operations. This control may allow them to amend corporate filings, elect all of
our board of directors, other than the director to be designated by the
representative, and substantially control all matters requiring approval by our
stockholders, including approval of significant corporate transactions. If you
purchase our common stock, you may have no effective voice in our management.
You will incur immediate and substantial dilution.
The initial public offering price substantially exceeds the amount of our
assets minus our liabilities on a per share basis. Investors in this offering
will contribute 59% of total capital contributed to Urban Cool, but will receive
only 32% of the shares of common stock. In addition, you will suffer immediate
and substantial dilution of $7.72 per share, or approximately 77.2% of the
estimated initial public offering price of $10.00 per share. The dilution to an
investor represents the comparison of the assets minus liabilities of Urban
Cool, including pro forma, adjustments, before and after the offering on a per
share basis. In addition, the exercise of options and warrants currently
outstanding could cause additional, substantial dilution to you. See "Dilution"
for more detailed information regarding the potential dilution you may incur.
9
<PAGE>
Shares eligible for future sale after this offering could impair our stock
price.
The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that these sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock. Our officers, directors and substantially all
of our stockholders have entered into lock-up agreements under which they have
agreed not to offer or sell any shares of common stock or securities convertible
into or exchangeable or exercisable for shares of common stock for various
periods without the prior written consent of Nutmeg Securities on behalf of the
underwriters or The American Stock Exchange, as the case may be. See "Shares
Eligible for Future Sale" for further information concerning potential sales of
our shares after this offering.
Failure of computer systems and software products to be Year 2000
compliant could negatively impact our business.
To date, customers have not reported any problems with our online network
as a result of the commencement of year 2000. Similarly, we have not experienced
any internal impairment in our operations associated with the year 2000 issue.
Nevertheless, in the future, we may experience year 2000 compliance issues with
our online network and/or our internal systems. Our failure to adequately
address any year 2000 compliance issues could result in claims against us, lost
revenue, increased operating expenses and other business interruptions. We have
not developed any specific contingency plans for year 2000 issues.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates and projections about our industry, our beliefs and
assumptions. Words including "may," "could," "would," "will," "anticipates,"
"expects," "intends," "plans," "projects," "believes," "seeks," "estimates" and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. These risks and
uncertainties are described in "Risk Factors" and elsewhere in this prospectus.
We caution you not to place undue reliance on these forward-looking statements,
which reflect our management's view only as of the date of this prospectus. We
are not obligated to update these statements or publicly release the result of
any revisions to them to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
10
<PAGE>
USE OF PROCEEDS
We will receive net proceeds from the sale of the shares of common stock
in this offering of approximately $17,035,000, or $19,735,000 if the
underwriters' over-allotment option is exercised in full, based upon an
estimated initial offering price of $10.00 per share, representing the midpoint
of the filing range. These numbers take into account underwriting discounts and
commissions, and other estimated offering expenses that we will pay.
We intend to use the net proceeds as follows:
<TABLE>
<CAPTION>
Approximate
Amount of Percentage of
Application of Net Proceeds Net Proceeds Net Proceeds
- --------------------------- ------------- ------------
<S> <C> <C>
Advertising, sales and marketing ............................................. $ 4,750,000 27.9%
Capital expenditures ......................................................... 4,000,000 23.5%
Development and marketing of electronic commerce capable web sites
and other services offered by e-commerce solutions ......................... 2,950,000 17.3%
Development and acquisition of web sites, content and procurement of traffic.. 2,000,000 11.7%
Repayment of debt ............................................................ 2,420,000 14.2%
Accrued expenses and other payments .......................................... 600,000 3.5%
Working capital and general corporate purposes ............................... 315,000 1.9%
----------- -----
Total ...................................................................... $17,035,000 100.0%
=========== =====
</TABLE>
Advertising, sales and marketing. We intend to utilize outdoor, radio,
print, Internet and television advertising in order to promote the Urban Cool
brand name and increase traffic on our web sites. We also intend to open
regional sales offices to market our products and services.
Capital expenditures. We intend to deploy NetStand kiosks in major urban
areas.
Development and marketing of electronic commerce capable web sites and
other services offered by e-commerce solutions. We intend to sell electronic
commerce capable web sites to urban-based small businesses through e-commerce
solutions. We intend to utilize a portion of the net proceeds of the offering to
make our required capital contribution in the aggregate amount of $3,000,000 to
e-commerce solutions, which will be utilized to complete the development of
proprietary software to construct these web sites and to set up a sales and
marketing organization for the sale of electronic commerce capable web sites. In
addition, it is anticipated that a portion of such funds will be utilized by
e-commerce solutions for other e-commerce and business related services,
including consulting, financing, reciprocal trade and barter services and
infrastructure related services for e-commerce, Internet and other related
businesses.
Development and acquisition of web sites, content and procurement of
traffic. We intend to develop original content, acquire web sites, license
third-party content, including financial information, news reports,
entertainment reports, features, and enter into content agreements to increase
and maintain traffic on our web sites.
Repayment of debt. We intend to repay:
o $1,050,000 in promissory notes issued during July through November
in a private financing transaction plus accrued interest, at the
rate of 10% per annum
o a promissory note in the amount of approximately $400,000 payable to
Analysts International Corporation plus accrued interest at the rate
of 18% per annum,
o a loan in the amount of up to $1,000,000 from The Elite Funding
Group, of which approximately $815,000 has been drawn as of the date
of this prospectus plus accrued interest at the rate of 10% per
annum plus an extension fee in the amount of $75,000 and
o accrued salary in the amount of $131,000 payable to Jacob R. Miles,
III, our Chairman, Chief Executive Officer and majority stockholder.
11
<PAGE>
Accrued expenses and other payments: We intend to utilize a portion of the
net proceeds of the offering to pay:
o $112,500 to RMH Consulting, an affiliate of The Elite Funding Group
and our lender and a principal stockholder, pursuant to the
consulting agreement between us and RMH;
o approximately $100,000 to Sheila Creque, Vice President of Celebrity
Relations and Merchandising;
o $175,000 to our executive officers for unpaid compensation and
expense reimbursements; and
o $212,500 for other miscellaneous accrued expenses and payments.
We anticipate that the net proceeds from this offering and cash provided
by operations will be sufficient to fund our operations and cash requirements
for at least the 12 months following the date of this prospectus. We cannot
assure you, however, that such funds will not be expended earlier due to
unanticipated changes in economic conditions or other circumstances that we
cannot foresee. In the event our plans or assumptions change or prove to be
inaccurate, we might seek additional financing sooner than currently
anticipated. Any net proceeds from the sale of the underwriters' over-allotment
option will be allocated to working capital and general corporate purposes.
The proposed allocation of the net proceeds represents our management's
best estimate of its current intentions concerning the expected use of funds to
finance our activities in accordance with our management's current objectives
and current market conditions. Our management and board of directors may
allocate the funds in significantly different proportions, depending on their
needs at the time.
Pending use of the net proceeds of this offering, we intend to invest the
net proceeds in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never paid any dividends on our common stock. We do not intend to
declare or pay dividends on our common stock; rather, we intend to retain our
earnings, if any, for the operation and expansion of our business. Dividends
will be subject to the discretion of our board of directors and will be
contingent on future earnings, if any, our financial condition, capital
requirements, general business conditions and other factors as our board of
directors deems relevant.
12
<PAGE>
DILUTION
Purchasers of our shares of common stock will experience immediate and
substantial dilution in the net tangible book value of their investment. The
difference between the initial public offering price per share of common stock
and the pro forma net tangible book value per share of common stock after this
offering constitutes the dilution per share of common stock to investors in this
offering. Pro forma net tangible book value per share represents Urban Cool's
total tangible assets less total liabilities, divided by the number of issued
and outstanding shares of common stock at December 31, 1999, after giving effect
to:
o the borrowing of $315,000 pursuant to a loan of up to $1,000,000,
from The Elite Funding Group, Inc., in the first quarter of 2000;
o the issuance of 580,000 shares of common stock in connection with
the acquisition of all of the capital stock of
WilhelminaUrbanCool.com, Inc. in March 2000;
As of December 31, 1999, we had a pro forma net tangible book value of
$(279,000), $(.07) per share of common stock. Giving effect to the sale of
2,000,000 shares of common stock at the estimated initial public offering price
of $10.00 per share, representing the midpoint of the filing range, and after
deducting underwriting discounts and commissions and estimated offering
expenses, our pro forma as adjusted net tangible book value on December 31, 1999
would have been $14,178,000 or $2.28 per share. This represents an immediate
increase in the net tangible book value of approximately $2.35 per share to
existing stockholders and an immediate and substantial dilution of $7.72 per
share to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share .............................. $10.00
Pro forma net tangible book value per share as of December 31, 1999 .......... (.07)
Increase per share attributable to new investors ............................. 2.35
----
Pro forma as adjusted net tangible book value per share after this offering .. $2.28
------
Dilution per share to new investors .......................................... $7.72
======
</TABLE>
Giving effect to the sale of 2,300,000 shares of our common stock, which
assumes the underwriters exercise the over-allotment option in full, at the
estimated initial public offering price of $10.00 per share, representing the
midpoint of the filing range, the pro forma adjusted net tangible book value on
December 31, 1999 would have been $2.59 per share. This represents an immediate
increase in the net tangible book value of approximately $2.66 per share to
existing stockholders and an immediate and substantial dilution of $7.41 per
share to new investors.
The following table summarizes, on a pro forma basis, as of December 31,
1999, the number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by existing
stockholders and by new investors. The following table excludes the deduction of
underwriting discounts and commissions and other estimated expenses payable by
us.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
--------------------- ----------------------- Price per
Number Percent Amount Percent Share
---------- ------- ------------- ------- --------
<S> <C> <C> <C> <C> <C>
Existing stockholders ........................... 4,210,000 68% $13,796,000 41% $ 3.28
New investors ................................... 2,000,000 32% $20,000,000 59% $10.00
--------- --- ----------- ---
Total ........................................... 6,210,000 100% $33,796,000 100% $ 5.44
========= === =========== ===
</TABLE>
13
<PAGE>
PRIVATE FINANCINGS
From July through November 1999, we completed the sale of 105 units at a
price of $10,000 per unit in a private financing transaction. Each unit in the
private financing consisted of a promissory note in the principal amount of
$10,000, 1,000 shares of common stock and warrants to purchase 5,000 shares of
common stock. The warrants are exercisable at an exercise price of $2.00 per
share commencing January 2000 through May 2000 and expire July 2004 through
November 2004. The notes bear interest at the rate of 10% per annum and are
payable on the earlier of 24 months from the date of issuance or upon the
closing of an initial public offering of our securities.
In addition, the holders of at least 50% of the shares of common stock and
the shares of common stock underlying the warrants issued in the private
financing have the right to demand the registration of their shares on one
occasion. The holders of the shares of common stock and the warrants have agreed
not to sell, transfer, assign or otherwise dispose of the shares of common
stock, the warrants and the shares of common stock underlying the warrants for a
period of 12 months from the date of this prospectus.
Security Capital acted as the placement agent for the private financing.
We paid Security Capital a fee of $105,000, which was equal to 10% of the
aggregate purchase price of the units sold, a portion of which was re-allowed to
a sub-placement agent, and a non-accountable expense allowance of $31,500 which
was equal to 3% of the aggregate purchase price of the units sold.
On November 23, 1999, we entered into a loan agreement with The Elite
Funding Group, Inc. which provides for a loan in an amount of up to $1,000,000
at an interest rate of 10% per annum, payable monthly. On the date we entered
into the agreement, we issued to the lender common stock purchase warrants for
the purchase of up to 750,000 shares of common stock at an as adjusted exercise
price of $1.00 per share. However if we issue shares of common stock or
securities convertible into shares of common stock at a lower price, then the
exercise price will be reduced to such amount. We have received advances in the
aggregate amount of $815,000 through March 31, 2000. The warrants are
exercisable by the lender at any time for a period of ten years. To secure the
repayment of advances under the loan agreement, we have pledged substantially
all of our assets to the lender. We must prepay any outstanding advances under
the loan agreement to the extent of any proceeds available to us from the sale
of our assets outside of the ordinary course of business, the issuance of any
indebtedness or the sale of any equity securities. We must pay the full amount
of all outstanding advances under the loan agreement on the earlier of May 18,
2000 or the closing of this offering. In April 2000 we agreed to pay the lender
an extension fee of $75,000 payable upon the maturity of the loan to extend the
maturity date from April 14, 2000 to May 18, 2000.
We have also granted registration rights to the lender for the
registration of the shares of common stock underlying the warrants, including
demand and "piggy-back" registration rights. Pursuant to an agreement with the
lender, the shares of common stock underlying the lender's warrant may not be
sold for a period of 12 months from the date of this prospectus. However, we
have agreed to cooperate with the lender to modify the lock-up, if the lender
obtains the consent of The American Stock Exchange.
We have also entered into a consulting agreement with RMH Consulting
Corp., an affiliate of The Elite Funding Group, a principal stockholder and our
lender. The consulting agreement is for a period of two years commencing as of
November 1, 1999 and requires us to pay the consultant a fee of $6,250 per
month. In April 2000 we agreed to pay an additional $75,000 to the consultant
upon the closing of the offering. Pursuant to the consulting agreement we issued
150,000 shares of common stock to the consultant and we will be required to
issue additional shares of common stock to the consultant if we commence an
initial public offering at a price of $9.00 or less per share, so that the total
number of shares issued to the consultant will be equal to the number of shares
which could have been purchased in the initial public offering for $1,500,000.
We have also granted registration rights to the consultant for the registration
of the shares of common stock, including demand and "piggy-back" registration
rights. Pursuant to an agreement with the consultant, the shares of common stock
may not be sold for a period of 12 months from the date of this prospectus.
However, we have agreed to cooperate with the consultant to modify the lock-up,
if the consultant obtains the consent of The American Stock Exchange.
Security Capital and May Davis Group assisted us in procuring the loan
from The Elite Funding Group and as compensation for such services received
warrants to purchase 40,000 shares of common stock and 20,000 shares of common
stock, respectively.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
o on an actual basis;
o on a pro forma basis to reflect:
o the borrowing of $315,000, pursuant to a loan of up to
$1,000,000, with The Elite Funding Group, Inc., in the first
quarter 2000; and
o the issuance of 580,000 shares of common stock in connection
with the acquisition of all of the capital stock of
WilhelminaUrbanCool.com, Inc. in March 2000.
o on a pro forma as adjusted basis to further reflect:
o the issuance of an aggregate of 15,000 shares of common stock
to three non-employee directors upon the consummation of this
offering;
o the capital contribution of $2,950,000 to e-commerce Solutions
and the resulting minority interest therein;
o the receipt of the net proceeds from our sale of common stock
in this offering, at an estimated initial public offering
price of $10.00 per share, representing the midpoint of the
filing range, and the anticipated application of the net
proceeds, including repayment of debt. See also "Use of
Proceeds."
The pro forma as adjusted table does not give effect to the following:
o 300,000 shares of our common stock issuable upon exercise of the
underwriters' over-allotment option;
o 200,000 shares of our common stock reserved for issuance upon the
exercise of the warrants granted to the underwriters of this
offering exercisable during the four-year period commencing one year
from the date of this prospectus at an exercise price of 120% of the
public offering price; and
o 500,000 shares of our common stock reserved for issuance upon the
exercise of options pursuant to our employee stock option plan, of
which options to purchase 267,850 shares of common stock have been
granted and 500,000 shares of common stock reserved for issuance
upon the exercise of options pursuant to our executive stock option
plan, all of which have been granted.
You should read this table in conjunction with our financial statements,
including the notes to our financial statements, which appear elsewhere in this
prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
-----------------------
Pro Forma
Actual Pro Forma as adjusted
----------- ----------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Notes payable (face value--$1,050,000, actual, and
$1,050,000, pro forma) ................................ $ -- $ -- $ --
---------- ---------- ----------
Minority interest ....................................... -- -- 983,000
---------- ---------- ----------
Stockholders equity:
Preferred stock--authorized 3,000,000 shares,
$.01 par value: none outstanding,
actual, pro forma and pro forma as adjusted --
Common stock--authorized 30,000,000 shares,
$.01 par value: 3,630,000 outstanding(actual),
4,210,000 outstanding (pro forma), 6,225,000
outstanding (pro forma as adjusted) ................... 36,000 42,000 62,000
Additional paid-in capital .............................. 22,477,000 28,586,000 45,751,000
Unearned compensation ................................... (6,139,000) (6,139,000) (6,139,000)
Deficit accumulated during the development stage ........ (5,997,000) (5,997,000) (17,534,000)
Unamortized debt discount in excess of
notes payable ......................................... (7,943,000) (7,943,000) --
----------- ----------- -----------
Total stockholders' equity .............................. $ 2,434,000 $ 8,549,000 $22,140,000
----------- ----------- -----------
Total capitalization .................................... $ 2,434,000 $ 8,549,000 $23,123,000
=========== =========== ===========
</TABLE>
15
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth our selected financial information as of
and for the periods indicated. We derived the statement of operations data for
year ended December 31, 1999, for the period January 23, 1998 (inception)
through December 31, 1998, for the period January 23, 1998 (inception) through
December 31, 1999 and the balance sheet data as of December 31, 1998 and 1999
from our audited financial statements included elsewhere in this prospectus. You
should read the selected financial information in conjunction with our financial
statements, the notes to our financial statements, and the discussion under
"Plan of Operation" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period From Period From
January 23, January 23,
1998 1998
Year (Inception) (Inception)
Ended Through Through
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Statement of operations data:
Revenues .............................................. -- -- --
---------- -------- ----------
Costs and expenses:
Content costs for website ............................. $ 421,000 $ 130,000 $ 551,000
General and administrative ............................ 2,481,000 198,000 2,679,000
Amortization of software costs ........................ 126,000 -- 126,000
---------- -------- ----------
Total costs and expenses .............................. (3,028,000) (328,000) (3,356,000)
Amortization of debt discounts ........................ 2,482,000 -- 2,482,000
Amortization of debt issuance costs ................... 142,000 -- 142,000
Interest and related costs ............................ 34,000 -- 34,000
---------- -------- ----------
Loss before income tax benefit and minority interest .. (5,686,000) (328,000) (6,014,000)
Income tax benefit .................................... -- -- --
---------- -------- ----------
Loss before minority interest ......................... (5,686,000) (328,000) (6,014,000)
Loss of investee attributable
to minority interest .................................. (17,000) -- (17,000)
---------- -------- ----------
Net loss/comprehensive loss ........................... $(5,669,000) $ (328,000) $(5,997,000)
=========== =========== ===========
Loss per share -- basic and diluted ................... $ (1.98) $ (0.16)
=========== ===========
Weighted average number of shares
outstanding -- basic and diluted ...................... 2,858,559 2,066,082
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Balance sheet data: December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C>
Cash ................................................................ $ 2,000 $ 118,000
Working capital (deficit) ........................................... $(220,000) $ (842,000)
Total assets ........................................................ $ 88,000 $3,406,000
Total long-term debt ................................................ $ -- $ --
Total liabilities ................................................... $ 222,000 $ 972,000
Stockholders' equity (deficiency) ................................... $(134,000) $2,434,000
</TABLE>
16
<PAGE>
PLAN OF OPERATION
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial
statements, the notes to our financial statements and the other financial
information contained elsewhere in this prospectus.
Overview
We are a development stage company. We were incorporated in January 1998,
and have not generated any revenues in offering products or services for sale.
Since our inception, we have primarily been engaged in the initial planning and
development of our web sites and operations, negotiating agreements with content
providers and raising capital. As a result, there has not been any operating
revenue generated by our web sites through the year ended December 31, 1999.
We believe that the minority segment of the urban population has not been
meaningfully targeted for Internet services. Accordingly, we believe there is a
significant opportunity for Urban Cool to capitalize upon the demand for
Internet access in the urban market. Our objective is to establish Urban Cool as
a leading online destination of the urban consumer (B2C) and businesses (B2B)
who market their products to urban consumers. Our strategy is to establish the
Urban Cool brand name and utilize our urbancool.com online network, NetStand
kiosks and CyberCenter locations to reach our target market of urban consumers
and businesses who market their products to urban consumers.
During the next twelve months, we intend to pursue our strategy by
substantially following tIhe plan of operation discussed below.
Plan of operation
We believe creating brand recognition will be critical to attracting urban
consumers to our web sites, NetStand kiosks, CyberCenters and businesses to our
business to business services. We intend to utilize approximately $4,750,000
from the net proceeds of the offering for advertising, sales and marketing in
order to help establish brand recognition. We intend to utilize outdoor,
television, print, Internet and radio advertising as well as displays, events,
direct mail, telemarketing and public relations efforts to promote the Urban
Cool brand name. We plan to co-market our services through strategic alliances
with major corporations. In addition, we intend to utilize celebrities,
primarily on a volunteer basis, to promote technology within our urban markets.
Our advertising and marketing efforts will also include radio giveaways and
in-house promotions. We have retained McCann-Erickson to develop and manage our
brand building campaign.
We intend to use approximately $4,000,000 of the net proceeds of this
offering for capital expenditures, of which approximately $3,000,000 will be
utilized to deploy NetStand kiosks. We intend to deploy the PC based NetStand
kiosk in at least 500 locations in urban markets. We anticipate that the cost of
each NetStand kiosk will be approximately $4,000 We intend to locate the
NetStand kiosks in high-traffic locations such as shopping malls, small
businesses, community centers, bus terminals and multi-family housing
developments.
We intend to open a model CyberCenter at 439 West 125th Street in Harlem,
New York in the third quarter of 2000. The CyberCenters are intended to provide
users with a place to socialize and access the Internet. The CyberCenters will
be 1,000 to 2,000 square feet and will contain 10 to 20 computers that provide
Internet access through our online network. We currently have no operating
CyberCenters. We intend to utilize approximately $200,000 from the net proceeds
of the offering to complete the development of the CyberCenter in Harlem. We
intend to license future CyberCenters to urban non-profit organizations, which
will own and operate the CyberCenters. The cost for each CyberCenter is
anticipated to range from $50,000 to $100,000. We plan to offer corporate
sponsorships of the CyberCenters in order to derive sponsorship revenue. We
intend to charge users a fee for the use of the Internet access stations at the
CyberCenters and charge a management fee to the non-profit organization which
will own and operate the CyberCenters. We plan to offer introductory classes at
the CyberCenters on the use of computers and the Internet.
17
<PAGE>
We plan to pursue relationships with membership-based groups such as
non-profit organizations, churches, alumni organizations, fraternities and other
similar organizations for brand building and membership acquisitions. We also
plan to pursue relationships with local and national businesses for content,
products, services and the sponsoring of our NetStand kiosks We may utilize a
portion of the net proceeds of this offering to make strategic acquisitions.
We plan to derive a substantial portion of our revenue from advertising
and sponsorships. We believe that a major portion of our revenue will be derived
from our NetStand kiosks, including corporate sponsorships, billboard treatment
of the NetStand kiosks, advertising, web site development, hosting and
application services. We initially plan to generate revenue of approximately
$10,000 per NetStand kiosk. We also plan to offer corporate sponsorship and
advertising packages for the CyberCenters. In addition, we plan to generate
revenue from other advertising sponsorship packages including banner
advertising, e-mail advertising, outdoor advertising, live and broadcast events
and contest promotions. We are uncertain as to whether we will be able to
generate revenue from our NetStand kiosks or CyberCenters or the sale of
advertising on our online network. However, even if we do not generate any
revenue, we believe that the net proceeds of the offering will be sufficient to
meet our anticipated needs for working capital for at least 12 months.
We also will seek to promote electronic commerce through our online
network. For example, we offer links to major Internet retailers and service
providers who have entered into revenue sharing agreements with us. The
agreements generally provide that we receive a commission for products purchased
through a link from our web site.
Pursuant to an agreement in November 1999, we acquired a 66 2/3% interest
in e-commerce solutions, Inc., which is developing proprietary software to
construct electronic commerce capable web sites and electronic commerce
communities. We intend to utilize approximately $2,950,000 of the net proceeds
of the offering to complete development of the software and to fund the start-up
costs for e-commerce solutions. In addition, it is anticipated that a portion of
such funds will be utilized by e-commerce solutions for other e-commerce and
business related services, including consulting, financing, reciprocal trade and
barter services and infrastructure related services for e-commerce, Internet and
other related businesses. We intend to market electronic commerce web sites
through e-commerce solutions to small businesses. We initially believe that a
basic electronic commerce capable web site can be marketed to small business
owners at a reasonable price. In addition, we believe that the sales of
electronic commerce web sites will provide us with additional opportunities to
increase revenue. However, we may not be able to develop the proprietary
technology on a timely basis, or at all, or generate significant revenues from
the sales of electronic commerce capable web sites.
Results of operations
From inception, operations have been in the early stages of development.
We had no revenues for the period ended December 31, 1998, and year ended
December 31, 1999. We incurred losses of $328,000 and $5,669,000, respectively,
for those periods, in connection with web site development costs, interest
expenses and other general and administrative expenses. The increase in expenses
for the year ended December 31, 1999 as compared to the period ended December
31, 1998 was primarily attributable to a $291,000 increase in content costs for
our web site, a $2,658,000 increase in interest expenses and amortization of
debt discount and a $2,223,000 increase in general and administrative expenses
consisting primarily of consulting and professional fees of $907,000, employee
compensation of $1,078,000 (which includes compensatory stock options) and
advertising, marketing and promotional expenses of $131,000.
As of December 31, 1999 we had net operating loss carryforwards for
federal income tax purposes of approximately $2,237,000. There can be no
assurance that we will realize the benefit of the net operating loss
carryforwards. The federal net operating loss carryforward will expire in 2019.
We have established a valuation allowance with respect to these federal net
operating loss carryforward.
For the period commencing on December 31, 1999 through the completion of
the offering, we will incur charges in the aggregate amount of approximately
$10,554,000 attributable to debt issuance costs, original issue discount and
estimated interest expenses incurred in connection with the sale of $1,050,000
of our promissory notes, the loan agreement with respect to The Elite Funding
Group loan in an amount up to $1,000,000, and the issuance of shares of common
stock to directors. Additionally, we will record a charge in the amount of
$983,000 directly to stockholders' equity representing a portion of our capital
contribution to e-commerce solutions, Inc., which reflects the minority
interest. An additional $6,139,000 of equity instrument compensatory charges are
attributable to various consulting agreements and an employee option, which are
amortizeable over
18
<PAGE>
the term of such agreements. In addition, upon the vesting of warrants to
purchase up to 800,000 shares of common stock issued to Stanley Wolfson in
connection with the acquisition of a 66 2/3% interest in e-commerce solutions we
will record a charge equal to the fair value of such warrants upon such vesting
in accordance with performance criteria. In connection with the acquisition of
all of the capital stock of Wilhelmina UrbanCool.com in March 2000 for 580,000
shares of common stock we will record an annual charge of $1,160,000 for a
period of five years.
We expect operating results to fluctuate significantly in the future as a
result of a variety of factors, many of which are outside our control. These
factors include:
o our ability to derive sponsorship and advertising revenue for our
online network;
o our ability to generate revenue from web site development, hosting
and application services
o obtaining licenses of third-party content;
o consumers' acceptance of electronic commerce;
o the development of our software to market electronic commerce
capable web sites;
o the level of traffic on our web sites;
o the amount and timing of the deployment of NetStand kiosks and other
capital expenditures and other costs relating to the expansion of
our operations;
o the success of our efforts to market electronic commerce capable web
sites;
o the introduction of new or enhanced services by us or our
competitors, including low-cost electronic commerce capable web
sites;
o the availability of desirable products and services for sale through
our web sites;
o the loss of a key affiliation or relationship by us;
o changes in our pricing policy or those of our competitors;
o technical difficulties with our web sites;
o incurrence of costs relating to general economic conditions; and
o economic conditions specific to the Internet or all or a portion of
the technology market.
As a strategic response to changes in the competitive environment, we may
from time to time make pricing, service or marketing decisions or business
combinations that could have a material adverse effect on our business, results
of operations and financial co Indition. In addition, in order to accelerate the
promotion of our brand name, we intend to significantly increase our sales and
marketing budget, which could materially and adversely affect our business,
results of operations and financial condition.
Liquidity and capital resources
We have funded our requirements for working capital to support operations
primarily from private placements of our securities, credit from our web site
developer, Analysts International Corp., and borrowings under a loan agreement.
As of December 31, 1999, we had a working capital deficit of ($842,000).
The independent auditor's report on our financial statements contains
explanatory language that substantial doubt exists about our ability to continue
as a going concern. The report specifies that we have incurred net losses, and
have a working capital deficiency. If we are unable to obtain sufficient
financing in the near term or achieve profitability, then we would, in all
likelihood, experience severe liquidity problems and may have to curtail our
operations.
For the period ended December 31, 1998, net cash provided by operating
activities was $73,000, which was primarily attributable to increases in
accounts payable, accrued expenses and a payable to officer/stockholder of
$222,000, offset by our net loss of $328,000 and increased by non-cash expenses
in the amount of $179,000. For the year ended December 31, 1999, cash used in
operating activities was $748,000. The cash used by operating activities for the
year ended December 31, 1999 was attributable to a net loss of $5,669,000 and
offset by non-cash expenses in the amount of $4,203,000 and an increase in
accounts payable, accrued expenses, payable to officer/stockholder, note payable
and net of an increase in other assets and minority interest in subsidiary in
the amount of $718,000.
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For the period ended December 31, 1998, net cash used in investing
activities was $86,000, which was attributable to the purchase of computer
equipment and software and web site development. For the year ended December 31,
1999, net cash used in investing activities was $219,000 which was attributable
to the purchase of computer equipment and software.
For the period ended December 31, 1998, net cash provided by financing
activities was $15,000, which was attributable to the sale of common stock. For
the year ended December 31, 1999, net cash provided by financing activities was
$1,083,000. The increase in net cash provided by financing activities was
primarily attributable to proceeds from the sale of our common stock of
$177,000, proceeds from a line of credit of $500,000 and net proceeds from a
private financing transaction of $791,000 offset by deferred offering costs of
$385,000.
In November 1999, we delivered a promissory note to Analysts
International, our web site developer, in the amount of $400,432, representing
the amount of the accounts payable plus accrued interest owed to Analysts
International. The note bears interest at the rate of 18% per annum, requires
monthly payments of $25,000 and is payable on the earlier of the closing of this
offering or June 1, 2000. We have not made the monthly payments due in December
1999 through April 2000.
In December 1999, we contributed $50,000 to e-commerce Solutions, Inc. in
connection with our acquisition of a 66 2/3% interest in e-commerce Solutions.
We have also agreed to contribute an additional $2,950,000 to e-commerce
solutions upon the closing of this offering.
In July through November, 1999, we completed the sale of 105 units at a
price of $10,000 per unit in a private financing transaction. Each unit in the
private financing consisted of a promissory note in the amount of $10,000, 1,000
shares of common stock and warrants to purchase 5,000 shares of common stock.
The warrants are exercisable at an exercise price of $2.00 per share commencing
January 2000 through November 2000 expiring in July 2004 through November 2004.
The notes bear interest at the rate of 10% per annum and are payable on the
earlier of 24 months from the date of issuance or upon the closing of this
offering.
On November 23, 1999, we entered into a loan agreement with The Elite
Funding Group, Inc. which provides for a loan in an amount of up to $1,000,000
at an interest rate of 10% per annum, payable monthly. On the date we entered
into the agreement, we issued to the lender common stock purchase warrants for
the purchase of up to 750,000 shares of common stock at an exercise price of
$1.00 per share, subject to adjustment, exercisable at any time for a period of
ten years. We have received advances in the aggregate amount of $815,000. We
must prepay any outstanding advances under the loan agreement to the extent of
any proceeds available to us from the sale of our assets outside of the ordinary
course of business, the issuance of any indebtedness or the sale of any equity
securities. We must pay the full amount of all outstanding advances under the
loan agreement on the earlier of May 18, 2000 or the closing of this offering.
In April 2000 we agreed to pay the lender an extension fee of $75,000 payable
upon the maturity of the loan to extend the maturity date from April 14, 2000 to
May 18, 2000. To secure the repayment of advances under the loan agreement, we
have pledged substantially all of our assets to the lender.
In November 1999, Jacob R. Miles, III, our Chairman, Chief Executive
Officer and majority stockholder entered into a deferred compensation agreement
with us which provides that Mr. Miles shall receive accrued salary in the amount
of $131,250, payable out of the net proceeds of this offering, which amount was
accrued from January 1, 1999 through September 30, 1999. As of December 31, 1999
we owed Mr. Miles approximately $11,000 for expenses he paid on our behalf which
has been recorded as a non-interest bearing loan.
We have also entered into a consulting agreement with RMH Consulting
Corp., an affiliate of The Elite Funding Group, a principal stockholder and our
lender. The consulting agreement is for a period of two years commencing as of
November 1, 1999 and requires us to pay the consultant a fee of $6,250 per month
and $75,000 upon the closing of this offering. Pursuant to the consulting
agreement we issued 150,000 shares of common stock to the consultant. See
"Management--Consulting Agreements" and "Certain Transactions."
In January 2000, we entered into a one-year agreement with Ask Jeeves
which provides for payments in the aggregate amount of $437,000 during the term
of the agreement. Ask Jeeves has developed a proprietary search engine which
utilizes a question and answer format. Pursuant to the agreement, Ask Jeeves
will customize its search engine with an urban theme for use and resale by Urban
Cool.
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Our capital requirements depend on numerous factors, including, market
acceptance of our products and services, the resources we devote to marketing
and selling our services and our brand promotions, capital expenditures and
other factors. We have experienced a substantial increase in our capital
expenditures since our inception consistent with the growth in our operations
and staffing. We anticipate this increase will continue for the foreseeable
future particularly relating to our development of NetStand kiosks, creation of
CyberCenters and systems infrastructure. We believe that, together with the
proceeds of the offering and anticipated revenues from operations, our current
cash will be sufficient to meet our anticipated needs for working capital,
capital expenditures and business expansion for the next 12 months. After 12
months, if cash generated from operations is insufficient to satisfy our
liquidity requirements, we may seek to sell additional equity or debt securities
or to obtain a credit facility. The sale of additional equity or convertible
debt securities could result in additional dilution to our stockholders. There
can be no assurance that financing will be available in amounts or on terms
acceptable to us, if at all. If we do not obtain such financing, we may have to
curtail or cease our operations.
Recent accounting pronouncements
In March 1998, the Accounting Standards Executive Committee issued AICPA
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
This statement provides guidance on the financial reporting of start-up costs
and organization costs. It requires that the cost of start-up activities and
organization costs be expensed as incurred. This statement of position is
effective for financial statements for fiscal years beginning after December 15,
1998. We do not expect adoption of this statement to have a material impact on
our financial statements.
We are required to adopt Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information."
Statement No. 131 superseded statement No. 14, "Financial Reporting for Segments
of a Business Enterprise" and is effective for years beginning after December
31, 1997. Statement 131 establishes standards for the way that public business
enterprises report selected information about operating segments in financial
reports. Statement 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The addition of
statement 131 will not affect our results of operations or financial position,
but may affect the disclosure of the segment information in the future.
In June 1998, the Financial Accounting Standards Board or "FASB," issued
statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement changes the previous accounting definition of
derivative, which focused on freestanding contracts such as options and
forwards, including futures and swaps, expanding it to include embedded
derivatives and many commodity contracts. Under the statement, every derivative
is recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Statement No. 133 is effective for fiscal years beginning after June
15, 2000. Earlier application is allowed as of the beginning of any quarter
beginning after issuance. We do not anticipate that the adoption of statement
No. 133 will have a material impact on our financial position or results of
operations.
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BUSINESS
General
We operate urbancool.com, an online network targeted to urban consumers
that provides a forum for communications, information and electronic commerce.
Our online network, which has been operational since January 1999, consists of
15 channels with original content organized by subject matter, and includes a
search engine for users. The channels cover topics of interest to urban
consumers such as arts and literature, health and fitness, sports, education,
children, entertainment, finance, women's issues and travel. In addition, our
online network includes urbanmall.net, a shopping site and business to business
sites urbancoolnet.com, an Internet services site and urbantrends.com, a
business information site. Through our search engine, our online network of web
sites is linked to more than 2,000 web sites. According to Web Trends, page view
impressions from January 1999 through December 1999 exceeded 500,000.
We are a development stage company. We were incorporated in January 1998,
and have not generated any revenues in offering products or services for sale.
Since our inception, we have primarily been engaged in the initial planning and
development of an infrastructure, our web sites and operations, negotiating
agreements with infrastructure companies, marketing partners, content providers
and raising capital.
Our objective is to establish our online network as a leading online
destination of urban consumers and businesses who market their products to urban
consumers. We intend to provide:
o urban residents with a local competitive means of accessing
information, technology, communications and financial products and
services as well as transportation products and services such as
bus, train and airline information and ticketing; and
o businesses with Internet services and access to the urban
marketplace for additional sales and customer service opportunities,
while providing exposure in the urban marketplace for their brands,
including utilizing our Netstand kiosks for web site development,
hosting, application services and content distribution services.
The Internet
Internet access among U.S. households is increasing at a rapid rate.
According to a July 1999 study published by the U.S. Department of Commerce,
approximately 42% of U.S. households own computers. Approximately 26% of U.S.
households now have Internet access, and Internet access has increased for all
demographic groups in all locations. In 1998, Internet access increased 52.8%
for White households, 52% for African American households and 48.3% for Hispanic
households.
We believe that the rapid increase in Internet usage by U.S. households
represents a substantial opportunity for companies to conduct business online.
The functionality and accessibility of the Internet have made it an attractive
commercial medium by providing features that historically have been unavailable
through traditional distribution channels. Applications that allow consumers to
comparison shop or choose from a large selection of goods or services have
flourished on the Internet. Because of these advantages, an increasingly broad
base of products and services is sold online, including consumer goods such as
automobiles, books and CDs, and a variety of services, including travel,
securities trading and other financial services. Forrester Research estimates
that revenues from electronic commerce consumer spending in the U.S. will
increase from approximately $20.2 billion in 1999 to approximately $184 billion
in 2004.
Advertisers and direct marketers are also increasingly using the Internet
to locate and market to customers. Forrester Research estimates that U.S.
Internet advertising will grow from approximately $2.8 billion in 1998 to
approximately $22 billion in 2004.
Urban consumer market segment
Our target audience for our web sites is America's urban residents. The
1990 U.S. Census states that approximately 160 million out of 250 million
Americans live in an urban environment. Within this urban market, we believe the
minority population will be attracted to Urban Cool as one of its primary online
destinations since we believe it has not been meaningfully and directly targeted
for Internet access.
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According to the Census, approximately 80% of the U.S. minority population
lives in an urban environment, which includes 24 million African Americans and
18 million Hispanics. Minorities trail whites in computer ownership and usage.
The U.S. Department of Commerce report states that African American and Hispanic
households have far lower ownership levels of computers (at 23% and 26%) and
Internet access levels (11% and 13%) as compared to White household computer
ownership of 47% and Internet access of 30%. However, both African American and
Hispanic households are twice as likely to own computers as they were in 1994
and this rate of increase is greater than the rate of increase for White
ownership of computers. Because minorities are increasing their use of
computers, we believe there is a significant opportunity for Urban Cool to
capitalize on new urban minority demand for Internet access.
Strategy
General
Our objective is to establish our online network as a leading online
destination for the urban consumer. Our strategy is to attract urban consumers
to our online network, NetStand kiosks and CyberCenter locations for
information, products and services and to develop revenue generating
relationships with businesses which desire to reach urban consumers. Our
strategy also includes marketing electronic commerce capable web sites to
urban-based small businesses as well as web site development, hosting,
application services and other Internet services. The key elements of our
strategy are described below.
Create brand recognition
We believe creating brand recognition will be critical to attracting urban
consumers to our web sites, NetStand kiosks and CyberCenters and building brand
awareness among urban businesses. We intend to differentiate our business from
other online networks through our focus on America's inner city residents and
our use of NetStand kiosks and CyberCenters which are intended to introduce and
promote our web sites to urban consumers. We intend to utilize outdoor,
television, print, Internet and radio advertising as well as displays, events,
direct mail, telemarketing and public relations efforts to promote the Urban
Cool brand name. We plan to co-market our services through strategic alliances
with major corporations. In addition, we intend to utilize celebrities,
primarily on a volunteer basis, to promote technology within our urban markets.
We believe celebrities will volunteer their services based on discussions we
have had with several of them who have given exclusive interviews on our online
network. Our advertising and marketing efforts will also include radio giveaways
and in-house promotions. We have retained McCann-Erickson to develop and manage
our brand building campaign.
Develop NetStands
We intend to use a portion of the net proceeds of this offering to place
PC-based NetStand kiosks in at least 500 locations in urban markets. Sites for
Netstand kiosks are initially planned within six urban markets: Brooklyn and
Harlem in New York City, and several areas within Dallas, Detroit, Los Angeles,
Miami and San Francisco Bay area. We intend to locate the NetStand kiosks in
high-traffic locations such as shopping malls, small businesses, community
centers, bus terminals and multi-family housing developments. We have built
seven NetStand kiosks which are fully operational and, in September 1999, we
entered into an agreement with a shopping center in Dallas, Texas to deploy five
NetStand kiosks. We believe that the NetStand kiosks will be an integral part of
our network. The NetStand kiosks provide Internet access in inner city locations
and are designed to be easily operated by people with no previous Internet or
computer experience.
Individuals will be able to use the NetStand kiosks to visit our web
sites, search the Internet, purchase tickets, send money, access local
information and engage in electronic commerce transactions. We intend to rely on
independent third parties to manufacture, install and service the NetStand
kiosks. We anticipate that the cost of each NetStand kiosk will be approximately
$4,000. The NetStand kiosks will be networked, designed and programmed for the
local urban market in which they are deployed. The users of the NetStand kiosks
will be provided with high-speed Internet access and charged fees for certain
functions. The NetStand kiosks are designed to accept cash as well as major
credit and debit cards. We also plan to offer corporate sponsorship programs and
advertising on the NetStand kiosks, which we believe will constitute a major
portion of our revenue. We also intend to utilize the NetStand kiosks to build a
data base of consumers for targeted marketing, consumer surveys and data mining
opportunities.
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Build CyberCenters
We intend to open a model CyberCenter at 439 West 125th Street in Harlem,
New York in the third quarter of 2000. The CyberCenters are intended to provide
users with a place to socialize and access the Internet. The CyberCenters will
be 1,000 to 2,000 square feet and will contain 10 to 20 computers in NetStand
kiosks and multi-media computer stations that provide Internet access through
our online network. We currently have no operating CyberCenters. We also intend
to provide technology focused business services at the CyberCenters, such as
computer enhanced photos, Internet telephone service, database research, urban
research and to offer telecommunication products and services.
We intend to license future CyberCenters to urban non-profit
organizations, which will own and operate the CyberCenters. The cost for each
CyberCenter is anticipated to range from $50,000 to $100,000. We anticipate the
non-profit organization will have capital expenditures of between $20,000 to
$40,000 in connection with opening the CyberCenter. We plan to offer corporate
sponsorships of the CyberCenter in order to derive sponsorship revenue. We
intend to charge users a fee for the use of the Internet access stations at the
CyberCenters and charge a management fee to the non-profit organizations which
will own and operate the CyberCenters. We plan to offer introductory classes at
the CyberCenters on the use of computers and the Internet.
Generate sponsorship, advertising revenues and other NetStand kiosk
revenue
We plan to derive a substantial portion of our revenue from Internet
services, advertising and sponsorships. We believe that a major portion of our
revenue will be derived as a result of our NetStand kiosks, including corporate
sponsorships, billboard treatment, advertising, web site development, hosting
and application services. We initially plan to generate revenue of approximately
$10,000 per NetStand kiosk. We also plan to offer corporate sponsorship and
advertising packages for the CyberCenters. In addition we plan to offer other
advertising sponsorship packages including banner advertising, e-mail
advertising, outdoor advertising, live and broadcast events and contest
promotions.
Promote electronic commerce
We also offer links to major Internet retailers and service providers who
have agreed to revenue sharing agreements with us based on either a percentage
of sales or a set fee basis. The agreements generally provide that we receive a
commission for products purchased through a link from our web site. Currently,
through our agreements with Internet retailers and service providers, we sell
gifts, flowers, travel, computer hardware and software, video game hardware and
software, fine art, music, videos and film, entertainment and sports branded
clothing and products, health products and haircare and beauty products. We also
plan to offer auction services, telecommunications products and services,
Internet services, financial services, transportation information and tickets.
We have had discussions with several telephone companies, a financial services
company, and Internet services companies to market their products and services.
Although no definitive agreements have been reached, we believe, although there
can be no assurance, that we will be able to offer their products and services
through our online network.
We also intend to offer merchandise through our online network including
Urban Cool branded and co-branded merchandise. Products anticipated to be
offered include t-shirts and caps, gift products, music and music video
products, video game products, posters, stickers and other printed merchandise
and low cost computers.
Pursue strategic acquisitions and alliances
We plan to pursue relationships with membership-based groups such as
non-profit organizations, churches, alumni organizations, fraternities and other
similar organizations for brand building and membership acquisitions. We also
plan to pursue relationships with local and national businesses for content,
products, services and the sponsoring of our NetStand kiosks. Additionally, we
plan to pursue strategic acquisitions of Internet-related companies, other web
sites and local urban weekly newspapers that have viewers/subscribers that reach
our target market segment and generate advertising revenue. We may utilize a
portion of the net proceeds of this offering to make strategic acquisitions.
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We have entered into a non-binding letter of intent with Bloomberg, L.P.
Pursuant to the letter of intent, Bloomberg will provide content for our web
sites and promote our web sites and, in return, we will pay Bloomberg $66,666
per month. The proposed term of the agreement is three years. However, we have
not reached a definitive agreement with Bloomberg and we cannot assure you that
an agreement will be reached. As of the date of this prospectus, we do not have
any other understandings, commitments or agreements concerning these types of
transactions.
We have entered into a marketing alliance agreement with Navisite, Inc.
Navisite provides web site hosting services, bandwidth and computer equipment to
businesses. Pursuant to the alliance agreement with Navisite, we will resell
Navisite services and receive a commission equal to 10% of all revenue which we
generate for Navisite. We have also entered into an agreement with Akamai
Technologies, Inc. Akamai provides services to businesses which will enhance the
performance and functionality of their web sites. Our web sites will contain a
link to Akamai's site and Akamai's site will contain a link to our site. We
intend to enter into similar agreements with other technology and
telecommunication companies which provide business-to-business services. We
believe that other companies will enter into strategic alliances with us because
of their desire to market their products and services to our target market of
urban consumers and businesses.
Other Business to Business Services
We have recently acquired a 66 2/3% interest in e-commerce solutions -- in
exchange for warrants to purchase up to 1,050,000 shares of common stock and our
agreement to contribute $3,000,000 -- which is developing proprietary software
to construct electronic commerce capable web sites and electronic commerce
communities. We anticipate completing the development of the software for the
design of the web sites in the third quarter of 2000. We intend to utilize a
portion of the net proceeds of the offering to make a required capital
contribution to e-commerce solutions which will be utilized to complete
development of the software and to set up a sales and marketing organization.
Using the software, our in-house personnel will consult with business customers,
and will design and sell customized electronic commerce capable web sites for
the business customer. We intend to market the electronic commerce web sites to
small urban-based businesses at a relatively low cost. Our goal is to develop a
substantial sales force to market the web sites.
In addition, we believe that the sales of electronic commerce web sites
will provide us with additional opportunities to increase revenue. We intend to
offer purchasers of web sites various services including:
o web hosting services;
o additional sophisticated web site development services; and
o specialized marketing into the African-American and Hispanic
markets.
We intend to enter into agreements with purchasers of web sites to provide
direct links to urbancool.com and to our other web sites.
e-commerce solutions also intends to offer other e-commerce and business
related services, including consulting, financing, reciprocal trade and barter
services and infrastructure related services for e-commerce, Internet and other
related businesses.
Provide other services
Urban Cool, together with non-profit organizations, intends to participate
in providing introductory computer training programs in select cities. By
providing introductory classes, we intend to build a client base familiar with
our services. We do not plan, however, on generating revenue from the classes.
Other services which we plan to offer through our online network, NetStand
kiosks and CyberCenters include money transfer, transportation tickets and
public transportation information. We intend to offer web hosting and related
services pursuant to our marketing alliance agreement with Navisite and
application services and content distribution services pursuant to our agreement
with Akamai.
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In addition, we intend to offer via urbancool.com, NetStand kiosks and
CyberCenters financial services such as bill paying and a full line of
telecommunication products and services including prepaid local and long
distance phone usage, prepaid cellular phones, pagers, prepaid home and business
phone services. We have entered into an agreement with NatioNet Online, an
Internet service provider, that offers Internet access to subscribers.
Urban Cool Online Network
Our online network is organized around consumer focused sites anchored by
urbancool.com with 15 content specific channels and three business focused Urban
Cool web sites. Our channels, web sites and special features are described
below.
Arts & literature channel
The Arts & Literature channel provides original content and links to web
sites related to the arts, culture, dance, genealogy, literature, performing
arts and theatre.
Health and fitness channel
The Health and Fitness channel provides news stories on health and fitness
topics as well as links to web sites related to medicine and drugs, diseases,
fitness, medical references, insurance, mental health, natural health,
organ-tissue donation, health organizations and vision.
Sports channel
The Sports channel provides original content, sports news and stories as
well as links to sports magazines and numerous professional and amateur sports
and sporting events.
Education channel
The Education channel provides links to web sites related to education,
including careers, college guides, curriculum, scholarships, educational
organizations and educational references.
U' Cool kids channel
The U' Cool Kids channel provides links to web sites related to books and
stories, clubs, education, games, girls only, holiday fun, museums and
television.
Urban styles channel
The Urban styles channel provides links to web sites related to autos,
auctions, toys, fashion and beauty, men's topics, hip hop and shopping
destinations.
Entertainment channel
The Entertainment channel provides special interest stories and interviews
as well as links to web sites related to entertainment awards, celebrities,
music, entertainment magazines, movies, films, television, games, history,
entertainment organizations, comics, radio and hobbies.
Living and family channel
The Living and Family channel provides top news stories and features as
well as links to web sites related to religions, adoption, gardening, home
improvement, real estate, parenting, environment, organizations, pets,
inspirational stories, seniors, singles, insurance, spiritual well-being and
time management.
Cool technology channel
The Cool Technology channel contains news stories as well as links to web
sites related to computers, stereo and television, telecommunications,
magazines, museums, technology-related organizations and video games.
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Food and beverage channel
The Food and Beverage channel provides links to web sites related to food
and beverage, recipes, food and beverage magazines and restaurants.
Money talks channel
The Money talks channel provides links to web sites related to financial
news, careers, financial topics and business, consumer and professional
organizations.
Travel and events channel
The Travel and Events channel provides links to web sites related to city
guides, travel, state guides, events and holidays.
Street watch channel
The Street Watch channel provides links to web sites related to law
enforcement agencies, drugs and crime.
News and government channel
The News and Government channel provides top news stories, as well as
links to web sites related to government, legal information, magazines, news
services, newspapers and organizations.
For women channel
The For Women channel provides original content and links to web sites for
women, related to health issues, business, careers, magazines, organizations and
weddings.
Urbancool.com
Urbancool.com is our consumer focused site for urban consumers and others
who follow trends in the urban community, which contains links to our 15 content
specific channels and our other web sites.
Urbancoolnet.com
The urbancoolnet.com site is our corporate and business to business web
site.
Urbanmall.net
The urbanmall.net site is a shopping site which offers software, videos,
books, music, CDs, Urban Cool caps, t-shirts and backpacks.
Urbantrends.com
The urbantrends.com site is a business-to-business site that provides
information about trends in the urban community and links to urban magazines,
advertising agencies and research about the urban community.
Urbanjobs.com
Urbanjobs.com is a site focused on career development, job searches and
business services for corporate personnel departments.
Future web sites
We intend to develop Urban Cool Magazine, a print and online technology
lifestyle magazine focused on the urban consumer. We also intend to develop
urbanauctions.com, a collection of web pages focused on celebrity, business and
charity auctions.
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U' Cool Crew
We intend that each channel will be hosted by one of our 12 proprietary
fictional characters known as part of the U' Cool Crew, presenting original
content, link recommendations and acting as sales persons for
electronic-commerce products and services. Our web sites contain a
computer-generated likeness and description of each of the characters, including
their favorite food, dessert, sport and other interests. We intend to further
develop the personalities of each of these characters, including animating and
casting for the characters and providing scripts for the characters. We also
intend to utilize the characters in television, radio and print advertising, to
make personal appearances and to promote the Urban Cool brand name and
electronic commerce products. Network users are able to send e-mail to the
characters and to vote for their favorite characters. We believe that the U'
Cool Crew will build brand awareness and brand loyalty for the Urban Cool brand
name.
Sales and marketing
We intend to establish a direct sales organization consisting of national,
regional and local sales representatives. Our sales organization will provide
input on design and placement of our Internet-based advertising and the content
on local web sites. The sales representatives' objective will be to provide a
high level of customer service and satisfaction to business customers. We also
intend to have our sales representatives focus on selling sponsorship packages
and banner advertising programs together with web site development services,
hosting and application services.
We intend to utilize a number of methods to promote the Urban Cool brand
name including outdoor advertising, advertising on other Internet sites,
targeted publications, radio stations, cable television and cross promotional
arrangements to secure advertising and other promotional considerations. We have
distributed promotional material at select targeted events such as Black expo,
cinco de mayo events, concerts and other community events. To further promote
the Urban Cool brand name, we intend to enter into strategic alliances with
consumer products and technology companies.
We intend to develop relationships with urban non-profit groups and with
other urban consumer membership based groups, such as churches, alumni
organizations, fraternities and similar organizations, for brand building and
membership acquisitions. We plan to meet with urban non-profit organizations and
other urban consumer membership based groups to identify sponsorship and grass
roots marketing opportunities. We also intend to sponsor events, concerts and
other community activities to promote the Urban Cool brand name.
Distribution - internet service provider
We have entered into an agreement with NatioNet Online, an Internet
service provider, to provide Internet access to our users. Pursuant to the
agreement, we will receive 5.1% of the monthly fee paid by each subscriber. We
intend to promote Internet service access by distributing Urban Cool co-branded
software via direct mail, magazine insertions, at concerts, seminars and events
as well as through our CyberCenters and NetStand kiosk locations. We also will
distribute our software in computer stores, record stores, discount stores,
grocery stores and through churches, community events and other community-based
organizations and membership based groups.
WilhelminaUrbanCool.com Inc.
In March 2000 we acquired all of the capital stock of
WilhelminaUrbanCool.com, Inc. in exchange for 580,000 shares of our common
stock. WilhelminaUrbanCool.com, Inc. was formed in February 2000 in order to
license the Wilhelmina trademark from Wilhelmina Artist Management LLC. The
license agreement provides for an initial term of 25 years and successive
five-year renewal options. Wilhelmina Models which was founded in 1967 is one of
the leading modeling agencies in the industry. Wilhelmina Models is an agent for
over 1,000 models and its current roster of models, athletes and musical talent
includes Mia Tyler, Kevin Garnett, Kate Dillon, Katerina Witt, Jenna Elfman,
Brandy, Paula Cole, Kid Rock, Kool and the Gang, Hootie and the Blowfish, and
Sugar Ray. Pursuant to the license agreement, WilhelminaUrbanCool.com, Inc. has
been granted the license to utilize the Wilhelmina trademark in connection with
a web site known as
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WilhelminaUrbanCool.com. Wilhelmina Artist Management, LLC has agreed to provide
to WilhelminaUrbanCool.com, Inc. all head shots, photographs and other materials
which Wilhelmina has the right to utilize for self-promotion and to provide
content for the WilhelminaUrbanCool.com web site. In addition, it is anticipated
that WilhelminaUrbanCool.com will market merchandise, sponsor contests, model
searches and engage in other promotions utilizing the web site.
Web site design services
In November 1999, we entered into an agreement to acquire 66 2/3% of the
capital stock of e-commerce solutions, Inc. In connection with the acquisition,
we have advanced $50,000 of capital to e-commerce solutions and have agreed to
contribute an additional $2,950,000 of capital to e-commerce solutions upon the
completion of the offering. In addition, we issued warrants to purchase up to
1,050,000 shares of common stock to Stanley Wolfson, exercisable are as follows:
o warrants to purchase 50,000 shares of common stock are exercisable
immediately at an exercise price of $2.00 per share;
o warrants to purchase 200,000 shares of common stock are exerciseable
immediately at an exercise price of $1.00 per share;
o warrants to purchase 200,000 shares of common stock are exercisable
provided that e-commerce solutions has gross sales of at least
$2,500,000 within 24 months of our contribution of $3,000,000 to
e-commerce solutions at an exercise price of $1.00 per share;
o warrants to purchase an additional 200,000 shares of common stock
are exercisable provided that e-commerce solutions has gross sales
of at least $7,500,000 within 24 months of our contribution of
$3,000,000 to e-commerce solutions at an exercise price of $1.00 per
share;
o warrants to purchase an additional 200,000 shares of common stock
are exercisable provided that e-commerce solutions has gross sales
of at least $15,000,000 within 24 months of our contribution of
$3,000,000 to e-commerce solutions at an exercise price of $1.00
per share and
o warrants to purchase an additional 200,000 shares of common stock
are exercisable provided that e-commerce solutions has gross sales
of at least $25,000,000 within 24 months of our contribution of
$3,000,000 to e-commerce solutions at an exercise price of $1.00 per
share.
e-commerce solutions has entered into a three-year employment agreement
with Stanley Wolfson to serve as the president. Mr. Wolfson shall receive a
salary of $175,000 per annum plus 2% of gross sales commencing as of November 1,
1999. Pursuant to our shareholder's agreement with Stanley Wolfson and
e-commerce solutions, Mr. Wolfson has the ability to manage the affairs of
e-commerce solutions, subject to our right to vote on certain shareholder
matters. In connection with the shareholder's agreement, the vote of 70% of the
shares of common stock outstanding is required in connection with a vote of the
shareholders.
e-commerce solutions owns partially developed proprietary software to
construct electronic commerce capable web sites and electronic commerce
communities. We intend to utilize a portion of the net proceeds of the offering
to complete development of the software and to fund the start-up costs for
e-commerce solutions. We anticipate completing the development of the software
in the third quarter of 2000. e-commerce solutions also intends to offer other
e-commerce and business related services, including consulting, financing,
reciprocal trade and barter services and infrastructure services for e-commerce,
Internet and other related businesses. We intend to market electronic commerce
web sites through e-commerce solutions to urban-based small businesses. We
believe that a basic electronic commerce capable web site can be marketed to
urban-based small business owners at a relatively low cost. We plan to utilize a
substantial telemarketing effort and a dedicated sales force to market the web
site design services. We cannot assure you that we will be able to develop such
a sales force or develop web site design services. We intend to offer
competitive performance-based compensation packages to our sales representatives
and telemarketers.
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<PAGE>
Revenue sharing agreements
We have entered into revenue sharing agreements, none of which are
material to our revenue, with Music Boulevard/CD Now, car prices.com,
electronics.net, Yahoo store, and buydirect.com. The agreements generally
provide that we receive a commission for products purchased through a link on
our web site. We intend to enter into agreements to offer Internet links to
other Internet retailers, including telecommunications and Internet services,
financial services, and transportation services.
Web site management and development
Analysts International designed our initial web sites. We presently
develop, manage and maintain our network of web sites. Our web site management
and development is supervised by our Vice President of Technology and Internet
Services and is assisted by employees, strategic partners and subcontractors.
Technology
Technology is a critical part of our business and affects our business in
a variety of ways. We intend to upgrade and modify our network hardware systems
and software in order to provide faster, more robust and more reliable
communications, entertainment and Internet services to our customers. We intend
to have servers in multiple locations in order to provide back-up of our
computer systems, quicker access to our online network and the ability to handle
the anticipated increased use of our online network. We intend to utilize
Navisite and Akamai for technology infrastructure support and Ask Jeeves for
search and customer service applications.
Competition
The market for Internet products and services is highly competitive and
competition is expected to continue to increase significantly. There are no
substantial barriers to entry in these markets, and we expect that competition
will continue to intensify. We compete with many other providers of information
and community services such as AOL, Excite, Inc. Infoseek Corporation, Lycos,
Inc., and Yahoo Inc. as well as other web sites including bet.com,
starmedia.com, and quepasa.com. As we expand the scope of our Internet services,
we will compete directly with a greater number of Internet sites and other media
companies. A large number of web sites and online services also offer electronic
commerce products, informational and community features. There can be no
assurance that we will be able to compete successfully or that the competitive
pressures faced by us will not have a material adverse effect on our business.
We compete with IBM and EDS for web site design services as well as other
local, regional and national web site designers. As we expand our web site
design services we will compete directly with other web site design services
offering similar products. In addition, other web site designers may offer
reasonably priced electronic commerce capable web sites or develop similar or
superior software. We cannot assure you that we will be able to compete
successfully.
There are other web sites that attract segments of our potential market.
We believe that we will be able to differentiate Urban Cool from competitors by
promoting the Urban Cool brand name and through access to our online network
through NetStand kiosks and CyberCenters.
Many of our existing competitors, as well as a number of potential new
competitors, have significantly greater financial, technical, marketing and
distribution resources. In addition, other web sites and online networks may be
acquired by, receive investments from, or enter into other commercial
relationships with larger, well-established and well financed companies. Greater
competition resulting from these types of strategies relationships could have a
material adverse effect on our business, operating results and financial
condition.
Government regulation
Due to the increasing popularity and use of the Internet, it is possible
that a number of laws and regulations may be adopted with respect to the
Internet, covering issues such as user privacy, defamation, pricing, taxation,
content regulation, quality of products and services, and intellectual property
ownership and infringement. Such legislation could dampen the growth in use of
the Internet generally, decrease the
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<PAGE>
acceptance of the Internet as a communications and commercial medium and require
us to incur expense in complying with any new regulations. Other nations have
taken actions to restrict the free flow of material deemed to be objectionable
on the Internet. In addition, several telecommunications carriers are seeking to
have telecommunications over the Internet regulated by the Federal
Communications Commission in the same manner as other telecommunications
services. Such laws and regulations if enacted in the United States or abroad
could have a material adverse effect on our business. Moreover, the
applicability to the Internet of the existing laws governing issues such as
property ownership, copyright, defamation, obscenity, and personal privacy is
uncertain, and we may be subject to claims that our services violate these laws.
Any new legislation or regulation in the United States or abroad or the
application of existing laws and regulations to the Internet could have a
material adverse effect on our business.
Due to the global nature of the Internet, it is possible that, although
transmissions by us over the Internet originate primarily in the State of Texas,
the governments of other states and foreign countries might attempt to regulate
our transmissions or prosecute us for violations of their laws. There can be no
assurance that violations of local laws will not be alleged or charged by state
or foreign governments, that we might not unintentionally violate such law or
that such laws will not be modified, or new laws enacted, in the future. Any of
the foregoing developments could have a material adverse effect on our business.
Trademarks and proprietary rights
We regard our copyrights, trademarks, trade names, trade dress, trade
secrets, and similar intellectual property as critical to our success, and we
intend to rely on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with our employees, customers,
independent contractors, partners and others to protect our proprietary rights.
We pursue the registration of our trademarks and service marks in the United
States, and have applied for and obtained registration in the United States for
the Urban Cool brand name. We are in the process of filing for additional
protection. Effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which our products and
services are made available online.
There can be no assurance that the steps taken by us to protect our
proprietary rights will be adequate or that third parties will not infringe or
misappropriate our copyrights, trademarks, trade dress and similar proprietary
rights. In addition, there can be no assurance that other parties will not
assert claims of infringement of intellectual property or alter proprietary
rights against us.
We may be required to obtain licenses from others to refine, develop,
market and deliver new services. There can be no assurance that we will be able
to obtain any license on commercially reasonable terms, or at all or that rights
granted pursuant to any licenses will be valid and enforceable.
Employees
We have nine full-time employees, four of which are involved in marketing
and sales and five in general management, technology and administration. We also
have two part time employees. We have no collective bargaining agreement with
our employees. We believe that our relationship with our employees is
satisfactory.
Legal proceedings
Urban Cool is not currently involved in any material legal proceedings. We
may from time to time become a party to various legal proceedings arising in the
ordinary course of our business.
Properties
Our Internet hosting and co-location servers are located at 1950 Stemmons
Freeway, Dallas Texas. Our lease is month to month at a monthly rate of $1,200
per month. We also have leased 1,350 square feet at 1401 Elm Street, Dallas,
Texas at a monthly rental of $1,635. We lease space at 439 West 125th Street in
the Harlem area of New York City at a monthly rate of $880 per month, for our
model CyberCenter. e-commerce solutions leases office space at 600 West 57th
Street, New York, New York at a monthly rate of $5,000 per month, which lease
expires in October 2002. We are in the process of locating additional space for
our expanded operations. However, no definitive agreements have been executed.
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MANAGEMENT
Directors and executive officers
The following table sets forth information concerning our directors and
executive officers as of the date of this prospectus. Sir Brian Wolfson has
agreed to serve as a director of Urban Cool upon the completion of the offering.
<TABLE>
<CAPTION>
Name Age Position
----- ---- --------
<S> <C> <C>
Jacob R. Miles, III* .................... 45 Chairman, Chief Executive Officer and Director
Terrence B. Reddy ....................... 57 President, Chief Operating Officer and Director
Barry M. Levine ......................... 56 Secretary, Treasurer and Chief Financial Officer
Tony Winston ............................ 33 Vice President of Technology and Internet Services
Rosalind Bell ........................... 41 Director
Rex Cumming* ............................ 36 Director
Sir Brian Wolfson* ...................... 64 Director Nominee
</TABLE>
- ----------------------
* We intend to elect such individuals to the audit and compensation committees.
The following is a brief summary of the background of each executive
officer and director:
Jacob R. Miles, III, our founder, has been Chairman and Chief Executive
Officer since inception. From 1996 to 1998, Mr. Miles was President of Miles
Companies, an entertainment- and technology-focused consulting firm. From 1993
to 1996, he was Chairman and Chief Executive Officer of Cultural Exchange
Entertainment Corp., a developer and marketer of entertainment properties, toys
and electronic learning aids targeted at urban markets, which filed for
protection from its creditors under Chapter 7 of the Bankruptcy Code in United
States Bankruptcy Court for the Southern District of New York in January 1998
and was discharged in July 1998. Prior to 1993, Mr. Miles held engineering
operations and senior management positions with Tonka Corp. and General Mills
Toy Group. He received an engineering management certificate from Xavier
University in 1980. Mr. Miles is the husband of Rosalind Bell, a director of
ours.
Terrence B. Reddy became our President, Chief Operating Officer in
September 1999 and a director in November 1999. From 1993 to August 1999, he
served as President of TransMedia Resources, a media research company that
services the broadcasting industry in markets in the state of Texas. Prior to
1993, Mr. Reddy held sales and general manager positions with various television
and cable network companies.
Barry M. Levine became our Secretary, Treasurer and Chief Financial
Officer in November 1999. From October 1996 to August 1999, Mr. Levine was a
director and the President and Chief Executive Officer of Millennium Sports
Management, Inc., a publicly-traded stadium management company. From April 1996
through September 1996 Mr. Levine was unemployed. From December 1991 through
March 1996, Mr. Levine held various offices and was a director of Sports Heroes,
Inc., a publicly-traded sports memorabilia company. Mr. Levine resigned from
Sports Heroes in March 1996, and subsequently, in May 1996, Sports Heroes, Inc.
filed a voluntary petition for reorganization under Chapter 11 of the United
States Bankruptcy Code; in October 1996, this case was converted to a proceeding
under Chapter 7 of the United States Bankruptcy Code. Mr. Levine is also a
certified public accountant. Mr. Levine received a B.B.A. in accounting from
Pace University in 1967.
Rosalind Bell became a director in November 1999. Ms. Bell has been a
marketing consultant from January 2000 to the present. From May 1999 to January
2000, Ms. Bell was Vice President of Marketing for Optel, a telecommunications
cable and Internet company, from May 1999 to the present. From April 1998 to
April 1999, Ms. Bell was a Vice President of Marketing for the Don Pablo
division of Avado Corporation. From October 1997 to April 1998, she served as
Vice President-Marketing for Time Warner's Six Flags Amusement Parks. From 1994
to 1997, Ms. Bell was Group Marketing Director at Pillsbury Company. Ms. Bell
received a B.A. in Business from Washington University in 1980 and an M.B.A.
from Northwestern University in 1981. Ms. Bell is the wife of Mr. Miles, the
Chairman and Chief Executive Officer, and majority stockholder of Urban Cool.
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Rex Cumming became a director in November 1999. Mr. Cumming, a co-founder
of Worksoft Inc., an enterprise productivity solutions company that builds
software testing tools, has been Worksoft's Chief Financial Officer since 1998.
From 1994 to 1998, Mr. Cumming was a co-founder and director of Silicon Reef,
Inc., an Internet service company. From 1992 to the present, Mr. Cumming has
been the President of Hytec Data System, Inc., a consulting firm which provides
investment, development and financial advisory services to start-up companies.
Sir Brian Wolfson has agreed to become a director of ours upon completion
of the offering. Sir Brian served as Chairman of Wembley, PLC from 1986 to 1995.
Sir Brian is currently a director of Fruit of the Loom, Inc., Kepner-Tregoe,
Inc., Playboy Enterprises, Inc., and Autotote Corporation, Inc.
Tony Winston has been Vice President of Technology and Internet Services
since August 1999. From 1994 to 1999, Mr. Winston was the founder and President
of Software Developers and Systems Integrations, Inc., a technology and services
firm, implementing applications for telecommunications, and financial services
companies. Mr. Winston received a Bachelors Degree in Business, with a
concentration in Management Information Systems, from Boston University School
of Business in 1988.
Board composition
Upon the consummation of this offering our board of directors will consist
of five directors. At each annual meeting of our stockholders, all of our
directors are elected to serve from the time of election and qualification until
the next annual meeting following election. In addition, our bylaws provide that
the maximum authorized number of directors, which is currently five, may be
changed by resolution of the stockholders or by resolution of the board of
directors.
We have granted to Nutmeg Securities and RMH Consulting the right, for a
period of five years and 15 months, respectively from the closing of this
offering, to nominate a designee for election to our board of directors. Neither
Nutmeg Securities nor RMH Consulting has indicated who they intend to designate
to our board. If Nutmeg Securities or RMH Consulting exercises its right to
nominate a designee to serve on our board of directors, then we will increase
the size of the board of directors. If in the future either Nutmeg Securities or
RMH Consulting elects not to exercise this right, then Nutmeg Securities or
RMH Consulting may designate one person to attend meetings of our board of
directors.
Each officer is elected by, and serves at the discretion of, our board of
directors. Each of our officers and directors, other than independent directors,
devotes his full time to our affairs. Our independent directors devote such time
to our affairs as is necessary to discharge their duties. There are no family
relationships among any of our directors, officers or key employees, except for
Mr. Miles and Ms. Bell, who are husband and wife.
Board committees
Prior to the completion of this offering, we intend to establish an audit
committee and a compensation committee and that Jacob R. Miles, III, Rex
Cumming, and Sir Brian Wolfson will be members of the audit committee and
compensation committee. The audit committee will make recommendations to the
board of directors regarding the independent auditors for us, approve the scope
of the annual audit activities of our independent auditors, review audit results
and will have general responsibility for all of our auditing related matters.
The compensation committee will review and recommend to the board of directors
the compensation structure of our officers and other management personnel,
including salary rates, participation in incentive compensation and benefit
plans, fringe benefits, non-cash perquisites and other forms of compensation. No
interlocking relationships exist between Urban Cool's board of directors or
compensation committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
Directors' compensation
Independent directors will receive 5,000 shares of common stock and
options to purchase 10,000 shares of common stock at the initial public offering
price upon completion of the offering. Independent directors will also receive
an annual director's fee of $10,000. Employee directors will not receive
additional compensation for serving on the board of directors. All directors
will be reimbursed for out-of-pocket expenses incurred in attending meetings of
the board of directors and committee meetings.
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Executive compensation
Summary Compensation Table
The following table provides a summary of cash and non-cash compensation
for the year ended December 31, 1999 with respect to the following officer of
Urban Cool:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------- ------------------------
Awards
---------
Securities
Restricted Underlying
Other Annual Stock Options LTIP All Other
Name and Principal Positions Year Salary($) Bonus($) Compensation Award(s)($) SARs(#) Payouts($) Compensation
- ---------------------------- ------ ------------ ---------- ------------ ----------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jacob R. Miles, III 1999 $175,000(1) 0 0 0 0 0 0
</TABLE>
- -------------
(1) We accrued $131,250 of salary which will be payable out of the net proceeds
of this offering.
Employment agreements
Urban Cool has entered into a three-year employment agreement, commencing
as of July 1, 1999, with Jacob R. Miles, III, our Chairman, President and Chief
Executive Officer, which provides for an annual salary of $175,000. The
employment agreement provides that Mr. Miles is eligible to receive incentive
bonus compensation, at the discretion of the board of directors based on his
performance and contributions to our success. The employment agreement provides
for termination based on death, disability or voluntary resignation and for
severance payments upon termination in the event that he is terminated without
cause, as described in the agreement, or he terminates his employment for good
reason as described in the agreement, or in the event of a change in control of
Urban Cool as described in the agreement. If the employment agreement is
terminated without cause, as a result of a change of control, or terminated by
Mr. Miles for good reason the amount of the severance payment shall be equal to
three times the average annual compensation payable under the employment
agreement.
Urban Cool has entered into one-year employment agreements, effective upon
completion of the offering, with Barry M. Levine, our Chief Financial Officer,
and Terrence B. Reddy, our President and Chief Operating Officer, which each
provide for an annual salary of $125,000. In addition, we have entered into a
one-year employment agreement effective upon completion of the offering with
Tony Winston, our Vice President of Technology and Internet Services, which
provides for an annual salary of $100,000. Each employment agreement provides
that the executive is eligible to receive short-term incentive bonus
compensation at the discretion of the board of directors based on his
performance and contributions to our success. Each employment agreement provides
for termination based on death, disability or voluntary resignation and for
severance payments upon termination in the event that the executive is
terminated without cause, as described in the agreement, or he terminates his
employment for good reason as described in the agreement. In the event the
employment agreement is terminated other than for good cause by us, then the
executive shall receive severance payments equal to the compensation payable
through the balance of the term.
In November 1999, Stanley Wolfson entered into a three-year employment
agreement with e-commerce Solutions pursuant to which Mr. Wolfson shall receive
an annual salary of $175,000 plus an amount equal to 2% of the gross sales of
e-commerce solutions. The agreement commences as of November 1, 1999. Mr.Wolfson
will be entitled to receive short term incentive bonus compensation at the
discretion of the board of directors based on his performance and contribution
to the company's success. The employment agreement provides for termination
based on death, disability or voluntary resignation and for severance payments
upon termination in the event that Mr.Wolfson is terminated without cause.
We have entered into a one year employment agreement with Sheila Creque as
Vice President of Celebrity Relations and Merchandising commencing upon the
completion of this offering pursuant to which Ms. Creque shall receive an annual
salary of $125,000. In addition, upon completion of this offering, Ms. Creque
shall receive a signing bonus of $35,000, accrued salary from January 1, 2000
through the closing of the offering and $25,000 attributable to the fourth
quarter of 1999. Ms. Creque shall also receive up to 35,000 shares of common
stock upon obtaining agreements from up to three celebrities to join our
advisory board. The employment agreement provides for termination based on
death, disability or voluntary resignation and for severance payments upon
termination in the event that Ms. Creque is terminated without cause.
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<PAGE>
Options Granted in Last Fiscal Year. The following table sets forth
certain information with respect to option grants during the fiscal year ended
December 31, 1999 to the named executive officers.
<TABLE>
<CAPTION>
Percent of Total
Number of Options Granted to Exercise of
Securities Underlying Employees in Base Price
Name Options Granted Fiscal Year ($.SH) Expiration Date
- ---- ---------------------- ------------------ ------------ ---------------
<S> <C> <C> <C> <C>
Jacob R. Miles, III 250,000 39.7% initial public offering price November 2004
250,000 39.7% 110% of initial public November 2004
offering price
</TABLE>
Year-end Option Table. During the fiscal year ended December 31, 1999,
none of the named executive officers exercised any options issued by us. The
following table sets forth information regarding the stock options held as of
December 31, 1999 by the named executive officers.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money Options
Unexercised Options at Fiscal Year End at Fiscal Year-End
-------------------------------------- -----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jacob R, Miles, III 250,000 250,000 $0 $0
</TABLE>
Consulting agreements
In November 1999 we entered into a consulting agreement with RMH
Consulting Corp., an affiliate of The Elite Funding Group, a lender to us and a
principal stockholder of ours, to provide us with consulting services, including
assisting us with implementation of our business plans and strategies. The
consulting agreement is for a period of two years commencing as of November 1,
1999 and requires us to pay the consultant a fee of $6,250 per month and $75,000
upon the closing of the offering. Pursuant to the consulting agreement, we have
issued 150,000 shares of common stock to the consultant and we will be required
to issue additional shares of common stock to the consultant if we commence an
initial public offering at a price of $9.00 or less per share, so that the total
number of shares issued to the consultant will be equal to the number of shares
which could have been purchased in the initial public offering for $1,500,000.
In September 1999, we entered into a three-year consulting agreement with
Surrey Associates, Inc. and issued 200,000 shares of common stock to Surrey.
Pursuant to the consulting agreement, Surrey will assist us in developing a
marketing plan for the deployment of NetStand kiosks in shopping centers. In
September 1999, we entered into a three-year consulting agreement with Upway
Enterprises, Inc. and issued 150,000 shares of common stock to Upway. Pursuant
to the agreement, Upway will consult with us with regard to marketing and
mergers and acquisitions. In October 1999, we entered into a two-year consulting
agreement with Sea Breeze Associates, Inc., and issued 175,000 shares of common
stock to Sea Breeze. Pursuant to the agreement, Sea Breeze will consult with us
with regard to corporate development and mergers and acquisitions.
Stock option plan
In November 1999, we adopted the 1999 Stock Option Plan. The purpose of
the plan is to enable us to attract, retain and motivate key employees,
directors, and consultants, by providing them with stock options. Options
granted under the plan may be either incentive stock options, as defined in
Section 422A of the Internal Revenue Code of 1986, or non-qualified stock
options. We have reserved 500,000 shares of common stock for issuance under the
plan. As of the date of this prospectus, 267,850 options have been granted
pursuant to the plan.
Our board of directors will administer the plan. Our board has the power
to determine the terms of any options granted under the plan, including the
exercise price, the number of shares subject to the option, and conditions of
exercise. Options granted under the plan are generally not transferable, and
each option is generally exercisable during the lifetime of the holder only by
the holder. The exercise price of all incentive stock options granted under the
plan must be at least equal to the fair market value of the shares of common
stock on the date of the grant. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of our stock, the
exercise price of any incentive stock option granted must be equal to at least
110% of the fair market value on the grant date. Our board of directors approves
the terms of each option. These terms are reflected in a written stock option
agreement.
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<PAGE>
The board of directors has the right to grant options pursuant to the plan
whereby the holder, under the conditions of exercise, may, in lieu of payment of
the exercise price in cash, surrender the option and receive a net amount of
shares. Such number of shares will be based upon the fair market value of Urban
Cool's common stock at the time of the exercise of the option, after deducting
the aggregate exercise price.
Executive stock option plan
In November 1999, we adopted the 1999 Executive Stock Option Plan. We have
reserved 500,000 shares of common stock for issuance under the plan. Pursuant to
the plan, we granted options to purchase an aggregate of 500,000 shares of
common stock to Jacob R. Miles, III, our Chairman and Chief Executive Officer.
Of these options, options to purchase 250,000 shares of common stock are
exercisable immediately at an exercise price equal to the initial public
offering price. The balance of these options are exercisable for a period of
five years from the date of grant at an exercise price equal to 110% of the
initial public offering price. Such options are exercisable only if Urban Cool
achieves the annual audited gross revenue as outlined in the table below and
will become exercisable immediately following the fiscal year indicated.
Years Ending Number of Options Exercisable Gross Revenue
------------ ------------------------------ -------------------
2001 125,000 $17,500,000
2002 125,000 $25,000,000
These options have net exercise provisions under which Mr. Miles may, in
lieu of payment of the exercise price in cash, surrender the option and receive
a net amount of shares, based on the fair market value of Urban Cool's common
stock at the time of the exercise of the option, after deducting the aggregate
exercise price.
Limitations of liability and indemnification of directors and officers
Our certificate of incorporation, as amended, and bylaws, as amended,
limit the liability of directors and officers to the maximum extent permitted by
Delaware law. We will indemnify any person who was or is a party, or is
threatened to be made a party to, an action, suit or proceeding, whether civil,
criminal, administrative or investigative, if that person is or was a director,
officer, employee, consultant or agent of us or serves or served any other
enterprise at our request.
In addition, our certificate of incorporation provides that generally a
director shall not be personally liable to us or our stockholders for monetary
damages for breach of the director's fiduciary duty. However, in accordance with
Delaware law, a director will not be indemnified for a breach of its duty of
loyalty, acts or omissions not in good faith or involving intentional misconduct
or a knowing violation or any transaction from which the director derived
improper personal benefit.
We intend to purchase and will maintain directors' and officers'
insurance, the amount of which has not yet been determined. This insurance will
insure directors against any liability arising out of the director's status as
our director, regardless of whether we have the power to indemnify the director
against the liability under applicable law.
The underwriting agreement also contains provisions whereby we agree to
indemnify the underwriters, each officer and director of the underwriters, and
each person who controls the underwriters within the meaning of Section 15 of
the Securities Act, against any losses, liabilities, claims or damages arising
out of alleged untrue statements or alleged omissions of material facts
contained in the registration statement or prospectus.
We have been advised that it is the position of the Commission that
insofar as the indemnification provisions referenced above may be invoked to
disclaim liability for damages arising under the Securities Act, these
provisions are against public policy as expressed in the Securities Act and are,
therefore, unenforceable.
36
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of April 1, 2000, and as adjusted for
the 2,000,000 shares of our common stock offered by this prospectus, the number
and percentage of outstanding shares of common stock beneficially owned by:
o each person who we know beneficially owns more than 5% of the
outstanding shares of our common stock;
o each of our officers and directors; and
o all of our officers and directors as a group.
Except as otherwise noted, the persons named in this table, based upon
information provided by these persons, have sole voting and investment power
with respect to all shares of common stock beneficially owned by them. The
number of shares of common stock outstanding used in calculating the percentage
for each listed person includes the shares of common stock underlying options or
warrants held by such person that are exercisable within 60 days of April 1,
2000, but excludes shares of common stock underlying options or warrants held by
any other person. Unless otherwise indicated, the address of each beneficial
owner is c/o Urban Cool, 1401 Elm Street, Dallas, Texas 75202.
<TABLE>
<CAPTION>
Percentage of
Percentage of common
common stock stock
Name and address of Number of beneficially beneficially
beneficial owner shares owned owned
- ------------------- --------- ------------- -------------
(Before Offering) (After Offering)
<S> <C> <C> <C>
Jacob R. Miles, III .................................... 2,336,493(1) 52.4% 36.1%
Terrence B. Reddy ...................................... -- * *
Rosalind Bell .......................................... 2,336,493(2)(3) 52.4% 36.1%
Rex Cumming ............................................ 5,000(3) * *
Sir Brian Wolfson ...................................... 5,000(3) * *
The Elite Funding Group, Inc. .......................... 853,124(4) 14.6% 10.6%
Wilhelmina Artist Management, LLC ...................... 580,000(5) 13.8% 9.3%
Stanley Wolfson ........................................ 250,000(6) 5.6% 3.9%
All executive officers and directors as a group
(7 persons) .......................................... 2,446,493 53.5% 38.6%
</TABLE>
- ----------
(1) Includes (a) 20,608 shares of common stock owned by Rosalind Bell, Mr.
Miles' wife, (b) 5,000 shares of common stock issuable to Rosalind Bell
upon the consummation of this offering and (c) 250,000 shares of common
stock issuable upon the exercise of options that are currently exercisable
at an exercise price equal to the initial public offering price, but does
not include options to purchase 302,500 shares of common stock which are
not presently exerciseable.
(2) Includes 2,310,885 shares of common stock beneficially owned by Ms. Bell's
husband, Jacob R. Miles, III.
(3) Includes 5,000 shares of common stock issuable to independent directors
upon the consummation of this offering.
(4) Includes (a) warrants to purchase 703,124 shares of common stock
connection with a loan in an amount of up to $1,000,000 which are
presently exercisable, and (b) 150,000 shares of common stock owned by RMH
Consulting Corp., a consultant and an affiliate of The Elite Funding
Group. Pursuant to the consulting agreement, we are required to issue
additional shares of common stock in the event that the initial public
offering price is less than $9.00 per share.
(5) The address of Wilhelmina Artist Management LLC is 300 Park Avenue South,
New York, New York 10010.
(6) Includes warrants to purchase 250,000 shares of common stock, but does not
include warrants to purchase 800,000 shares of common stock which are not
presently exerciseable.
* Represents less than 1% of the applicable number of shares of common stock
outstanding.
37
<PAGE>
CERTAIN TRANSACTIONS
In November 1999, Jacob R. Miles, III, our Chairman, Chief Executive
Officer and majority stockholder entered into a deferred compensation agreement
with us which provides that Mr. Miles shall receive accrued salary in the amount
of $131,250, payable out of the net proceeds of this offering, which amount was
accrued from January 1, 1999 through September 30, 1999. As of December 31, 1999
we owed Mr. Miles approximately $11,000 for expenses he paid on our behalf which
has been recorded as a non-interest bearing loan.
In November 1999, we entered into a consulting agreement with RMH
Consulting Corp., an affiliate of The Elite Funding Group, a lender to us and a
principal stockholder of ours, to provide us with consulting services, including
assisting us with implementation of our business plans and strategies. We
believe that the terms of the consulting agreement are on terms at least as
favorable as those that could have been obtained from an unrelated third party.
See "Management -- Consulting Agreements."
In November 1999, e-commerce solutions subleased office space at 600 West
57th Street, New York, New York from MEI Associates, Inc., at a monthly rate of
$5,000 per month. Stanley Wolfson, a principal stockholder of ours, is an
affiliate of MEI Associates.
38
<PAGE>
DESCRIPTION OF SECURITIES
The following section should be read in conjunction with detailed
provisions of our certificate of incorporation and bylaws, copies of which have
been filed with our registration statement of which this prospectus forms a
part. Our capital stock is also governed by the provisions of applicable
Delaware law.
General
Our authorized capital stock consists of 30,000,000 shares of common
stock, $.01 par value and 3,000,000 shares of preferred stock, $.01 par value.
As of April 1, 2000, 4,210,000 shares of common stock were issued and
outstanding. As of the date of this prospectus, we have approximately 60 holders
of our common stock. No shares of preferred stock are outstanding.
Common stock
Each holder of common stock is entitled to one vote per share, either in
person or by proxy, on all matters that may be voted upon by the owners of our
shares at meetings of our stockholders. There is no provision for cumulative
voting with respect to the election of directors by the holders of common stock.
Therefore, the holders of more than 50% of our shares of outstanding common
stock can, if they choose to do so, elect all of our directors and approve
significant corporate transactions. In this event, the holders of the remaining
shares of common stock will not be able to elect any directors.
The holders of common stock:
o have equal rights to dividends from funds legally available therefor,
when and if declared by our board of directors;
o are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon liquidation, dissolution
or winding up of our affairs; and
o do not have preemptive rights, conversion rights, or redemption of
sinking fund provisions.
The rights, preferences and privileges of the holders of common stock may
be adversely affected by the rights of the holders of shares of any series of
preferred stock that we designate in the future.
Preferred stock
The board of directors is authorized, without stockholder approval, from
time to time to issue up to an aggregate of 3,000,000 shares of preferred stock
in one or more series. The board of directors can fix the rights, preferences
and privileges of the shares of each series and any qualifications, limitations
or restrictions. Issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third-party to
acquire, or of discouraging a third-party from attempting to acquire a majority
of our outstanding voting stock. We have no present plans to issue any shares of
preferred stock.
Outstanding options, warrants and contingent shares
As of the date of this prospectus, up to 3,287,850 shares of common stock
are issuable pursuant to outstanding options, warrants and contingent shares. Of
such options, warrants and contingent shares, excluding the 200,000 shares of
common stock reserved for issuance upon the exercise of warrants granted to the
underwriters:
o 675,000 shares of common stock are issuable at an exercise price of
$2.00 per share;
o 1,750,000 shares of common stock are issuable at an exercise price of
$1.00 per share;
o 310,000 shares of common stock are issuable at an exercise price of
equal to 110% of the initial public offering price;
o 517,850 shares of common stock are issuable at an exercise price equal
to the initial public offering price per share; and
o 35,000 shares of common stock are issuable upon achieving certain
performance criteria.
39
<PAGE>
These options and warrants generally have net exercise provisions under
which the holder may, in lieu of payment of the exercise price in cash,
surrender the option or warrant and receive a net amount of shares, based on the
fair market value of Urban Cool's common stock at the time of the exercise of
the warrant, after deducting the aggregate exercise price. These warrants expire
on dates ranging from July 2004 to November 2009.
Underwriters' warrants
We have agreed to issue to the underwriters, for a total of $20.00,
warrants to purchase an aggregate of 200,000 shares of common stock exercisable
for a period of four years commencing one year after the effective date of the
registration statement of which this prospectus is a part, at a price equal to
120% of the initial public offering price of the shares of common stock. The
underwriters' warrants contain anti-dilution provisions providing for automatic
adjustments of the exercise price and number of shares issuable on exercise
price and number of shares issuable on exercise of the underwriters' warrants
upon the occurrence of some events, including stock dividends, stock splits,
mergers, acquisitions and recapitalizations.
The underwriters' warrants contain demand and piggyback registration
rights relating to the issuance of 200,000 shares of common stock. For the life
of the underwriters' warrants, the underwriters will have the opportunity to
profit from a rise in the market price for the 200,000 shares of common stock.
The holders of the underwriters' warrants will have no voting, dividend or other
stockholder rights with respect to those warrants. The holders of shares of
common stock issued upon exercise of those warrants will have the voting,
dividend and other stockholder rights of holders of shares of common stock. The
underwriters' warrants are restricted from sale, transfer, assignment or
hypothecation for the one year period from the date of this prospectus, except
to officers or partners of the underwriters and members of the selling group
and/or their officers or partners.
Registration rights
In July through November, 1999, we completed the sale of 105 units at a
price of $10,000 per unit in a private financing transaction. Each unit in the
private financing consisted of a promissory note in the amount of $10,000, 1,000
shares of common stock and warrants to purchase 5,000 shares of common stock.
The holders of at least 50% of the shares of common stock and the shares of
common stock underlying the warrants issued in the private financing have the
right to demand the registration of their shares on one occasion and such
holders have "piggyback registration rights" commencing 12 months from the date
of this prospectus.
We entered into a loan agreement with The Elite Funding Group, Inc. which
provides for a loan in an amount of up to $1,000,000 at an interest rate of 10%
per annum, payable monthly. In connection with the loan, we issued to the lender
common stock purchase warrants for the purchase of up to 750,000 shares of
common stock at an as adjusted exercise price of $1.00 per share, subject to
adjustment. We have granted registration rights to the lender for the
registration of the shares of common stock underlying the warrants in this
offering, including demand registration rights, and certain additional
"piggy-back" registration rights. We have granted similar registration rights to
RMH Consulting Corp., a consultant who is an affiliate of the lender with
respect to 150,000 shares of common stock.
Security Capital and May Davis Group assisted us in procuring the
$1,000,000 loan from The Elite Funding Group and received warrants to purchase
40,000 shares of common stock and warrants to purchase 20,000 shares of common
stock, respectively.
Delaware law and certificate of incorporation and bylaw provisions
Urban Cool is subject to Section 203 of the Delaware General Corporation
Law regulating corporate takeovers. This section prevents Urban Cool from
engaging, under some circumstances, in a business combination, which includes a
merger or sale of more than 10% of its assets, with any interested stockholder,
defined as a stockholder who owns 15% or more of its outstanding voting stock,
as well as affiliates and associates of any such persons, for three years
following the date such stockholder became an interested stockholder unless:
40
<PAGE>
o the transaction in which the stockholder became an interested
stockholder is approved by the board of directors prior to the date the
interested stockholder attained that status;
o upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of Urban Cool's voting stock outstanding at the time the
transaction commenced, excluding shares owned by persons who are
directors or officers and shares owned by employee stock plans; or
o the business combination is approved by the board of directors and
authorized by the affirmative vote of at least two-thirds of the
outstanding voting stock not owned by the interested stockholder.
Some of the provision of our certificate of incorporation and bylaws could
discourage, delay or prevent an acquisition of Urban Cool at a premium price.
Our bylaws provide that any vacancy on the board of directors may be filled by a
majority of the directors then in office. Our bylaws provide that special
meetings of stockholders may be called only by a majority of the directors of
our board or the President or by at least 25% of the holders of shares of common
stock.
In addition, the certificate of incorporation also authorizes the board of
directors to issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to change control of Urban Cool.
Transfer agent
We intend to appoint Continental Stock Transfer & Trust Company as the
transfer agent and registrar for our shares of common stock.
41
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public market,
or the availability of shares for sale, could adversely affect the prevailing
market price of our common stock and our ability to raise capital through an
offering of equity securities.
Upon completion of this offering, we will have 6,225,000 shares of common
stock outstanding, assuming no exercise of outstanding options or warrants or
the underwriters' over-allotment option. After the offering, the 2,000,000
shares sold in this offering will be immediately tradeable without restriction
under the Securities Act, except for any shares purchased by an "affiliate" of
ours, as that term is defined in the Securities Act. Affiliates will be subject
to the resale limitations of Rule 144 under the Securities Act.
We issued the remaining 4,225,000 shares of common stock in private
transactions in reliance upon one or more exemptions contained in the Securities
Act. These shares will be deemed "restricted securities" as defined in Rule 144.
Of these restricted securities 2,602,692 shares have been held for more than one
year as of the date of this prospectus. Therefore, 2,602,692 of these shares
will be eligible for public sale beginning 90 days after the date of this
prospectus in accordance with the requirements of Rule 144, subject to the
lock-up agreements described below.
In general, under Rule 144, a stockholder, or stockholder whose shares are
aggregated, who has beneficially owned "restricted securities" for at least one
year will be entitled to sell an amount of shares within any three month period
equal to the greater of:
o 1% of the then outstanding shares of common stock; or
o the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which notice of the
sale is filed with the Commission, provided certain requirements are
satisfied.
In addition, our affiliates must comply with additional requirements of
Rule 144 in order to sell shares of common stock, including shares acquired by
affiliates in this offering. Under Rule 144, a stockholder who had not been our
affiliate at any time during the 90 days preceding a sale by him, would be
entitled to sell those shares without regard to the Rule 144 requirements if he
owned the restricted shares of common stock for a period of at least two years.
The foregoing summary of Rule 144 is not a complete description. Non-affiliates
may resell our securities issued under Rule 701 in reliance upon Rule 144
without having to comply with Rule 144's public information holding, volume and
notice requirements.
Substantially all of our stockholders, our warrant holders and our
officers and directors, have agreed to not directly or indirectly, offer, sell,
pledge, grant any option to purchase, or otherwise sell or dispose of any of our
shares for a period of at least 12 months after the offering without the prior
written consent of Nutmeg Securities or The American Stock Exchange, as the case
may be.
42
<PAGE>
PLAN OF DISTRIBUTION
The underwriters named below, for whom Kashner Davidson Securities Corp.
is acting as representative, have severally agreed, subject to the terms and
conditions contained in the underwriting agreement, to purchase from us, and we
have agreed to sell to the underwriters on a firm commitment basis, the
respective number of shares of common stock set forth opposite their names:
Number of
Underwriters Shares
------------ ---------
Kashner Davidson Securities Corp. .....................
Nutmeg Securities, Ltd. ...............................
Security Capital Trading, Inc. ........................
Total ............................................... 2,000,000
The underwriters are committed to purchase all the securities offered by
this prospectus, if any of the securities are purchased. The underwriting
agreement provides that the obligations of the several underwriters are subject
to the conditions specified in the underwriting agreement.
The representative has advised us that it initially proposes to offer the
common stock to the public at the public offering price set forth on the cover
page of this prospectus, and to certain dealer concessions not in excess of
$____ per share of common stock. The dealers may reallow a concession not in
excess of $____ per share of common stock to other dealers. After completion of
the offering, the public offering price, concessions and reallowances may be
changed by the representative. The representative has informed us that it does
not expect sales to discretionary accounts by the representative to exceed five
percent of the shares of common stock offered by us in this prospectus.
We have granted to the underwriters an over-allotment option, exercisable
during the 45-day period from the date of this prospectus, to purchase from us
up to an additional 300,000 shares of common stock at the initial public
offering price, less underwriting discounts and the non-accountable expense
allowance. This option may be exercised only for the purpose of covering
over-allotments, if any, incurred in the sale of the shares of common stock. To
the extent this option is exercised in whole or in part, each underwriter will
have a firm commitment, subject to some conditions, to purchase the number of
the additional shares of common stock proportionate to its initial commitment.
We have agreed to pay to the representative a non-accountable expense
allowance equal to three percent of the gross proceeds derived from the sale of
the shares of common stock underwritten, of which $70,000 has been paid to date.
We have agreed to indemnify the underwriters against some liabilities, including
liabilities under the Securities Act arising out of alleged untrue statements or
alleged omissions of material facts contained in the registration statement or
prospectus. We have also agreed to pay all expenses in connection with
qualifying the securities under the laws of those states the underwriter may
designate, including fees and expenses of counsel retained for such purposes by
the representative and the costs and disbursements in connection with qualifying
the offering with the National Association of Securities Dealers, Inc.
Substantially all of our stockholders, our warrant holders and our
officers and directors, have agreed to not directly or indirectly, offer, sell,
pledge, grant any option to purchase, or otherwise sell or dispose of any of our
shares for a period of at least 12 months after the offering without the prior
written consent of Nutmeg Securities, or The American Stock Exchange, as the
case may be. An appropriate legend shall be placed on the certificates
representing the securities. The representative has no general policy with
respect to the release of shares prior to the expiration of the lock-up period
and has no present intention to waive or modify any of these restrictions on the
sale of our securities.
Security Capital acted as the placement agent for the private financing in
July through November, 1999. We paid Security Capital a fee of $105,000, which
was equal to 10% of the aggregate purchase price of the units sold, a portion of
which was reallowed to a sub-placement agent, May Davis Group, and a
non-accountable expense allowance of $31,500, which was equal to 3% of the
aggregate purchase price of the units sold.
43
<PAGE>
Security Capital and May Davis Group also assisted us in procuring the
$1,000,000 loan with The Elite Funding Group, Inc. and received warrants to
purchase 40,000 shares of common stock and warrants to purchase 20,000 shares of
common stock at an exercise price equal to 110% of the initial public offering
price, respectively.
In connection with this offering, we have agreed to sell to the
underwriters, and/or their designees, for nominal consideration, five-year
underwriters' warrants to purchase up to 200,000 shares of our common stock. The
underwriters' warrants are initially exercisable at any time during a period of
four years beginning one year from the date of the prospectus at a price equal
to 120% of the initial public offering price per share. The shares of common
stock underlying the warrants are identical to those offered to the public. The
underwriters' warrants provide for adjustment in the number of securities
issuable upon their exercise as a result of certain subdivisions and
combinations of the common stock. The underwriters' warrants grant to the
holders rights of registration for the securities issuable upon exercise of the
warrants. In addition, the underwriters' warrants may not be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part, for a
period of one year from the date of the prospectus, except to officers of the
underwriters.
We have also granted to Nutmeg Securities, the right, for a period of five
years from the closing of the offering, to nominate a designee of the
representative for election to our board of directors. Our officers, directors
and principal stockholders have agreed to vote their shares in favor of this
designee.
In connection with this offering, certain underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the securities. The
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M, pursuant to which the persons may bid for or purchase
our common stock for the purpose of stabilizing their respective market prices.
The underwriters also may create a short position for the account of the
underwriters by selling more shares of common stock in connection with the
offering than they are committed to purchase from us. In that case they may
purchase shares of common stock in the open market following completion of the
offering to cover all or a portion of the short position. The underwriters may
also cover all or a portion of the short position, up to 300,000 shares of
common stock, by exercising the over-allotment option referred to above. In
addition, the representative may impose "penalty bids" under contractual
arrangements with the underwriters whereby it may reclaim from an underwriter,
or dealer participating in the offering, for the account of other underwriters,
the selling concession with respect to the shares of common stock that are
distributed in the offering but subsequently purchased for the account of the
underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the prices of the shares of common
stock at a level above that which might otherwise prevail in the open market.
None of the transactions described in this paragraph is required, and, if they
are undertaken, they may be discontinued at any time.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price of the common stock has
been determined by negotiation between us and the representative and does not
necessarily bear any relationship to our asset value, net worth or other
established criteria of value. The factors considered in these negotiations, in
addition to prevailing market conditions, included the history of and prospects
for the industry in which we compete, an assessment of our management, our
prospects, our capital structure and other factors as were deemed relevant.
The foregoing is a summary of the principal terms of the agreements
described above. Reference is made to a copy of each agreement that is filed as
an exhibit to the registration statement of which this prospectus is a part.
44
<PAGE>
LEGAL MATTERS
The validity of the common stock being offered in this prospectus will be
passed upon for us by Silverman, Collura & Chernis, P.C., New York, New York.
Gersten, Savage & Kaplowitz, LLP, New York, New York is acting as counsel for
the underwriters in connection with this offering.
EXPERTS
The financial statements of Urban Cool as of December 31, 1999 and 1998
and for the year ended December 31, 1999, for the period January 23, 1998
through December 31, 1998 and for the period January 23, 1998 through December
31, 1999 appearing in this prospectus and registration statement have been
audited by Richard A. Eisner & Company, LLP, independent auditors, as set forth
in their report thereon which contains an explanatory paragraph with respect to
the substantial doubt about our ability to continue as a going concern, as
discussed in Note A to the Financial Statements appearing in the registration
statement, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all the information set forth in the
registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the to the exhibits for a
complete statement of their terms and conditions. The registration statement and
other information may be read and copied at the Commission's Public Reference
Room at 450 Fifth Street N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, Suite 1300, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The
public may obtain information on the operation of the Public Reference Room by
calling the Commission at 1-800-SEC-0330. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the
Commission.
Upon effectiveness of the registration statement, we will be subject to
the reporting and other requirements of the Securities Exchange Act of 1934 and
we intend to furnish our stockholders annual reports containing financial
statements audited by our independent auditors and to make available quarterly
reports containing unaudited financial statements for each of the first three
quarters of each year.
We have applied for the listing of our common stock on The American
Stock Exchange under the symbol "UBN." After this offering is effective, you may
obtain certain information about us on The American Stock Exchange's Internet
site (http://www.Nasdaq-Amex.com).
45
<PAGE>
<TABLE>
<CAPTION>
URBAN COOL NETWORK, INC. and subsidiary
(a development stage company)
Contents
<S> <C>
Page
----
Independent auditors' report F-2
Consolidated balance sheets as of December 31, 1999 and 1998 F-3
Consolidated statements of operations for the year ended December 31, 1999, for
the period from January 23, 1998 (inception) through December 31, 1998, and
for the period from January 23, 1998 (inception) through December 31, 1999 F-4
Consolidated statements of changes in stockholders equity/(capital deficiency)
for the year ended December 31, 1999, and for the period from January 23, 1998
(inception) through December 31, 1998 F-5
Consolidated statements of cash flows for the year ended December 31, 1999, for
the period from January 23, 1998 (inception) through December 31, 1998, and
for the period from January 23, 1998 (inception) through December 31, 1999 F-6
Notes to financial statements F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Urban Cool Network, Inc.
Dallas, Texas
We have audited the accompanying consolidated balance sheets of Urban Cool
Network, Inc. and subsidiary (the "Company") (a development stage company) as of
December 31, 1999 and 1998 and the related consolidated statements of
operations, changes in stockholders' equity (capital deficiency) and cash flows
for the year ended December 31, 1999, for the period from January 23, 1998
(inception) through December 31, 1998 and for the period from January 23, 1998
(inception) through December 31, 1999. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the consolidated financial position of Urban Cool
Network, Inc. and subsidiary as of December 31, 1999 and 1998 and the
consolidated results of their operations and their consolidated cash flows for
the year ended December 31, 1999, for the period from January 23, 1998
(inception) through December 31, 1998 and for the period from January 23, 1998
(inception) through December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has experienced net losses, has a working
capital deficiency and is past due on vendor obligation that raises substantial
doubt about the ability of the Company to continue as a going concern.
Management's plans in regard to these matters are also described in Note A. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Richard A. Eisner & Company, LLP
New York, New York
April 13, 2000
with respect to the second paragraph of Note (H)
April 19, 2000
F-2
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS (Note H)
Current assets:
Cash .................................................................................. $ 118,000 $ 2,000
Other current assets .................................................................. 12,000
------------ ------------
Total current assets ................................................................ 130,000 2,000
------------ ------------
Computer equipment ....................................................................... 224,000 23,000
Website development costs ................................................................ 63,000 63,000
------------ ------------
287,000 86,000
Less accumulated depreciation and amortization ........................................... (42,000)
------------ ------------
245,000 86,000
------------ ------------
Software costs, net of amortization of $126,000 .......................................... 2,162,000
Debt issuance costs, net ................................................................. 481,000
Deferred offering costs .................................................................. 385,000
Other assets ............................................................................. 3,000
------------ ------------
3,031,000
------------ ------------
$ 3,406,000 $ 88,000
============ ============
LIABILITIES
Current liabilities:
Note payable -- vendor ................................................................ $ 400,000
Note payable -- line of credit (face value -- $500,000), net of
debt discount ....................................................................... 0
Accounts payable and accrued expenses ................................................. 430,000 $ 209,000
Payable to officer/stockholder ........................................................ 142,000 13,000
------------ ------------
Total current liabilities ........................................................... 972,000 222,000
============ ============
Notes payable (face value -- $1,050,000), net of debt discount ........................... 0
Minority interest ........................................................................ 0
Commitments and other matters
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Preferred stock -- authorized 3,000,000 shares, $.01 par value;
none outstanding
Common stock -- authorized 30,000,000 shares, $.01 par value; 3,630,000 and
2,121,475 shares outstanding at December 31, 1999
and 1998, respectively ................................................................ 36,000 21,000
Additional paid-in capital ............................................................... 22,477,000 173,000
Deficit accumulated during the development stage ......................................... (5,997,000) (328,000)
Unearned compensation .................................................................... (6,139,000)
Unamortized debt discount in excess of notes payable ..................................... (7,943,000)
------------ ------------
2,434,000 (134,000)
------------ ------------
$ 3,406,000 $ 88,000
============ ============
</TABLE>
See notes to financial statements
F-3
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Period From Period From
January 23, January 23, 1998
1998 (Inception) (Inception)
Year Ended Through Through
December 31, December 31, December 31,
1999 1998 1999
------------------------------------------------
<S> <C> <C> <C>
Revenues
----------- ---------- -----------
Costs and expenses:
Content costs for website ..................................... $ 421,000 $ 130,000 $ 551,000
General and administrative .................................... 2,481,000 198,000 2,679,000
Amortization of software costs ................................ 126,000 126,000
----------- ---------- -----------
Total costs and expenses ...................................... (3,028,000) (328,000) (3,356,000)
Amortization of debt discounts ................................ 2,482,000 2,482,000
Amortization of debt issuance costs ........................... 142,000 142,000
Interest and related costs .................................... 34,000 34,000
----------- ---------- -----------
Loss before income tax benefit and minority interest .......... (5,686,000) (328,000) (6,014,000)
Income tax benefit
----------- ---------- -----------
Loss before minority interest ................................. (5,686,000) (328,000) (6,014,000)
Loss of investee attributable to minority interest ............ (17,000) (17,000)
----------- ---------- -----------
Net loss/comprehensive loss ................................... $(5,669,000) $ (328,000) $(5,997,000)
=========== ========== ===========
Loss per share -- basic and diluted ........................... $ (1.98) $ (0.16)
=========== ==========
Weighted average number of shares outstanding --
basic and diluted .......................................... 2,858,559 2,066,082
=========== ==========
</TABLE>
See notes to financial statements
F-4
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Equity (Capital Deficiency)
Unamortized
Deficit Debt
Accumulated Discount
Common Stock Additional During the in Excess
------------------ Paid-in Unearned Development of Notes
Shares Amount Capital Compensation Stage Payable Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued to founder ......... 2,060,885 $ 20,000 $ (15,000) $ 5,000
Issuance of common stock
for cash ($.23 per share):
November ....................... 13,602 3,000 3,000
December ....................... 30,501 1,000 6,000 7,000
Issuance of common stock
for consulting services --
November ....................... 16,487 4,000 4,000
Value of services contributed by
an officer/stockholder ......... 175,000 175,000
Net loss/comprehensive loss for
the period from January 23, 1998
(inception) through
December 31, 1998 .............. $ (328,000) (328,000)
--------- -------- ------------ ------------ -----------
Balance -- December 31, 1998 ..... 2,121,475 21,000 173,000 (328,000) (134,000)
Issuance of common stock
for cash ($.24 per share):
March .......................... 637,844 6,000 149,000 155,000
June ........................... 8,245 2,000 2,000
July ........................... 82,436 1,000 19,000 20,000
Issuance of common stock and
warrants in private placements . 105,000 1,000 5,396,000 5,397,000
Issuance of common stock
for consulting services --
September ...................... 350,000 4,000 3,496,000 $ (3,500,000) --
Issuance of common stock
for consulting services --
October/November ............... 325,000 3,000 3,247,000 (3,250,000) --
Value of warrants issued
in connection with
loan agreement -- November ..... 6,942,000 6,942,000
Value of warrants issued re:
e-Commerce Solutions
Inc. -- November ............... 2,270,000 2,270,000
Compensatory options
granted to employee ............ 800,000 800,000
Amortization of
unearned compensation .......... 611,000 611,000
Unamortized debt discount
in excess of notes payable
and loan ....................... $(10,425,000) (10,425,000)
Amortization of debt discount .... 2,482,000 2,482,000
Share of minority interest
for investment in subsidiary:
Cash invested ................ (17,000) (17,000)
Net loss/comprehensive loss
for the year ended
December 31, 1999 .............. (5,669,000) (5,669,000)
--------- -------- ------------ ------------ ------------ ------------ -----------
Balance -- December 31, 1999 ..... 3,630,000 $ 36,000 $ 22,477,000 $ (6,139,000) $ (5,997,000) $ (7,943,000) $ 2,434,000
========= ======== ============ ============ ============ ============ ===========
</TABLE>
See notes to financial statements
F-5
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Period From Period From
January 23, 1998 January 23, 1998
(Inception) (Inception)
Year Ended Through Through
December 31, December 31, December 31,
1999 1998 1999
------------ --------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................................... $(5,669,000) $ (328,000) $(5,997,000)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Value of services contributed by an officer/
stockholder charged as compensation and
treated as additional paid-in capital ................................ 175,000 175,000
Depreciation and amortization .......................................... 42,000 42,000
Issuance of stock for services rendered ................................ 4,000 4,000
Amortization of unearned compensation .................................. 611,000 611,000
Issuance of options for services rendered .............................. 800,000 800,000
Amortization of software costs ......................................... 126,000 126,000
Amortization of debt discount and
issuance costs ...................................................... 2,624,000 2,624,000
Payable to officer/stockholder ......................................... 129,000 13,000 142,000
Loss of investee attributable to
minority interest .................................................... (17,000) (17,000)
Changes in:
Note payable -- vendor ............................................... 400,000 400,000
Accounts payable and accrued
expenses ........................................................... 221,000 209,000 430,000
Other current assets and other assets .................................. (15,000) (15,000)
----------- ----------- -----------
Net cash (used in) provided by
operating activities ............................................. (748,000) 73,000 (675,000)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of computer equipment and
software ................................................................. (219,000) (23,000) (242,000)
Costs of developing website and related
software ................................................................. (63,000) (63,000)
----------- ----------- -----------
Net cash used in investing
activities ....................................................... (219,000) (86,000) (305,000)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock ......................................... 177,000 15,000 192,000
Proceeds from private placement, net ....................................... 791,000 791,000
Proceeds from line of credit ............................................... 500,000 500,000
Deferred offering costs .................................................... (385,000) (385,000)
----------- ----------- -----------
Net cash provided by financing
activities ....................................................... 1,083,000 15,000 1,098,000
----------- ----------- -----------
Net increase in cash ......................................................... 116,000 2,000 118,000
Cash at beginning of period .................................................. 2,000
----------- ----------- -----------
Cash at end of period ........................................................ $ 118,000 $ 2,000 $ 118,000
=========== =========== ===========
Interest paid -- -- --
Income tax paid -- -- --
Supplemental disclosures of non-cash investing
and financing activity:
Value of common stock for consulting
services ................................................................. $ 6,750,000 $ 6,750,000
Value of common stock and warrants issued
in private placement ..................................................... $ 5,397,000 $ 5,397,000
Value of warrants issued in connection with
loan agreement ........................................................... $ 6,942,000 $ 6,942,000
Value of warrants issued to e-Commerce
Solutions, Inc. .......................................................... $ 2,270,000 $ 2,270,000
Minority interest for investment in subsidiary ............................. $ 17,000 $ 17,000
</TABLE>
See notes to financial statements
F-6
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
NOTE A -- THE COMPANY AND BASIS OF PRESENTATION
Urban Cool Network, Inc. (the "Company") was incorporated in Delaware in January
1998. The Company operates an online network that became operational in January
1999, and provides a forum for communications, information and electronic
commerce. The online network has 15 channels with original content including a
search engine for users. The Company intends to derive its revenue primarily
from sponsorship and advertising. The Company is in the development stage and
has not yet generated any revenue.
The Company's primary market is residents of inner city or urban areas. The
Company's strategy is to utilize its online network to reach its target market
of urban consumers and businesses that market their products to urban consumers.
The Company intends to utilize NetStands, which are PC-based kiosks, which will
be located in selected inner cities. The Company also intends to license
CyberCenters, which are central meeting areas that will contain between ten and
twenty computers, to urban nonprofit organizations.
As reflected in the accompanying financial statements, the Company has not
generated any revenues, has incurred substantial losses since inception and such
losses are expected to continue in the near future. As of December 31, 1999, the
Company had a working capital deficiency of $842,000 and deficit accumulated
during the development stage of $5,997,000. The Company is delinquent with
regard to notes payable issued to a vendor. These factors raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. The Company's continued existence is dependent on its ability
to obtain additional debt or equity financing.
The Company is attempting to raise additional financing through a proposed
public offering (see Note F). There is no assurance that the proposed financing
can be accomplished or that profitable operations can be achieved.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
[1] Principles of consolidation:
The consolidated financial statements include the accounts of Urban Cool
Network, Inc. and its majority owned subsidiary, e-Commerce Solutions,
Inc. (collectively, the "Company") (see Note 1).
[2] Purchased computer equipment and software:
Computer equipment and software are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over
their estimated useful lives of the assets which range from three to five
years.
[3] Website development costs:
In accordance with Statement of Position 98-1, costs of design, software
configuration, coding, installation to hardware and testing expenses
incurred during application development stage activities are capitalized.
Costs incurred during the preliminary software project stage activities
and post-implementation/operation stage activities are expensed. The
capitalized costs will be amortized using the straight-line method over an
estimated useful life of two years beginning when the website is ready for
its intended use.
F-7
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1999 and 1998
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[4] Income taxes:
The Company accounts for income taxes using the liability method. Deferred
income taxes are measured by applying enacted statutory rates to net
operating loss carryforwards and to the differences between the financial
reporting and tax bases of assets and liabilities. Deferred tax assets are
reduced, if necessary, by a valuation allowance for any tax benefits which
are not expected to be realized.
[5] Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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 those
estimates.
[6] Loss per common share:
Basic loss per share is calculated by dividing net loss by the weighted
average number of outstanding common shares during the period. No effect
has been given to potential issuances of common stock including
outstanding options and warrants in the diluted computation as their
effect would be antidilutive.
The supplemental basic and diluted loss per share for the year ended
December 31, 1999 would have been ($1.96) giving effect to 40,500 shares
that would need to be issued to raise the net proceeds to repay the debt
on consummation of the proposed initial public offering.
[7] Stock-based compensation:
The Company has adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The
provisions of SFAS No. 123 allow companies to either expense the estimated
fair value of stock options or to apply the intrinsic value method set
forth in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") but disclose the pro forma effects on net
income (loss) had the fair value of the options been expensed. The Company
has elected to apply APB 25 in accounting for its employee stock options.
NOTE C -- COMMITMENTS AND OTHER MATTERS
[1] Leases:
During 1999, the Company entered into operating lease agreements for its
CyberCenter Facility, and administrative offices expiring in March 2014
and March 2003, respectively. During November 1999, the Company's
subsidiary subleased office space from an affiliate of a principal
stockholder of the Company through, October 2002. As of December 31, 1999,
future monthly minimum rental payments under these leases are as follows:
Year Ending
September 30,
-------------
2000 ............................................... $ 90,000
2001 ............................................... 90,000
2002 ............................................... 86,000
2003 ............................................... 16,000
2004 ............................................... 12,000
2005 and thereafter ................................ 133,000
--------
$427,000
========
Rent expense amounted to approximately $20,000 for the year ended December 31,
1999.
F-8
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1999 and 1998
NOTE C -- COMMITMENTS AND OTHER MATTERS (CONTINUED)
[2] Employment agreements:
On July 1, 1999, the Company entered into a three-year employment
agreement with its Chief Executive Officer ("CEO") who is also a principal
stockholder. The agreement is automatically renewed on an annual basis for
an additional year unless terminated. The agreement provides for an annual
base salary of $175,000 and an incentive bonus and stock options to
purchase shares of common stock to be determined by the Board of
Directors.
In November 1999, the Company entered into employment agreements
commencing on the consummation of the proposed public offering with its
President and Chief Operating Officer, Chief Financial Officer ("CFO") and
Vice President of Technology and Internet services ("VP"). The agreements
are for a period of one year. The agreements provide for a total annual
base compensation aggregating $350,000 plus incentive bonuses to be
determined by the Board of Directors. The officers received options to
purchase an aggregate of 30,000 shares of common stock exerciseable at the
proposed public offering price expiring in November 2004. The Company's
financial statements do not reflect any compensation charge for these
conditional options granted. In addition, the VP received options to
purchase 100,000 shares of common stock at an exercise price of $2.00
expiring November 2004. In addition, in January 2000 the Company issued to
these officers, options to purchase 157,500 shares of common stock
exercisable for a period of five years at the proposed public offering
price.
The Company has also entered into a one year employment agreement with
Vice President of Celebrity Relations and Merchandising, contingent upon
consummation of the public offering. The agreement provides for an annual
salary of $125,000 plus a signing bonus of $35,000 effective October 1,
1999. For the year ended December 31, 1999 the Company has accrued $60,000
as compensation payable. The Company has also agreed to issue 35,000
shares of common stock to the employee upon obtaining agreements from up
to three celebrities to join the Company's advisory board.
[3] Consulting agreements:
In April 1999, the Company entered into an agreement with a marketing firm
whereby the Company has agreed to pay a fee based upon certain benchmarks
and to grant options to purchase 2,060 shares of restricted common stock
with the opening of each CyberCenter and 412 shares with the placement and
live operation of a CyberStation in a single location at an exercise price
of $0.24 per share. The agreement is in effect until terminated by either
party for cause. In connection therewith the Company will record a charge
equal to the fair value of the option on the opening of each CyberCenter
and operation of each CyberStation.
In September 1999, the Company entered into two consulting agreements each
for a period of three years. In connection with these agreements, the
Company issued unconditionally 150,000 and 200,000 shares of common stock
which are valued at $10.00 per share and will be amortized over a period
of three years. The consultants are to provide consulting services with
respect to marketing and mergers and acquisitions.
In October 1999, the Company issued unconditionally 175,000 shares of
common stock to a consultant to provide corporate development consulting
services over a period of two years which the Company valued at $10.00 per
share.
[4] Related party transactions:
The Company's CEO served without pay from inception through December 31,
1998. The Company, based on employment agreement effective July 1, 1999,
valued such services at $175,000 per year. In this connection, the Company
recognized a compensation expense and a credit to paid-in capital.
F-9
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1999 and 1998
NOTE C -- COMMITMENTS AND OTHER MATTERS (CONTINUED)
At December 31, 1999 the Company has accrued salary of $131,000 to the
CEO/stockholder and the CEO has agreed to defer the payment of such
salaries until the consummation of a proposed public offering which
results in a gross proceeds of at least $10,000,000. In addition from
inception through December 31, 1999, the CEO paid certain operating
expenses of $11,000 on behalf of the Company. These amounts have been
recorded as noninterest bearing loans with no fixed date of repayment.
The Company has received from the CEO the right to the domain name "urban
trends.com" for nominal consideration.
[5] Other commitment:
In January 2000, the Company entered into an agreement with a software
provider, for a period of one year. Under the agreement, the Company has
agreed to pay an aggregate of $437,000. The software provider has
developed a proprietary search engine which utilizes a question and answer
format. Pursuant to the agreement, the software provider will customize
its search engine for use by the Company.
NOTE D -- STOCKHOLDERS' EQUITY
[1] Stock split:
The Board of Directors approved a 8.24354 for one stock split effective in
July 1999. All information regarding shares of common stock have been
restated to give retroactive recognition to the stock split for all the
periods presented, including all references to number of shares and per
share amounts.
[2] Stock options:
In November 1999, the Board of Directors and the stockholders of the
Company approved a Stock Option Plan (the "1999 Plan") which provides for
the granting of options to purchase up to 500,000 shares of common stock,
pursuant to which key employees, directors and consultants are eligible to
receive incentive and/or nonqualified stock options. The exercise period
and price of options granted under the 1999 Plan are determined by the
Board of Directors. The exercise price for incentive stock options must
not be less than the fair market value of the shares of common stock on
the date of the grant, except that the exercise price of options granted
to a stockholder owning more than 10% of the outstanding capital stock may
not be less than 110% of the fair value of the common stock at date of
grant.
In November 1999, the Board of Directors and stockholders approved the
1999 Executive Stock Option Plan (the "Executive Plan") which provides for
the granting of up to 500,000 options to purchase shares of common stock
to the CEO of the Company. The Company has granted the entire 500,000
options to the CEO of the Company. Of these options, options to purchase
250,000 shares of common stock of the Company are exercisable immediately
for a period of five years at an exercise price equal to the proposed
public offering price. The balance of such options are exercisable for a
period of five years at an exercise price equal to 110% of the proposed
public offering price. Options to purchase 125,000 shares of common stock
are exercisable in each of the year 2001 and 2002 upon achieving gross
sales revenue of $17,500,000 and $25,000,000 respectively.
The Company has granted stock options to outside directors to purchase
30,000 shares of common stock, including options to purchase 10,000 shares
of common stock to the spouse of the CEO and principal stockholder,
contingent upon consummation of the proposed public offering. These
options are exercisable commencing 90 days after the consummation of the
proposed public offering at an exercise price equal to the proposed public
offering price expiring five years after the consummation of the proposed
public offering.
F-10
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1999 and 1998
NOTE D -- STOCKHOLDERS' EQUITY (CONTINUED)
[2] Stock options: (continued)
The following table summarizes information about stock options outstanding
at December 31, 1999:
Number of Weighted
Options Average
Granted Contractual Number of
Exercise and Life Options
Price Outstanding Remaining Exercisable
-------- ----------- ----------- -----------
Note(1) 60,000 5 years 60,000
Note(1) 250,000 5 years 250,000
$ 2.00 100,000 5 years 100,000
-------- --------
410,000 410,000
======== ========
Note(1): The exercise price is equal to the proposed public offering
price. The exercise price of options granted to a stockholder owning more
than 10% of the outstanding capital stock may not be less than 110% of the
fair value of the common stock at date of grant.
At December 31, 1999, the Company had available 440,000 options under the
Company's 1999 plan.
The Company has elected to continue to account for stock option grants in
accordance with APB 25 and related interpretations. Accordingly, no
compensation cost has been recognized for fixed options because the
exercise prices of the stock options on the date of grant equal the market
values of the Company's common stock.
Had the compensation costs for the plans been determined based upon the
fair value at the grant date consistent with SFAS No. 123, the Company's
net (loss) and net (loss) per share on a pro forma basis would have been
the amounts indicated below:
Year Ended
December 31,
1999
------------
Net (loss):
As reported ............................. $(5,669,000)
Pro forma ............................... (6,296,000)
Net (loss) per share:
As reported
Basic and diluted ..................... $(1.98)
Pro forma
Basic and diluted ..................... $(2.20)
The Company has not included potential common shares pro forma diluted
loss per share computation, since the result would be antidilutive.
The pro forma amounts may not be representative of future disclosures due
to, among other things: (i) the estimated fair value of stock option is
amortized over the vesting period and (ii) additional options may be
granted in future years.
The weighted average fair value at date of grant for unconditional options
granted during the year 1999, was $6.27 using the Black-Scholes
option-pricing model with the following assumptions:
Dividend yield ................................ 0.00%
Expected volatility ........................... .70
Risk-free interest rate ....................... 5.76%
Expected life in years ........................ 5
F-11
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1999 and 1998
NOTE D -- STOCKHOLDERS' EQUITY (CONTINUED)
[3] Warrants:
In connection with certain units sold in a private placement (see Note E)
the Company has issued warrants to purchase 525,000 shares of common
stock.
The above warrants are exercisable commencing January, 2000 at an exercise
price of $2.00 per share expiring five years from the issue date in 1999.
NOTE E -- PRIVATE PLACEMENT
In 1999, the Company sold 105 units, aggregating $1,050,000. Each unit consists
of a $10,000 promissory note, 1,000 shares of common stock and a warrant to
purchase 5,000 shares of common stock (see Note D[3]). The promissory notes bear
interest at 10% per annum and are due the earlier of 24 months from date of
issuance or the closing of the proposed initial public offering. The common
stock and warrants have been valued at $10.00 and $8.28, respectively, by using
the proposed public offering price and the application of the Black-Scholes
model and is being accounted for as debt discount which is being amortized over
the life of the loan. The aggregate value of the common stock and warrants is
calculated to be $5,397,000.
The Company incurred costs in connection with obtaining the financing of
approximately $259,000 which is amortized over the life of the loans. The
effective interest rate on the notes is 300% excluding debt issuance costs.
NOTE F -- PROPOSED PUBLIC OFFERING
The Company signed a letter of intent with an underwriter with respect to a
proposed public offering of shares of common stock. There is no assurance that
such offering will be consummated. The Company anticipates incurring substantial
expenses in connection with the proposed public offering which, if the offering
is not consummated, will be charged to expense. Upon consummation of the public
offering outside directors are to receive an aggregate of 15,000 shares of
common stock of the Company, including 5,000 shares of common stock to be issued
to the spouse of the CEO and principal stockholder.
NOTE G -- INCOME TAXES
At December 31, 1999, the Company had available federal net operating loss
carryforward to reduce future taxable income of approximately $2,327,000. The
net operating loss carryforwards expire in 2018 and 2019. The Company's ability
to utilize its net operating loss carryforwards may be subject to annual
limitations pursuant to Section 382 of the Internal Revenue Code if future
changes in ownership occur.
At December 31, 1999 and December 31, 1998, the Company has a deferred tax asset
of approximately $1,380,000 and $83,000, respectively, representing the benefits
of its net operating loss carryforwards and certain start up costs capitalized
for tax purposes. The Company has not recorded a benefit from its net operating
loss carryforward because realization of the benefit is uncertain and therefore
a valuation allowance has been fully provided against the deferred tax asset.
The difference between statutory rate of 40% and the Company's effective tax
rate of 0% is due to an increase in the valuation allowance of $1,297,000 and
$83,000 in 1999 and 1998, respectively.
F-12
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1999 and 1998
NOTE G -- INCOME TAXES (CONTINUED)
A reconciliation of income tax expense to amounts computed using federal
statutory rates is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Income tax benefit computed at federal statutory rate ............................ $2,266,000 $111,000
Nondeductible salary to officer (28,000)
Nondeductible amortization of discount on debt ................................... (833,000)
Nondeductible amortization of consulting fees .................................... (156,000)
Startup costs .................................................................... 20,000 (83,000)
---------- -------
1,297,000 0
Valuation allowance .............................................................. (1,297,000) 0
---------- -------
0 0
========== =======
The deferred tax assets are recorded as follows:
Year Ended December 31,
--------------------------
1999 1998
-------- --------
Loss carryforwards ............................................................... $ 930,000
Deferred startup costs ........................................................... 78,000 $ 83,000
Salary to officer/stockholder .................................................... 52,000
Options to employee .............................................................. 320,000
------------ ---------
1,380,000 83,000
Valuation allowance .............................................................. (1,380,000) (83,000)
------------ ---------
Net deferred tax assets .......................................................... 0 0
============ =========
</TABLE>
NOTE H -- NOTE PAYABLE/LOAN PAYABLE
In November 1999, the Company issued an unsecured note payable for $400,000 to
its website developer for accounts payable. The note bears interest at 18% per
annum, payable in monthly installments of $25,000 beginning December 1, 1999,
with the outstanding balance due at the earlier of a public offering of the
Company's securities resulting in gross proceeds of at least $10,000,000 or June
1, 2000. The Company failed to make monthly payments due on December 1, 1999
through April 1, 2000.
In November 1999, the Company entered into a loan agreement with a lender
pursuant to which the lender has agreed to loan advances up to $1,000,000. The
loan matures on the earlier of consummation of the proposed public offering or
May 18, 2000 (as amended) and bears interest at 10% per annum. In consideration
for the extension of the original due date, the Company has agreed to pay
$75,000 to the lender on the maturity date. In connection with the loan
agreement the Company issued to the lender warrants to purchase 750,000 shares
of common stock at an exercise price of $1.00 per share which has been valued at
$8.77 per warrant by application of the Black-Scholes model and will be treated
as debt discount and amortized over the term of the loan. The warrants are
exercisable by the lender at any time for a period of ten years. The aggregate
value of the warrant is calculated to be $6,578,000. The loan is secured by all
of the assets of the Company, including intangibles, intellectual property and
internet websites. Through December 1999, the Company drew down $500,000 under
the loan agreement. Through March 2000, the Company has $815,000 outstanding
under the loan agreement.
Under the loan agreement, the Company had agreed with the lender to use its best
efforts to convert the repayment of the loan balance into shares of common stock
of the Company in the proposed public offering at the proposed initial public
offering price. Subsequently the lender has agreed not to excercise such rights.
F-13
<PAGE>
URBAN COOL NETWORK, INC. and Subsidiary
(a development stage company)
Notes to Financial Statements (continued)
December 31, 1999 and 1998
NOTE H -- NOTE PAYABLE/LOAN PAYABLE (CONTINUED)
In November 1999, the Company entered into a consulting agreement with an
affiliate of the lender to implement its business plans and strategies for a
period of two years with a right to terminate by either party upon written
notice as of the end of the first year. Under the agreement, the Company will
pay a fee of $6,250 per month and the Company issued unconditionally 150,000
shares of common stock valued at $10.00 per share. The consultant will receive
additional shares if the offering price in the contemplated public offering is
$9.00 or less. In April 2000, the Company agreed to pay an additional consulting
fee of $75,000 on completion of the proposed public offering.
In connection with the loan agreement, the Company issued warrants to purchase
40,000 and 20,000 shares of common stock at an exercise price equal to 110% of
the initial public offering price each expiring in 2004 to brokerage firms. The
aggregate value of the warrants is calculated to be $364,000.
NOTE I -- INVESTMENT IN TECHNOLOGY
In November 1999, the Company entered into a shareholders' agreement with
e-commerce Solutions, Inc., ("ESI"), a corporation formed in November 1999 and
Stanley Wolfson ("SW") to acquire 66 2/3% of the common stock of ESI. SW
contributed certain intellectual property in exchange for his ownership in ESI.
ESI had no material operating activities and has had no other assets and
liabilities since inception. The intellectual property represents a computer
software platform engine in development that will attempt to create an ability
to mass produce e-commerce websites, manage and administer said sites. Under the
amended agreement, SW has the right to manage the affairs of ESI subject to the
Company's right to vote on certain shareholder matters. Under the agreements as
amended the Company has granted warrants to SW for purchase of up to 1,050,000
shares of common stock at an exercise price of $1.00 per share with respect to
1,000,000 shares of common stock and $2.00 per share with respect to 50,000
shares of common stock, each expiring on the fifth anniversary of the date of
issuance. The warrants to purchase 250,000 shares of common stock were
exercisable immediately and the balance of 800,000 warrants become exercisable
upon ESI achieving certain gross sales within 24 months of a capital
contribution by the Company aggregating $3,000,000. The Company accounted for
this asset purchase at the fair value of the warrants immediately exercisable
equal to $2,270,000. Such fair value is amortized over three years. The Company
will record an additional charge based on the fair value of the warrants upon
achieving the sales targets.
The Company has agreed to contribute $2,950,000 to ESI upon the completion of
the proposed public offering. In the event that the proposed public offering is
consummated and the Company fails to contribute $2,950,000 within three days
after the receipt of the net proceeds of the proposed public offering or if the
proposed public offering is not consummated on or before July 1, 2000, ESI will
have the right to cancel the shares of common stock issued to the Company and
will terminate the shareholders' agreement. This will also result in expensing
of unamortized portion of the capitalized software which at December 31, 1999
was $2,144,000.
ESI also entered into an employment agreement with SW for a period of three
years commencing November 1, 1999 at an annual salary of $175,000 per year and
plus an amount equal to 2% of the gross sales of ESI.
NOTE J -- SUBSEQUENT EVENT
In March 2000, the Company acquired all of the issued and outstanding shares of
WilhelminaUrbanCool.com ("WilhelminaUrbanCool"), a wholly owned subsidiary of
Wilhelmina Artist Management LLC ("LLC") for 580,000 shares of the Company's
common stock, which has been valued at $5,800,000 based on the proposed initial
public offering price.
WilhelminaUrbanCool was formed in February 2000 in order to license the
Wilhelmina trademark from the LLC. The license agreement provides for an initial
term of 25 years and successive five-year renewal options. Pursuant to the
license agreement, WilhelminaUrbanCool has been granted the licenses to utilize
the Wilhelmina trademark in connection with a website known as
WilhelminaUrbanCool.com. LLC has agreed to provide all head shots, photographs
and other materials which the subsidiary has the right to utilize for
self-promotion and to provide the Company with content for the
WilhelminaUrbanCool.com website.
F-14
<PAGE>
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any shares in any jurisdiction where it is unlawful. The information in this
prospectus is current only as of the date of this prospectus.
Urban Cool Network, Inc.
-----------------------
2,000,000 Shares of Common Stock
-----------------------
, 2000
-----------------------
Kashner Davidson Securities Corp.
Nutmeg Securities, Ltd.
Until , 2000 (25 days after the date of this prospectus), all
dealers that buy, sell or trade these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses (other than
underwriting commissions and discounts payable to the underwriters) payable by
Urban Cool in connection with the issuance and distribution of the securities
being registered. With the exception of the registration fee, the NASD filing
fee and The American Stock Exchange listing fees, all amounts shown are
estimates.
Registration fee .................................................. $ 11,101
The American Stock Exchange listing fees .......................... 32,500
NASD filing fee ................................................... 4,705
Printing and engraving expenses ................................... 125,000
Legal fees and expenses (other than Blue Sky) ..................... 450,000
Accounting fees and expenses ...................................... 240,000
Blue Sky fees and expenses (including legal and filing) ........... 25,000
Transfer agent fees and expenses .................................. 5,000
Miscellaneous expenses ............................................ 71,694
--------
Total ......................................................... $965,000
Item 14. Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation Law ("DGCL") permits, in
general, a Delaware corporation to indemnify any person made, or threatened to
be made, a party to an action or proceeding by reason of the fact that he or she
was a director or officer of the corporation, or served another entity in any
capacity at the request of the corporation, against any judgment, fines, amounts
paid in settlement and expenses, including attorney's fees actually and
reasonably incurred as a result of such action or proceeding, or any appeal
therein, if such person acted in good faith, for a purpose he or she reasonably
believed to be in, or, in the case of service for another entity, not opposed
to, the best interests of the corporation and, in criminal actions or
proceedings, in addition had no reasonable cause to believe that his or her
conduct was unlawful. Section 145(e) of the DGCL permits the corporation to pay
in advance of a final disposition of such action or proceeding the expenses
incurred in defending such action or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount as, and to the
extent, required by statute. Section 145(f) of the DGCL provides that the
indemnification and advancement of expense provisions contained in the DGCL
shall not be deemed exclusive of any rights to which a director or officer
seeking indemnification or advancement of expenses may be entitled.
Urban Cool's certificate of incorporation provides, in general, that we
shall indemnify, to the fullest extent permitted by Section 145 of the DGCL, any
and all persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities or other matters referred
to in, or covered by, said section. The certificate of incorporation also
provides that the indemnification provided for therein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to actions taken in his or her official capacity and as to
acts in another capacity while holding such office.
In accordance with that provision of the certificate of incorporation,
Urban Cool shall indemnify any officer or director (including officers and
directors serving another corporation, partnership, joint venture, trust, or
other enterprise in any capacity at Urban Cool's request) made, or threatened to
be made, a party to an action or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that he or she was
serving in any of those capacities against judgments, fines, amounts paid in
settlement and reasonable expenses (including attorney's fees) incurred as a
result of such action or proceeding. Indemnification would not be available if a
judgment or other final adjudication adverse to such director or officer
establishes that (i) his or
II-1
<PAGE>
her acts were committed in bad faith or were the result of active and deliberate
dishonesty or (ii) he or she personally gained in fact a financial profit or
other advantage to which he or she was not legally entitled.
The Form of Underwriting Agreement filed as Exhibit 1.1 hereto also
contains, among other things, provisions whereby the underwriters agree to
indemnify Urban Cool, each officer and director of Urban Cool who has signed the
registration statement, and each person who controls Urban Cool within the
meaning of Section 15 of the Securities Act, against any losses, liabilities,
claims or damages arising out of alleged untrue statements or alleged omissions
of material facts with respect to information furnished to Urban Cool by the
underwriters for use in the registration statement or prospectus.
The Underwriting Agreement also contains provisions whereby Urban Cool
agrees to indemnify the underwriters, each officer and director of the
underwriters, and each person who controls the underwriters within the meaning
of Section 15 of the Securities Act, against any losses, liabilities, claims or
damages arising out of alleged untrue statements or alleged omissions of
material facts contained in the registration statement or prospectus.
Urban Cool has been advised that it is the position of the Commission that
insofar as the indemnification provisions referenced above may be invoked to
disclaim liability for damages arising under the Securities Act, these
provisions are against public policy as expressed in the Securities Act and are,
therefore, unenforceable.
Item 26. Recent Sales of Unregistered Securities.
Unless otherwise noted, the sale of the securities were exempt from
registration under the Securities Act under Section 4(2) and/or Regulation D
promulgated thereunder. All such sales being made to sophisticated investors
and/or accredited investors who had access to information about Urban Cool and
were able to bear the risk of loss of their investment.
(1) On January 23, 1998, Jacob R. Miles was issued 2,040,276 shares of
common stock upon our formation under Section 4(2) of the Securities
Act.
(2) On November 4, 1998, Rosalind Bell was issued 4,122 shares of common
stock for a purchase price of $1,000 under Section 4(2) of the
Securities Act.
(3) On November 4, 1998, Bettye Bell was issued 412 shares of common
stock for an aggregate purchase price of $100 under Section 4(2) of
the Securities Act.
(4) On November 4, 1998 Rosalind Bell was issued 16,487 shares of common
stock for services rendered under Section 4(2) of the Securities
Act.
(5) On November 30, 1998, Omni Source Events was issued 8,244 shares of
common stock for an aggregate purchase price of $2,000 under Section
4(2) of the Securities Act.
(6) On November 30, 1998, Crystal R. Smith was issued 412 shares of
common stock for an aggregate purchase price of $100 under Section
4(2) of the Securities Act.
(7) On November 30, 1998, Jennifer L. Smith was issued 412 shares of
common stock for an aggregate purchase price of $100 under Section
4(2) of the Securities Act.
(8) On December 7, 1998, Robert A. and Jacqueline M. Smith were issued
1,649 shares of common stock for an aggregate purchase price of $400
under Section 4(2) of the Securities Act.
(9) On December 7, 1998, Karen Miles was issued 1,649 shares of common
stock for an aggregate purchase price of $400 under Section 4(2) of
the Securities Act.
(10) On December 7, 1998, Venture Partners was issued 4,122 shares of
common stock for an aggregate purchase price of $1,000 under Section
4(2) of the Securities Act.
(11) On December 7, 1998, James Hurley, Jr. was issued 20,609 shares of
common stock for an aggregate purchase price of $5,000 under Section
4(2) of the Securities Act.
(12) On November 4, 1998 Jacob R. Miles was issued 20,609 shares of
common stock for an aggregate purchase price of $5,000 under
Section 4(2) of the Securities Act.
II-2
<PAGE>
(13) On March 3, 1999, James and Gloria Austin were issued 164,871 shares
of common stock for an aggregate purchase price of $40,000 under
Section 4(2) of the Securities Act.
(14) On March 1, 1999, Geraldine Miles was issued 1,649 shares of common
stock for an aggregate purchase price of $400 under Section 4(2) of
the Securities Act.
(15) On December 7, 1998, Eva G. Miles was issued 824 shares of common
stock for an aggregate purchase price of $200 under Section 4(2) of
the Securities Act.
(16) On March 3, 1999, Gary Fargusson was issued 82,435 shares of common
stock for an aggregate purchase price of $20,000 under Section 4(2)
of the Securities Act.
(17) On March 3, 1999, the Brannon-Cottrell Group was issued 61,826
shares of common stock for an aggregate purchase price of $15,000
under Section 4(2) of the Securities Act.
(18) On March 9, 1999, Black Urban Investors of Arlington were issued
163,840 shares of common stock for an aggregate purchase price of
$39,750 under Section 4(2) of the Securities Act.
(19) On March 9, 1999, Teddy Bosey, Jr. was issued 41,218 shares of
common stock for an aggregate purchase price of $10,000 under
Section 4(2) of the Securities Act.
(20) On March 10, 1999, Monte E. Ford was issued 41,218 shares of common
stock for an aggregate purchase price of $10,000 under Section 4(2)
of the Securities Act.
(21) On March 10, 1999, Paul R. Martinez was issued 41,218 shares of
common stock for an aggregate purchase price of $10,000 under
Section 4(2) of the Securities Act.
(22) On March 4, 1999, Larry D. Whiting was issued 41,218 shares of
common stock for an aggregate purchase price of $10,000 under
Section 4(2) of the Securities Act.
(23) On April 3, 1999, Debra Perk Haynes and Frederick D. Haynes were
issued 8,244 shares of common stock for an aggregate purchase price
of $2,000 under Section 4(2) of the Securities Act.
(24) On July 1, 1999, Bertram Denson was issued 41,218 shares of common
stock for an aggregate purchase price of $10,000 under Section 4(2)
of the Securities Act.
(25) On July 1, 1999, H. Ron and Rita White were issued 41,218 shares of
common stock for an aggregate purchase price of $10,000 under
Section 4(2) of the Securities Act.
(26) On September 17, 1999, Upway Enterprises, Inc. was issued an
aggregate of 150,000 shares of common stock for consulting services
under Section 4(2) of the Securities Act.
(27) On September 19, 1999, Surrey Associates, Inc. was issued an
aggregate of 200,000 shares of common stock for consulting services
under Section 4(2) of the Securities Act.
(28) On October 31, 1999, Sea Breeze Associates, Inc. was issued an
aggregate of 175,000 shares of common stock for consulting services
under Section 4(2) of the Securities Act.
(29) As of November 1, 1999, RMH Consulting Corp. was issued an aggregate
of 150,000 shares of common stock for consulting services under
Section 4(2) of the Securities Act.
(30) In November, 1999 and March 2000, Stanley Wolfson was issued
warrants to purchase up to 1,050,000 shares of common stock in
connection with the acquisition of e-commerce Solutions, Inc under
Section 4(2) of the Securities Act.
(31) On November 23, 1999 we issued warrants to purchase 750,000 shares
of common stock to the Elite Funding Group, Inc. in connection with
a loan in the amount up to $1,000,000 under Section 4(2) of the
Securities Act.
(32) From July through November 1999, in connection with a private
financing transaction to accredited investors pursuant to Regulation
D, the Company sold 105 units at a price of $10,000 per unit to the
individuals listed below. Each unit in the private financing
consisted of a promissory note in the amount of $10,000, 1,000
shares of common stock and warrants to purchase 5,000 shares of
common stock. The warrants are exercisable at an exercise price of
$2.00 per share commencing January,
II-3
<PAGE>
2000 through November, 2004. The notes bear interest at the rate of
10% per annum and are payable on the earlier of 24 months from the
date of issuance or upon the closing of this offering.
Security Capital acted as the placement agent for the private
financing. We paid Security Capital a fee of $105,000, which was
equal to 10% of the aggregate purchase price of the units sold, a
portion of which was re-allowed to other registered broker-dealers,
and a non-accountable expense allowance of $31,500 which was equal
to 3% of the aggregate purchase price of the units sold.
<TABLE>
<CAPTION>
Number of
Date of Closing Name Units
- --------------- ------ ---------
<S> <C> <C>
July 21, 1999 Jeffrey E. Levine 20
July 21, 1999 Michael Kessler 5
July 21, 1999 Jay Konesey 10
October 12, 1999 Julius Smith Young, Jr. 15
October 12, 1999 Gerald Holland, Kathleen Holland, JTWROS 5
October 29, 1999 Charles P. Atkins 5
October 29, 1999 Bella Figura, LLC 3
October 29, 1999 Tom Hogan 3
October 29, 1999 Arnold Eisenstadt 2
October 29, 1999 Jeffrey George 2
October 29, 1999 Henry Volquardsen 2
October 29, 1999 Morton Mower 2
October 29, 1999 Jeffrey Hrutkay 2
October 29, 1999 John C. Kroening and Sherri L. Kroening 2
October 29, 1999 Keith M. Ganzer 1.5
October 29, 1999 Insurance Planning Consultants Pension Plan 1
October 29, 1999 Kenneth W. Forbes 1
October 29, 1999 International Premium Associates, Inc. 1
October 29, 1999 Fran Bader & Allan Bader 1
October 29, 1999 E.H. Tepe Co., Inc. 1
November 16, 1999 Sigma Services Corp. 2
November 16, 1999 Howard B. Culang 1.5
November 16, 1999 Russell P. Truitt 1
November 16, 1999 Rodney Grebe 1
November 16, 1999 Michael Spindel 2
November 16, 1999 Loni Z. Spurkeland 5
November 16, 1999 Lennart Dahlgren 2.5
November 23, 1999 Greg Tucker 3
November 23, 1999 Phelps Hoyt 2.5
Total 105
</TABLE>
(33) In March 2000 we issued 580,000 shares of common stock in connection
with the registration of WilhelminaUrbanCool.com Inc. to Wilhemina
Asset Management llc. under Section 4(2) of the Securities Act.
II-4
<PAGE>
Item 27. Exhibits.
The following documents (unless indicated) are filed herewith and made a
part of this Registration Statement.
<TABLE>
<CAPTION>
Number Description of Exhibit
- -------- ----------------------
<S> <C>
1.1 Form of Underwriting Agreement.(2)
3.1 Certificate of Incorporation.(1)
3.2 By-laws.(1)
4.1 Specimen Certificate of the Common Stock.
4.2 Form of Representative's Warrants.(2)
5.1 Opinion of Silverman, Collura & Chernis, P.C., counsel to Urban Cool.
10.1 Employment agreement dated November 22, 1999 between Urban Cool Network, Inc. and Jacob R. Miles, III.(1)
10.2 Employment agreement dated November 22, 1999 between Urban Cool Network, Inc. and Barry Levine.(1)
10.3 Employment agreement dated November 22, 1999 between Urban Cool Network, Inc. and Terrence B. Reddy.(1)
10.4 Employment agreement dated November 22, 1999 between Urban Cool Network, Inc. and Anthony Winston.(1)
10.5 Executive Stock Option Plan.(1)
10.6 1999 Stock Option Plan.(1)
10.7 Common Stock Purchase Warrant Agreement dated November 21, 1999 between Stanley Wolfson and Urban Cool Network, Inc.(1)
10.8 Shareholders' Agreement, dated November 21, 1999, between Urban Cool Network, Inc. and Stanley Wolfson.(1)
10.9 Sale of Technology Agreement, dated November 21, 1999, between e-commerce Solutions, Inc. and Stanley Wolfson.(1)
10.10 Employment agreement, dated November 21, 1999, between e-commerce Solutions, Inc. and Stanley Wolfson.(1)
10.11 Promissory Note, dated November 18, 1999, between Urban Cool Network, Inc. and Analysts International, Inc.(1)
10.12 Loan Agreement, dated November 23, 1999, between Urban Cool Network, Inc. and The Elite Funding Group, Inc.(1)
10.13 Subscription Agreement and Investment Representation, dated November 23, 1999, between Urban Cool Network, Inc.
and The Elite Funding Group, Inc.(1)
10.14 Common Stock Purchase Warrant Agreement dated November 23, 1999 between The Elite Funding Group, Inc. and
Urban Cool Network, Inc.(1)
10.15 Security Agreement, dated November 23, 1999, between The Elite Funding Group, Inc. and Urban Cool Network, Inc.(1)
10.16 Subscription Agreement and Investment Representation, dated as of November 1, 1999, between Urban Cool Network,
Inc. and RMH Consulting Group.(1)
10.17 Consulting agreement dated as of November 1, 1999 between Urban Cool Network, Inc. and RMH Consulting Corp.(1)
10.18 Consulting agreement dated September 17, 1999 between Urban Cool Network, Inc. and Upway Enterprises.(1)
10.19 Consulting agreement dated September 19, 1999 between Urban Cool Network, Inc. and Surrey Associates, Inc.(1)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Number Description of Exhibit
- -------- ----------------------
<S> <C>
10.20 Consulting agreement dated October 31, 1999 between Urban Cool Network, Inc. and Sea Breeze Associates, Inc.(1)
10.21 Letter Agreement between Urban Cool Network, Inc. and The Elite Funding Group, Inc.(1)
10.22 Letter of Intent, dated October 12, 1999, by Bloomberg, L.P. to Urban Cool Network, Inc.(1)
10.23 Network Access Agreement dated August 16, 1998 between Urban Cool Network, Inc. and Connect Ten LLC.(1)
10.24 Form of Common Stock Purchase Warrant Agreement between Urban Cool Network, Inc. and the investors in the
private financing transaction.(1)
10.25 Form of Promissory Note between Urban Cool Network, Inc. and the investors in the private financing
transaction.(1)
10.26 Form of Subscription Agreement and Investment Representation between Urban Cool Network, Inc. and the
investors in the private financing transaction.(1)
10.27 Sublease Agreement, dated August 13, 1999, between Urban Cool Network, Inc. and Focus Communications, Inc.(1)
10.28 Sublease Agreement and Rider, dated February 8, 1999, between Urban Cool Network, Inc. and Ecumenical
Community Development Organization.(1)
10.29 Deferred Compensation Agreement dated November 22, 1999 between Urban Cool Network, Inc. and Jacob R. Miles III.(1)
10.30 Alliance Partnering Agreement, dated as of December 30, 1999, between Urban Cool Network, Inc. and Akamai
Technologies, Inc.(1)
10.31 Letter of Agreement, dated January 6, 2000, between Urban Cool Network, Inc. and NaviSite, Inc.(1)
10.32 Memorandum of Understanding, dated as of November 29, 1999, between Urban Cool Network, Inc. and NatioNet Online.(1)
10.33 Amendment dated December 27, 1999, between Urban Cool Network Inc. and Stanley Wolfson to the Shareholder
Agreement, dated November 21, 1999, between Urban Cool Network Inc. and Stanley Wolfson.(1)
10.34 Ask Jeeves Question and Answer Service Agreement, dated January 10, 2000, between Urban Cool Network, Inc. and
Ask Jeeves, Inc.
10.35 Employment Agreement, by and between Urban Cool Network, Inc. and Sheila Creque.
10.36 First Amendment to Employment Agreement, dated April 13, 2000, by and between Urban Cool Network, Inc. and
Sheila Creque.
10.37 Second Amendment to Shareholders' Agreement, dated as of March 16, 2000, by and among Urban Cool Network, Inc., Stanley
Wolfson and e-Commerce Solutions, Inc.
10.38 Amended and Restated Warrant, dated March 30, 2000, between Stanley Wolfson and Urban Cool Network, Inc.
10.39 Amendment No. 3 to Consulting Agreement, dated April 17, 2000, between Urban Cool Network, Inc. and RMH
Consulting Corp.
10.40 Amendment No. 1 to Subscription Agreement, dated April 17, 2000, between Urban Cool Network, Inc. and RMH
Consulting Corp.
10.41 Amendment No. 1 to Warrant, dated April 17, 2000, between Urban Cool Network, Inc. and The Elite Funding Group, Inc.
10.42 Sublease Agreement, dated November 1, 1999, by and between e-Commerce Solutions, Inc. and MEI Associates, Inc.
10.43 Stock Purchase Agreement, dated March 22, 2000, by and among Urban Cool Network, Inc. and Wilhelmina Artist
Management, LLC.
10.44 License Agreement, dated March 22, 2000, by and between Wilhelmina Artist Management, LLC, and Urban Cool Network, Inc.
21.1 List of Subsidiaries.(1)
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Silverman, Collura & Chernis, P.C. (contained in Exhibit 5.1).
24.1 Power of Attorney (included on the signature page of this Registration Statement).(1)
</TABLE>
II-6
<PAGE>
Number Description of Exhibit
- -------- ----------------------
27.1 Financial Data Schedule
99.1 Consent to Identification as Director Nominee of Sir Brian Wolfson.(1)
- ----------
(1) Previously filed
(2) To be filed by amendment
Item 28. Undertakings.
1. Urban Cool hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment(s) to this Registration Statement:
(1) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(2) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
together, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing any increase or
decrease in the volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(3) To include any additional or changed 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;
(b) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering; and
(c) To provide to the underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(d) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
2. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Urban
Cool pursuant to the foregoing provisions, or otherwise, Urban Cool has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Urban Cool of expenses incurred or paid
by a director, officer or controlling person of Urban Cool 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, Urban
Cool 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 of 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.
3. Urban Cool will:
(a) For determining any liability under the Securities Act, 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 Urban Cool 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 declared it effective; and
(b) For purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<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 this Amendment No. 3 to Form S-1 and has
authorized this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, Texas on April
19, 2000.
URBAN COOL NETWORK,INC.
By: /s/ Jacob R. Miles, III
----------------------------------------
Jacob R. Miles, III
Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints JACOB R. MILES, III his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or either of them or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jacob R. Miles, III
- ------------------------------------- Chairman, Chief Executive Officer and Director April 19, 2000
Jacob R. Miles, III
/s/ Terrence B. Reddy
- ------------------------------------- President, Chief Operating Officer and Director April 19, 2000
Terrence B. Reddy
/s/ Barry M. Levine
- ------------------------------------- Chief Financial Officer and Treasurer April 19, 2000
Barry M. Levine (principal accounting officer)
/s/ Rosalind Bell
- ------------------------------------- Director April 19, 2000
Rosalind Bell
/s/ Rex Cumming
- ------------------------------------- Director April 19, 2000
Rex Cumming
</TABLE>
II-8
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Number Description of Exhibit
- ------ ----------------------
<S> <C>
1.1 Form of Underwriting Agreement.(2)
3.1 Certificate of Incorporation.(1)
3.2 By-laws.(1)
4.1 Specimen Certificate of the Common Stock.
4.2 Form of Representative's Warrants.(2)
5.1 Opinion of Silverman, Collura & Chernis, P.C., counsel to Urban Cool.
10.1 Employment agreement dated November 22, 1999 between Urban Cool Network, Inc. and Jacob R. Miles, III.(1)
10.2 Employment agreement dated November 22, 1999 between Urban Cool Network, Inc. and Barry Levine.(1)
10.3 Employment agreement dated November 22, 1999 between Urban Cool Network, Inc. and Terrence B. Reddy.(1)
10.4 Employment agreement dated November 22, 1999 between Urban Cool Network, Inc. and Anthony Winston.(1)
10.5 Executive Stock OptionPlan.(1)
10.6 1999 Stock Option Plan.(1)
10.7 Common Stock Purchase Warrant Agreement dated November 21, 1999 between Stanley Wolfson and Urban Cool Network, Inc.(1)
10.8 Shareholders' Agreement, dated November 21, 1999, between Urban Cool Network, Inc. and Stanley Wolfson.(1)
10.9 Sale of Technology Agreement, dated November 21, 1999, between e-commerce Solutions, Inc. and Stanley Wolfson.(1)
10.10 Employment agreement, dated November 21, 1999, between e-commerce Solutions, Inc. and Stanley Wolfson.(1)
10.11 Promissory Note, dated November 18, 1999, between Urban Cool Network, Inc. and Analysts International, Inc.(1)
10.12 Loan Agreement, dated November 23, 1999, between Urban Cool Network, Inc. and The Elite Funding Group, Inc.(1)
10.13 Subscription Agreement and Investment Representation, dated November 23, 1999, between Urban Cool Network, Inc.
and The Elite Funding Group, Inc.(1)
10.14 Common Stock Purchase Warrant Agreement dated November 23, 1999 between The Elite Funding Group, Inc. and
Urban Cool Network, Inc.(1)
10.15 Security Agreement, dated November 23, 1999, between The Elite Funding Group, Inc. and Urban Cool Network, Inc.(1)
10.16 Subscription Agreement and Investment Representation, dated as of November 1, 1999, between Urban Cool Network,
Inc. and RMH Consulting Group.(1)
10.17 Consulting agreement dated as of November 1, 1999 between Urban Cool Network, Inc. and RMH Consulting Corp.(1)
10.18 Consulting agreement dated September 17, 1999 between Urban Cool Network, Inc. and Upway Enterprises.(1)
10.19 Consulting agreement dated September 19, 1999 between Urban Cool Network, Inc. and Surrey Associates, Inc.(1)
10.20 Consulting agreement dated October 31, 1999 between Urban Cool Network, Inc. and Sea Breeze Associates, Inc.(1)
10.21 Letter Agreement between Urban Cool Network, Inc. and The Elite Funding Group, Inc.(1)
10.22 Letter of Intent, dated October 12, 1999, by Bloomberg, L.P. to Urban Cool Network, Inc.(1)
10.23 Network Access Agreement dated August 16, 1998 between Urban Cool Network, Inc. and Connect Ten LLC.(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Description of Exhibit
- ------ ----------------------
<S> <C>
10.24 Form of Common Stock Purchase Warrant Agreement between Urban Cool Network, Inc. and the investors in the
private financing transaction.(1)
10.25 Form of Promissory Note between Urban Cool Network, Inc. and the investors in the private financing transaction.(1)
10.26 Form of Subscription Agreement and Investment Representation between Urban Cool Network, Inc. and the
investors in the private financing transaction.(1)
10.27 Sublease Agreement, dated August 13, 1999, between Urban Cool Network, Inc. and Focus Communications, Inc.(1)
10.28 Sublease Agreement and Rider, dated February 8, 1999, between Urban Cool Network, Inc. and Ecumenical
Community Development Organization.(1)
10.29 Deferred Compensation Agreement dated November 22, 1999 between Urban Cool Network, Inc. and Jacob R. Miles III.(1)
10.30 Alliance Partnering Agreement, dated as of December 30, 1999, between Urban Cool Network, Inc. and Akamai
Technologies, Inc.(1)
10.31 Letter of Agreement, dated January 6, 2000, between Urban Cool Network, Inc. and NaviSite, Inc.(1)
10.32 Memorandum of Understanding, dated as of November 29, 1999, between Urban Cool Network, Inc. and NatioNet Online.(1)
10.33 Amendment dated December 27, 1999, between Urban Cool Network Inc. and Stanley Wolfson to the Shareholder
Agreement, dated November 21, 1999, between Urban Cool Network Inc. and Stanley Wolfson.(1)
10.34 Service Agreement dated January 10, 2000, between Urban Cool Network, Inc. and Ask Jeeves, Inc.
10.35 Employment Agreement, by and between Urban Cool Network, Inc. and Sheila Creque.
10.36 First Amendment to Employment Agreement, dated April 13, 2000, by and between Urban Cool Network, Inc. and
Sheila Creque.
10.37 Second Amendment to Shareholders' Agreement, dated as of March 16, 2000, by and among Urban Cool Network, Inc.,
Stanley Wolfson and e-Commerce Solutions, Inc.
10.38 Amended and Restated Warrant, dated March 30, 2000, between Stanley Wolfson and Urban Cool Network, Inc.
10.39 Amendment No. 3 to Consulting Agreement, dated April 17, 2000, between Urban Cool Network, Inc. and RMH
Consulting Corp.
10.40 Amendment No. 1 to Subscription Agreement, dated April 17, 2000, between Urban Cool Network, Inc. and RMH
Consulting Corp.
10.41 Amendment No. 1 to Warrant, dated April 17, 2000, between Urban Cool Network, Inc. and The Elite Funding Group, Inc.
10.42 Sublease Agreement, dated November 1, 1999, by and between e-Commerce Solutions, Inc. and MEI Associates, Inc.
10.43 Stock Purchase Agreement, dated March 22, 2000, by and among Urban Cool Network, Inc. and Wilhelmina Artist
Management, LLC.
10.44 License Agreement, dated March 22, 2000, by and between Wilhelmina Artist Management, LLC, and Urban Cool Network, Inc.
21.1 List of Subsidiaries.(1)
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Silverman, Collura & Chernis, P.C. (contained in Exhibit 5.1).
24.1 Power of Attorney (included on the signature page of this Registration Statement).(1)
27.1 Financial Data Schedule
99.1 Consent to Identification as Director Nominee of Sir Brian Wolfson.(1)
</TABLE>
- --------------
(1) Previously filed
(2) To be filed by amendment
Exhibit 4.1
[LOGO]
COMMON COMMON
NUMBER URBAN COOL NETWORK, INC. SHARES
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE
CUSIP 091703M 10 09
THIS CERTIFIES that
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.01 PER
SHARE, OF
Urban Cool Network, Inc. transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney, on surrender of this
certificate properly endorsed.
This certificate is not valid until countersigend and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
CERTIFICATE OF STOCK
Dated:
/s/ Barry Levine
COUNTERSIGNED AND REGISTERED: -----------------------
CONTINENTAL STOCK TRANSFER SECRETARY
& TRUST COMPANY
(NEW YORK, NEW YORK)
TRANSFER AGENT URBAN COOL NETWORK, INC.
AND REGISTRAR CORPORATE
---
SEAL /s/ Jacob R. Miles, III
DELAWARE -----------------------
CHAIRMAN
AUTHORIZED SIGNATURE
<PAGE>
The Corporation is authorized to issue more than one class or series of
stock. The Corporation will furnish without charge to each stockholder who
so requests a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such request may be made
to the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT-______Custodian_______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to
survivorship and not as tenants Minors
in common Act___________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares
- --------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
----------------------------------------------
Attorney
- ------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-----------------------
------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
- --------------------------------------------------------------------------------
THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17aD-15.
[LETTERHEAD OF SILVERMAN, COLLURA & CHERNIS, P.C.]
Exhibit 5.1
April 14, 2000
Urban Cool Network, Inc.
1401 Elm Street, Suite 1955
Dallas, Texas 75202
Attn: Jacob R. Miles, III, Chief Executive Officer
Re: Registration Statement on Form S-1, as amended (the "Registration
Statement") SEC File No. 333-92223
Gentlemen:
We refer to the public offering (the "Offering") of the following
securities (collectively, the "Securities") of Urban Cool Network., Inc., a
Delaware corporation (the "Company"), as described in the Registration Statement
on Form S-1:
o 2,300,000 shares of common stock of the Company, $.01 par value (the
"Common Stock");
In furnishing our opinion, we have examined copies of the Registration
Statement and the Exhibits thereto. We have conferred with officers of the
Company and have examined the originals or certified, conformed or photostatic
copies of such records of the Company, certificates of officers of the Company,
certificates of public officials, and such other documents as we have deemed
relevant and necessary under the circumstances as the basis of the opinion
expressed herein. In all such examinations, we have assumed the authenticity of
all documents submitted to us as originals or duplicate originals, the
conformity to original documents of all document copies, the authenticity of the
respective originals of such latter documents, and the correctness and
completeness of such certificates. Finally, we have obtained from officers of
the Company such assurances as we have considered necessary for the purposes of
this opinion.
Based upon and subject to the foregoing and such other matters of fact and
questions of law as we have deemed relevant in the circumstances, and in
reliance thereon, it is our opinion that, when and if (a) the Registration
Statement shall have become effective, as the same may hereafter be amended; and
(b) the Securities to be sold for the account of the Company for full and
adequate consideration as contemplated in the Registration Statement, then all
of the Securities, upon correct execution and delivery of proper certificates
therefor, will be duly authorized, validly issued and outstanding, fully paid
and nonassessable.
<PAGE>
SILVERMAN, COLLURA & CHERNIS, P.C.
Urban Cool Network, Inc.
April 14, 2000
Page 2
The undersigned hereby consents to the use of its name in the Registration
Statement and in the prospectus forming a part of the Registration Statement
(the "Prospectus"), to references to this opinion contained therein under the
caption of the Prospectus entitled "Legal Matters," and to the inclusion of this
opinion in the Exhibits to the Registration Statement.
We are members of the Bar of the State of New York and we do not express
herein any opinion as to any matters governed by any law other than the law of
the State of New York, the corporate law of the State of Delaware and the
Federal laws of the United States.
This opinion is limited to the matters herein and may not be relied upon
in any matter by any other person or used for any other purpose other than in
connection with the corporate authority for the issuance of the Securities
pursuant to and as contemplated by the Registration Statement.
Very truly yours,
SILVERMAN, COLLURA & CHERNIS, P.C.
Exhibit 10.34
ASK JEEVES QUESTION & ANSWER SERVICE AGREEMENT *_____
- --------------------------------------------------------------------------------
CUSTOMER ("Customer") as set Ask Jeeves, Inc. ("Ask Jeeves")
forth on Service Order
/s/ Jacob R. Miles, III /s/ Amy Slater
- ---------------------------- ------------------------
Signature Signature
Jacob R. Miles, III Amy Slater
- ---------------------------- ------------------------
Print Name Print Name
CEO General Counsel
- ---------------------------- ------------------------
Title Title
12/29/99 1/10/00
- ---------------------------- ------------------------
Date Date
This ASK JEEVES QUESTION & ANSWER SERVICE AGREEMENT is a master agreement
between Ask Jeeves and Customer which governs the use of the Question and Answer
Service by Customer and the performance of services by Ask Jeeves, (together
with the Service Order describing specifics of the Services to be rendered,
payments, the "Agreement").
1. Definitions.
1.1 "Answer Content" means the web contents for which Ask Jeeves will
develop and maintain a question & answer system. The initial Answer Content is
specified in the Statement of Work.
1.2 "Knowledgebase(s)" means the set(s) of proprietary Ask Jeeves data
files, developed and compiled by Ask Jeeves, that, when used in conjunction with
software delivered under the Service, allow web users access to online
information contained within the Answer Content using the question & answer
format.
1.3 "Service" includes the Ongoing Knowledgebase Services under Section
3.1 Knowledgebase(s), any software Ask Jeeves delivers for use with the services
rendered by Ask Jeeves, and other items that Ask Jeeves may deliver to Customer
from time to time under this Agreement. Unless otherwise specified in the Order
Form, the Service will be the English-language version.
1.4 "Site(s)" means the website(s) (or part of website(s) specified on the
Service Order on which Customer may make the Service available to users. The
Site includes co-branded (where both Customer and a third party prominently
brand) or framed versions of the Site but does not include any customized
version of the Site not primarily branded as a Customer site.
2. Knowledgebase Build Services.
2.1 Creation. Ask Jeeves will build the Knowledgebase(s) as set forth in
the Statement of Work, and deliver the completed Knowledgebases(s) to Customer.
2.2 Customer Assistance. Customer agrees to assist Ask Jeeves with the
creation of the Knowledgebase(s), including but not limited to (i) providing a
designated employee to act as liaison with Ask Jeeves for the build of the
Knowledebase(s), (ii) modifying the web content (e.g. adding location tags) in
order to maximize the efficacy of the Knowledgebase(s), (iii) providing access
to website content that will be referenced by the Knowledgebase(s), and (iv)
providing timely information about any planned changes to the content or
organization of the Site(s) that materially affects the development of the
Knowledgebase(s). Customer acknowledges that Ask Jeeves' timely delivery of the
Knowledgebase(s) is dependent on Customer's assistance.
2.3 License to Materials. Customer acknowledges that in order to perform
the Services Ask Jeeves may be required to have access to certain Customer
software, equipment, the Answer Content, and other material of Customer or
Customer's suppliers ("Customer Materials"). Customer grants to Ask Jeeves a
non-exclusive, non-transferable license to use the Customer Materials for this
purpose.
2.4 Changes to Creation Services Scope. If Customer desires to change the
Statement of Work, Customer will submit a written request to Ask Jeeves
detailing the proposed changes. Ask Jeeves will notify Customer of resource
availability, resulting cost, and schedule changes and whether Ask Jeeves has
the resources available to make these changes. If Ask Jeeves has adequate
resources to make the change it will so advise the Customer, and the amendments
will be made in writing to reflect the changes. If Customer and Ask Jeeves are
not able to agree to the proposed changes to the Statement of Work, it will
remain unchanged.
2.5 Content and Creation of Site. Unless otherwise specified on the
Service Order, Customer agrees that it shall be responsible for the creation of
all Customer Materials and all contents of the Site other than the Services.
3. Ongoing Knowledgebase Services.
3.1 Ongoing Knowledgebase Service Offering. Following delivery of the
Service under Section 2.1, and while Customer is current in its payments of the
Ongoing Knowledgebase Services fees listed on the Service Order, Ask Jeeves will
provide services to Customer under Ask Jeeves' then-current Ongoing
Knowledgebase Services Program for the Knowledgebases(s) created pursuant to the
Agreement. Ask Jeeves' current program provides the following services:
a. New Content Mapping. As Customer adds Answer Content to the Site,
Ask Jeeves will map questions to the new content
b. Ongoing Question Refinement. Based on and user use, Ask Jeeves
will refine the questions in the Knowledgebase to provide for improved relevance
of answers.
c. Analysis of Missing Content. Ask Jeeves will analyze areas of the
Answer Content for which answers to questions are not available and refine the
Knowledgebases.
d. Reports. Based on user logs delivered to Ask Jeeves by Customer under
Section 6, Ask Jeeves will generate standard reports setting forth end user
activity and make these
================================================================================
Ask Jeeves internet use only: signatures below are not from authorized
individuals and do not constitute acceptance of terms.
T&C Approvals: Production (Holtmann or Lomond):____ | Finance (Davis):____
| Legal (Jha or Slater):____
Internal approvals must be obtained by sales on hard copy prior to
Ask Jeeves signature.
================================================================================
QUESTION & ANSWER SERVICE AGREEMENT PAGE 1 CONFIDENTIAL
<PAGE>
reports available to Customer via the Ask Jeeves reporting extranet.
Ask Jeeves will provide up to the number of hours of Ongoing Knowledgebase
Services listed on the Service Order. Ask Jeeves may from time to time revise
its Ongoing Knowledgebase Services Program offerings at its discretion, provided
that Ask Jeeves will apply the changes equally to all program participants.
4. License to Ask Jeeves Service.
4.1 License. Subject to the terms of this Agreement, Ask Jeeves grants
Customer a limited, nonsublicensable, nontransferable, non-exclusive right to
use the Service solely to permit users of the Site(s) access to the software
portions of the Service on the Site(s). Customer may only make copies of the
Service (i) for installation and use on the Sites and (ii) backup copies of the
Service made incidentally to backing up the Sites. Customer must reproduce and
include the copyright notice and any other notices that appear on the Service,
including on the copy's media. Customer will only use the Service in the
Technical Environment described on the Service Order.
4.2 Restrictions. Customer will not, and will not allow any third party
to: (i) decompile, disassemble, or otherwise reverse engineer the Service by any
means whatsoever, (ii) provide, lease, lend, use for timesharing or service
bureau purposes or otherwise use the Service for or with a third party (except
as end users may use the Service over Customer's web site), (iii) modify the
Service or incorporate it into software, except to the extent that the Service
may be used on the Site in accordance with its documentation, (iv) disseminate
performance information or analysis relating to the Service; (v) use any portion
of the Service to create a competitive service, product or technology; or (vi)
enter into any arrangement with a third party to use the Service without
displaying the Site itself (such as querying the Site or displaying the answers
without taking the user to the Site). Customer may not use the Service for any
purpose or in any manner not expressly permitted in this agreement. Customer has
no right to receive any source code or design documentation relating to the
Service. If the laws of any applicable jurisdiction limit the enforceability of
these restrictions, they will be limited so that they prohibit the activity only
to the maximum extent permitted by law, and Customer agrees to negotiate in good
faith with Ask Jeeves the terms of a license prior to engaging in any of the
above activities.
4.3 Updates and Fixes. During the term of this Agreement Ask Jeeves will
provide bug fixes, software updates and enhancements to Customer under Ask
Jeeves' then-current Update Program. Customer acknowledges that the functioning
of the Service depends on Customer using the most current version of the
Service, and agrees to use the most current version of the Service delivered to
Customer under the Update Program. All bug fixes, updates and enhancements
provided will be Services for the purposes of this Agreement. Ask Jeeves'
current Update Program provides customers with bug fixes and performance
enhancements to the software portions of the Service; but does not include
platform extensions (such as product extensions to different hardware platforms
or different operating system platforms) or new functionality in new releases of
the Services; Ask Jeeves may from time to time revise its Update Program
offerings at its discretion, provided that Ask Jeeves will apply the changes
equally to all program participants.
5. Ownership. The Customer Materials are the property of Customer. Ask Jeeves
retains ownership of the Service and all copies and portions of the Service. All
rights not expressly granted under this Agreement are reserved by Ask Jeeves.
6. Payment and Records.
6.1 Payment. Customer agrees to pay Ask Jeeves the amounts and on the
schedule set forth on the Service Order.
6.2 Records and Audit. Each party agrees that it will maintain complete
records, including usage records of the Service and Knowledgebase, for a period
of two years. Each Party will have the right to examine the other party's
records or reports made under this Agreement from time to time to determine the
correctness of any report or payment made under this Agreement. If any
inspection shows that the other party underpaid the sums due, then the audited
party will immediately pay any deficiency with interest at a rate equal to the
lower of one and a half percent per month from the date due, or at such lower
rate as is the maximum rate permitted by applicable law. If any audit reveals an
underpayment of more than five percent of the correct amount of fees due
hereunder, the audit will be at the expense of the underpaying party.
6.3 User Logs. Customer agrees to provide log files generated from the
software portion of the Services to Ask Jeeves daily. Customer agrees that
failure to timely deliver the user logs will excuse Ask Jeeves from rendering
Ongoing Knowledgebase Services to the extent these Services utilize these logs.
7. Term and Termination. This Agreement will be effective for the term set forth
on the applicable Service Order. Following the expiration of this term this
Agreement will automatically renew for additional one year terms unless either
party gives the other party written notice that it elects not to renew at least
60 days prior to the expiration of a term. Ask Jeeves agrees that it will
negotiate in good faith and under its then-current pricing the terms of a
renewal of this Agreement, which will not be unreasonably withheld or delayed.
This Agreement will terminate automatically if either party fails to cure any
material breach of this Agreement within 30 days after the breach first occurs
(or immediately in the case of a breach of Section 4) Upon either any
termination for Customer's breach or any expiration, Customer will immediately
(i) cease all use of the Service and return or destroy all copies of the Service
and all portions thereof and so certify in writing to Ask Jeeves and (ii) pay
Ask Jeeves all amounts due under Section 6.1. Upon any termination for Ask
Jeeves' breach, Customer may continue to use the software portions of the
Service under the terms hereof for a period of time equal to the remainder of
the then-current term. Sections 1,5,6.2,7,8.5,9,10.2,11,15 and 16 will survive
any expiration or termination of this Agreement.
8. Limited Warranty and Disclaimer.
8.1 Development Warranty. Ask Jeeves will perform the development efforts
in a good and workmanlike manner.
8.2 Limited Warranty. Ask Jeeves warrants that for a period of 30 days
from Customer's receipt of the Service that the Service will materially conform
to Ask Jeeves' then-current published documentation for the Service. This
warranty covers only problems reported to Ask Jeeves during the 30 day period.
Ask Jeeves warrants that it has the right to provide the Service.
8.3 Year 2000 Compliance. Ask Jeeves warrants that it has made diligent
efforts to ensure that date calculations, including sorting data by date, will
neither cause an abnormal termination nor generate inconsistent results. The
foregoing warranty will not apply to output, results, errors, or abnormal
QUESTION & ANSWER SERVICE AGREEMENT PAGE 2 CONFIDENTIAL
<PAGE>
termination caused on whole or in part but (i) any functionality of the Service
not created by Ask Jeeves or use of the Service in combination with any other
service not created by Ask Jeeves, (ii) errors not attributable to date-specific
data, (iii) any modifications of the Service not made by Ask Jeeves, and (iv)
any data provided to the Service which does not specify the century or is
incorrect or ambiguous.
8.4 Sole Remedy. The sole and exclusive remedy for any breach of the
warranties in this Section 8 will be for Ask Jeeves to use commercially
reasonable efforts to promptly correct or replace the Service or re-perform the
development so that it complies with the terms of the warranties set forth
above.
8.5 Warranty Disclaimer. EXCEPT FOR THE WARRANTIES IN SECTIONS 8.1, 8.2
and 8.3, THE SERVICE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND AND ASK
JEEVES HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND OR NATURE,
WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, EXCEPT FOR THE EXPRESS WARRANTIES IN SECTIONS 8.1, 8.2 and
8.3, ASK JEEVES DOES NOT WARRANT OR REPRESENT THAT THE SERVICE WILL BE FREE FROM
BUGS OR THAT ITS USE WILL BE INITERRUPTED OR ERROR-FREE OR MAKE ANY OTHER
REPRESENTATIONS REGARDING THE UPTIME, USE OR THE RESULTS OF THE USE, OF THE
SERVICE OR WRITTEN MATERIALS IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, OR
OTHERWISE. Customer understands that Ask Jeeves is not responsible for and will
have no liability for hardware, software, or other items or any services
provided by any persons other than Ask Jeeves.
9. Limitations of Liability. ASK JEEVES WILL NOT BE LIABLE FOR ANY LOSS OF USE,
LOSS OF DATA, INTERRUPTION OF BUSINESS, DOWNTIME, LOST PROFITS, OR ANY INDIRECT,
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND REGARDLESS OF THE FORM
OF ACTION WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT PRODUCT
LIABILITY, OR OTHERWISE, EVEN IF ASK JEEVES HAS BEEN ADVISED OF THE POSSIBILTY
OF DAMAGES. IN NO EVENT WILL ASK JEEVES' LIABILITY TO CUSTOMER INDER THIS
AGREEMENT EXCEED PAYMENTS RECEIVED BY ASK JEEVES FROM CUSTOMER UNDER THIS
AGREEMENT WTHIN THE PRECEDING TWELVE MONTHS. THE EXISTENCE OF ONE OR MORE CLAIMS
WILL NOT ENLARGE THIS LIMIT. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS SECTION
IS AN ESSENTIAL ELEMENT OF THE AGREEMENT AND THAT IN ITS ABSENSE, THE ECONOMIC
TERMS OF THIS AGREEMENT WOULD BE SUBSTATNTIALLY DIFFERENT. THIS SECTION IS
SEVERABLE AND SHALL SURVIVE ANY TERMINATION OR EXPIRATION OF THIS AGREEMENT.
10. Indemnity.
10.1. Ask Jeeves Indemnity. Ask Jeeves agrees to indemnify, defend and
hold harmless Customer from and against any and all liabilities, damages, loss,
demands, fees, expenses, fines, penalties and direct costs (including attorneys'
fees) incurred by Customer and arising from any claims, suits, actions or
proceedings brought against Customer by any third party that alleges that the
Service infringes any U.S. patent, trademark or copyright of a third party
existing as of the effective date of this Agreement or misappropriates third
party any trade secret; provided that Customer provides Ask Jeeves (i) prompt
written notice of the existence of the claim, suit, action or proceeding, (ii)
sole control over the defense or settlement of the claim, and (iii) assistance
at Ask Jeeves' request to the extent reasonably necessary for the defense of the
claim or suit. Ask Jeeves will not indemnify Customer for any claims based on
(a) any non-Ask Jeeves intellectual property or Service incorporated in or
combined with the Service where in the absence of the incorporated item, the
Service would not have been infringing, (b) Service which has been altered or
modified by any other party other than Ask Jeeves where in the absence of the
alteration or modification the Service would not be infringing, and (c) any use
of an outmoded version of the Service for which Ask Jeeves has made available an
updated, revised or repaired version which is not infringing. The indemnity in
this Section 10.1 sets forth Ask Jeeves' sole and exclusive obligation and
Customer's sole and exclusive remedy for any claim of intellectual property
infringement or misappropriation.
10.2 Customer Indemnity. Customer agrees to indemnify, defend and hold
harmless Ask Jeeves from and against any and all liabilities, damages, loss,
demands, fees, expenses, fines, penalties and direct costs (including attorneys'
fees) incurred by Ask Jeeves and arising from any claims, suits, actions or
proceedings brought against Ask Jeeves by any third party arising out of the
content of the Site or alleging that all or any part of the Customer Materials
or the Site infringe any patent, copyright, trademark or other intellectual
property right of a third party or misappropriate any third party trade secret;
provided that Ask Jeeves provides Customer (i) prompt written notice of the
existence of the claim, suit, action or proceeding, (ii) sole control over the
defense or settlement of the claim, and (iii) assistance at Customer's request
to the extent reasonably necessary for the defense of the claim or suit Customer
will not indemnify Customer for any claims to the extent based on the Service as
it exists without combination with other materials. Customer agrees to indemnify
and defend Ask Jeeves from and against any claims of injury arising from Ask
Jeeves' work on Customer's premises.
10.3 Mitigation. Upon notice of any claim of infringement or upon
reasonable belief of the likelihood of such a claim, an indemnifying party under
this Section 10 will have the right, as its option, (i) to obtain the rights to
continued use of the allegedly infringing item, (ii) substitute other suitable,
functionally-equivalent, non-infringing items, (iii) replace or modify the
allegedly infringing item or its design so that it is no longer infringing.
11. Confidentiality. In the course of performing this Agreement, the parties may
disclose to each other information identified as confidential at the time of
disclosure ("Confidential Information"), including information about their
technology and businesses. The terms of this Agreement are Confidential
Information of Ask Jeeves, subject to requirements for government authority
disclosure set forth below. Customer acknowledges that the user logs will
contain certain Ask Jeeves Confidential Information (such as payments due) and
agrees not to disclose user logs to third parties. All Confidential Information
will remain the sole property of the disclosing party, and the receiving party
will have no interest in or rights with respect to it except as expressly set
forth in this Agreement. Each party agrees to maintain all Confidential
Information of the other party in
QUESTION & ANSWER SERVICE AGREEMENT PAGE 3 CONFIDENTIAL
<PAGE>
confidences and further agrees to take all reasonable precautions to prevent any
unauthorized disclosure of the information. This restriction on disclosure will
not apply with respect to any information which (a) becomes generally known or
publicly available through no act or failure to act on the part of the receiving
party; (b) is known by the receiving party at the time of receiving the
information as evidenced by its records; (c) is hereafter furnished to the
receiving party by a third party, as a matter of right and without restriction
on disclosure; or (d) is delivered to Ask Jeeves by Customer for placement on
the Service during the development of the Service. A party may disclose
Confidential Information to the extent required by law (for example, as this
Agreement may be required to be filed as a material agreement with the SEC) or
government order, provided that it notifies the other party promptly and informs
the requesting entity of the confidential nature of the information. If Customer
is required to file this Agreement as a material agreement, it shall request
redaction of the price terms hereof. This Section 11 will survive any
termination of the Agreement for a period of five years.
12. No Export. Customer acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the software portion of the Services. Customer
agrees that it will not export or re-export the software from the United States
or the country originally shipped to by Ask Jeeves in any form, without the
appropriate United States and foreign governmental licenses. Customer agrees
that its obligations pursuant to this section will survive and continue after
any termination or expiration of rights under this Agreement.
13. Publicity and Branding. Customer agrees to the branding and press release
terms of the Branding Schedule attached to the Service Order Form. Subject to
the terms and conditions of this Agreement, Ask Jeeves grants Customer a
non-exclusive, non-transferable license to use the Ask Jeeves marks and logos as
set forth in the Branding Schedule on the Site solely in connection with the
Service.
14. Assignment. This Agreement is assignable by Customer only in connection with
an assignment of all assets relating to the Site and if the assignee agrees in
writing to be bound by the terms of this Agreement. Ask Jeeves may assign this
agreement in connection with the sale of all or substantially all of its assets
relating to the Services. All other assignments are without effect and shall be
void.
15. Governing Law. This Agreement will be deemed to have been made in, and will
be construed pursuant to the laws of the State of California and the United
States without regard to conflicts of laws provisions thereof and without regard
to the United Nations Convention on Contracts for the International Sale of
Goods. Any suit or proceeding arising out of or relating to this Agreement will
be commenced in a federal court in the Northern District of California or in
state court in Alameda County, California, and each party irrevocably submits to
the jurisdiction and venue of these courts.
16. Miscellaneous. Both parties recognize and agree that there is no adequate
remedy at law for a breach of this agreement that such a breach would
irreparably harm the other party, and that each party is entitled to seek
equitable relief in additional to any other remedies available at law. Each
party is an independent contractor of the other and neither is an employee,
agent, partner or joint venturer of the other. Neither party will make any
commitment, by contract or otherwise, binding upon the other or represent that
it has any authority to do so. Any notice, report, approval or consent required
or permitted under this agreement will be in writing to the address specified in
the Service Order, Any waiver by either party of any breach of this Agreement,
whether express or implied, will not constitute a waiver of any other or
subsequent breach. No provision of the Agreement will be waived by any act,
omission or knowledge of a party or its agents or employees except by an
instrument in writing expressly waiving the provision and signed by a duly
authorized officer of the waiving party. Any claim by Customer of deficient
performance of the Services must be brought within one year of the date the
allegedly deficient Service was delivered. No handwritten markings changing
terms of this Agreement will be effective, and are rejected by Ask Jeeves,
unless the change is expressly noted as accepted by both parties by signature in
the margin next to the change. If any provision of this Agreement is adjudged by
any court of competent jurisdiction to be unenforceable or invalid, that
provision will be limited or eliminated to the minimum extent necessary so that
this Agreement will otherwise remain in full force and effect and enforceable.
The headings contained in this Agreement are for reference purposes only and
will not affect in any way the meaning or interpretation of this Agreement. The
parties agree that this Agreement is the complete and exclusive statement of the
mutual understanding of the parties, and supercedes and cancels all previous
written and oral agreements and communications relating to the subject matter of
this Agreement.
QUESTION & ANSWER SERVICE AGREEMENT PAGE 4 CONFIDENTIAL
<PAGE>
Addendum to the Order Form Agreement between
UrbanCool.Network.com
And
Ask Jeeves, Inc.
The order form dated December 29, 1999 shall be amended to read the following
Initial payment of $80,000 for the build shall be paid as follows
$15,000 upon invoice
$65,000 due on or before February 29, 2000.
Upon completion of this agreement, UrbanCool.Network.com and Ask Jeeves, Inc.
will work to establish a referral program for UrbanCool.Network.com to receive
referrals fees of not less that 5% and up to 10% for helping to create
additional corporate accounts for Ask Jeeves in perpetuity of contractual
relationship.
Urban Cool Network has the right to use any character of its choice throughout
its website and marketing relationships at no additional charge for development
or use.
Urban Cool Network, Inc. Ask Jeeves, Inc.
/s/ Jacob R. Miles, III /s/ Amy Slater
- ---------------------------------- ----------------------------------
Signature of Authorized Individual Signature of Authorized Individual
12/29/99 1/10/00
- ---------------------------------- ----------------------------------
Date Date
Exhibit 10.35
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made and entered into as of this 17th day of December, 1999
between Urban Cool Network, Inc., a Delaware corporation (the "Corporation")
having an address at 1401 Elm Street, Dallas, Texas 75202 and Sheila Creque (the
"Executive"), residing at 1 Park Lane, Mount Vernon, New York 10552.
W I T N E S S E T H:
WHEREAS, the Company and the Executive desire to set forth the terms of
Executive's employment with the Company, pursuant to the terms and conditions
hereof.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree with each other as follows:
1. Term of Employment. The Corporation agrees to and does hereby employ
Executive, and Executive agrees to and does hereby accept employment by the
Corporation, as the Vice President of Celebrity Relations and Merchandising of
the Corporation, subject to the supervision and direction of its Chief Executive
Officer and its Board of Directors, for the one (1) year period commencing on
the consummation of the initial public offering of the Corporation's securities
(the "Term").
2. Duties of Executive. Executive shall devote such time, attention and
energy to the affairs of Corporation as shall be reasonably required to perform
her duties hereunder, and, in pursuance of the policies and directions of the
CEO and Board of Directors, Executive shall use her best efforts to promote the
business and affairs of the Corporation.
<PAGE>
3. Base Compensation.
(a) In consideration of the Executive's services pursuant to this
Agreement, Corporation shall pay to Executive, during the period of Executive's
employment under this Agreement (the "Base Compensation"), a salary at the rate
of Seventy Five Thousand Dollars ($75,000) per year. The Base Compensation shall
be payable in equal installments, in accordance with the Corporation's customary
procedures for executive employees, subject to applicable tax and payroll
deductions.
(b) Commission: The Corporation will pay Executive 10% of gross
sales less returns and discounts of merchandise related to co-developed and/or
managed by Executive. On a quarterly basis Corporation will provide Executive
with monthly certified sales reports of these activities.
4. Incentive Compensation.
(a) Provided Executive has duly performed her obligations pursuant
to this Agreement, Executive shall be eligible to receive, as additional
compensation for the services to be rendered by Executive under this Agreement,
incentive compensation. The amount of such incentive compensation, if any, shall
be determined by the Board of Directors in its sole discretion based on the
Executive's performance and contributions to the Corporation's success.
(b) Provided Executive's employment continues during the term hereof
and she is in good standing with the Company, Executive shall be eligible to
receive, as additional compensation pursuant to a separate option agreement for
the services to be rendered by Executive under this Agreement, 25,000 options to
purchase shares of the Company's common stock pursuant to the Company's 1999
Stock Option Plan. Such options shall vest immediately upon the consummation of
the IPO.
5. Other Benefits.
(a) During the term of this Agreement the Executive shall be
entitled to participate in any benefit plans adopted by the Corporation for the
general and overall benefit of all employees and/or for key executives of the
Corporation such as health care, life insurance, disability, stock option plans,
tax, legal and financial planning services, pension, profit sharing and savings.
(b) During the term of this agreement, Executive shall be entitled
to a monthly car allowance in the amount of $400.
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<PAGE>
6. Vacation. Executive shall be entitled to a fully paid vacation of three
(3) weeks per calendar year, which vacation shall be scheduled at such time or
times as the Corporation in consultation with Executive may reasonably
determine.
7. Expenses. The Corporation shall pay or reimburse Executive for all
reasonable and necessary expenses incurred by her in connection with her duties
hereunder, upon submission by Executive to the Corporation of such reasonable
evidence of such expenses as the Corporation may require.
8. Insurance. The Corporation may from time to time apply for policies of
life, health and accident insurance or disability insurance upon the Executive
in such amounts as the Corporation deems appropriate. The Executive agrees to
aid the Corporation in procuring such insurance, including submitting to a
physical examination, if required, and completing any and all forms required for
application for any insurance policy.
9. Disclosure of Information. The Executive shall, during her employment
under this Agreement and thereafter, keep confidential and refrain from
disclosing to any unauthorized persons all data and information relating to the
respective businesses of the Corporation or any of its subsidiaries.
10. Intellectual Property Rights.
(a) The Executive shall promptly disclose to the Corporation in
writing, any and all charts, layouts, maps, inventions, improvements,
techniques, markets, sales and advertising plans, processes, concepts and plans,
whether or not copyrightable or patentable, secret processes and "know-how,"
conceived by the Executive during the term of her employment by the Corporation
(the "Executive's Work Product"), whether alone or with others and
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<PAGE>
whether during regular working hours and through the use of facilities and
property of the Corporation or otherwise, which directly relates to the present
business of the Corporation. Upon the Corporation's request at any time or from
time to time during the Term of the Executive's employment, the Executive shall
(i) deliver to the Corporation copies of the Executive's Work Product that may
be in her possession or otherwise available to her, and (ii) execute and deliver
to the Corporation such applications, assignments and other documents as it may
reasonably require in order to apply for and obtain copyrights or patents in the
United States of America and other countries with respect to any Executive's
Work Product that it deems to be copyrightable or patentable, and/or otherwise
to vest in itself full title thereto.
(b) All documents that pertain to the Corporation, including but not
limited to the Executive's Work Product, shall be the sole and exclusive
property of the Corporation. Upon the termination of the Executive's employment,
all such documents that may be in her possession or otherwise available to her
or shall thereafter come into her possession or control shall be promptly
returned to the Corporation without the necessity of a request therefor.
11. Non-Competition Covenant.
(a) The Executive shall not, during her employment by the
Corporation, engage, directly or indirectly, in any business competitive with
the business of the Corporation without the consent of the Board of Directors.
(b) For a period of one (1) year after the termination of the
Executive's employment hereunder (the "Non-Competition Period"), for any reason
whatsoever, other than a termination by the Corporation without good cause, the
Executive shall not (i) engage, directly or indirectly, as an officer, director,
shareholder, owner, partner, joint venturer or in a managerial capacity, whether
as an employee, independent contractor, consultant or advisor, or as a sales
-4-
<PAGE>
representative in any business related to Internet products and services, and
related activities throughout the United States (the "Territory"), without the
permission of the Board of Directors, which permission shall not be unreasonably
withheld or delayed or (ii) induce or actively attempt to influence any other
employee or consultant of the Corporation to terminate his or her employment or
consultancy with the Corporation. Nothing herein contained shall be deemed to
prevent ownership by Executive and her associates (as said term is defined in
regulation 14(A) promulgated under the Securities Exchange Act of 1934 as in
effect on the date hereof), collectively, of not more than 5% of the outstanding
capital stock of a corporation listed on a national securities exchange.
(c) (i) The parties to this Agreement consider the restrictions
contained herein reasonable as to the duration of the Non-Competition Period and
the extent of the Territory. However, if the duration of the Non-Competition
Period or the extent of the Territory herein specified should be judged
unreasonable by any Court or arbitration proceeding, the validity and effect of
the remaining provisions of this Agreement shall not be affected thereby and,
the duration of the Non-Competition Period shall be reduced by such number of
months and/or the area of the Territory shall be reduced such that, the
Territory and the Non-Competition Period shall be deemed reasonable so that the
foregoing covenant not to compete may be enforced.
(ii) Executive agrees and recognizes that in the event of a
breach or threatened breach by Executive of the provisions of the foregoing
covenants, the Corporation may suffer irreparable harm, and that money damages
may not be an adequate remedy. Therefore, the Corporation shall be entitled as a
matter of right to specific performance of the covenants of Executive contained
herein by way of temporary or permanent injunctive relief in a Court of
competent jurisdiction.
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<PAGE>
12. Termination. This Agreement and Executive's employment may be
terminated in any one of the followings ways:
(a) Death. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.
(b) Disability. If, as a result of incapacity due to physical or
mental illness or injury, Executive shall have been absent from her full-time
duties hereunder for three (3) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
three (3) month period, but which shall not be effective earlier than the last
day of such three (3) month period), the Corporation may terminate Executive's
employment hereunder provided Executive is unable to resume her full-time duties
at the conclusion of such notice period. Also, Executive may terminate this
employment hereunder if her health should become impaired to an extent that
makes the continued performance of her duties hereunder hazardous to her
physical or mental health or her life, provided that Executive shall have
furnished the Corporation with a written statement from a qualified doctor to
such effect and provided, further, that, at the Corporation's request made
within thirty (30) days of the date of such written statement, Executive shall
submit to an examination by a doctor selected by the Corporation who is
reasonably acceptable to Executive or Executive's doctor and such doctor shall
have concurred in the conclusion of Executive's doctor. In the event this
Agreement is terminated as a result of Executive's disability, Executive shall
(i) receive from the Company, in a lump-sum payment due within thirty (30) days
of the effective date of termination, the base salary for the balance of the
Term and (ii) the Corporation shall make the insurance premium payments
contemplated by COBRA for a period of eighteen (18) months after such
termination.
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<PAGE>
(c) Good Cause. The Corporation may terminate this Agreement ten
(10) days after written notice to Executive for "Good Cause," which shall mean
any one or more of the following: (1) Executive's willful, material and
irreparable breach of this Agreement; (2) Executive's gross negligence in the
performance or intentional nonperformance (continuing for ten (10) days after
receipt of written notice of need to cure) of any of Executive's material duties
and responsibilities hereunder; (3) Executive's willful dishonesty, fraud or
misconduct with respect to the business or affairs of the Corporation which
materially and adversely affects the operations or reputation of the
Corporation; (4) Executive's conviction of a felony crime; or (5) confirmed
positive illegal drug test result. In the event of a termination for Good Cause,
as enumerated above, Executive shall have no right to any severance
compensation.
(d) Without Good Cause. At any time after the commencement of
employment, Executive may, without cause, terminate this Agreement and
Executive's employment, effective thirty (30) days after written notice is
provided to the Corporation. Executive may only be terminated without Good Cause
by the Corporation during the Term hereof if such termination is approved by a
majority of the members of the Board of Directors of the Corporation and
provided that the Executive receives at least one (1) month written notice. In
the event that Executive is terminated without Good Cause during the Term,
Executive shall receive from the Corporation, on such dates as would otherwise
be paid by the Corporation, the lesser of the base salary at the rate then in
effect for a period of one (1) year, or the base salary then in effect for the
balance of the Term. Further, if Executive is terminated without Good Cause, (a)
the Corporation shall make the insurance premium payments contemplated by COBRA
for a period of six (6) months after such termination, (b) the Executive shall
be entitled to receive a prorated portion of any annual
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<PAGE>
bonus and other incentive compensation to which the Executive would have been
entitled for the year during which the termination occurred had the Executive
not been terminated, (c) all options to purchase the Corporation's Common Stock
based upon the schedule set forth in paragraph 4(b) shall vest thereupon, and
(d) the Executive shall be entitled to receive all other unpaid benefits due and
owing through Executive's last day of employment. If Executive resigns or
otherwise terminates her employment, rather than the Corporation terminating her
employment pursuant to this paragraph 12, Executive shall receive no severance
compensation.
(e) Corporation's Failure to Consummate Initial Public Offering. In
the event that the Corporation does not complete an initial public offering of
the Corporation's securities which does not result in the gross proceeds of at
least $10,000,000 by April 15, 2000, the Corporation hereunder shall have the
right to terminate the employment agreement without any liability.
13. Indemnification. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the
Corporation against Executive), by reason of the fact that she is or was
performing services under this Agreement, then the Corporation shall indemnify
Executive against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Executive in
connection therewith to the maximum extent permitted by applicable law. The
advancement of expenses shall be mandatory. In the event that both Executive and
the Corporation are made a party to the same third-party action, complaint, suit
or proceeding, the Corporation agrees to engage competent legal representation,
and Executive agrees to use the same representation, provided that if counsel
selected by the Corporation shall have a conflict of interest that prevents such
counsel from representing Executive, Executive may
-8-
<PAGE>
engage separate counsel and the Corporation shall pay all attorneys' fees of
such separate counsel. Further, while Executive is expected at all times to use
her best efforts to faithfully discharge her duties under this Agreement,
Executive cannot be held liable to the Corporation for errors or omissions made
in good faith where Executive has not exhibited gross, willful and wanton
negligence and misconduct or performed criminal and fraudulent acts which
materially damage the business of the Corporation.
14. Effect of Waiver. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
15. Notices. Any notice permitted, required, or given hereunder shall be
in writing and shall be personally delivered; or delivered by any prepaid
overnight courier delivery service then in general use; or mailed, registered or
certified mail, return receipt requested, to the addresses designated herein or
at such other address as may be designated by notice given hereunder:
If to: Sheila Creque
1 Park Lane
Mt. Vernon, N.Y. 10582
If to: Urban Cool Network, Inc.
1401 Elm Street
Dallas, Texas 75202
With a copy to: Marc G. Rosenberg, Esq.
Silverman, Collura & Chernis, P.C.
381 Park Avenue
New York, New York 10016
Delivery shall be deemed made when actually delivered, or if mailed, three
days after delivery to a United States Post Office.
-9-
<PAGE>
16. Assignment. Executive shall not be entitled to assign her rights,
duties or obligations under this Agreement.
17. Amendments. The terms and provisions of this Agreement may be amended
or modified only by mutual agreement and a written instrument executed by both
parties to be charged by such amendment or modification.
18. Governing Law. The terms and provisions herein contained and all the
disputes or claims relating to this Agreement shall be governed by, interpreted
and construed in accordance with the internal laws of the State of New York,
without reference to its conflict of laws principles.
19. Arbitration.
(a) In the event of a dispute between the parties arising out of or
relating to this Agreement, or the breach thereof, the parties shall make every
effort to amicably resolve, reconcile, and settle such dispute between them.
Should an amicable resolution not be possible, either party may invoke
arbitration.
(b) Subject to the provisions of Section 11(c)(ii) hereof, all
claims, disputes and other matters in controversy arising out of or related to
this Agreement or the performance or breach hereof, shall be decided by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA Rules"), by a panel of three (3) arbitrators,
in New York, New York. One (1) such arbitrator shall be appointed by each of the
parties within three (3) weeks after being requested by the other party to make
such appointment and the third arbitrator shall be appointed by the two (2)
arbitrators appointed by the parties. In the event that a party does not appoint
its arbitrator within such three (3) week period, or the two (2) arbitrators
appointed by the parties shall fail to agree on the third arbitrator, such
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<PAGE>
appointed arbitrator or arbitrators shall be appointed by the American
Arbitration Association in accordance with the AAA Rules. The award shall state
the facts and findings and shall be rendered with reasons in writing. The
arbitrators shall have no authority or power to alter or modify any express
condition or provision of this Agreement, or to render any award which by its
terms shall have the effect of altering or modifying any express conditions or
provisions of this Agreement. The award rendered by the arbitrators shall be
final and judgement may be entered upon it in any court having jurisdiction
thereof. The successful party to the arbitration shall be entitled to an award
for reasonable attorney's fees, as determined by the arbitrators.
20. Captions. The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
21. Merger and Severability. This Agreement shall constitute the entire
Agreement between the Corporation and Executive with respect to the subject
matter hereof. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision.
22. Counterparts; Facsimile. This Agreement may be executed by facsimile
and in two (2) or more counterparts, each of which shall be deemed an original
and all of which together shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have affixed their signatures the
day and year first above written.
URBAN COOL NETWORK, INC.
By: /s/ Jacob R. Miles, III
-------------------------
Name: Jacob R. Miles, III
Title: CEO
/s/ Sheila Creque
-----------------
SHEILA CREQUE
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Exhibit 10.36
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Agreement") is made
and entered into as of the 13th day of April, 2000, by and between Urban Cool
Network, Inc., a Delaware corporation (the "Corporation") having an address at
1401 Elm Street, Dallas, Texas 75202 and Sheila Creque (the "Executive"), an
individual residing at 1 Park Lane, Mount Vernon, New York 10552.
BACKGROUND
----------
WHEREAS, the Corporation and the Executive are parties to that certain
Employment Agreement dated as of the 17th day of December, 1999 (the "Employment
Agreement"); and
WHEREAS, the Corporation and the Executive each desire to amend and
supplement the Employment Agreement by way of this Agreement.
AGREEMENT
---------
NOW THEREFORE, in consideration of the premises and agreements contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows;
1. Amendment to Existing Terms of Employment Agreement
1.1. Amendment to Section 3(a). Section 3(a) of the Employment Agreement
is hereby amended so that the phrase "Seventy Five Thousand Dollars ($75,000)
per year" is hereby stricken and in its place the following phrase inserted:
"One Hundred Twenty-Five Thousand Dollars ($125,000.00) per year."
2. Additional Terms to Employment Agreement
2.1. Compensation for Services Performed Prior to Term. The parties hereby
acknowledge that during the period from January 1, 2000, until the consummation
of an initial public offering of the Corporation's securities (the "Pre-Term
Period"), the Executive has been performing and will continue to perform
services for the Corporation. Accordingly, in order to compensate Executive for
the performance of such services, the Corporation hereby agrees to pay to
Executive, upon the consummation of an initial public offering of the
Corporation's securities, an amount equal to the amount the Executive would have
received as base salary during the Pre-Term Period if the Corporation had
consummated an initial public offering of the Corporation's securities on
January 1, 2000, assuming the Executive's base annual salary at the time of such
consummation was One Hundred Twenty-Five Thousand Dollars ($125,000.00).
2.2. Compensation for Work Previously Performed. Upon the consummation of
an initial public offering of the Corporation's securities, the Corporation
shall pay Executive an amount equal to Twenty-Five Thousand Dollars ($25,000.00)
as consideration for services performed by Executive during the fourth quarter
of the calendar year ended December 31, 1999.
1
<PAGE>
2.3. Signing Bonus. Upon the consummation of an initial public offering of
the Corporation's securities, the Corporation shall pay Executive an amount
equal to Thirty-Five Thousand Dollars ($35,000.00) as a signing bonus.
2.4. Advisory Board. In addition to other incentive compensation provided
for in the Employment Agreement, the Corporation hereby agrees to compensate the
Executive, as follows
(a) Fifteen thousand (15,000) shares of common stock of Urban Cool payable
upon the later of: (1) the consummation of an initial public offering of
the Corporation's securities; and (2) the agreement by Danny Glover to be
on an advisory board of Urban Cool;
(b) Ten thousand (10,000) shares of common stock of Urban Cool, payable
upon the later of: (1) the consummation of an initial public offering of
the Corporation's securities; and (2) the agreement by Celia Cruze to be
an advisory board of Urban Cool; and
(c) Ten Thousand (10,000) shares of common stock of Urban Cool, payable
upon the later of: (1) the consummation of an initial public offering of
the Corporation's securities; and (2) the agreement by Wanya Morris to be
on an advisory board of Urban Cool.
The parties hereby acknowledge that all shares payable pursuant to this Section
2.4 are payable to Executive as compensation for Executive's services and that
Mr. Glover, Ms. Cruze and Mr. Morris, respectively, will be separately
compensated for agreeing to join the advisory board.
2.5. Lock-Up Agreement. Simultaneous with the execution of this Agreement,
the Executive shall execute the Lock-Up Agreement attached hereto as "Annex I".
3. Miscellaneous.
3.1. Consent to Jurisdiction. The parties hereby submit to the
jurisdiction and venue of the Courts of the State of New York.
3.2. Headings. The Section and Subsection headings have been included for
convenience only, are not a part of this Agreement and shall not be taken as an
interpretation of any provision thereof.
3.3. Integration. This Agreement and the Employment Agreement represents
the parties' final understanding as to all matters included herein, and
supersedes all prior written or oral agreements of the parties concerning
matters covered herein.
3.4. Further Actions. The parties shall take such actions and execute and
deliver such instruments and documents as may reasonably be required from time
to time to effect and complete the transactions set forth in this Agreement.
2
<PAGE>
3.5. Amendments and Modifications. This Agreement may be amended, waived,
changed, modified or discharged only by an Agreement in writing signed by all of
the parties.
3.6. Governing Law. The laws of the State of New York shall govern the
validity and construction of this Agreement, without regard to the principles of
conflicts of laws.
3.7. Binding Effect. This Agreement shall inure to the benefit of, and
shall be binding upon the parties hereto and their respective successors,
permitted assigns and personal representatives.
3.8. Background. The Background is a part of this Agreement.
3.9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute a single agreement. In proving this Agreement against
any party hereto it shall only be necessary to produce or account for the
counterpart signed by the party against whom the proof is being presented.
3.10. Effectiveness. This Agreement shall become effective and binding
when one or more counterparts hereof, individually or taken together, shall bear
the signatures of all the parties reflected hereon as the signatories.
[Remainder Of Page Intentionally Blank]
3
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
Urban Cool Network, Inc.
By:
-------------------------------
Name: Jacob R. Miles, III
-----------------------------
Title: CEO
----------------------------
Sheila Creque
/s/ Sheila Creque
-----------------
4
Exhibit 10.37
SECOND AMENDMENT TO
SHAREHOLDERS' AGREEMENT
-----------------------
SECOND AMENDMENT TO SHAREHOLDERS' AGREEMENT, dated as of March __, 2000
(the "Second Amendment") by and among URBAN COOL NETWORK, INC., a Delaware
corporation ("UCN") having an office at 1401 Elm Street, Dallas, Texas 75202,
STANLEY WOLFSON ("Wolfson") having an address at 1030 Fifth Avenue, New York,
New York 10022 and E-COMMERCE SOLUTIONS, INC., a New York Corporation (the
"Company") having an address at 600 West 57th Street, Second Floor, New York,
New York 10019 (UCN and Wolfson are hereinafter sometimes, collectively,
referred to as the "Shareholders" and, individually, as a "Shareholder.")
W I T N E S S E T H:
WHEREAS, UCN, Wolfson and the Company (collectively, the "Parties") have
heretofore entered into a Shareholders' Agreement dated as of November 21, 1999
(the "Shareholders' Agreement"); and
WHEREAS, the Parties entered into an Amendment dated December 27, 1999,
(the "First Amendment") to the Shareholders' Agreement; and
WHEREAS, the Parties acknowledge that UCN has complied with its
obligations under Section 2(b) of the First Amendment; and
WHEREAS, two (2) shares of the no par value Common Stock of the Company
have been issued to UCN, and such shares are fully paid and non-assessable;
WHEREAS, the Parties acknowledge that under the Shareholders' Agreement,
as amended by the First Amendment, UCN is obligated to contribute to the Company
an additional $2,950,000 upon the consummation of a public offering of UCN's
securities; and
WHEREAS, the Parties desire to further amend and modify the Shareholders'
Agreement, as amended by the First Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the Parties hereby agree, as follows:
1. Section 1(a) of the Shareholders' Agreement is hereby amended by
deleting Section 1(a) in its entirety and inserting in lieu thereof a new
Section 1(a) to read in its entirety, as follows:
"1. Governance. (a) The Board of Directors of the Company shall consist of
two members. Each Shareholder agrees that during the term of this
Agreement each Shareholder shall vote for Jacob R. Miles, III and Stanley
Wolfson as the members of the Board of
<PAGE>
Directors."
2. Section 1(b) of the Shareholders' Agreement is hereby modified to
delete any reference to Barry M. Levine as Secretary and Treasurer of the
Company.
3. Section 3 of the Shareholders' Agreement is hereby amended by deleting
Section 3 in its entirety and inserting in lieu thereof a new Section 3 to read
in its entirety, as follows:
"3. Management of the Company. The Company and each Shareholder agree that
any action taken by the Shareholders shall require not less than the
affirmative votes of 70% of the outstanding shares of the Company for the
transaction of any business, including amendments to the certificate of
incorporation. The Company and each Shareholder agree that any action
taken by the Board of Directors shall require not less than the
affirmative votes of 70% of the directors shall be necessary for the
transaction of any business at any meeting of the Board of Directors.
Each of the Shareholders agree that they shall cause the By-laws of the
Company to be amended to provide for the creation of an Executive
Committee of the Board. The Executive Committee shall consist of one
member, and each of the Shareholders agree that during the term of this
Agreement, Stanley Wolfson shall be the sole member of such Executive
Committee. The Executive Committee shall be vested with and granted the
power to exercise all the authority of the Board of Directors, provided,
however, that the power and authority of the Executive Committee shall not
include: (a) the submission to Shareholders of any action that needs
Shareholders' approval under the Business Corporation Law of the State of
New York; (b) the filling of vacancies in the Board of Directors or in any
committee; (c) the fixing of compensation of the Directors for serving on
the Board or any committee; (d) the amendment or repeal of the By-laws, or
the adoption of new Bylaws; (e) the amendment or repeal of any resolution
of the Board of Directors which by its terms shall not be so amendable or
repealable; (e) any amendment to or restatement of the certificate of
incorporation ; (f) any change to the number of directors of the Company;
(g) the liquidation or dissolution of the company; (h), any
recapitalization, restatement of assets, redemption of shares, reduction
of capital or other change in the capitalization of the Company; (i) the
authorization, issuance, reissuance or sale, or the entering into of any
material agreement providing for the issuance or sale (contingent or
otherwise) of any equity securities of the Company or the issuance, sale
or grant of any security, option,
2
<PAGE>
warrant or right to acquire, convert into or otherwise dispose of any
equity securities of the Company (collectively, the "Securities"), in any
case, whether or not authorized, issued or held in treasury; (j) the
direct or indirect redemption, purchase or sale or other acquisition or
disposition of any of the Company's Securities; (k) any change in the name
of the Company; (l) any change in the salary of Wolfson or any amendment
to any employment agreement between the Company and Wolfson; (m) the
declaration or payment of any dividends or distributions in excess of
$10,000 in cash, property, securities or otherwise, upon any of the
Company's Securities; and (n) any change in the Company's independent
certified accountant."
4. The sixty (60) day period referred to in Section 7(a) of the
Shareholders' Agreement and the thirty (30) day period referred to in Section
7(b) of the Shareholders' Agreement shall not apply to the fiscal year of the
Company ending December 31, 1999 or the quarter ending December 31, 1999. The
Company shall provide the Shareholders with the information, reports or other
documents required by Sections 7(a) and 7(b) of the Shareholders' Agreement as
soon as practicable.
5. Pursuant to Section 11 of the Shareholders' Agreement, notice is hereby
deemed to have been given that the Company's address for purposes of notice is
hereby changed to the address first set forth above with respect to the Company.
7. In the event that: (a) the public offering of UCN's securities is
consummated and UCN fails to make the additional contribution of $2,950,000 to
the Company as required by Section 2(a) of the First Amendment within three (3)
days after the receipt of the net proceeds from such consummated public
offering, or (b) the public offering of UCN's securities is not consummated on
or before July 1, 2000, then, pursuant to the provisions of Section 506(j) of
the Business Corporation Law of the State of New York, the Company shall have,
in addition to any other legal or equitable remedies it may have, the right to
cancel the shares of the common stock of the Company issued to UCN, retain the
$50,000 heretofore contributed to the Company by UCN and terminate the
Shareholders' Agreement, as amended by the First Amendment and this Second
Amendment.
8. Wolfson and UCN hereby agree that they take such steps as are necessary
to cause the Certificate of Incorporation and the By-laws of the Company to be
amended to effectuate the terms and provisions of the Shareholders' Agreement,
as amended by the First Amendment and this Second Amendment. Wolfson and UCN
further agree that they will vote in favor of such resolutions of the
Shareholders and the Board of Directors as are necessary to effectuate the terms
and provisions of the Shareholders' Agreement, as amended by the First Amendment
and this Second Amendment.
9. To the extent that this Second Amendment conflicts with the
Shareholders' Agreement or the First Amendment, this Second Amendment shall be
deemed superseding and
3
<PAGE>
controlling.
IN WITNESS WHEREOF, the Parties have executed this Second Amendment to
Shareholders' Agreement as of the day and year first above written.
URBAN COOL NETWORK, INC.
By
--------------------------------
Name: Jacob R. Miles III
Title: Chief Executive Officer
----------------------------------
STANLEY WOLFSON
E-COMMERCE SOLUTIONS, INC.
By
--------------------------------
Name: Stanley Wolfson
Title: President and
Chief Executive Officer
4
Exhibit 10.38
AMENDED AND RESTATED WARRANT
NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS
WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
URBAN COOL NETWORK, INC.
Warrants for the Purchase of 1,050,000 Shares
of Common Stock, Par Value $ 0.01 per share
No. ______ March 30, 2000
THIS CERTIFIES that, for value received Stanley Wolfson. (together with
all permitted assigns, the "Holder") is entitled to subscribe for, and purchase
from, Urban Cool Network, Inc., a Delaware corporation (the "Company"), upon the
terms and conditions set forth herein, 1,050,000 shares of common stock of the
Company, par value $.01 per share ("Common Stock"). This Warrant shall become
exercisable as follows:
(i) warrants to purchase 50,000 shares of Common Stock shall be
immediately exercisable;
(ii) warrants to purchase 200,000 shares of Common Stock shall be
immediately granted and exercisable upon the consummation of an
initial public offering of the Company's securities;
(iii) warrants to purchase an additional 200,000 shares of Common Stock
shall be exercisable upon e-commerce solutions, Inc. and its at
least 80% owned subsidiaries, achieving gross sales of at least
$2,500,000 within 24 months of the Funding Date, as defined below;
(iv) warrants to purchase an additional 200,000 shares of Common Stock
shall be exercisable upon e-commerce solutions, Inc. and its at
least 80% owned subsidiaries, achieving gross sales of at least
$7,500,000 within 24 months of the Funding Date, as defined below;
(v) warrants to purchase an additional 200,000 shares of Common Stock
shall be exercisable upon e-commerce solutions, Inc. and its at
least 80% owned
<PAGE>
subsidiaries, achieving gross sales of at least $15,000,000 within
24 months of the Funding Date, as defined below; and
(vi) warrants to purchase an additional 200,000 shares of Common Stock
shall be exercisable upon e-commerce solutions, Inc. and its at
least 80% owned subsidiaries, achieving gross sales of at least
$25,000,000 within 24 months of the Funding Date, as defined below.
The determination of gross sales of e-commerce solutions, Inc. and its at
least 80% owned subsidiaries shall be made by the independent certified public
accountants employed by e-commerce solutions, Inc. The Funding Date shall mean
the date that the Company has provided funding to e- commerce solutions, Inc. of
at least $3,000,000, or such lesser amount as agreed to by Stanley Wolfson.
The rights to subscribe for and purchase shares of Common Stock pursuant
to this Warrant shall terminate at 5:00 p.m., New York City local time, on the
date which is the fifth anniversary of the date hereof (such five year term, the
"Exercise Period") or in the event that this Warrant is to be canceled pursuant
to the terms of the Shareholders' Agreement dated November 21, 1999, as amended
by an Amendment dated December 27, 1999, and as further amended by a Second
Amendment to Shareholders' Agreement dated March 30, 2000, between the Company,
the Holder and e-commerce solutions, Inc.
During the Exercise Period, this Warrant is exercisable at an exercise
price of $2.00 per share with respect to the shares of Common Stock referred to
in (i) above, and $1.00 per share with respect to the shares of Common Stock
referred to in (ii) through (vi) above (the "Exercise Price"); provided,
however, that upon the occurrence of any of the events specified in Section 5
hereof, the rights granted by this Warrant, including the number of shares of
Common Stock to be received upon such exercise, shall be adjusted as therein
specified.
This Warrant supersedes and replaces the warrant granted to the Holder
dated November 21, 1999.
Section 1 Exercise of Warrant.
(a) This Warrant may be exercised during the Exercise Period, either in
whole or in part, by the surrender of this Warrant (with the election at the end
hereof duly executed) to the Company, at Urban Cool Network, Inc., 1401 Elm
Street, Dallas, Texas 75226, or at such other place as is designated in writing
by the Company, together with a certified or bank cashier's check payable to the
order of the Company in an amount equal to the product of the Exercise Price and
the number of Warrant Shares for which this Warrant is being exercised.
(b) At any time during the term, the Holder may, at its election, exchange
these Warrants, in whole or in part (an "Warrant Exchange"), into the number of
shares determined in accordance with this paragraph 1(b) by surrendering these
Warrants at the principal office of the Company, accompanied by a notice stating
the Holder's intent to effect such exchange, the number of shares to be
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares issuable upon such Warrant Exchange and, if applicable, a new Warrant of
like tenor evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within five (5) business days following the Exchange
-2-
<PAGE>
Date. In connection with any Warrant Exchange, this Warrant shall represent the
right to subscribe for and acquire the number of shares (rounded to the next
highest integer) equal to (i) the number of shares specified by the Holder in
its Notice of Exchange (the "Total Number") less (ii) the number of shares equal
to the quotient obtained by dividing (A) the product of the Total Number and the
then existing exercise price by (B) the closing bid price of a share of the
Company's Common Stock (prior to an initial public offering of the Company's
securities the closing bid price shall be deemed to be $10.00).
Section 2 Rights Upon Exercise; Delivery of Securities.
Upon each exercise of the Holder's rights to purchase Warrant Shares, the
Holder shall be deemed to be the holder of record of the Warrant Shares,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing the Warrant Shares with respect to which this Warrant
was exercised shall not then have been actually delivered to the Holder. As soon
as practicable after each such exercise of this Warrant, the Company shall issue
and deliver to the Holder a certificate or certificates representing the Warrant
Shares issuable upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a Warrant
evidencing the right of the Holder to purchase the balance of the aggregate
number of Warrant Shares purchasable hereunder as to which this Warrant has not
been exercised or assigned.
Section 3 Registration of Transfer and Exchange.
Any Warrants issued upon the transfer or exercise in part of this Warrant
shall be numbered and shall be registered in a warrant register (the "Warrant
Register") as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes, and shall not be bound to recognize any equitable or
other claim to, or interest in, such Warrant on the part of any other person,
and shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration of transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable on the books of the Company only upon
delivery thereof duly endorsed by the Holder or by his duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his, her, or its authority shall be produced. Upon any registration
of transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, or other Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like number
of Warrant Shares (or portions thereof), upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act and the rules and regulations thereunder.
Section 4 Reservation of Shares.
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<PAGE>
The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the Warrants, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor. The Company represents that all
shares of Common Stock issuable upon exercise of this Warrant are duly
authorized and, upon receipt by the Company of the full payment for such Warrant
Shares, will be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof and will not be issued in
violation of any preemptive or similar rights of stockholders.
Section 5 Antidilution.
(a) In the event that the Company shall at any time after the Initial
Exercise Date: (i) declare a dividend on the outstanding Common Stock payable in
shares of its capital stock; (ii) subdivide the outstanding Common Stock; (iii)
combine the outstanding Common Stock into a smaller number of shares; or (iv)
issue any shares of its capital stock by reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price per Warrant Share in effect at the time of the record date
for the determination of stockholders entitled to receive such dividend or
distribution or of the effective date of such subdivision, combination, or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying such Exercise Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action, and the denominator of which shall be the number of shares of Common
Stock outstanding after giving effect to such action. Such adjustment shall be
made successively whenever any event listed above shall occur and shall become
effective at the close of business on such record date or at the close of
business on the date immediately preceding such effective date, as applicable.
(b) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(c) In any case in which this Section 5 shall require that an adjustment
in the number of Warrant Shares be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Warrant after such
record date, the Warrant Shares, if any, issuable upon such exercise over and
above the number of Warrant Shares issuable upon such exercise on the basis of
the number of shares of Common Stock in effect prior to such adjustment;
provided, however, that the Company shall deliver to the Holder a due bill or
other appropriate instrument evidencing the Holder's right to receive such
additional shares of Common Stock upon the occurrence of the event requiring
such adjustment.
(d) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall within 15 days thereafter cause written notice thereof to be
sent by registered mail, postage prepaid, to the Holder, at its address as it
shall appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares issuable and
the Exercise Price thereof after such adjustment and setting forth a brief
statement of the facts
-4-
<PAGE>
requiring such adjustment and the computation thereof, which officer's
certificate shall be conclusive evidence of the correctness of any such
adjustment absent manifest error.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share of Common Stock would be issuable on the
exercise of this Warrant (or specified portions thereof), the Company shall pay
lieu of such fraction an amount in cash equal to the same fraction of the
average closing sale price (or average of the closing bid and asked prices, if
closing sale price is not available) of Common Stock for the 10 trading days
ending on and including the date of exercise of this Warrant.
(f) No adjustment in the Exercise Price per Warrant Share shall be
required if such adjustment is less than $.01; provided, however, that any
adjustments which by reason of this Section 5 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
(g) Whenever the Exercise Price payable upon exercise of this Warrant is
adjusted pursuant to subsection (a) above, the number of Warrant Shares issuable
upon exercise of this Warrant shall simultaneously be adjusted by multiplying
the number of Warrant Shares issuable upon exercise of this Warrant on the date
hereof by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
Section 6 Reclassification; Reorganization; Merger.
(a) In case of any capital reorganization, other than in the cases
referred to in Section 5(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock or the conversion
of such outstanding shares of Common Stock into shares of other stock or other
securities or property), or in the case of any sale, lease, or conveyance to
another corporation of the property and assets of any nature of the Company as
an entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of Warrant
Shares theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the respective number of Warrant
Shares which would otherwise have been deliverable upon the exercise of this
Warrant would have been entitled upon such Reorganization if this Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of the Holder so that
the provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of this Warrant. Any such adjustment shall be made by, and set
forth in, a supplemental agreement between the Company, or any successor
thereto, and the Holder, with respect to this Warrant, and shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment. The
Company shall not effect any such Reorganization unless, upon or prior to the
consummation thereof, the successor corporation, or if the Company shall be the
surviving corporation in any such Reorganization and is not the
-5-
<PAGE>
issuer of the shares of stock or other securities or property to be delivered to
holders of shares of the Common Stock outstanding at the effective time thereof,
then such issuer, shall assume by written instrument the obligation to deliver
to the Holder such shares of stock, securities, cash, or other property as such
Holder shall be entitled to purchase in accordance with the foregoing
provisions. In the event of sale, lease, or conveyance or other transfer of all
or substantially all of the assets of the Company as part of a plan for
liquidation of the Company, all rights to exercise this Warrant shall terminate
30 days after the Company gives written notice to the Holder that such sale or
conveyance or other transfer has been consummated.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from a specified par value to no par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder or holders of this
Warrant shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities, property,
cash, or any combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of Warrant Shares for which
this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
Section 7 Notice of Certain Events.
In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common Stock
in shares of Common Stock or make any other distribution (other than regularly
scheduled cash dividends which are not in a greater amount per share than the
most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants, or other securities to all holders of
Common Stock entitling them to purchase any additional shares of Common Stock or
any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock or any consolidation, merger, sale, lease, or conveyance of
property, as described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the Company;
or
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<PAGE>
(e) to take any other action which would cause an adjustment to the
Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to: (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined; (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up; or (iii) the date of such action which would require
an adjustment to the Exercise Price per Warrant Share.
Section 8 Charges and Taxes.
The issuance of any shares or other securities upon the exercise of this
Warrant and the delivery of certificates or other instruments representing such
shares or other securities shall be made without charge to the Holder for any
tax or other charge in respect of such issuance. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other than that
of the Holder and the Company shall not be required to issue or deliver any such
certificate unless and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
Section 9 Periodic Reports.
The Company agrees that until all the Warrant Shares shall have been sold
pursuant to Rule 144 under the Securities Act or a Registration Statement under
the Securities Act, it shall keep current in filing all reports, statements, and
other materials required to be filed with the Commission to permit holders of
the Warrant Shares to sell such securities under Rule 144 under the Securities
Act.
Section 10 Legend.
Until sold pursuant to the provisions of Rule 144 or otherwise registered
under the Securities Act, the Warrant Shares issued on exercise of the Warrants
shall be subject to a stop transfer order and the certificate or certificates
representing the Warrant Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
-7-
<PAGE>
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
HOLDER OF THE SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS.
Section 11 Loss; Theft; Destruction; Mutilation.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction, or mutilation of any Warrant (and upon surrender of any Warrant if
mutilated), and upon receipt by the Company of reasonably satisfactory
indemnification, the Company shall execute and deliver to the Holder thereof a
new Warrant of like date, tenor, and denomination.
Section 12 Stockholder Rights.
The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
Section 13 Governing Law.
This Warrant shall be construed in accordance with the laws of the State
of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first above written.
URBAN COOL NETWORK, INC.
By:
---------------------
Name:
Title:
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto _________________ a Warrant to purchase __________ shares of
Common Stock, par value
-8-
<PAGE>
$.01 per share, of Urban Cool Network, Inc., a Delaware
corporation (the "Company"), and does hereby irrevocably constitute and appoint
___________ attorney to transfer such Warrant on the books of the Company, with
full power of substitution.
Dated:
---------------
Signature
------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
-9-
Exhibit 10.39
AMENDMENT NO. 3 TO CONSULTING AGREEMENT
Amendment No. 3 dated April 17, 2000 to the Consulting Agreement (the
"Consulting Agreement") dated as of the 1st day of November, 1999 by Urban Cool
Network, Inc. (the "Company") and RMH Consulting Corp. (the "Consultant").
W I T N E S S E T H
WHEREAS, the parties hereto hereby agree that it would be in their mutual
best interest to amend the Consulting Agreement in the manner set forth herein;
NOW, THEREFORE, in consideration of the above premises and the mutual
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree that the Consulting Agreement is amended as follows:
I. Modifications.
A. The first sentence of paragraph 1.3 of the Agreement is
deleted in its entirety and amended to read as follows:
The term of this Agreement shall commence on and be
effective as of November 1, 1999 ("Commencement Date")
and shall continue for two years after the Commencement
Date (the "Term"), unless either party provides to the
other written notice terminating this Agreement as of
the end of the date which is 15 months from the
consummation of an initial public offering of the
Company's securities, which notice must be delivered at
least 15 days prior to such date.
B. Section 2.1 of the Agreement is deleted in its entirety
and is amended to read as follows:
Fees. In consideration for the performance of the
Services to be provided by the Consultant, the Company
shall pay a fee to the Consultant equal to $6,250 per
month, payable in advance on the first day of each month
(the "Compensation") during the Term of this Agreement,
commencing on the Commencement Date and $75,000 upon the
consummation of an initial public offering of the
Company's securities. Notwithstanding the foregoing, no
amount of the Compensation shall be currently payable as
provided in the foregoing sentence until the earlier of
(i) the consummation of the initial public offering of
the securities of the Company or (ii) July 15, 2000 (the
"Payment Date"). On the Payment Date, the Consultant
shall receive, without interest, from the Company all
Compensation that was otherwise due and payable through
the Payment Date and shall begin to receive the monthly
Compensation as otherwise provided in this Agreement.
C. The following paragraphs are hereby added as Sections
4.13 through 4.16:
4.13 Board of Directors
(a) The Company agrees that it will, upon consummation
of its proposed initial
<PAGE>
public offering, for a period of not less than fifteen
(15) months, appoint a designee of the Consultant as an
advisor to its Board of Directors and such advisor shall
be entitled to attend meetings of the Board, receive all
notices and other correspondence and communications sent
by the Company to members of its Board of Directors. In
lieu of the Consultant's right to designate an advisor
to the Board, the Consultant shall have the right during
such fifteen (15) month period, in its sole discretion,
to designate one person for election as a director of
the Company, who is reasonably acceptable to the
Company, and the Company will utilize its best efforts
to obtain the election of such person. The Company
agrees that Mark Herskowitz or Robert Herskowitz are
acceptable as directors.
The Company agrees that such advisor or member of the
Board shall be entitled to the same reimbursement as
provided to other directors for costs incurred in
attending such meetings, including but not limited to
food, lodging and transportation and (as to a member
other than Mark Herskowitz or Robert Herskowitz)
compensation and fees.
(b) For a period of fifteen (15) months from the
consummation of the Company's proposed initial public
offering of the Company's securities, the Company agrees
to consult with the Consultant or its designee in
connection with any transaction outside of the ordinary
course of its business. Such consultation shall occur at
the earliest practicable time, to assure that the advice
of the Consultant or its designee would be meaningful in
connection with such transaction.
(c) The rights granted to the Consultant pursuant to
this Section 4.13 shall expire on the earlier of (i) 15
months from the consummation of an initial public
offering of the Company's securities or (ii) 120 days
from the termination of the lock-up period imposed by
the American Stock Exchange on the shares of Common
Stock held by the Consultant and its affiliates.
4.14 Lock-Up Agreement.
(a) The Company hereby agrees to utilize its best
efforts to obtain the agreement of each of its
securityholders, officers and directors not to issue,
offer, agree or offer to sell, sell, grant an option for
the purchase or sale of, transfer, pledge, assign,
hypothecate, distribute or otherwise encumber or dispose
of (whether pursuant to Rule 144 of the General Rules
and Regulations under the Securities Act of 1933, as
amended, or otherwise) any securities of the Company,
including common stock or options, rights, warrants or
other securities underlying, convertible into,
exchangeable or exercisable for or evidencing any right
to purchase or subscribe for any common stock, or any
beneficial interest therein for a period of at least 12
months from the effective date of the registration
statement in connection with the Company's proposed
initial public offering. The Company agrees that it will
not file a registration statement (except a registration
statement on Form S-4 (in connection with an acquisition
and provided that the Company obtains a fairness opinion
from one of the ten largest accounting firms in the
United States) or Form S-8 with respect to 100,000
shares of Common Stock and additional shares of Common
Stock upon the prior written consent of the Consultant
which shall not be unreasonably withheld or delayed or
other similar
-2-
<PAGE>
form) covering any shares of its Common Stock without
consent of the Consultant until the Common Stock of the
Consultant is tradeable without restriction, unless the
shares of Common Stock held by the Consultant are
included in such registration statement.
(b) The Company agrees to obtain an agreement from Jacob
R. Miles, III, Stanley Wolfson and Wilhelmina Artist
Management, LLC as described in Section 4.14 (a).
(c) The Company agrees not to release any securityholder
from the lock-up agreement described in Section 4.14(a)
unless the Company releases The Elite Funding Group,
Inc. and RMH Consulting Corp. from such lock-up
agreement at such time.
4.15 Reimbursement and Cooperation
(a) In addition to its other obligations with respect to
legal fees incurred prior to the date hereof, the
Company hereby agrees to reimburse the Consultant for
any legal fees and expenses in an amount of up to $7,500
incurred from and after the date hereof by the
Consultant in connection with the Consultant contesting
the requirement imposed by The American Stock Exchange
of a 12 months lock-up period with respect to the shares
of common stock of the Company held by the Consultant or
its affiliates.
(b) The Company agrees to cooperate with the Consultant
in connection with the Consultant's efforts to obtain
the waiver or relaxation of the lock-up period by the
American Stock Exchange.
4.16 Specific Performance
The Company acknowledges that the Consultant's remedies
at law may not be adequate, therefore, in addition to
the Consultant's remedies at law, the Consultant shall
have the remedy of specific performance in the event of
the Company's breach of the terms of this Agreement. In
the event that the Consultant elects to exercise the
remedy of specific performance, the Company hereby
waives its right to request a bond from the Consultant.
The Company shall be responsible for all legal fees
incurred by Consultant in enforcing this Agreement.
II. Confirmation. Except as expressly specified herein, all other
terms, conditions and provisions of the Consulting Agreement are hereby
confirmed and shall remain in full force and effect without modification.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
URBAN COOL NETWORK, INC.
By:
------------------------
Name:
Title:
RMH CONSULTING CORP.
By:
------------------------
Name:
Title:
-4-
Exhibit 10.40
AMENDMENT NO. 1 TO SUBSCRIPTION AGREEMENT
Amendment No. 1 dated April 17, 2000 to the Subscription Agreement (the
"Subscription Agreement") dated as of the 23rd day of November, 1999 by and
between Urban Cool Network, Inc. (the "Company") and RMH Consulting Corp. (the
"Holder").
W I T N E S S E T H
WHEREAS, the parties hereto hereby agree that it would be in their mutual
best interest to amend the Subscription Agreement in the manner set forth
herein;
NOW, THEREFORE, in consideration of the above premises and the mutual
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree that the Subscription Agreement is amended as follows:
I. Modifications.
A. Section 4.2(a) of the Subscription Agreement is hereby
deleted in its entirety.
B. Section 4.2(b) of the Subscription Agreement is hereby
deleted in its entirety and amended to read as follows:
At any time during the five-year period commencing on the
earlier of (i) ten months after the consummation of an initial
public offering of the Company's securities or (ii) the waiver
or the relaxation of the restrictions imposed by The American
Stock Exchange of a lock-up agreement for a period of 12
months, the Consultant shall have the right (which right is in
addition to the registration rights under Section 4.1 hereof),
exercisable by written notice to the Company, to have the
Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the
Company's expense, a registration statement and such other
documents, including a prospectus, as may be necessary in the
opinion of both counsel for the Company and counsel for the
Underwriter, if any, and the Consultant, in order to comply
with the provisions of the Securities Act, so as to permit a
public offering and sale of its Common Stock for twenty-four
(24) consecutive months by the Consultant. Upon notice from
the Holder, the Company will use its best efforts to file a
registration statement at the earliest possible time which
shall, in any event, not be later than 30 days from the demand
therefor.
II. Confirmation. Except as expressly specified herein, all other
terms, conditions and provisions of the Subscription Agreement are hereby
confirmed and shall remain in full force and effect without modification.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
URBAN COOL NETWORK, INC.
By:
------------------------
Name:
Title:
RMH CONSULTING CORP.
By:
------------------------
Name:
Title:
Exhibit 10.41
AMENDMENT NO. 1 TO WARRANT
Amendment No. 1 dated April 17, 2000 to the Warrant (the "Warrant") dated
as of the 23rd day of November, 1999 by and between Urban Cool Network, Inc.
(the "Company") and The Elite Funding Group, Inc. (the "Holder").
W I T N E S S E T H
WHEREAS, the parties hereto hereby agree that it would be in their mutual
best interest to amend the Warrant in the manner set forth herein;
NOW, THEREFORE, in consideration of the above premises and the mutual
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree that the Warrant is amended as follows:
I. Modifications.
A. Section 3.2(a) of the Warrant is hereby deleted in its
entirety.
B. Section 3.2(b) of the Warrant is hereby deleted in its
entirety and amended to read as follows:
At any time during the five-year period commencing on the
earlier of (i) ten months after the consummation of an initial
public offering of the Company's securities or (ii) the waiver
or the relaxation of the restrictions imposed by The American
Stock Exchange of a lock-up agreement for a period of 12
months, the Holder as represented by Mark Herskowitz or Robert
Herskowitz shall have the right (which right is in addition to
the registration rights under Section 3.3 hereof), to have the
Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion at the
Company's expense, a registration statement and such other
documents, including a prospectus, as may be necessary in the
opinion of counsel for the Company, and counsel for the
Holder, if any, and the Holder, in order to comply with the
provisions of the Securities Act, so as to permit a public
offering and sale of the Holder's Shares for nine (9)
consecutive months. Upon notice from the Holder, the Company
will use its best efforts to file a registration statement at
the earliest possible time which shall, in any event, not be
later than 30 days from the demand therefor.
II. Confirmation. Except as expressly specified herein, all other
terms, conditions and provisions of the Warrant are hereby confirmed and shall
remain in full force and effect without modification.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
URBAN COOL NETWORK, INC.
By:
--------------------------
Name:
Title:
THE ELITE FUNDING GROUP, INC.
By:
--------------------------
Name:
Title:
Exhibit 10.42
SUBLEASE AGREEMENT
The parties agree as follows:
Date of this
Sublease: NOV. 1, 1999
Parties to this Overtenant: MEI Associates, Inc.
Sublease: Address for notices: 600 W. 57th Street, N.Y. N.Y. 10019
You, the Undertenant: e-COMMERCE Solutions, Inc.
Address for notices: 600 W. 57th Street, N.Y.N.Y. 10019
If there are more than one Overtenant or Undertenant, the
words "Overtenant" and "Undertenant" used in this Sublease
includes them.
Information from Landlord: Big Lio Realty
Over-Lease: Address for notices: 600 W. 57th St., NY NY 10019
Overtenant:
Address for notices:
Date of Over-Lease:
Term: 5 years from: Nov. 1, 1999 to: Oct. 31, 2002
A copy of the Over-Lease is attached as an important part
of the Sublease.
Term: 1. 3 year years: months: Beginning: Nov. 1, 1999
ending: Oct. 31, 2002
Premises rented: 2.
Use of premises: 3. The premises may be used for only.
Rent: 4. The yearly rent is $60,000.00, You, the Undertenant, will
pay this yearly rent to the Overtenant in twelve equal
monthly payments of $5,000.00. Payments shall be paid in
advance on the first day of each month during the Term.
Security: 5. The security for the Undertenant's performance is
$10,000.00. Overtenant states that Overtenant has received
it. Overtenant shall hold the security in accordance with
Paragraph of the Over-Lease.
Agreement to 6. Overtenant sublets the premises to you, the Undertenant,
lease and for the Term. Overtenant states that it has the authority
pay rent: to do so. You, the Undertenant, agree to pay the Rent and
other charges as required in the Sublease. You, the
Undertenant, agree to do everything required of you in the
Sublease.
Notices: 7. All notices in the Sublease shall be sent by certified
mail, "return receipt requested".
Subject to: 8. The Sublease is subject to the Over-Lease. It is also
subject to any agreement to which the Over-Lease is
subject. You, the Undertenant, state that you have read
and initialed the Over-Lease and will not violate it in
any way.
Overtenant's
duties: 9. The Over-Lease describes the Landlord's duties. The
Overtenant is not obligated to perform the Landlord's
duties. If the Landlord fails to perform, you, the
Undertenant, must send the Overtenant a notice. Upon
receipt of the notice, the Overtenant shall then promptly
notify the Landlord and demand that the Over-Lease
agreements be carried out. The Overtenant shall continue
the demands until the Landlord performs.
Consent: 10. If the Landlord's consent to the Sublease is required,
this consent must be received within 10 days from the date
of this Sublease. If the Landlord's consent is not
received within this time, the Sublease will be void. In
such event all parties are automatically released and all
payments shall be refunded to you, the Undertenant.
Adopting the 11. The provisions of the Over-Lease are part of this
Over-Lease and Sublease. All the provisions of the Over-Lease applying to
exceptions: the Overtenant are binding on you, the Undertenant, except
these:
a) These numbered paragraphs of the Over-Lease shall
not apply:
b) These numbered paragraphs of the Over-Lease are
changed as follows:
<PAGE>
12. You, the Undertenant, have no authority to contact or make
any agreement with the Landlord about the premises or the
Over-Lease. You, the Undertenant, may not pay rent or
other charges to the Landlord, but only to the Overtenant.
Successors: 13. Unless otherwise stated, the Sublease is binding on all
parties who lawfully succeed to the rights or take the
place of the Overtenant or you, the Undertenant. Examples
are an assign, heir, or a legal representative such as an
executor of your will or administrator of your estate.
Changes: 14. This sublease can be changed only by an agreement in
writing signed by the parties to the Sublease.
Signatures: OVERTENANT:
MEI ASSOCIATES, INC.
---------------------------
[ILLEGIBLE SIGNATORY]
---------------------------
You, the UNDERTENANT:
Witness: e-COMMERCE Solutions, Inc.
---------------------------
- ------------------------------- ---------------------------
GUARANTY OF PAYMENT WHICH IS PART OF THE SUBLEASE
Date of Guaranty:
Guarantor
and address:
Reason for 1. I know that the Overtenant would not rent the premises to
Guaranty: the Undertenant unless I guarantee Undertenant's
performance. I have also requested the Overtenant to enter
into the Sublease with the Undertenant. I have a substantial
interest in making sure that the Overtenant rents the
premises to the Undertenant.
Guaranty: 2. The following is my Guaranty:
I guaranty the full performance of the Sublease by the
Undertenant. This Guaranty is absolute and without any
condition. It includes, but is not limited to, the payment
of rent and other money charges.
In addition, I agree to these other terms:
Changes in 3. This Guaranty will not be affected by any changes in the
Sublease have Sublease, whatsoever. This includes, but is not limited to,
no effect: any extention of time or renewals. The Guaranty will be
binding even if I am not a party to these changes.
Waiver of
notice: 4. I do not have to be informed about any failure of
performance by Undertenant, I waive notice of nonpayment or
nonperformance.
Performance: 5. If the Undertenant fails to perform under the Sublease, the
Overtenant may require me to perform without first demanding
that the Undertenant perform.
Waiver of jury
trial: 6. I give up my right to trial by jury in any claim related to
the Sublease or this Guaranty.
Changes: 7. This Guaranty of payment and performance can be changed only
by written agreement signed by all parties to the Sublease
and Guaranty.
Signatures: GUARANTOR:
WITNESS:
------------------------------
-----------------------------
- --------------------------------------------------------------------------------
EPA and HUD Lead Paint Regulations, Effective September 6, 1996(1)
Landlords must disclose known lead-based paint and lead-based paint hazards of
pre-1978 housing to tenant.(2) Use the following BLUMBERG LAW PRODUCTS (800 LAW
MART) to comply:
3140 Lead Paint Information Booklet 3141 Lead Paint Lease Disclosure Form
(1) December 6, 1996 for owners of 1 to 4 residential dwellings.
(2) Leases for less than 100 days, 0-bedroom units, elderly and handicapped
housing (unless children live there) and housing found to be lead-free by a
certified inspector are excluded.
- --------------------------------------------------------------------------------
Exhibit 10.43
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement"), is made and entered
into as of March 22, 2000, by and among Urban Cool Network, Inc. ("UCN") a
Delaware corporation, and Wilhelmina Artist Management LLC, a New York limited
liability company ("WAM").
RECITALS
I. WAM owns 500 shares of common stock of WilhelminaUrbanCool.com, Inc.
("WUC"), a Delaware corporation, which constitutes all issued and
outstanding shares of capital stock of WUC (such shares hereinafter
referred to as the "WUC Stock"); and
II. WAM desires to transfer to UCN one hundred percent (100%) of the issued
and outstanding shares of WUC stock, in exchange for 580,000 shares of UCN
common shares of the 3,630,000 million currently outstanding in a tax-free
stock for stock transaction, on the terms and subject to the conditions
set forth in this Agreement (the "Acquisition").
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants, promises, representations and warranties set forth herein, and for
other good and valuable consideration, intending to be legally bound hereby, the
parties agree as follows:
SECTION 1. EXCHANGE OF SECURITIES
1.1 Exchange of Stock: Subject to the terms and conditions hereof, at the
Closing (as hereinafter defined), WAM will transfer to UCN all right,
title and interest of WAM in the WUC Stock for 580,000 shares of UCN
common stock, $.001 par value, to be issued to WAM at the Closing (the
"UCN Stock").
1.2 The Closing: The closing of the Acquisition (the "Closing") will take
place as promptly as practicable, but no later than five (5) business days
following satisfaction or waiver of the conditions set forth in Article 6,
at the offices of WAM located at 300 Park Avenue South, New York, New York
10010, unless another place or time is agreed to by the parties. The date
upon which the Closing actually occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the
Acquisition to be consummated in accordance with the relevant provisions
of applicable law. The parties intend that the Closing Date will occur on
or prior to March 31, 2000.
(a) Procedure at the Closing: At the Closing, the parties agree that the
following shall occur:
(i) The parties shall have satisfied each of the conditions set
forth in Sections 5 and 6, and shall deliver any and all
documents required by such Sections, unless such delivery is
waived.
<PAGE>
(ii) WAM will assign and transfer to UCN all of WAM's right, title,
and interest in and to the WUC Stock by delivering to UCN a
certificate or certificates representing the WUC Stock, in
genuine and unaltered form, duly endorsed in blank or
accompanied by duly executed stock powers endorsed in blank,
with requisite stock transfer tax stamps, if any, attached.
(iii) UCN shall execute, provide and deliver to WAM a certificate or
certificates representing the UCN Stock, in genuine and
unaltered form, with requisite stock transfer stamps, if any,
attached.
1.3 Taking of Necessary Action; Further Action: If, at any time after the
Closing, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest UCN with full right, title and
possession to the WUC Stock, or to vest WAM with full right, title, and
possession to the UCN Stock, the officers and directors of both UCN and
WAM are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
1.4 Restrictions on UCN Stock:
(a) The UCN Stock has not been registered under the Securities Act, by
reason of a specific exemption from the registration provisions of
the Securities Act of 1933, as amended (the "Securities Act"). WAM
understands that the shares of UCN Stock are "restricted securities"
under applicable U.S. federal and state securities laws and,
therefore, that WAM must hold the UCN Stock indefinitely unless such
shares are registered by UCN and qualified by state authorities, or
an exemption from such registration is available.
(b) Legend. Each certificate evidencing the UCN Stock subject to the
terms and conditions of this Agreement and each certificate issued in
exchange for or upon the transfer of any shares subject to the terms
and conditions of this Agreement (if such shares remain subject to
the terms and conditions of this Agreement after such transfer) shall
be stamped or otherwise imprinted with a conspicuous legend, in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND
HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE UCN THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933."
2
<PAGE>
SECTION 2. CONTENT SHARING AND STRATEGIC ALLIANCES
(a) WAM Services, Alliances and Added Value: WAM's Public Relations
Department, Special Events Promotion, Co-creation of International
Events (i.e., World Wide Internet Talent/Model Search on the UCN
Platform) shall be available for marketing and platform construction
purposes. In addition, WAM shall use reasonable commercial efforts to
include all other strategic partners in the UCN agreement for
cross-linkages, partnerships and alliances. The list of companies
that have already concluded a partnership agreement with WAM include:
1. OnlyReal.com- women's plus size fashion site
2. Verius.com- sports, events, and language instruction site
3. OrbitTravel.com- travel destination site
The companies with which WAM is currently in negotiation with respect
to the formation of a partnership or strategic alliance include:
1. Wirebreak.com- live entertainment site
2. ShopPlanetX- 3rd world ecommerce site
3. Gloss.com- beauty site
4. AKA.com- hip-hop site
5. MuzicDepot.com- music site
6. EUniverse.com- entertainment site
7. GoHastings.com- entertainment site
8. MSGonline.com- teen girls site
9. ICanBuy.com- teen ecommerce site
10. CyberRetail.com- fashion site
11. Graffitionline- teen fashion site
12. Inchant.com- intimate apparel site
13. Pseudo.com- digital content site
Subject to the License Agreement, WAM may attempt to enter into
negotiations with additional partners. In addition, if applicable,
the content platform residing on the AOL Keyword "Wilhelmina" will be
accessible among all partners.
3
<PAGE>
(b) WAM Talent: Talent represented by WAM is not included as part of this
Agreement. The engagement of any WAM talent shall be negotiated in an
arms-length transaction in order to avoid a conflict of interest.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF WAM
WAM hereby represents and warrants to UCN as follows:
3.1 Organization, Standing, and Power: WAM is a limited liability company duly
organized, validly existing, and in good standing under the laws of the
State of New York.
(a) WUC is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware; has all requisite
corporate power to own, lease, and operate its properties and to
carry on its business as currently being conducted; is duly
qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good
standing would have a material adverse effect on the business,
assets (including intangible assets), properties, liabilities
(contingent or otherwise), financial condition, or operations (a
"Material Adverse Effect") of WUC; and WUC does not directly or
indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture, or other
business association or entity. WUC is not in violation of any of
the provisions of its Certificate of Incorporation or Bylaws.
3.2 WUC Capital Structure: The authorized capital stock of WUC consists of One
Thousand (1,000) shares of WUC Common Stock, $1.00 par value, of which
Five Hundred (500) shares are issued and outstanding and are held of
record by WAM. All outstanding shares of WUC Stock have been duly
authorized and validly issued, are fully paid and nonassessable, and are
subject to no preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation, or Bylaws of WUC or any
agreement to which WUC is a party or by which it is bound. WAM owns all of
the issued and outstanding capital stock of WUC free and clear of any
mortgage, pledge, assessment, security interest, lease, lien, adverse
claim, levy, charge, or other encumbrance of any kind, or any contract or
agreement to grant any of the foregoing ("Liens"). The delivery of a
certificate or certificates at the Closing representing the WUC Stock will
transfer to UCN good and valid title to the WUC Stock, free and clear of
all Liens.
(a) There are (i) no equity securities of any class of WUC or any
securities exchangeable into or exercisable for such equity
securities issued, reserved for issuance, or outstanding and (ii) no
outstanding subscriptions, options, warrants, puts, calls, rights, or
other commitments or agreements of any character to which WUC is a
party or by which it is bound obligating WUC to issue, deliver, sell,
repurchase, or redeem, or cause to be issued, delivered, sold,
repurchased, or redeemed, any equity securities of WUC or obligating
WUC to grant, extend, accelerate the vesting of, change the price of,
or otherwise amend or enter into any such option, warrant, call,
right, commitment, or agreement.
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3.3 Authority: WAM has all requisite limited liability company power and
authority to enter into this Agreement and the other documents required to
be executed and delivered by WAM hereunder (collectively, the "WAM
Transaction Documents") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
other WAM Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of WAM. This Agreement and the other WAM
Transaction Documents have been duly executed and delivered by WAM and
constitute the valid and binding obligations of WAM, enforceable against
WAM in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to creditors' rights generally, and general
principles of equity.
(a) The execution and delivery by WAM of this Agreement and the other WAM
Transaction Documents do not, and the consummation of the
transactions contemplated hereby and thereby will not: (i) conflict
with, or result in any violation or breach of any provision of the
Certificate of Formation or Operating Agreement of WAM or the
Certificate of Incorporation or Bylaws of WUC, (ii) result in any
violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default under, or give rise to a right of
termination, cancellation, or acceleration of any material obligation
or loss of any benefit under any note, mortgage, indenture, lease,
contract, or other agreement or obligation to which WAM or WUC is a
party or by which WAM or WUC or any of their properties or assets may
be bound; (iii) conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule, or regulation applicable to WAM or WUC or any of their
properties or assets; or (iv) require WAM or WUC to obtain any
consent, approval, or action of, make any filing with or give any
notice to any entity or person as a result or under the terms of any
contract or agreement to which WAM or WUC is a party or by which
their properties or assets are bound, except in the case of (ii) and
(iii) for such violations, breaches, defaults, rights, or conflicts
which would not be reasonably likely to have a Material Adverse
Effect on WUC or materially affect the ability of WAM to consummate
the transactions contemplated by this Agreement in accordance with
its terms, and, except in the case of (iv) for such consents,
approvals or actions which, if not obtained or made, would not be
reasonably likely to have a Material Adverse Effect on WUC or
materially adversely affect the ability of WAM to consummate the
transactions contemplated by this Agreement in accordance with its
terms.
(b) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any governmental entity is required by
WAM or WUC in connection with the execution and delivery of this
Agreement or the other WAM Transaction Documents or the consummation
of the transactions contemplated hereby or thereby except for such
consents, authorizations, filings, approvals, and registrations
which, if not obtained or made, would not be reasonably likely to
have a Material Adverse Effect on WUC or materially adversely affect
the ability
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of WAM to consummate the transactions contemplated by this Agreement
in accordance with its terms.
3.4 Absence of Undisclosed Liabilities: WUC does not have any liabilities,
either accrued or contingent, and whether due or to become due, other than
liabilities incurred since its formation in connection therewith, and
liabilities incurred or to be incurred pursuant to the License Agreement.
3.5 Absence of Certain Changes or Events: Since its date of formation, WUC has
not conducted any business and has not suffered any event or occurrence
that has had or could reasonably be expected to have a Material Adverse
Effect on WUC;
3.6 Intellectual Property: WUC owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, and copyrights, and any applications for and registrations
of such Intellectual Property, and all processes, formulae, methods,
schematics, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or
materials that are necessary to conduct the business of WUC as currently
conducted.
3.7 WUC License: WUC is a party to a binding agreement with WAM that provides
a renewable twenty-five year, royalty-free, exclusive (as it pertains to
urban sites where the urban market is targeted as its principal form of
business) license (the "License Agreement"), a true and accurate copy of
which is attached hereto as Exhibit "A" and by this reference incorporated
herein, to use, reproduce, transmit, display and otherwise exploit the
trademarks, tradenames, service marks, designs, logo and other proprietary
marks of WAM (the "Marks") in connection with the (i) development,
exploitation, marketing, promotion, positioning, and branding of UCN, its
affiliates, and it and its affiliates' respective businesses, and (ii)
development, reproduction, transmission, display, communication,
distribution and other exploitation of programming and content (in
whatever form UCN deems appropriate) featuring or otherwise involving the
Marks and the models, athletes and other talent represented by WAM or an
affiliate of WAM.
3.8 Contracts: WUC is not a party or subject to any other binding agreements,
obligations, or commitments, written or oral:
(a) that call for any fixed and/or contingent payment or expenditure or
any related series of fixed an/or contingent payments or expenditures
by or to WUC totaling more than $25,000.00 in any calendar year;
(b) with agents, advisors, salesmen, representatives, contractors, or
consultants that are not cancelable by it on no more than thirty (30)
days notice and without liability, penalty, or premium;
(c) that restricts WUC from carrying on anywhere in the world its
business or any portion thereof as currently conducted;
(d) to provide funds to or to make any investment in any other person or
entity (in the form of a loan, capital contribution, or otherwise);
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(e) with respect to obligations as guarantor, surety, co-signer,
endorser, co-maker, indemnitor, or otherwise in respect of the
obligation of any other person or entity;
(f) for any line of credit, standby financing, revolving credit, or other
similar financial arrangement;
(g) with any distributor, original equipment manufacturer, value added
remarketer or other person for the distribution of any WUC products.
WUC is not in material default under or in material breach or violation of, nor
is there any valid basis for any claim of material default by WUC under, or
material breach or violation by WUC of, any contract, commitment, or restriction
to which WUC is a party or by which WUC or any of its properties or assets is
bound (including the License Agreement). To WUC's or WAM's knowledge, no other
party is in material default under or in material breach or violation of, nor is
there any valid basis for any claim of material default by any other party under
any contract, commitment, or restriction to which WUC is a party or by which WUC
or any of its properties or assets is bound.
3.9 Compliance with Laws: WUC has complied in all material respects with, is
not in material violation of, and has not received any notices of
violation with respect to, any statute, law, or regulation applicable to
the ownership or operation of its business.
3.10 Litigation: There is no action, suit, proceeding, claim, arbitration, or
investigation pending before any agency, court, or tribunal, or, to WAM's
and WUC's knowledge, threatened against WUC or any of its properties or
officers or directors (in their capacities as such). There is no judgment,
decree, or order against WUC or, to WAM's or WUC's knowledge, any of its
directors or officers (in their capacities as such) that could prevent,
enjoin, or materially alter or delay any of the transactions contemplated
by this Agreement, or that could reasonably be expected to have a Material
Adverse Effect on WUC.
3.11 Restrictions on Business: There is no agreement, judgment, injunction,
order, or decree binding upon WUC which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any
current business practice of WUC or the conduct of its business as
currently conducted.
3.12 Governmental Authorization: WUC has obtained each governmental consent,
license, permit, grant, or other authorization of a governmental entity
that is required for the operation of the business of WUC as currently
conducted, except for those which, if not obtained, would not be
reasonably likely to have a Material Adverse Effect on WUC.
3.13 Broker's and Finder's Fees: WAM has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.14 Investment Representations:
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(a) The UCN Stock is being acquired for WAM's own account, for investment
and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the
Securities Act of 1933, as amended, or other applicable securities
laws.
(b) WAM is an "Accredited Investor" as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act of 1933, as
amended.
3.15 No Sale or Transfer of UCN Stock: WAM hereby agrees to sign a lock-up
agreement as requested by UCN, in the same form as executed by the
directors and officers of UCN, attached hereto as Schedule 1.
(a) In the event that the effective date of UCN's Registration Statement
does not occur on or before May 31, 2000, the provisions hereof shall
forthwith terminate and be of no further force or effect.
(b) WAM shall be entitled to transfer the UCN Stock (i) to a WAM
subsidiary, or affiliate, (ii) to a survivor by merger or
consolidation, or any other successor in interest of WAM or any other
entity referred to in (i), or (iii) to the employees of WAM or any
other entity related to WAM and referred to in the foregoing clauses
(i) or (ii), pursuant to an employee stock option plan.
(c) In each instance of a transfer pursuant to clauses (i), (ii), or
(iii) above, such transferee shall be subject to the provisions of
this paragraph.
3.16 No Misrepresentation: No representation or warranty by WAM in this
Agreement, and no written statement, certificate, or schedule furnished or
to be furnished by or on behalf of WAM pursuant to this Agreement, when
taken together, contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in
order to make such statements, in light of the circumstances under which
they were made, not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF UCN
UCN represents and warrants to WAM as follows:
4.1 Organization, Standing, and Power: UCN is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. UCN has the corporate power to own its properties and to carry
on its business as now being conducted.
4.2 UCN Capital Structure: The authorized capital stock of UCN consists of
thirty-three million (33,000,000) shares of UCN Common Stock, $.001 par
value, of which shares are issued and outstanding and are held of record
by UCN. All outstanding shares of UCN Stock have been duly authorized and
validly issued, are fully paid and nonassessable, and are subject to no
preemptive rights or rights of first refusal created by statute, the
Certificate of Incorporation, or Bylaws of UCN or any agreement to which
UCN is a party or by which it is bound. The delivery of a certificate or
certificates at the Closing
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representing the UCN Stock will transfer to WAM good and valid title to
the UCN Stock, free and clear of all Liens.
(a) Except as set forth on Schedule 2, there are (i) no equity securities
of any class of UCN or any securities exchangeable into or
exercisable for such equity securities issued, reserved for issuance,
or outstanding and (ii) no outstanding subscriptions, options,
warrants, puts, calls, rights, or other commitments or agreements of
any character to which UCN is a party or by which it is bound
obligating UCN to issue, deliver, sell, repurchase, or redeem, or
cause to be issued, delivered, sold, repurchased, or redeemed, any
equity securities of UCN or obligating UCN to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment, or
agreement.
4.3 Authority: UCN has all requisite corporate power and authority to enter
into this Agreement and the other documents required to be executed and
delivered by UCN hereunder (collectively, the "UCN Transaction Documents")
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other UCN Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part of UCN. This Agreement and the other UCN Transaction Documents to
which they are parties have been duly executed an delivered by UCN and
constitute the valid and binding obligations of UCN, enforceable against
UCN in accordance with their terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally, and (ii) general principles of
equity.
(a) The execution and delivery by UCN of this Agreement and the other UCN
Transaction Documents do not, and the consummation of the
transactions contemplated hereby and thereby will not: (i) conflict
with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of UCN, (ii) result in any
violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default under, or give rise to a right of
termination, cancellation, or acceleration of any material obligation
or loss of any benefit under any note, mortgage, indenture, lease,
contract, or other agreement or obligation to which UCN is a party or
by which UCN or any of its properties or assets may be bound; (iii)
conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule, or regulation
applicable to UCN or any of its properties or assets; or (iv) require
UCN to obtain any consent, approval, or action of, make any filing
with, or give any notice to any entity or person as a result or under
the terms of any contract or agreement to which UCN is a party or by
which their properties or assets are bound, except in the case of
(ii) and (iii) for such violations, breaches, defaults, rights, or
conflicts which would not be reasonably likely to have a Material
Adverse Effect on UCN and its parents and subsidiaries, taken as a
whole, or materially affect the ability of UCN to consummate the
transactions contemplated by this Agreement in accordance with its
terms.
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(b) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any governmental entity is required by
UCN in connection with the execution and delivery of this Agreement
or the other UCN Transaction Documents or the consummation of the
transactions contemplated hereby or thereby, except for such
consents, authorizations, filings, approvals, and registrations
which, if not obtained or made, would not be reasonably likely to
have a Material Adverse Effect on UCN or materially adversely affect
the ability of UCN to consummate the transactions contemplated by
this Agreement in accordance with its terms.
4.4 Absence of Undisclosed Liabilities: Except as disclosed in the Company's
Registration Statement on Form S-1 dated February 3, 2000, as amended from
time to time, UCN does not have any liabilities, either accrued or
contingent, and whether due or to become due, other than normal or
recurring liabilities incurred since its formation in the ordinary course
of business.
4.5 Absence of Certain Changes or Events: Except as disclosed in the Company's
Registration Statement on Form S-1 dated February 3, 2000, as amended from
time to time, since its date of formation, UCN has conducted its business
in the ordinary course and in a manner consistent with past practices, and
has not suffered any event or occurrence that has had or could reasonably
be expected to have a Material Adverse Effect on UCN;
4.6 Intellectual Property: Except as disclosed in the Company's Registration
Statement on Form S-1 dated February 3, 2000, as amended from time to
time, UCN owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, and
copyrights, and any applications for and registrations of such
Intellectual Property, and all processes, formulae, methods, schematics,
technology, know-how, computer software programs or applications, and
tangible or intangible proprietary information or materials that are
necessary to conduct the business of UCN as currently conducted.
4.7 Investment Representations:
(a) The WUC Stock is being acquired for UCN's own account, for investment
and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the
Securities Act of 1933, as amended, or other applicable securities
laws.
(b) UCN is an "Accredited Investor" as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act of 1933, as
amended.
4.8 Registration Rights: No director or officer of UCN has any registration
rights or other rights to transfer or dispose of UCN common stock pursuant
to this agreement or otherwise, except as provided by Rule 144 of the
Securities Act of 1933, as amended ("Rule 144")
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4.9 The UCN Stock: The UCN Stock to be issued in accordance with the terms and
provisions of this Agreement will be duly authorized, validly issued,
fully paid, and non-assessable.
4.10 No Sale or Transfer of UCN Common Stock:
(a) Directors and officers of UCN hereby agree to sign a lock-up
agreement, attached hereto as Schedule 1, which shall prevent such
director and officer from selling or otherwise transferring UCN
common stock; provided, however, that UCN shall provide written
notice to WAM within five (5) business days, if the restrictions
contained therein are lifted or changed for any reason or in any
manner.
(b) If UCN proposes to prepare and file with the Securities and Exchange
Commission ("SEC") a form S-1, or any other similar form registering
any UCN common stock held by directors and officers of UCN (other
that pursuant to Forms S-4, S-8 or any successor to such forms), UCN
shall provide written notice to WAM of such registration within five
(5) business days and register the same proportionate amount of UCN
stock held by WAM, as the directors or officers of UCN are proposing
to register pursuant to that registration statement.
4.11 Compliance with Laws: UCN has complied in all material respects with, is
not in material violation of, and has not received any notices of
violation with respect to, any statute, law, or regulation applicable to
the ownership or operation of its business.
4.12 Litigation: There is no action, suit, proceeding, claim, arbitration, or
investigation pending before any agency, court, or tribunal, or, to UCN's
knowledge, threatened against UCN or any of its properties or officers or
directors (in their capacities as such). There is no judgment, decree, or
order against UCN or, to UCN's knowledge, any of its directors or officers
(in their capacities as such) that could prevent, enjoin, or materially
alter or delay any of the transactions contemplated by this Agreement, or
that could reasonably be expected to have a Material Adverse Effect on
UCN.
4.13 Restrictions on Business: There is no agreement, judgment, injunction,
order, or decree binding upon UCN which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any
current business practice of UCN or the conduct of its business as
currently conducted.
4.14 Governmental Authorization: UCN has obtained each governmental consent,
license, permit, grant, or other authorization of a governmental entity
that is required for the operation of the business of UCN as currently
conducted, except for those which, if not obtained, would not be
reasonably likely to have a Material Adverse Effect on UCN.
4.15 Brokers' and Finders' Fees: UCN has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or
agent's commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
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4.15 No Misrepresentation: No representation or warranty by UCN in this
Agreement, and no written statement, certificate, or schedule furnished or
to be furnished by or on behalf of UCN pursuant to this Agreement, when
taken together, contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in
order to make such statements, in light of the circumstances under which
they were made, not misleading.
SECTION 5. ADDITIONAL AGREEMENTS
5.1 Confidentiality: "Confidential Information" as used in this Agreement
shall mean any information, not generally known in the trade or industry,
which was obtained from the parties to this Agreement, or which was
learned, discovered, developed, conceived, originated, or prepared during
or as a result of any performance hereunder and which falls within the
following general categories: (i) information relating to trade secrets of
the parties; (ii) information relating to existing or contemplated
products, services, technology, designs, computer systems, computer
software and research, or developments of the parties; (iii) information
relating to business plans, sales or marketing methods, methods of doing
business, customer lists, customer usages and/or requirements, names of
sales representatives, and supplier information of the parties; (iv)
information relating to proprietary computer software not generally known
to the public; and (v) any other confidential information that the parties
may wish to protect by patent, copyright, or by keeping such information
secret and confidential.
(a) The party which receives confidential information from the other
party agrees to maintain such information in secrecy at all times,
and to take reasonable steps, including such steps as it takes to
protect its own proprietary information, prior to and (if applicable)
after termination of this Agreement, to prevent the duplication or
disclosure of any such confidential and proprietary information,
other than by or to its own employees or agents who must have access
to such information to perform such party's obligations hereunder.
Information of either party shall not be subject to the obligations
imposed by this Section if such information is publicly available or
is lawfully obtained by the disclosing party from another source free
of restrictions or is independently developed by the disclosing
party.
5.2 Expenses: Regardless of whether the transaction provided for herein is
consummated, all fees and expenses incurred in connection with such share
exchange including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties
incurred by a party in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party
incurring such fees and expenses.
5.3 Public Disclosure: Following the execution of this Agreement, the parties
shall agree to the text of the initial public disclosure to be made
concerning the transaction discussed in this Agreement. The parties shall
further agree on the timing and nature of such disclosure. Disclosure
(whether or not in response to an inquiry) of the existence or nature of
this Agreement shall be made by any party hereto unless approved in
writing by
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duly authorized officers of all parties prior to release, provided that
such approval shall not be unreasonably withheld and subject in any event
to UCN's obligation to comply with applicable securities laws and stock
market regulations.
5.4 Reasonable Efforts: Subject to the terms and conditions provided in this
Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and
filings and to remove any injunctions or other impediments or delays,
legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to
the parties hereto the benefits contemplated by this Agreement.
5.5 Notification of Certain Matters: WAM shall give prompt notice to UCN, and
UCN shall give prompt notice to WAM, of (a) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is
likely to cause any representation or warranty of any party, respectively,
contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Closing except as contemplated by this
Agreement, and (b) any failure of WAM or UCN, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of
any notice pursuant to this Section 5.5 shall not limit or otherwise
affect any remedies available to the party receiving such notice.
5.6 Use of UCN Corporate Name: UCN hereby consents to WUC's use of the words
"Urban Cool" in WUC's corporate name.
5.7 Tax-Free Acquisition: Each WAM and UCN hereby agree to treat the
Acquisition as a tax-free exchange of shares in any and all tax or other
filings, documents or agreements relating to or containing a
characterization of the Acquisition, and neither party shall take any
position in any such filing that is inconsistent with this intended
characterization.
SECTION 6. CONDITIONS TO THE CLOSING
6.1 Conditions to Obligations of Each Party: The respective obligations of
each party to this Agreement to effect the transactions provided for
herein shall be subject to the satisfaction at or prior to the Closing of
the following conditions:
(a) Director and/or Stockholder Approval: Director and/or Stockholder
approval shall have been obtained;
(b) No Injunctions or Restraints; Illegality: No temporary restraining
order, preliminary or permanent injunction, or other order issued by
any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the
transactions provided for herein shall be in effect;
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(c) Regulatory Approvals and Third Party Consents: All governmental and
third party consents, orders and approvals legally required for the
consummation of the transactions provided for herein and the
transactions contemplated hereby, shall have been obtained and be in
effect as of the Closing;
6.2 Additional Conditions to the Obligations of UCN: The obligations of UCN to
effect the transactions provided for herein are subject to the
satisfaction of each of the following additional conditions, any of which
may be waived in writing exclusively by UCN:
(a) The representations and warranties of WAM set forth in this Agreement
shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date,
except for changes contemplated by this Agreement.
(b) WAM shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to
the Closing Date.
(c) The license granted to WUC by WAM shall be in full force and effect
in accordance with its terms as of the Closing Date.
6.3 Additional Conditions to the Obligations of WAM: The obligations of WAM to
effect the transactions provided for herein are subject to the
satisfaction of each of the following additional conditions, any of which
may be waived in writing exclusively by WAM:
(a) The representations and warranties of UCN set forth in this Agreement
shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date.
(b) UCN shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to
the Closing Date.
SECTION 7. TERMINATION, AMENDMENT, AND WAIVER
7.1 Termination: This Agreement may be terminated and the transaction
abandoned at any time prior to the Closing:
(a) By mutual consent of the parties;
(b) By either party if: (i) the Closing has not occurred by March 31,
2000 (provided that the right to terminate this Agreement under this
clause 7.1(b)(i) shall not be available to any party whose willful
failure to fulfill any obligation hereunder has been the cause of, or
resulted in, the failure of the Closing to occur on or before such
date); (ii) there shall be a final non-appealable order of a federal
or state court in effect preventing consummation of the transactions
contemplated hereby; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the transactions provided for herein by any
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governmental entity that would make consummation of the transactions
provided for herein illegal; or
(c) By either party if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed
applicable to the transactions provided for herein by any
governmental entity, which would: (i) prohibit UCN's ownership of the
WUC Stock; (ii) prohibit WAM's ownership of the UCN Stock; or (iii)
compel UCN to dispose of or hold separate, as a result of the
Acquisition, any material portion of the business or assets of WUC.
Where action is taken to terminate this Agreement pursuant to this Section
7.1, it shall be sufficient for such action to be authorized by the Board
of Directors (as applicable) of the party taking such action.
7.2 Effect of Termination: In the event of termination of this Agreement as
provided in Section 7.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of either party or
their respective officers, directors or stockholders, provided that each
party shall remain liable for any breaches of this Agreement prior to its
termination and WAM shall liquidate WUC.
7.3 Amendment: Except as is otherwise required by applicable law, this
Agreement may be amended by the parties hereto at any time only by
execution of an instrument in writing signed on behalf of each of the
parties hereto.
7.4 Extension; Waiver: At any time prior to the Closing, either party may, to
the extent legally allowed, (a) extend the time for the performance of any
of the obligations of the other party hereto, (b) waive any inaccuracies
in the representations and warranties made to such party contained herein
or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party at any
time or times to require performance of any provision hereof shall in no
manner affect the right of such party at a later time to enforce the same
or any other provision of this Agreement. No waiver of any condition or of
the breach of any term in this Agreement in one or more instances shall be
deemed to be or construed as a further or continuing waiver of such
condition or breach or a waiver of any other condition or of the breach of
any other term of this Agreement.
SECTION 8. INDEMNIFICATION
8.1 Survival of Representations and Warranties: All of the representations and
warranties of WAM and UCN contained in this Agreement shall survive the
Closing Date for a period of twelve (12) months; provided, however, that
the representation and warranty made by WAM and UCN in Sections 3.1, 3.2,
3.3, 4.1, 4.2, 4.3 and 4.8 shall survive the Closing Date indefinitely.
After the expiration of such twelve-month period, such representations and
warranties shall expire and be of no further force or effect other than
those specifically listed above.
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<PAGE>
8.2 WAM Indemnification: WAM hereby agrees to indemnify and hold harmless UCN,
including its affiliates, subsidiaries, successors, assigns, officers,
directors, agents, and employees, from and against any and all
liabilities, damages, losses, expenses, claims, demands, suits, fines, or
judgments (including, but not limited to, attorneys' fees, expert witness
costs, court costs, and expenses) that may at any time be threatened
against, suffered by, accrued against, charged to, or recoverable from UCN
in any forum, by reason of:
(a) The breach in any material respect of any representation or warranty
of WAM contained in or made pursuant to this Agreement; or
(b) A material breach in any covenant or agreement of WAM contained in
this Agreement.
8.3 UCN Indemnification: UCN hereby agrees to indemnify and hold harmless WAM,
including its affiliates, subsidiaries, successors, assigns, officers,
directors, agents, and employees, from and against any and all
liabilities, damages, losses, expenses, claims, demands, suits, fines, or
judgments (including, but not limited to, attorneys' fees, expert witness
costs, court costs, and expenses) that may at any time be threatened
against, suffered by, accrued against, charged to, or recoverable from WAM
in any forum, by reason of:
(a) The breach in any material respect of any representation or warranty
of UCN contained in or made pursuant to this Agreement;
(b) A material breach in any covenant or agreement of UCN contained in
this Agreement.
SECTION 9. GENERAL PROVISIONS
9.1 Non-Survival of Representations and Warranties: Except as explicitly set
forth in this Agreement, the representations and warranties set forth in
this Agreement shall not survive beyond the Closing.
9.2 Notices: All notices and other communications hereunder shall be in
writing, shall be effective when received, and shall in any event be
deemed to have been received (a) when delivered, if delivered personally
or by commercial delivery service, (b) three (3) business days after
deposit with U.S. Mail, if mailed by registered or certified mail (return
receipt requested), (c) one (1) business day after the business day of
deposit with Federal Express or similar nationally recognized overnight
courier for next day delivery (or, two (2) business days after such
deposit if deposited for second business day delivery), if delivered by
such means, or (d) one (1) business day after delivery by facsimile
transmission with copy by U.S. Mail, if sent via facsimile plus mail copy
(with acknowledgment of complete transmission), to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
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<PAGE>
if to UCN, to:
Urban Cool Network, Inc.
1401 Elm Street
Dallas, Texas 75202
Attention: Jacob R. Miles III, Chairman & CEO
if to WAM, to:
Wilhelmina Artist Management, LLC
300 Park Avenue South
2nd Floor
New York, NY 10010
Attention: Dieter Esch
9.3 Interpretation: The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each
case to mean any contract, commitment or other agreement, whether oral or
written, that is legally binding. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. When
reference is made herein to "the business of" an entity, such reference
shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such
entity.
9.4 Counterparts: This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. Execution of this Agreement
via facsimile shall have the same force of authority as an original
signature.
9.5 Entire Agreement: This Agreement, the schedules and Exhibits hereto, and
the documents and instruments and other agreements among the parties
hereto referenced herein: (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof; and (b) are not intended to
confer upon any other person any rights or remedies hereunder.
9.6 Severability: In the event that any provision of this Agreement or the
application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted in
such a manner so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision
of this Agreement with a
17
<PAGE>
valid and enforceable provision that will achieve, to the greatest extent
possible, the economic, business and other purposes of such void or
unenforceable provision.
9.7 Other Remedies: Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and
not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
9.8 Specific Performance: The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this remedy being in
addition to any other remedy to which they are entitled at law or in
equity.
9.9 Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the
conflicts of law principles thereof. Each of the parties hereto consents
to the exclusive jurisdiction of the courts of the State of New York, and
any Federal Court sitting in the Southern District of the State of New
York, and that process may be served upon them in any manner authorized by
the laws of the State of New York for such persons and waives and
covenants not to assert or plead any objection which they might otherwise
have to such jurisdiction and such process.
9.10 Assignment: No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written
approval of the other parties hereto. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
9.11 Absence of Third Party Beneficiary Rights: No provisions of this Agreement
are intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner of any party hereto or any other person or
entity unless specifically provided otherwise herein.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
The following page is the signature page
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be signed by their duly authorized respective officers, as of the
date first written above.
URBAN COOL NETWORK, INC.
By:
-----------------------------------
Jacob R. Miles III
Chairman and CEO
WILHELMINA ARTIST MANAGEMENT, LLC
By:
-----------------------------------
Dieter Esch
Managing Member
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<PAGE>
Schedule 1
URBAN COOL NETWORK INC.
1401 Elm Street, Suite 2955
Dallas, TX 75202
The undersigned, a beneficial owner of an aggregate of shares of common
stock of Urban Cool Network, Inc. (the "Company"), par value $0.01 per share
(the "Common Stock"), and/or warrants, options or rights to purchase, or
securities convertible into, Common Stock, understands that the Company has
filed with the Securities and Exchange Commission a registration statement (the
"Registration Statement") for the registration of 2,000,000 shares of Common
Stock.
In order to induce Security Capital Trading, Inc. (the "Representative")
and Urban Cool Network, Inc. (together with its predecessors, successors and
assigns, the "Company) to enter into an underwriting agreement with respect to
the public offering of securities issued by the Company, the undersigned hereby
agrees that for a period of thirteen (13) months following the effective date of
the Company's Registration Statement relating to the underwritten public
offering of securities by the Company (the "Lock-up Period"), he, she or it will
not, without the prior written consent of the Representative and the Company,
directly or indirectly, issue, offer, agree or offer to sell, sell, grant an
option for the purchase or sale of, transfer, pledge, assign, hypothecate,
distribute or otherwise encumber or dispose of (whether pursuant to Rule 144 of
the General Rules and Regulations under the Securities Act of 1933, as amended,
or otherwise) any securities of the Company, including common stock or options,
rights, warrants or other securities underlying, convertible into, exchangeable
or exercisable for or evidencing any right to purchase or subscribe for any
common stock (whether or not beneficially owned by the undersigned), or any
beneficial interest therein (collectively, the "Securities").
Further, the undersigned hereby waives, from the date hereof until the
expiration of the Lock-up Period, any and all rights to request or demand the
registration pursuant to the Securities Act of 1933, as amended, of any
Securities of the Company which are registered in the name of or beneficially
owned by the undersigned.
In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or stop-transfer orders with the
transfer agent of the Company's securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned, and the undersigned hereby confirms the undersigned's investment in
the Company.
Dated: March __, 2000
------------------------------
By:
Title:
------------------------------
Print Social Security Number
or Taxpayer I.D. Number
20
Exhibit 10.44
LICENSE AGREEMENT
THIS AGREEMENT is made this 22nd day of March, 2000 by and between
Wilhelmina Artist Management LLC, a New York Limited Liability Company with a
principal place of business at 300 Park Avenue South, New York, NY 10010
(hereinafter, collectively, the "Licensor"); and WilhelminaUrbanCool.com, Inc.,
a Delaware corporation, with a principal place of business at 300 Park Avenue
South, New York, NY 10010 (hereinafter, the "Licensee").
WHEREAS, Licensor is the owner of the trademark "Wilhelmina" that it has
used since at least as early as 1970 in connection with modeling services and
subsequent to 1970 in connection with management services for musical performers
(hereinafter, the "Mark"), which Mark has become well-known and recognized by
the general public and associated in the public mind with Licensor; and
WHEREAS, Licensee desires to utilize the Mark in connection with content
for its network of web sites and a web site to be created by Licensee (the "Web
Site") located at "WilhelminaUrbanCool.com" (the "Domain Name") that provides a
broad array of information, entertainment, on-line services and products
targeted to urban inner city residents as further described in this Agreement
(hereinafter, the "Services"), which Services will be marketed in part through
and by professional models, music celebrities and others (each of whose
engagements shall be subject to separately negotiated agreements for specific
services, except as described in this Agreement) who are approved in advance by
Licensor.
NOW, THEREFORE, in consideration of the promises and covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. LICENSE: Licensor hereby grants Licensee the right to use the Mark
solely in connection with the above-mentioned Services and in all advertising
and promotion for said Services, provided that Licensee offers the Services in
accordance with the normal quality standards and specifications approved by
Licensor which approval shall not be unreasonably withheld or delayed. Nothing
in this Agreement shall be construed to prevent Licensor from granting any other
licenses for the use of the Mark or from utilizing the Mark in any manner
whatsoever, except that Licensor agrees that except as provided herein it will
grant no other licenses during the Term of this Agreement (as hereinafter
defined) for use of the Mark in connection with a web site that principally
offers a broad array of information, entertainment, on-line services and
products targeted to urban residents and businesses, African-Americans,
Hispanic-Americans and other minorities in the United States, including but not
limited to the web sites or similar web sites listed on Schedule 1; provided,
that, the foregoing shall not prevent or limit the right of Licensor to license
the Mark in connection with web sites that target one or more aspects of
African-American, Hispanic-American, or other minority communities, as long as
such web sites are not portals providing a broad array of information,
entertainment, on-line services and products targeted to urban residents and
businesses. For purposes of this definition, urban residents shall include
residents living in urban areas as described in the most recent U.S. Census
data. All rights not specifically licensed hereunder are reserved by Licensor.
<PAGE>
2. QUALITY CONTROL:
a. Licensee agrees to use the Mark only in connection with the
above-mentioned Services and in accordance with the reasonable standards,
specifications, directions, information and know-how provided by Licensor
from time to time in order to protect Licensor's rights in the Mark. In
furtherance of, and without limiting, the foregoing, Licensee agrees to
comply with any reasonable requirements established by Licensor concerning
the style, design, display and use of the Mark including, without
limitation, any requirement to use a trademark symbol ((TM) or (R)) with
any or all uses of the Mark, and Licensee agrees that it will take all
steps reasonably necessary to ensure that Licensor's ownership of the Mark
is recognized and afforded protection wherever the Mark is used.
b. Licensee agrees that (i) any and all uses of the Mark by
Licensee, (ii) any and all content of the Web Site, (iii) any person or
model whose name or likeness is used on or in connection with the Web
Site, and (iv) any and all advertising and promotion related to the Web
Site shall be subject to the advance written approval of Licensor, which
approval shall not be unreasonably withheld or delayed and which approval
shall be deemed to have been given if Licensor does not notify Licensee of
its objections thereto within three (3) business days following Licensor's
receipt of written request to Licensor for Licensor's approval of such.
c. Upon written request from Licensor, Licensee shall submit for
Licensor's review such materials and documents as Licensor shall
reasonably require in order for Licensor to ensure that Licensee is in
compliance with the terms of this Agreement, including compliance with all
such standards, specifications, directions, information and know-how
provided by Licensor to Licensee pursuant to the terms hereof.
d. Licensee agrees to maintain the reasonable standards of quality
established by Licensor including those standards provided to Licensee by
Licensor pursuant to this Agreement. Licensor shall be the sole determiner
of whether Licensee has maintained said standards of quality provided that
Licensor utilizes reasonable discretion.
3. OWNERSHIP/POLICING OF MARK: Licensee agrees that ownership of the Mark
and the goodwill relating thereto shall remain vested in Licensor and that
Licensee's use of the Mark inures to the benefit of Licensor both during the
Term of this Agreement and thereafter, and Licensee further agrees never to
challenge, contest or question the validity of Licensor's ownership of the Mark
or any registrations thereof by Licensor. Licensee agrees to inform Licensor of
the use of any marks similar to the Mark and any potential infringements of
Licensor's Mark which come to its attention.
4. LITIGATION: In the event Licensee is named as defendant in any action
based on its use of the Mark, Licensee agrees to immediately notify Licensor,
and Licensor shall have the right to intervene in any such action and to control
and direct the defense thereof, including the right to select defense counsel,
provided that in the event Licensor chooses to exercise control it agrees to
immediately reimburse Licensee for the cost of its defense and to indemnify it
against
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<PAGE>
all damages arising therefrom, provided that Licensee has compiled with all its
obligations under this Agreement.
5. DOMAIN NAME: Licensee agrees that during the Term of this Agreement
that it shall maintain in its own name a valid and operable registration for the
Domain Name and shall not transfer or assign to any third party or otherwise
encumber said Domain Name registration. Licensor shall not have the right to
utilize the Domain Name after the Term of this Agreement.
6. INDEMNIFICATION:
a. Licensee hereby assumes all responsibility for and agrees to
defend, indemnify, and hold harmless Licensor against any and all damages,
losses, claims, suits or other expenses whatsoever, including Licensor's
reasonable attorneys' fees, arising out of (i) the negligent or
intentional acts or omissions of Licensee or its employees or agents, (ii)
any of Licensee's promotion, advertising, use or sale of the Mark and
Services or (iii) any breach by Licensee of any covenant, representation
or agreement of Licensee contained in this Agreement.
b. Licensor hereby assumes all responsibility for and agrees to
defend, indemnify, and hold harmless Licensee against any and all damages,
losses, claims, suits or other expenses whatsoever, including Licensee's
reasonable attorneys' fees, arising out of (i) alleged trademark
infringement arising out of Licensee's use of the Mark itself (i.e., as
distinguished from the Domain Name and any variations thereof) in
accordance with the provisions of this Agreement, (ii) any breach by
Licensor of any covenant, representation or agreement of Licensor
contained in this Agreement, (iii) the negligent or intentional acts or
omissions of Licensor or its employees or agents or (iv) any of Licensor's
promotion, advertising, use or sale of the Mark.
7. REPRESENTATIONS AND WARRANTIES:
a. Licensee represents, warrants, and covenants that (i) it has the
full power and authority to enter into this Agreement, (ii) it will use
its best efforts to market and sell the Services in a commercially
reasonable and ethical manner, (iii) it will market and sell the Services
in accordance with all applicable laws and regulations and (iv) it will
not disclose to any third party, without Licensor's consent, any
information relating to or disclosed to it in connection with this
Agreement, which is or reasonably should be understood to be confidential
or proprietary, except as required in connection with filings as required
by law or by a national securities exchange.
b. Licensor represents, warrants and covenants that (i) it has full
power and authority to enter into this Agreement, (ii) it has the right to
license the Mark to Licensee, (iii) without limiting the Licensor's
obligations hereunder, which are absolute and unconditional, it will
utilize its best efforts to provide the content requested by Licensee
pursuant to this Agreement and (iv) it will not disclose to any third
party, without Licensor's consent, any information relating to or
disclosed to it in connection with this Agreement, which is or reasonably
should be understood to be confidential or proprietary.
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<PAGE>
8. TERM: The term of this Agreement shall commence on the date hereof and
shall remain in full force and effect for a period of twenty-five (25) years
(the "Initial Term"), unless earlier terminated pursuant to the provisions
hereof. At the end of each five (5) year term beginning with the end of the
Initial Term, this license shall be automatically renewed for a further five (5)
year term upon all the terms and conditions contained herein, unless the
Licensor shall be given written notice to the contrary by Licensee at least
thirty (30) days prior to the expiration date or unless earlier terminated
pursuant to the provisions hereof. The Initial Term and any subsequent five (5)
year terms are sometimes collectively referred to herein as the "Term."
9. COVENANTS AND REPRESENTATIONS OF LICENSOR:
a. Licensee shall have the right to utilize on its Web Site or
network of web sites any and all information, head shots, photographs, and
other material cleared for such use to be furnished by Licensor, or its
affiliates, or developed by Licensor, which Licensor, or its affiliates,
has the right to utilize for self-promotion, as determined by Licensor, in
connection with its capacity as agent for models and other talent which it
represents. Licensor agrees to make all of such material available to
Licensee at Licensee's request for use on Licensee's Web Site or network
of web sites. Licensor hereby represents to Licensee that Licensor has
full power and capacity to assign such rights to Licensee to utilize such
material to Licensee.
b. Licensor agrees during the term of this Agreement to assist
Licensee in creating content for the Licensee's Web Site or network of web
sites, such content shall include, but not be limited to the items
described in Schedule 2, annexed hereto. Licensor, at its own cost, shall
provide the underlying materials necessary to produce such content and
Licensee shall be responsible for converting such materials for use on the
Web Site and shall bear the cost and expense thereof.
c. Licensor hereby agrees to provide a cross link in a form
reasonably acceptable to Licensee to Licensee's Web Site on any web site
that is owned or operated by Licensor or to Licensor's affiliates and
Licensor agrees to utilize its best efforts to provide a cross link for
Licensee on any web site in which Licensor or its affiliates have an
ownership interest.
10. REVENUE SHARING: Licensor and Licensee shall negotiate in good faith
to establish revenue sharing arrangements with respect to (i) third-party
modeling jobs initiated by Licensee (for which a 10% finder's fee shall apply),
(ii) joint contests and (iii) merchandising, subject to Licensor's approval of
the use of the Mark in each case.
11. TERMINATION:
a. Except as otherwise provided herein, this Agreement may only be
terminated by written agreement of both parties signed by their officers
or representatives. Licensor may terminate this Agreement:
i) on not less than thirty (30) days written notice in the
event that Licensee defaults on or fails to comply with any
provision of this Agreement,
4
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unless within such thirty (30) day period Licensee shall remedy such
default or failure to comply or diligently commences to remedy such
default or failure to comply and consummates such remedy as soon as
practicable thereafter.
ii) if Licensee, or its shareholders, officers, directors,
employees, or agents take any action in connection with the sale,
advertising, distribution, dissemination or promotion of the
Services and/or the Mark which damages or reflects adversely upon
the Licensor or the Mark materially, as determined reasonably by
Licensor;
iii) if Licensee fails to make commercial use of the Mark for
a period of twelve (12) months or more; or
iv) if Licensee ceases its business operations or makes any
assignments of assets or business for the benefit of creditors, or a
trustee or receiver is appointed to conduct its business or affairs,
or if Licensee files a petition in bankruptcy or is adjudicated
bankrupt or insolvent.
b. Licensee acknowledges that its failure to cease use of the Mark
after the termination or expiration of this Agreement will result in
immediate and irreparable harm to Licensor and to the rights of any
subsequent licensee of Licensor such that Licensor would have no adequate
remedy at law, and that in such event, Licensor shall be entitled to seek
equitable relief including injunctive relief, as well as such other relief
as a court of competent jurisdiction may deem just and proper.
c. Licensor acknowledges that its failure to cease use of the Domain
Name after the termination or expiration of this Agreement will result in
immediate and irreparable harm to Licensee and to the rights of any
subsequent licensee of Licensee such that Licensee would have no adequate
remedy at law, and that in such event, Licensee shall be entitled to seek
equitable relief including injunctive relief, as well as such other relief
as a court of competent jurisdiction may deem just and proper.
12. SUBLICENSING/ASSIGNMENT: Except for sublicenses to affiliates of
Licensee which for purposes hereof shall mean entities which directly or
indirectly are controlled by the Licensee or Urban Cool Network, Inc., as
defined by Rule 405 promulgated by the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended, Licensee may not
sublicense any of the rights granted herein and may not assign any of its rights
hereunder without the prior written consent of Licensor which shall be exercised
in good faith. This Agreement will inure to the benefit of the Licensor, its
successors and assigns.
13. ATTORNEY'S FEES: In the event of any breach or alleged breach, under
this Agreement, the prevailing party shall be entitled to reasonable attorney's
fees and costs.
14. REMEDIES: In the event of either party's failure to perform hereunder,
in addition to any other remedies available at law or in equity, the parties
shall have the right to enforce specific performance of the obligations under
this Agreement.
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15. CHOICE OF LAW: This Agreement shall be interpreted under the laws of
the State of New York.
16. RELATIONSHIP OF PARTIES: Nothing contained herein shall be construed
to create, expressly or by implication, an employment relationship, joint
venture, partnership, or other association between the parties, and neither
party may bind the other party in any dealings with any third parties. For
purposes of this Agreement references to Licensee's Web Site or network of web
sites shall include Urban Cool Network, Inc.'s web sites. Nothing herein shall
entitle Licensor to any rights to the Urban Cool brand, name or any rights in
Urban Cool's web sites.
17. WAIVER: The waiver by either party of a breach of a provision of this
Agreement shall not operate or be construed to invalidate the balance of the
provisions contained in this Agreement, which shall continue to remain in
effect.
18. SEVERABILITY: The finding by any court that a provision of this
Agreement is invalid shall not operate or be construed to invalidate the balance
of the provisions contained in this Agreement, which provisions shall continue
to remain in full force and effect.
19. ENTIRE AGREEMENT: This Agreement contains the entire agreement between
the parties relating to the subject matter hereof, and all prior proposals,
discussions or writings are superseded hereby. The terms of this License shall
be binding upon and shall inure to the benefit of the parties and their
successors, heirs and assigns.
20. COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original of the party or
parties executing the same and all of which together shall be deemed to
constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this License Agreement by
their duly authorized representatives on the date set forth above.
WILHELMINA ARTIST MANAGEMENT, LLC
By:
--------------------------------
Name:
Title:
WILHELMINAURBANCOOL.COM, INC.
By:
--------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED
WITH RESPECT TO SECTION 9 OF THE
FOREGOING AGREEMENT:
WILHELMINA MODELING AGENCY
By:
---------------------------------
Name:
Title:
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SCHEDULE 1
List of Web Sites
urban box office
urbanmagic.com
BET.com
BlackPlanet.com
Blackvoices.com
Blackfamily.com
NetNoir.com
PeopleofColor.com
LatinaOnline
OneNetNow.com
NationNet
Latinobay.com
8
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SCHEDULE 2
NOTE: Notwithstanding anything to the contrary herein set forth, the
services of models and other talent represented by Licensor (and any use of
their photos or likenesses other than to promote Licensor or Licensee) shall be
subject to separately-negotiated arrangements between Licensee and Licensor on
behalf of such models and other talent for the applicable services involved;
provided, however, that Licensor's supplying of models for launch events and
model headshots for display on the Web Site shall be at no cost to Licensee.
1. Launch Events: Licensor shall provide models to Licensee for web
casting on the Licensee's Web Site. The Licensee shall have the right to request
models from one of the following categories: Wilhelmina Sports, Creative
Management and Music artists. The launch event will be conducted by Licensee
semi-annually, at the option of the Licensee. The Licensee shall have the right
to utilize the launch event, among other uses, (i) to signal the launch of a new
site, channel or feature on the Licensee's Web Site or (ii) in conjunction with
industry trade shows in North America, South America and Europe.
a. NetStand Kiosks and CyberCenter Events: Licensor shall supply
models and celebrities for participation at trade shows attended by
Licensee and for launch events for netstand kiosks and cyber-centers
sponsored by Licensee. The talent supplied will be featured on Licensee's
Web Site.
2. Model Search: Licensor shall conduct an annual high profile urban
themed model search, upon the request of the Licensee, utilizing the Licensee's
Web Site and NetStand kiosks as requested by Licensee. The parties anticipate
seeking a multi-media partner (either television, radio or print) in connection
with the model search. The parties anticipate that the model search will consist
of one of the following categories: (i) high fashion runway model (female), (ii)
children, (iii) sports model (male) and (iv) plus size model (women).
3. Profile: Licensor shall supply a model or celebrity, to be featured
weekly on Licensee's Web Site. The feature shall include an interview, pictures,
video clip, e-mail program on live chats as agreed by Licensor and Licensee.
4. Wilhelmina Agency Feature: Licensor shall supply information to
Licensee for use on the Licensee's Web Site, which shall be updated not less
than quarterly, with respect to the following: (i) the modeling agency business,
(ii) how to become a model agent, (iii) how to obtain a model agent, (iv) behind
the scenes at the Wilhelmina Agency and (v) the importance of having a model
agent.
5. Wilhelmina Urban Cool Merchandise: Licensor and Licensee shall sell
merchandise, subject to Licensor's approval of the use of the Mark in each case,
on the Licensee's Web Site and shall share in the revenues on terms to be
negotiated in good faith. Licensor shall assist Licensee in developing three
calendars on an annual basis (female, male and children), for which Licensee
shall be entitled to any revenues except as otherwise agreed if Licensor
contributes to the cost of production thereof. Licensee's Web Site shall be used
to select the models and determine the month in which they should be featured.
Licensee shall design the calendar (subject to Licensor's approval) with an
urban international theme. Licensor shall cooperate
9
<PAGE>
with Licensee's promotion of the calendar in the third quarter of each year.
Licensor shall cooperate with Licensee in seeking a retail partner for the
calendars, such as Saks Fifth Avenue (female), Barney's (male) or Gap Kids
(Children). The parties shall seek to sell other merchandise on-line such as
t-shirts, caps, mugs, backpacks and other items. Licensee shall share in
revenues of Wilhelmina Urban Cool merchandise sold on Licensor's web sites.
6. Wilhelmina Urban Cool Monthly Contest: Licensee, at its option, shall
design a monthly contest with the assistance of the Licensor that requires the
user to answer questions in one of the following categories: models/fashion,
entertainment and sports. The answers to the questions will be found in areas on
the Web Site. Licensee anticipates that there will be several prizes leading to
a grand prize. The Licensee intends to seek corporate partners for the contest.
7. History of Wilhelmina: Licensor shall supply content to Licensee for a
standard channel feature which shall include historical, current material and
upcoming events.
8. Wilhelmina Urban Cool Auctions: Licensor shall consult with Licensee
with respect to content for Licensee to feature in connection with celebrity
merchandise, trips and ticket packages. The merchandise shall have an urban
theme and may be auctioned on-line. The celebrities will host on line auctions
on Licensee's Web Site. Licensee will offer additional auctions upon
consultation with Licensor.
10
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Amendment No. 3 to the Registration
Statement on Form S-1 of our report dated April 13, 2000 (with respect to the
second paragraph, Note (H) April 19, 2000), on our audits of the consolidated
financial statements of Urban Cool Network, Inc. and subsidiary as of December
31, 1999 and 1998, for year ended December 31, 1999, for the period from January
23, 1998 (inception) through December 31, 1998 and for the period from January
23, 1998 (inception) through December 31, 1999 and to the reference of our firm
under the caption "Experts".
Richard A. Eisner & Company, LLP
New York, New York
April 19, 2000
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