As filed with the Securities and Exchange Commission on February 27, 2001.
Registration No. ____________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Instanet, Inc.
(Name of small business issuer in its charter)
Nevada 3578 84-1575085
------------------------------ --------------------------- ---------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) I.D. Number)
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Copies to:
Gary A. Agron, Esq.
5445 DTC Parkway, Suite 520
Greenwood Village, CO 80111
(303) 770-7254
Fax (303) 770-7257
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: [ X ]
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]
This registration statement registers the sale of 500,000 shares of common stock by Instanet, Inc. at $1.00 per share and the resale of 1,350,000 shares of common stock offered by our two selling stockholders, valued at $1.00 per share.
In addition to the number of shares set forth above, the amount to be registered includes any shares of our common stock issued as a result of stock splits, stock dividends and similar transactions in accordance with Rule 416.
The Proposed Maximum Offering Price Per Share and the Proposed Maximum Aggregate Offering Price in the table above are estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933. These estimates were calculated based on the offering price of $1.00 per share for the 500,000 shares of common stock which we are offering to the public.
We hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until we 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 Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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 we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion. Dated February 27, 2001
1,850,000 shares of common stock
INSTANET, INC.
We are offering a minimum of 150,000 shares and a maximum of 500,000 shares of our common stock for sale at $1.00 per share on a best-efforts basis for a maximum period of 90 days from the date of this prospectus and without the assistance of an underwriter. We will close the offering the earlier of the date all of the 500,000 shares are sold or 90 days from the date of this prospectus unless extended by us for up to an additional 60 days. In addition, following our offering of up to 500,000 shares, our two selling stockholders will offer for sale up to 1,350,000 shares of our common stock held by them at then prevailing market prices. Until we sell 150,000 shares, all the proceeds from the sale of shares sold by us will be deposited in an escrow account at Key Bank, Denver, Colorado. In the event the minimum 150,000 shares are not sold, all funds will be promptly returned to subscribers without interest or deduction.
The selling stockholders may not offer their shares for sale until we close our 500,000 shares offering and our common stock is listed for trading on the Nasdaq Over-the-Counter Electronic Bulletin Board Trading System.
There is no public market for our common stock and no assurance that a market will develop.
Investing in our common stock involves substantial risks. See "Risk Factors" beginning on page 6.
Commissions
Offering and Discounts Net Proceeds
-------- ------------- ------------
Per Share $1.00 $ 0 $1.00
Minimum $150,000 $ 0 $150,000
Maximum $500,000 $ 0 $500,000
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The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is ____________, 2001.
TABLE OF CONTENTS
Page
----
About this Prospectus ............................................. 3
Summary ........................................................... 3
Risk Factors ...................................................... 6
Use of Proceeds ................................................... 10
Dilution .......................................................... 11
Capitalization .................................................... 12
Selected Financial Data ........................................... 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations ................... 14
Business .......................................................... 15
Management ........................................................ 20
Principal Stockholders ............................................ 23
Selling Stockholders .............................................. 23
Plan of Distribution .............................................. 26
Related Party and Other Material Transactions ..................... 27
Description of Capital Stock ...................................... 27
Shares Eligible for Future Sale ................................... 28
Experts ........................................................... 28
Legal Matters ..................................................... 28
Where You Can Find More Information ............................... 29
Financial Statements .............................................. F-1
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than contained in this
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prospectus in connection with the offering described here, and if given or made, such information or representations must not be relied upon as having been authorized by us. This prospectus does not constitute an offer to sell, or the solicitation of an offer to buy, the securities offered by this prospectus to any person in any state or other jurisdiction in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale under this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since this date.
Until _________________ , 2001 (90 days after the date of this prospectus), all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus as we have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where such an offer or sale is not permitted.
SUMMARY
This summary highlights material information regarding our company and the offering contained in this prospectus. You should read the entire prospectus carefully, including the financial information and related notes, before making an investment decision.
Business.
In February 2001 we entered into a Master Agency Agreement with KeyCom, Inc. which developed, and now operates under the trade name XTRAN, an electronic system for transferring funds from one location to another. Currently, XTRAN initiates funds transfer from approximately 200 remittance locations in New York and Florida and electronically transfers the funds to any of the approximately 2,100 payout locations in Jamaica, Mexico and Central America.
Under the Master Agency Agreement, we obtained the exclusive right to initiate funds transfers from a Web site we are developing to any XTRAN payout location. We also have the right to earn fees from Key Com for obtaining additional XTRAN remittance locations worldwide.
We are a development stage enterprise and have not commenced operations or generated any revenue. We intend to use the proceeds of the offering to complete the development of our Web site for funds transfers and to begin soliciting XTRAN remittance locations in Florida.
Strategy.
Our strategy is to:
o Complete the development of our funds transfer Web site;
o Direct our Web site marketing specifically to concentrated populations of expatriates whose countries of origin contain multiple XTRAN payout locations;
o Solicit XTRAN remittance locations first in Florida and then in other U.S. and foreign locations;
o Direct our remittance location marketing efforts to retail chain store operators; and
o Offer Web based funds transfer services at rates below those of our competitors.
History.
We were incorporated in Nevada in January 2001. Our offices are located at 26 West Dry Creek Circle, Suite 600, Littleton, Colorado 80120, and our telephone number is (303) 794-9450.
Plan of Distribution.
We are offering a minimum of 150,000 shares and a maximum of 500,000 shares on a best-efforts basis directly to the public through our officers and directors. All subscriber funds will be held in escrow until at least 150,000 shares are sold. If 150,000 shares are not sold by us during the selling period, we will return subscriber funds without interest or deduction.
The Offering.
Securities offered by us: 500,000 shares of common stock.
Securities offered by the
selling stockholders: 1,350,000 shares of common stock.
Common stock outstanding prior to offering: 1,350,000 shares of common stock.
Common stock outstanding after the offering: 1,850,000 shares of common stock.
Use of proceeds: Development of our Web site,
repayment of loans from officers,
establishment of remittance
locations, marketing, and
working capital.
Proposed Bulletin Board symbol: "INET"
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Our shares outstanding do not include up to 125,000 shares issuable upon exercise of stock options issued under our 2001 Stock Option Plan.
Description of Selling Stockholders.
Through this prospectus, we are also registering for resale up to 1,350,000 shares of our common stock held by our two selling stockholders who acquired their shares upon our organization in January 2001.
Forward-Looking Statements.
This prospectus includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us which are discussed in the Risk Factors section below as well as throughout this prospectus. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur.
SUMMARY FINANCIAL DATA
The following summary of our financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited financial statements and related notes included elsewhere in this prospectus.
Statement of Operations Data:
Period from inception
(January 9, 2001) to
January 31, 2001
----------------
Total costs and expenses $ 0
Net (loss) $ 0
Net (loss) per share $ 0
Weighted average number of shares
of common stock outstanding 1,350,000
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Balance Sheet Data:
The as adjusted information below gives effect to the sale of the minimum and maximum shares and receipt of the net proceeds from the sale.
Minimum As Adjusted Maximum As Adjusted
January 31, 2001 January 31, 2001
At January 31, 2001 (Unaudited) (Unaudited)
------------------- ------------------- --------------------
Cash and cash equivalents $ 3,334 $ 70,000 $ 420,000
Total assets $ 30,000 $ 70,000 $ 420,000
Total liabilities $ 0 $ 0 $ 0
Stockholders' equity $ 30,000 $ 70,000 $ 420,000
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RISK FACTORS
The shares of common stock offered by this prospectus involve a high degree of risk and represent a highly speculative investment. You should not purchase these shares if you cannot afford the loss of your entire investment. In addition to the other information contained in this prospectus, you should carefully consider the following risk factors in evaluating our company, our business prospects and an investment in our shares of common stock.
We cannot assure you that we will be profitable and may need additional capital.
Our limited operating history, lack of revenue to date and the uncertainty of the electronic funds transfer market in which we intend to operate, make any prediction of our future results of operations difficult or impossible. We expect to increase considerably our operating expenses in the future, particularly expenses to develop our funds transfer Web site and for marketing. We do not expect that our revenue will cover these expenses. As a result, we expect to incur significant losses and expect that we will need to raise additional capital. We cannot assure that we will be able to raise additional capital and we do not know what the terms of any such capital raising would be. Any future sale of our equity securities would dilute the ownership and control of our stockholders and could be at prices substantially below the offering price. Our inability to raise capital could require us to significantly curtail our operations.
We have not generated any revenue or incurred any expenses since our inception on January 9, 2001 through January 31, 2001. In order to achieve profitability, we must complete the development of and market our funds transfer Web site. We cannot assure you that our Web based funds transfer business will ever achieve broad market acceptance, profitability or positive operating cash flow.
We are completely dependent upon KeyCom for our funds transfer business.
We have an exclusive license with KeyCom to market its electronic funds transfer system through the Internet and a non-exclusive right to be compensated for merchant remittance locations we obtain for KeyCom. Should KeyCom elect not to honor its exclusive agreement with us or cease its electronic funds transfer operations, we would be unable to continue in that business. Moreover, we can only market our Web based transfers of funds to destinations in which Key Com has already contracted for payout locations. Accordingly, should KeyCom fail to obtain a significant number of such payout locations, our business will be extremely limited.
We have received a going concern opinion from our auditors.
In their audit report dated February 9, 2001 our auditors indicated that there was substantial doubt as to our ability to continue as a going concern and that our ability to continue as a going concern was dependent upon our obtaining additional financing for our operations. We cannot assure that we will be able to do so.
We have not completed the development of our funds transfer Web site and cannot assure that we will be able to do so in the future.
Our funds transfer Web Site is not yet operational and we can give no assurance that it will become operational in the future. Our inability to cause our Web site to become operational would significantly reduce any anticipated revenue.
We face intense competition in the funds transfer industry which could reduce our revenue and earnings.
The funds transfer industry is intensely competitive with two multinational companies dominating the business. While no company has as yet initiated Web based funds transfers, either of these two companies as well as other well established smaller competitors could enter the Web based business. Moreover, there can be no assurances that customers will elect to use Web based funds transfers. In either event, this competition is likely to reduce any future revenue we might generate and reduce any earnings we might otherwise report.
We depend on key personnel and could be affected by the loss of their services because of the limited number of qualified people in our industry.
Competition for qualified employees in the Internet services and electronic funds transfer industries is intense and there are a limited number of people with knowledge of and experience in either industry. The process of locating personnel with the skills required to carry out our strategies may be lengthy and costly. We do not have employment agreements with any of our executive officers nor do we carry key man insurance on their lives. Our success depends to a significant degree upon our ability to attract and retain qualified management, technical, marketing and sales personnel and upon the continued contributions of such people. Any of our employees may voluntarily terminate their employment with us at any time. We cannot assure you that we will be successful in attracting and retaining qualified executives and personnel. The loss of the services of key personnel, or the inability to attract additional qualified personnel, could have a material adverse effect on our business, operating results and financial condition.
Rapid technological change could negatively affect our business.
Rapidly changing technology and frequent new product and service introductions characterize the market for Internet and electronic funds transfer companies. Our future success will depend on our ability to maintain one of the fastest and most secure Web site for funds transfers in response to other competitive product offerings. Our efforts in these areas may not be successful.
Our business model is new, unproven and changing.
Our business model consists of using the Internet to originate funds transfers. To our knowledge, no other company has attempted to institute this business model and we can give no assurance that customers will find these services attractive compared to current funds transfer systems. Even if customers accept our funds transfer arrangements we cannot assure that the costs of marketing to funds transfer customers will allow us to earn a profit.
We have not yet launched our funds transfer Web site and therefore, you should consider our prospects in light of the risks and difficulties frequently encountered by early stage companies in the rapidly evolving Internet market. These risks include, but are not limited to, an unpredictable business environment, the difficulty of managing growth and the successful application of our business model. To address these risks, we must, among other things:
o Develop customers;
o Enhance our brand recognition;
o Successfully implement our business and marketing strategy;
o Respond effectively to competitive and technological developments; and
o Attract and retain qualified personnel.
Shares of our common stock which are eligible for sale by our stockholders may decrease the price of our common stock.
Upon completion of the offering, we will have 1,850,000 shares outstanding comprised of 500,000 shares offered to investors by this prospectus and 1,350,000 registered for sale by our two stockholders. Accordingly, all 1,850,000 shares will be freely tradeable as of the date of this prospectus. If our selling stockholders or any other holders sell substantial amounts of our common stock, then the market price of our common stock could decrease.
There is no trading market for our common stock.
Our common stock is not currently eligible for trading on any stock exchange and there can be no assurance that our common stock will be listed on any stock exchange in the future. We have applied for listing on the Nasdaq Over-the-Counter Bulletin Board Trading System pursuant to Rule 15c2-11 of the Securities Exchange Act of 1934, but there can be no assurance we will obtain such a listing. The Bulletin Board tends to be highly illiquid, in part because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make a market in particular stocks. There is a greater chance of market volatility for securities that trade on the Bulletin Board as opposed to a national exchange or quotation system. This volatility may be caused by a variety of factors, including:
o The lack of readily available price quotations;
o The absence of consistent administrative supervision of "bid" and "ask" quotations;
o Lower trading volume; and
o Market conditions.
In a volatile market, you may experience wide fluctuations in the market price of our securities. These fluctuations may have an extremely negative effect on the market price of our securities and may prevent you from obtaining a market price equal to your purchase price when you attempt to sell our securities in the open market. In these situations, you may be required to either sell our securities at a market price which is lower than your purchase price, or to hold our securities for a longer period of time than you planned.
Because our common stock is likely to be classified as "penny stock," trading will be limited, and our stock price could decline.
Because our common stock is likely to fall under the definition of "penny stock," trading in our common stock, if any, is expected to be limited because broker-dealers are required to provide their customers with disclosure documents prior to allowing them to participate in transactions involving our common stock. These disclosure requirements are burdensome to broker-dealers and may discourage them from allowing their customers to participate in transactions involving our common stock.
"Penny stocks" are equity securities with a market price below $5.00 per share other than a security that is registered on a national exchange; included for quotation on the Nasdaq system; or whose issuer has net tangible assets of more than $2,000,000 and has been in continuous operation for greater than three years. Issuers who have been in operation for less than three years must have net tangible assets of at least $5,000,000.
Rules promulgated by the Securities and Exchange Commission under Section 15(g) of the Exchange Act require broker-dealers engaging in transactions in penny stocks, to first provide to their customers a series of disclosures and documents, including:
o A standardized risk disclosure document identifying the risks inherent in investment in penny stocks;
o All compensation received by the broker-dealer in connection with the transaction;
o Current quotation prices and other relevant market data; and
o Monthly account statements reflecting the fair market value of the securities. In addition, these rules require that a broker-dealer obtain financial and other information from a customer, determine that transactions in penny stocks are suitable for such customer and deliver a written statement to such customer setting forth the basis for this determination.
In addition, under the Exchange Act and its regulations, any person engaged in a distribution of shares of our common stock offered by this prospectus may not simultaneously engage in market making activities with respect to the common stock during the applicable "cooling off" periods prior to the commencement of this distribution.
Our preferred stock may make a third-party acquisition of our company more difficult.
Our articles of incorporation authorize our Board of Directors to issue up to 5,000,000 shares of preferred stock having such rights as may be designated by our Board of Directors, without stockholder approval. This issuance of preferred stock could inhibit a change in control by making it more difficult to acquire the majority of our voting stock.
We do not anticipate paying dividends.
We have not paid any cash dividends on our common stock since our inception and we do not anticipate paying cash dividends in the foreseeable future. Any dividends which we may pay in the future will be at the discretion of our Board of Directors and will depend on our future earnings, any applicable regulatory considerations, our financial requirements and other similarly unpredictable factors. For the foreseeable future, we anticipate that we will retain any earnings which we may generate from our operations to finance and develop our growth.
USE OF PROCEEDS
The net proceeds of the offering after payment of all expenses will be $110,000 if the minimum 150,000 shares are sold, and $460,000 if all 500,000 shares are sold. These net proceeds reflect offering expenses previously paid by us in the amount of $70,000. We expect to use the net proceeds over a six-month period, approximately as follows:
Purpose Minimum Maximum ------- ------- ------- Development of our Web site $ 10,000 $ 10,000 Repayment of loans from officers $ 40,000 $ 40,000 Establish remittance locations $ 10,000 $ 50,000 Marketing expenses $ 45,000 $200,000 Working capital $ 5,000 $160,000 TOTALS $110,000 $460,000 |
Proceeds not immediately needed will be invested in bank certificates of deposit, treasury bills, insured bank deposits or similar investments.
We will not receive any proceeds from the sale of up to 1,350,000 shares of our common stock being offered by our two selling stockholders.
DILUTION
At January 31, 2001, the net tangible book value of our outstanding shares of common stock was $30,000, or $.02 per share. "Net tangible book value" per share represents the total amount of our tangible assets, less the amount of our liabilities, divided by the number of shares of common stock outstanding. Without taking into account any changes in net tangible book value after January 31, 2001, other than to give effect to the sale of all 500,000 shares of common stock offered at the public offering price of $1.00 per share, less estimated costs of the offering, our net tangible book value at January 31, 2001, would have been $420,000, or approximately $.23, per share. This represents an immediate increase in net tangible book value of $.21 per share of common stock to our existing stockholders, and an immediate dilution of $.77 per share to new investors at January 31, 2001.
"Dilution" per share represents the difference between the price to be paid by the new stockholders and the net tangible book value per share of common stock immediately after this offering. The following table illustrates this per share dilution.
January 31, 2001
----------------
Initial public offering price per share: $1.00
Net tangible book value per share before
the offering: $.02
Increase in net tangible book value per share
attributable to new investors purchasing
in the offering: $.21
Net tangible book value per share after the offering: $ .23
Dilution per share to new investors: $ .77
Dilution as a percentage of the per share purchase price: 77%
The following table sets forth the number of shares of common stock
purchased, assuming all 500,000 shares are sold, the total consideration paid,
before the deduction of offering expenses, and the average price per share paid
by our existing stockholders as of January 31, 2001, and new investors
purchasing the shares of common stock offered:
Shares Purchased Total Consideration Average Price
---------------- -------------------
Number Percentage Amount Percentage Per Share
------ ---------- ------ ---------- ---------
New investors 500,000 27% $500,000 94% $1.00
Existing stockholders 1,350,000 73% $ 30,000 6% $ .02
--------- ---- -------- ----
Totals: 1,850,000 100% $530,000 100%
========= ==== ======== ====
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CAPITALIZATION
The following table sets forth our actual and as adjusted capitalization as of January 31, 2001, after deducting commissions and estimated offering expenses. As adjusted capitalization reflects the sale of the maximum 500,000 shares of common stock offered by us at an offering price of $1.00 per share and the application of the net proceeds. You should carefully read our financial statements and related notes included elsewhere in this prospectus.
January 31, 2001
January 31, 2001 (As Adjusted)
---------------- -------------
Long-term liabilities $ 0 $ 0
Common Stock, $.001 par value,
50,000,000 shares authorized,
1,350,000 shares outstanding,
1,850,000 shares outstanding,
as adjusted $ 1,350 $ 1,850
Preferred stock, $.001 par value,
5,000,000 shares authorized,
no shares issued $ 0 $ 0
Additional paid-in-capital $28,650 $418,150
Accumulated deficit $ 0 $ 0
Total stockholders' equity $30,000 $420,000
------- --------
Total capitalization $30,000 $420,000
======= ========
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SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited financial statement and related notes included elsewhere in this prospectus.
Statement of operations data:
Period from January 9, 2001
(date of inception) through
January 31, 2001
---------------------------
Total costs and expenses $ 0
Operating loss $ 0
Net loss $ 0
===
Net loss per share $ 0
===
Weighted average number of shares
of common stock outstanding 1,350,000
=========
Balance Sheet data:
As of
January 31, 2001
----------------
Cash and cash equivalents $ 3,334
Total assets $30,000
Total liabilities $ 0
Stockholders' equity $30,000
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this prospectus. This discussion should be read in conjunction with our audited financial statements and notes included elsewhere in this prospectus.
Results of Operations.
Period from inception (January 9, 2001) to January 31, 2001.
We commenced operations on January 9, 2001. From January 9, 2001 through January 31, 2001, we reported neither revenue nor expense. Subsequent to January 31, 2001, we incurred expenses in connection with organizing our company, entering into our agreement with KeyCom and preparing this prospectus. All of our expenses were paid in cash.
Liquidity and Capital Resources.
To date we have not generated any revenue from operations. Funds used in our organizational activities were provided in the form of a $30,000 equity investment and a $40,000 loan from our two stockholders. The loans are evidenced by promissory notes bearing interest at 10% per annum and are due the earlier of completion of the offering or March 31, 2002.
We expect to need additional funds to finance the further development of our cash transfer business, in addition to the funds which may be generated from this offering. However, there can be no assurance that such funds will be available to us or that adequate funds for our operations, whether from debt or equity financings, will be available when needed or on terms satisfactory to us. Our failure to obtain adequate additional financing may require us to delay or curtail some or all of our business efforts. Any additional equity financing may involve substantial dilution to our then-existing stockholders.
BUSINESS
Current Operations.
In February 2001 we entered into a Master Agency Agreement with Key Com, Inc. which developed, and now operates under the trade name XTRAN, an electronic system for transferring funds from one location to another. Currently, XTRAN initiates funds transfer from approximately 200 remittance locations in New York and Florida and electronically transfers the funds to any of the 2,100 payout locations in Jamaica, Mexico and Central America.
Under the Master Agency Agreement, we obtained the exclusive right to initiate funds transfers from a Web site we are developing to any XTRAN payout location. We also have the right to earn fees from KeyCom for obtaining additional XTRAN remittance locations worldwide.
We are a development stage enterprise and have not commenced operations or generated any revenue. We intend to use the proceeds of the offering to complete the development of our Web site for funds transfers and to begin soliciting XTRAN remittance locations in Florida.
XTRAN
KeyCom developed XTRAN as an innovative method for transferring cash by electronic means, which KeyCom believes offers significant technological and cost advantages over traditional funds transfer systems currently used by market leading competitors such as Western Union and MoneyGram.
XTRAN's electronic transfer system employs specially programmed point of sale terminals, which are the terminals that read credit cards or ATM cards at the cash register. XTRAN transfers cash instantaneously, as compared to the bank wire systems used by competitors. XTRAN transfers are simple and secure, allowing funds transfer clerks to be quickly trained.
XTRAN's funds transfer system is also user friendly. The person originating the funds transfer, often referred to as the remitter, tenders cash or a credit card, the clerk programs numbers into the XTRAN terminal, a receipt is generated and the funds are available nearly instantly at the receiving payout destination point, directed solely by pin number and transaction number, to the person entitled to receive the funds. The user also receives a free 2-minute telephone card to arrange for funds pick-up with the recipient. The simple tasks performed by the XTRAN terminal operator at a typical retail location set into motion the following series of computer-driven processes that make XTRAN work seamlessly:
o The receiving point is notified;
o The system that accomplishes the withdrawal and transfer of funds is alerted;
o Cash is withdrawn from the sending location and transferred to central banking locations for electronic re-transmittal;
o Cash is then transmitted from central banking locations to the proper receiving accounts;
o Fees are identified for payment through the XTRAN distribution system; and oab Transfers are tracked through secure Internet routing.
Consumers sending expatriate remittance funds to their country of origin and individuals without bank accounts are the two largest segments of repetitive funds transfer customers. The Federal Reserve Board of Governors estimates that approximately 15% of families in the United States do not have checking accounts. A large portion of individuals without bank accounts remit funds regularly through cash transfers to relatives in their countries of origin.
KeyCom has elected to concentrate its initial funds transfer marketing efforts to specific targeted expatriate populations. Initially, KeyCom selected the Latin American and Caribbean markets as the two markets best suited for its initial marketing emphasis. This market is large, approximately $23 billion in annual funds transfers, easy to identify and reach, and offers numerous opportunities to establish strategic alliances with existing retail chains in the target remittance and payout markets. KeyCom has further focused its initial marketing efforts on expatriates from Jamaica, Cuba and Mexico with the following results:
According to the Bank of Jamaica, Jamaica represents one of the largest transmittal remittance markets from the United States, receiving over $650 million per year from conventional money transfer sources, such as bank transfers, Western Union and the like. Jamaicans in the United States have concentrated their populations in readily identifiable areas, such as specific neighborhoods in Queens, the Bronx and Brooklyn, New York, and Ft. Lauderdale, Florida. Other concentrated populations exist in Toronto, Canada and in various smaller locations throughout the United States. KeyCom has an exclusive agreement with Paymasters (Jamaica), LTD. which operates 51 utility payment locations on Jamaica to provide XTRAN payout services and has over 200 remittance terminals in Jamaican neighborhoods in New York and South Florida.
According to Valores Panafin, S. A., a Costa Rican based financial services company, Mexicans living in the United States wire home over $12 billion per year. In Mexico, KeyCom has contracted with Gigante Mercados S. A., Dimex S.A. and Central de Communicaciones S.A. which operate in the aggregate over 1,100 retail locations throughout Mexico, to act as payout locations. KeyCom has also joined the Mexican American Grocer's Association, which has hundreds of retail member stores suitable for use as remittance locations in Southern California, Texas, New Mexico and Arizona, where Mexicans and Mexican-Americans concentrate.
The existing market for funds transfers from expatriates to relatives in Cuba is estimated at $1.1 billion per year according to Valores Panafin. The heaviest concentration of Cuban expatriates live in the South Florida area. Key Com has contracted with Global Cash, S. A. which will provide over 500 payout locations through its relationships with banks in Cuba and with other retail locations in Nicaragua, El Salvador, Honduras and Costa Rica. U.S. originated funds transfers destined for Cuba must be routed through Central American locations to comply with U.S. regulations concerning doing business in Cuba.
Strategy.
Our strategy is to:
o Complete the development of our funds transfer Web site;
o Direct our Web site marketing specifically to concentrated populations of expatriates whose countries or origin contain multiple XTRAN payout locations;
o Solicit XTRAN remittance locations first in Florida and then in other U.S. and foreign locations;
o Direct our remittance location marketing efforts to retail chain store operators; and
o Offer Web based funds transfer services at rates below those of our competitors.
We expect to complete the development of our Web site for funds transfer by the third quarter of 2001. Because we have limited funds, we intend to direct our initial marketing efforts to Internet users who are expatriates of countries served by XTRAN and who live in concentrated geographical locations where marketing is expected to be more cost effective. An example of this approach is our expected emphasis upon expatriates of Jamaica living in New York and Florida and expatriates of Mexico living in California and Texas.
With respect to our rights to obtain new remittance locations for XTRAN, we intend to focus first on locations in Florida, followed by locations in other expatriate concentrated population centers such as New York, California and Texas. In this regard, we will direct our marketing to operators of retail store chains and to non-bank financial services companies in the U. S. and abroad in order to maximize our marketing budget.
We expect that our costs of funds transfers will be less than those of our competitors which use traditional, manual, employee intensive systems. Accordingly, we expect to offer our funds transfer services at rates below those of our competitors.
Web Based Transfer of Funds.
We are developing a Web site that will allow our customer to initiate, from the customer's computer, a funds transfer transaction to a specific recipient at a designated payout location within the XTRAN system. We will use the customer's credit card or ATM card and other identifying customer information in order to allow the customer to transfer the funds in a secure and encrypted environment. Because there are security considerations for Web based funds transfers, we are carefully considering the type of software that will be used and the methods we deploy.
Our Web site will be designed to promote ease of use and is expected to be a less expensive alternative for executing a funds transfer transaction. Our Web site will also provide a directory of XTRAN payout locations so that the customer will have access to the address of a payout location close to the recipient. We intend to also provide a two minute phone card to be used by the customer to relay transaction and security code information to the recipient.
Our KeyCom Master Agency Agreement.
Under our Master Agency Agreement with KeyCom, we obtained the exclusive right to originate funds transfers from our Web site to any payout location which accepts XTRAN funds transfers. Currently XTRAN has payout locations in Jamaica, Mexico and Central America. Under the agreement we receive a fee of 15% of the fee charged the customer by XTRAN to complete the funds transfer.
Our Master Agency Agreement also entitles us to obtain on a non-exclusive basis remittance locations for XTRAN anywhere in the world on a non-exclusive basis. In such event, we are entitled to 9% of the fee charged by XTRAN for payouts outside the U.S. and 5% of XTRAN's fee for payouts within the U.S. We are also entitled to a fixed fee of $225 for each remittance location established by us for XTRAN, and a monthly fee of $3,000, cancellable by KeyCom on 30 days notice, to assist KeyCom in developing new Florida remittance locations. We employ one full-time employee in Florida to assist us in obtaining remittance locations.
The agreement is not terminable by either party unless breached by the other party. We are not required to generate any minimum number or amount of Web based transactions in order to maintain our exclusive Internet funds transfer rights.
Marketing.
We intend to reach prospective customers by targeting our advertising to the concentrated population centers in which these customers reside. Our advertising will include local and neighborhood foreign language newspapers, direct mailings and pamphlets distributed by local merchants. We may also use Web based advertising links and banners on Web sites and portals which appeal to our target customers, as well as affiliate programs and search engine listings. We will attempt to use key words and phrases for funds transfers in order to improve our placement ranks in search engines.
With respect to our marketing to obtain remittance and payout locations, we intend to target U.S. and foreign chain stores which have the potential to serve as both remittance and payout locations. We will also target international financial service companies, including banks, that offer check cashing, prepaid telephone cards and prepaid cellular services to their customers. We will also market to retail grocery stores that offer non-bank financial services. We will focus primarily on merchants already selling products using an existing point of sale terminal rather than customers that require installation of new point of sale terminals.
Government Regulation.
Various aspects of KeyCom's service areas are subject to federal and state regulation, which, depending on the nature of any non-compliance, may result in the suspension or revocation of any funds transfer license, as well as the imposition of civil fines and criminal penalties.
Although many states license funds transfer companies and may require bonds or other forms of collateral, compliance with these laws is the responsibility of KeyCom, and not us. We simply act as a remittance merchant to KeyCom, similar to the retail stores which initiate funds transfers to payout locations. However, if KeyCom fails to comply with application laws or regulations and is prohibited from doing business in any state or market, we would be unable to originate funds transfers in these same locations.
Competition.
The consumer money transfer services industry is large and intensely competitive. Although we are not aware of anyone offering a Web site to initiate funds transfers, we nevertheless will compete with the two multinational companies serving our industry, Western Union and MoneyGram, as well as smaller local and regional funds transfers companies. Western Union is a wholly-owned subsidiary of First Data Corporation, a public company, and MoneyGram is a wholly-owned subsidiary of Travelers Express Company, Inc., which in turn is a wholly-owned subsidiary of Viad Corp., a public company. These two companies have substantially longer operating histories, greater name recognition and financial resources than we. Moreover, our product offerings are small compared to the wide variety of products offered by Western Union, MoneyGram and others. However, we believe that the convenience of initiating funds transfers on the Internet, and the lower costs of our funds transfers, offer a competitive advantage.
Employees.
As of February 19, 2001, we employed one full-time employee and one part-time employee along with our President and Vice President, who work part-time and are uncompensated.
Facilities.
Our President provides us with 450 square feet of office space in his offices at 26 West Dry Creek Circle, Suite 600, Littleton, Colorado 80120 on a month to month basis at no cost to us.
MANAGEMENT
Directors and Executive Officers.
The following table sets forth information regarding our executive officers
and directors:
Name Age Office Officer/Director Since
---- --- ------ ----------------------
Earnest Mathis, Jr. 41 Chief Executive Officer, Chief Financial January 2001
Officer and Director
Van R. Perkins 54 Vice President, Secretary and Director January 2001
Michael G. Carpenter 44 Chief Technical Officer February 2001
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Directors hold office for a period of one year from their election at the annual meeting of stockholders and until their successors are duly elected and qualified. Officers are elected by, and serve at the discretion of, the Board of Directors. None of the above individuals has any family relationship with any other. Our audit committee is composed of Messrs. Mathis and Perkins. Directors do not receive payment for attending Board meetings, but are reimbursed for out-of-pocket expenses.
The following is a summary of the business experience of our two executive officers and directors:
Earnest Mathis, Jr. has been President and a director of Inverness Investments, a privately held financial consulting company based in Denver, Colorado, since 1987. Since February 1998, Mr. Mathis has also been a manager of Amerigolf, LLC, a golf course development company. From January 1997 to March 1999, Mr. Mathis was President of Integrated Medical Services, Inc., a medical waste processor. He is a director of Vov Enterprises, Inc., Zedik Enterprises, Inc., Milestone Capital, Inc. and Care Concepts, Inc. all of which are inactive companies subject to SEC reporting requirements. Mr. Mathis attended Denver University where he studied finance.
Van R. Perkins has been the President and Chief Executive Officer of Business Development Corporation, a privately held Colorado corporation, since 1985. Business Development Corporation is engaged in the business of investing in securities for its own account and in providing strategic financial consulting services.
Michael G. Carpenter has been our Chief Technical Officer since February 2001. Since January 2000, Mr. Carpenter has been the Chief Executive Officer of Linux Wizardry, Inc., a software company that produces new products in the Linux and router areas. From July 1997 to January 2000, Mr. Carpenter was President of Internet Software Group, a firm specializing in the development of database-driven Web sites. In 1999 Mr. Carpenter was also employed by IBM in its voice synthesis software division. From October 1997 to December 1998, Mr. Carpenter was also employed by Motorola as a system administrator. From December 1994 to September 1997, Mr. Carpenter was President and founder of EmiNet Domain, Inc., a Web design and programming company.
Significant Employee
Russell Pollock, age 38, has been our Locations Director since February 2001. From August 2000, until he joined us, Mr. Pollock was senior project manager for KeyCom. From June 1988 to July 2000, Mr. Pollock was employed by Vehicle Specialists as its Sales Manager.
Executive Compensation.
None of our executive officers has received or currently receives compensation. We do not have employment agreements with any of our executive officers.
Although we have developed a stock option plan, none of our executive officers or directors have been granted stock options under the plan.
Stock Option Plan.
In February 2001, our stockholders adopted our 2001 Stock Option Plan, which provides for the grant to employees, officers, directors and consultants of options to purchase up to an aggregate of 250,000 shares of common stock, consisting of both "incentive stock options" within the meaning of Section 422A of the United States Internal Revenue Code of 1986 (the "Code") and "non-qualified" options. Incentive stock options are issuable only to employees, while non-qualified options may be issued to non-employee directors, consultants and others, as well as to employees.
The Plan is administered by our board of directors, which determines those individuals who are to receive options, the time period during which the options may be partially or fully exercised, the number of shares of common stock that may be purchased under each option, and the option price.
The per share exercise price of the common stock subject to an incentive stock option or non-qualified option may not be less than the fair market value of the common stock on the date the option is granted. The per share exercise price of the common stock subject to a non-qualified option will be established by the board of directors. The aggregate fair market value, determined as of the date the option is granted, of the common stock that any employee may purchase in any calendar year pursuant to the exercise of incentive stock options may not exceed $1,000,000. No person who owns, directly or indirectly, at the time of the granting of an incentive stock option to him, more than 10% of the total combined voting power of all classes of our stock is eligible to receive any incentive stock options under the Plan unless the option price is at least 110% of the fair market value of the common stock subject to the option, determined on the date of grant. Non-qualified options are not subject to this limitation.
No incentive stock option may be transferred by an optionee other than by will or the laws of descent and distribution, and during the lifetime of an optionee, the option will be exercisable only by him or her. In the event of termination of employment other than by death or disability, the optionee has three months after such termination during which he or she can exercise the option. Upon termination of employment of an optionee by reason of death or permanent total disability, his or her option remains exercisable for one year thereafter to the extent it was exercisable on the date of such termination. No similar limitation applies to non-qualified options.
Options under the Plan must be granted within ten years from the effective date as amended of the Plan. The incentive stock options granted under the Plan cannot be exercised more than ten years from the date of grant except that incentive stock options issued to 10% or greater stockholders are limited to five year terms. Options granted under the Plan may provide for the payment of the exercise price in cash or by delivery to us of shares of common stock already owned by the optionee having a fair market value equal to the exercise price of the options being exercised, or by a combination of such methods of payment. Therefore, an optionee may be able to tender shares of common stock to purchase additional shares of common stock and may possibly exercise all of his stock options with no additional investment other than his original shares.
Any unexercised options that expire or that terminate upon an optionee ceasing to be an officer, director or an employee becomes available once again for issuance. To date, we have granted 100,000 options under the Plan to Mr. Carpenter, one of our executive officers, and 25,000 options to an employee, exerciseable at $.25 per share.
Liability and Indemnification of Officers and Directors.
Our Articles of Incorporation provides that our directors will not be liable for monetary damages for breach of their fiduciary duty as directors, other than the liability of a director for:
o An intentional breach of the director's fiduciary duty to our company or our stockholders;
o Acts or omissions by the director which involve intentional misconduct, fraud or a knowing violation of law; or
o The payment of an unlawful dividend, stock purchase or redemption.
Our Articles of Incorporation also require us to indemnify all persons whom we may indemnify pursuant to Nevada law to the full extent permitted by Nevada law.
Our bylaws require us to indemnify our officers and directors and other persons against expenses, judgments, fines and amounts incurred or paid in settlement in connection with civil or criminal claims, actions, suits or proceedings against such persons by reason of serving or having served as officers, directors, or in other capacities, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests and, in a criminal action or proceeding, if he had no reasonable cause to believe that his/her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of no contest or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to our best interests or that he or she had reasonable cause to believe his or her conduct was unlawful. Indemnification as provided in our bylaws shall be made only as authorized in a specific case and upon a determination that the person met the applicable standards of conduct. Insofar as the limitation of, or indemnification for, liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, or persons controlling us pursuant to the foregoing, or otherwise, we have been advised that, in the opinion of the Securities and Exchange Commission, such limitation or indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore, unenforceable.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial ownership of our common stock owned, as of January 31, 2001, by:
o Holders of more than 5% of our common stock;
o Each of our directors; and
o All of our directors and executive officers as a group.
Each stockholder's address is in care of our company at 26 West Dry Creek Circle, Suite 600, Littleton, Colorado 80120.
Number of Percent of Common Percent of Common
Shares of Common Stock Owned Stock Owned
Name of Beneficial Owner Stock Owned Prior to Offering After Offering
------------------------ ----------- ----------------- --------------
Earnest Mathis, Jr. 450,000 33.3% 24.3%
Van R. Perkins 900,000 66.7% 48.6%
Michael G. Carpenter (1) 100,000 6.9% 5.1%
All officers and directors as a 1,450,000 100% 74.4%
group (two persons)
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(1) Represents stock options to purchase 100,000 shares at $.25 per share.
SELLING STOCKHOLDERS
The following table sets forth the names of our two selling stockholders and the number of shares of our common stock beneficially owned by each as of January 31, 2001. Each selling stockholder is offering all shares owned by him. The two selling stockholders founded our company, acquired their shares following our incorporation in January 2001, and are our only officers and directors. The two selling stockholders may offer their shares from time to time. However, the selling stockholders may not offer their shares for sale until we close our offering of up to 500,000 shares and our common stock is listed for trading on the Electronic Bulletin Board or the Pink Sheets. Nevertheless, the selling stockholders are under no obligation to sell all or any portion of their shares either now or in the future. Since the selling stockholders may sell all or part of their shares, we cannot estimate the number of shares of our common stock that will be held by the selling stockholders upon termination of this offering.
Shares Beneficially Owned and Offered
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Information Regarding the Selling Stockholders.
The shares of our common stock which the selling stockholders or their pledgees, donees, transferees or other successors in interest are offering for resale will be sold from time to time in one or more of the following transactions:
o Block transactions;
o Transactions on the Bulletin Board or on such other market on which our common stock may from time to time be trading;
o Privately negotiated transactions;
o Through the writing of options on the shares;
o Short sales; or
o Any combination of these transactions.
The sale price to the public in these transactions may be:
o The market price prevailing at the time of sale;
o A price related to the prevailing market price;
o Negotiated prices; or
o Such other price as the selling stockholders determine from time to time.
The selling stockholders may not offer their shares for sale until we close our offering of up to 500,000 shares and then not until our common stock is listed for trading on the Bulletin Board or the Pink Sheets.
In the event that we permit or cause this prospectus to lapse, the selling stockholders may sell all of their shares of our common stock pursuant to Rule 144 under the Securities Act of 1933 commencing in January 2002. The selling stockholders will have the sole and absolute discretion not to accept any purchase offer or make any sale of these shares of our common stock if they deem the purchase price to be unsatisfactory at any particular time.
The selling stockholders or their pledges, donees, transferees or other successors in interest, may also sell these shares of our common stock directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. These broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of these shares of our common stock for whom such broker-dealers may act as agents or to whom they sell as principal, or both. As to a particular broker-dealer, this compensation might be in excess of customary commissions. Market makers and block purchasers purchasing these shares of our common stock will do so for their own account and at their own risk. It is possible that a selling stockholder will attempt to sell shares of our common stock in block transactions to market makers or other purchasers at a price per share which may be below the prevailing market price of our common stock. There can be no assurance that all or any of these shares of our common stock offered hereby will be issued to, or sold by, the selling stockholders. Upon effecting the sale of any of these shares of our common stock offered under this prospectus, the selling stockholders and any brokers, dealers or agents, hereby, may be deemed "underwriters" as that term is defined under the Securities Act of 1933 or the Securities Exchange Act of 1934, or the rules and regulations thereunder.
Alternatively, the selling stockholders may sell all or any part of the shares of our common stock offered hereby through an underwriter. No selling stockholder has entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into. If a selling stockholder enters into an agreement or agreements with an underwriter, then the relevant details will be set forth in a supplement or revision to this prospectus.
The selling stockholders and any other persons participating in the sale or distribution of these shares of our common stock will be subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations thereunder including, without limitation, Regulation M. These provisions may restrict activities of, and limit the timing of purchases and sales of any of these shares of our common stock by, the selling stockholders. Furthermore, pursuant to Regulation M, a person engaged in a distribution of our securities is prohibited from bidding for, purchasing, or attempting to induce any person to bid for or purchase our securities for a period beginning five business days prior to the date of this prospectus until such person is no longer a selling shareholder. These regulations may affect the marketability of these shares of our common stock.
We will pay substantially all of the expenses incident to the registration and offering of our common stock including the common stock held by our selling stockholders, other than commissions or discounts of underwriters, broker-dealers or agents.
PLAN OF DISTRIBUTION
We are offering a minimum of 150,000 shares and a maximum of 500,000 shares on a best-efforts basis directly to the public through our officers and directors, who will not receive any compensation for assisting us with the offering. Our two officers and directors may purchase up to 15,000 shares in the offering.
We intend to apply to list our common stock on the Electronic Bulletin Board. Unless and until the common stock is accepted for listing, on the Electronic Bulletin Board or another exchange, no public market will develop for the resale of the securities.
Prior to this offering, there has been no market for our securities. Accordingly, the public offering price for the shares was determined solely by us. Among the factors we considered in determining the public offering price were our record of operations, our current financial condition, our future prospects, the background of our management, and the general condition of the equity securities market.
Method of Subscribing.
Persons may subscribe by completing and returning our subscription agreement. The offering price of $1.00 per share must accompany the subscription agreement. All checks must be made payable to "Key Bank - Instanet, Inc. Escrow Account." All checks will be transmitted to the escrow account by noon of the next business day following receipt. The minimum purchase is 250 shares for $250. Certificates for the shares subscribed will be issued within three business days following the closing of the offering.
Selling Period.
The selling period of the offering will terminate 90 days from the date of this prospectus unless extended for up to an additional 60 days.
Minimum-Maximum and Escrow.
Until the minimum 150,000 shares are sold, all funds will be deposited in a non-interest bearing escrow account at Key Bank, Denver, Colorado and such funds will only be invested in investments permissible under SEC Rule 15c2-4. In the event that 150,000 shares are not sold during the 90-day selling period commencing on the date of this prospectus, or during the 60 day extension, all funds will be promptly returned to investors without deduction or interest. If 150,000 shares are sold, we may either continue the offering for the remainder of the selling period or close the offering at any time.
Right to Reject.
We reserve the right to reject any subscription, and to withdraw the offering at any time prior to acceptance of the subscriptions received, if acceptance of a subscription would result in the violation of any laws to which we are subject.
RELATED PARTY AND OTHER MATERIAL TRANSACTIONS
Mr. Mathis or entities controlled by him, along with Mr. Perkins, purchased $125,000 and $225,000, respectively of debt securities of KeyCom as part of a private placement of these securities to a number of accredited investors. The securities are repayable only out of transaction fees charged by KeyCom for its funds transfers and included stock options to purchase shares of common stock of KeyCom. Neither Mr. Perkins nor Mr. Mathis are officers, directors or principal stockholders of KeyCom.
DESCRIPTION OF CAPITAL STOCK
General.
We are authorized to issue 50,000,000 shares of common stock, $.001 par value per share, and 5,000,000 shares of preferred stock, $.001 par value per share.
Common Stock.
At January 31, 2001, we had 1,350,000 shares of common stock outstanding. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders, including the election of directors. There is no right to cumulate votes in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally available therefor subject to the prior rights of holders of preferred stock and any contractual restrictions we have against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock.
Holders of common stock have no preemptive rights and have no right to convert their common stock into any other securities. All of the outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock.
Shares of preferred stock may be issued from time to time in one or more series with such designations, voting powers, if any, preferences and relative, participating, optional or other special rights, and such qualifications, limitations and restrictions, as are determined by resolution of our Board of Directors. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by stockholders and could adversely affect the rights and powers, including voting rights, of the holders of common stock. In certain circumstances, the issuance of preferred stock could depress the market price of the common stock. There are no shares of Preferred Stock outstanding.
Dividends.
We do not intend to pay dividends on our capital stock in the foreseeable future.
Transfer Agent.
Corporate Stock Transfer, Inc., Denver, Colorado is our transfer agent.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, we will have 1,850,000 shares outstanding, all of which have been registered by this prospectus. Our outstanding shares are comprised of 500,000 shares offered by us and up to 1,350,000 shares offered by our two selling stockholders. In addition, our selling stockholders, commencing January 2002, may sell their shares under Rule 144 of the Securities Act.
In general, under Rule 144 as currently in effect, a person, or persons whose shares are aggregated, who owns shares that were purchased from us, or any affiliate, at least one year previously, including a person who may be deemed our affiliate, is entitled to sell within any three-month period, a number of shares that does not exceed the greater of:
o 1% of the then outstanding shares of our common stock; or
o The average weekly trading volume of our common stock during the four calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission.
Sales under Rule 144 are also subject to manner of sale provisions, notice requirements and the availability of current public information about us. Any person who is not deemed to have been our affiliate at any time during the 90 days preceding a sale, and who owns shares within the definition of "restricted securities" under Rule 144 under the Securities Act that were purchased from us, or any affiliate, at least two years previously, is entitled to sell such shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements.
Future sales of common stock by our selling stockholders either under this prospectus or under Rule 144 or otherwise or of the shares which we are registering under this prospectus could negatively impact the market price of our common stock. We are unable to estimate the number of shares that may be sold in the future by our selling stockholders or the effect, if any, that sales of shares by such stockholders will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock by selling stockholders could adversely affect prevailing market prices.
EXPERTS
Our financial statements included in this prospectus as of and for the period ended January 31, 2001, have been included in reliance on the reports of Ehrhardt Keefe Steiner & Hottman, PC, independent certified public accountants, given on the authority of this firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for us by the Law Office of Gary A. Agron, Greenwood Village, Colorado.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form SB-2 under the Securities Act of 1933
with respect to our common stock offered by this prospectus. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits to the registration statement. For further information with
respect to our company, and the common stock offered hereby, reference is made
to the registration statement and the exhibits filed as part of the registration
statement. Following the effective date of the prospectus, we will be required
to file periodic reports with the Securities and Exchange Commission, including
quarterly reports, annual reports which include our audited financial statements
and proxy statements. The registration statement, including exhibits thereto,
and all of our periodic reports may be inspected without charge at the
Securities and Exchange Commission's principal office in Washington, D.C., and
copies of all or any part thereof may be obtained from the Public Reference
Section of the Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Securities and Exchange Commission's regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New York, New
York 10048, after payment of fees prescribed by the Securities and Exchange
Commission. You may obtain additional information regarding the operation of the
Public Reference Section by calling the Securities and Exchange Commission at
1-800-SEC-0330. The Securities and Exchange Commission also maintains a World
Wide Web site which provides on-line access to reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission at the address: http://www.sec.gov.
INSTANET, INC.
(a Development Stage Company)
Financial Statements and
Independent Auditors' Report
For the period from January 9, 2001 (Inception) through January 31, 2001
INSTANET, INC.
(a Development Stage Company)
Page
----
Independent Auditors' Report...........................................F - 2
Financial Statements
Balance Sheet.....................................................F - 3
Statement of Operations...........................................F - 4
Statement of Stockholders' Equity.................................F - 5
Statement of Cash Flows...........................................F - 6
Notes to Financial Statements..........................................F - 7
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Instanet, Inc.
Littleton, Colorado
We have audited the accompanying balance sheet of Instanet, Inc. (a Development Stage Company) as of January 31, 2001 and the related statements of operations, stockholders' equity and cash flows for the period from January 9, 2001 (Inception) through January 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Instanet, Inc. as of January 31, 2001, and the results of its operations and its cash flows for the period from January 9, 2001 (Inception) though January 31, 2001 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 shown in the financial statements, the Company is in the development stage and has not completed its capital raising activities to fund substantial initial operations. This condition raises substantial doubt about the Company's ability as a going concern. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.
Ehrhardt Keefe Steiner & Hottman PC
February 9, 2001
Denver, Colorado
INSTANET, INC.
(a Development Stage Company)
Balance Sheet
January 31, 2001
Assets
Current assets
Cash $ 3,334
-------
Total current assets 3,334
Other assets
Prepaid legal fees 26,666
-------
Total assets $30,000
=======
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Liabilities and Stockholders' Equity
Total liabilities $ --
-------
Stockholders' equity
Preferred stock, authorized 5,000,000 shares,
$.001 par value; none issued or outstanding $ --
Common stock, authorized 50,000,000 shares,
$.001 par value; 1,350,000 shares
issued and outstanding 1,350
Additional paid-in capital 28,650
-------
Total stockholders' equity 30,000
-------
Total liabilities and stockholders' equity $30,000
=======
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See notes to financial statements.
INSTANET, INC.
(a Development Stage Company)
Statement of Operations
The Period from January 9, 2001 (Inception) through January 31, 2001
Revenues $ --
Expenses --
----------
Net Income $ --
==========
Earnings per share $ --
==========
Weighted average shares outstanding 1,350,000
==========
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See notes to financial statements.
INSTANET, INC.
(a Development Stage Company)
Statement of Stockholders' Equity
The Period from January 9, 2001 (Inception) through January 31, 2001
Common Stock Additional Total
---------------------------------- Paid-In Stockholders'
Shares Amount Capital Equity
--------- --------- --------- ------------
Balance, January 9, 2001 -- -- -- --
Issuance of stock for cash 1,350,000 $ 1,350 $ 28,650 $ 30,000
--------- --------- --------- ---------
Balance, January 31, 2001 1,350,000 $ 1,350 $ 28,650 $ 30,000
========= ========= ========= =========
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See notes to financial statements.
INSTANET, INC.
(a Development Stage Company)
Statement of Cash Flows
The Period from January 9, 2001 (Inception) through January 31, 2001
Cash flows from financing activities
Prepaid legal fees $(26,666)
Proceeds from issuance of common stock 30,000
--------
Net cash provided by financing activities 3,334
--------
Net increase in cash 3,334
Cash, beginning of period --
--------
Cash, end of period $ 3,334
========
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See notes to financial statements.
INSTANET, INC.
(A Development Stage Company)
Notes to Financial Statements
Instanet, Inc. (the "Company"), Nevada corporation, was incorporated in January 2001. The Company is organized for the purpose of providing market extensions, including on the internet, for an electronic cash transmission system developed and owned by an outside company.
The Company is a development stage company that has not had any revenue from operations since inception. The Company is in the process of obtaining additional equity from a public offering. There is no assurance that the Company will generate revenue or earn profit in the future.
The Company will recognize revenues as services are performed.
Deferred income taxes result from temporary differences. Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. As the Company had no operations for the period, there are no differences in the book and tax basis of its assets and liabilities.
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.
INSTANET, INC.
(A Development Stage Company)
Notes to Financial Statements
In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin ("SAB") 101, which will become effective for financial statements with periods ending after December 15, 2000. SAB 101 provides guidance on applying generally accepted accounting principles to selected revenue recognition issues. Management believes that the Company's revenue recognition policies are in accordance with SAB 101.
The corporate offices of the Company are located at the corporate offices of the president of the Company. No rent has been charged, but there can be no assurance that rent will not be charged in the future. The value of the rent received is immaterial to the financial statements as a whole.
In February 2001 the Company entered into a Master Agency Agreement with Key Com, Inc. ("KeyCom") which developed, and now operates under the trade name XTRAN, an electronic system for transferring funds from one location to another. Currently, XTRAN initiates funds transfer from approximately 200 remittance locations in New York and Florida and electronically transfers the funds to any of the 2,100 payout locations in Jamaica, Mexico and Central America.
Under the Master Agency Agreement with KeyCom, the Company obtained the exclusive right to originate funds transfers from the Company's Web site to any payout location, which accepts XTRAN funds transfers. Currently XTRAN has payout locations in Jamaica, Mexico and Central America. Under the agreement the Company will receive a fee of 15% of the fee charged the customer by XTRAN to complete the funds transfer.
The Master Agency Agreement also entitles the Company to obtain on a non-exclusive basis remittance locations for XTRAN anywhere in the world on a non-exclusive basis. In such event, the Company is entitled to 9% of the fee charged by XTRAN for payouts outside the U.S. and 5% of XTRAN's fee for payouts within the U.S. The Company is also entitled to a fixed fee of $225 for each remittance location established on behalf of XTRAN, and a $3,000 monthly fee, cancelable by KeyCom on 30 days notice, to assist KeyCom in developing new Florida remittance locations.
INSTANET, INC.
(A Development Stage Company)
Notes to Financial Statements
In February 2001, our stockholders adopted the 2001 Stock Option Plan, which provides for the grant to employees, officers, directors and consultants of options to purchase up to an aggregate of 250,000 shares of common stock, consisting of both incentive stock options and non-qualified options. For options granted to an employee owning shares of common stock possessing more than 10% of the total combined voting power of all classes of the Company's common stock, the option price shall not be less than 110% of the fair market value of the common stock, on the date of grant. The incentive stock options granted under the Plan cannot be exercised more than ten years from the date of grant except that incentive stock options issued to 10% or greater stockholders are limited to five-year terms. The Company has granted 100,000 options under the Plan to one of our executive officers, and 25,000 options to an employee, exercisable at $.25 per share.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VII of the Registrant's Articles of Incorporation provide as follows:
"(2) Indemnification. The corporation shall indemnify, to the maximum extent permitted by law, any person who is or was a director, officer, agent, fiduciary or employee of the corporation against any claim, liability or expense arising against or incurred by such person made party to a proceeding because he is or was a director, officer, agent, fiduciary or employee of the corporation or because he is or was serving another entity or employee benefit plan as a director, officer, partner, trustee, employee, fiduciary or agent at the corporation's request. The corporation shall further have the authority to the maximum extent permitted by law to purchase and maintain insurance providing such indemnification."
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. (1)
SEC Registration Statement $ 491
Blue Sky Filing Fees $ 4,000
Blue Sky Legal Fees $ 4,000
Printing Expenses $ 10,000
Legal Fees $ 80,000
Accounting Fees $ 5,000
Transfer Agent Fees $ 1,000
Miscellaneous Expenses $ 5,509
-----------
Total $ 110,000
===========
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(1) All expenses, except the SEC registration fee and NASD filing fee, are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The Registrant was organized in January 2001, and at that time, sold 450,000 shares to Earnest Mathis, Jr., or entities controlled by Earnest Mathis, Jr., for $10,000 ($.022 per share) and 900,000 shares to Van R. Perkins for $20,000 ($.022 per share). There have been no other sales of the Registrant's common stock. In February 2001, the Registrant issued 100,000 stock options to Michael G. Carpenter, an executive officer, and 25,000 stock options to Russell Pollock, an employee, under the Registrant's 2001 Stock Option Plan, exercisable at $.25 per share.
With respect to the above securities issuances, the Registrant relied on
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act")
and Rule 506 promulgated thereunder. No advertising or general solicitation was
employed in offering the securities. The securities were issued to two persons,
both of whom were officers and directors of the Registrant. Both persons were
accredited investors who acquired the securities for investment and not with a
view toward distribution or resale. All common stock issued contained a
restrictive legend prohibiting transfer of the shares except in accordance with
federal securities laws.
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ITEM 27. EXHIBIT INDEX.
Exhibit No. Title ----------- ----- 3.01 Articles of Incorporation of the Registrant 3.02 Bylaws of the Registrant 5.01 Opinion of Gary A. Agron regarding legality 10.01 Master Agency Agreement with Key Com, Inc. 10.02 Stock Option Plan 10.03 Escrow Agreement 23.01 Consent of Gary A. Agron (see 5.01 above) 23.02 Consent of Ehrhardt Keefe Steiner & Hottman, PC |
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes:
(a) That insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registration of expenses incurred or paid by a director, officer or controlling person to the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(b) That subject to the terms and conditions of Section 13(a) of the Securities Exchange Act of 1934, it will file with the Securities and Exchange Commission such supplementary and periodic information, documents and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section.
(c) That any post-effective amendment filed will comply with the applicable forms, rules and regulations of the Commission in effect at the time such post-effective amendment is filed.
(d) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof), which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement;
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(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(e) 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.
(f) 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.
(g) To remove from registration by means of a post-effective amendment all of the securities if the minimum 150,000 shares are not all sold at the termination of this Offering.
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SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing Form SB-2 and has caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Denver, Colorado, on February 26, 2001.
INSTANET, INC.
By: /s/ Earnest Mathis, Jr.
--------------------------------------------
Earnest Mathis, Jr., Chief Executive Officer
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Pursuant to the requirements of the Securities Act, as amended, this Registration Statement has been signed below by the following persons on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Earnest Mathis, Jr. Chief Executive Officer, Chief Financial February 26, 2001
-------------------------- Officer (Principal Accounting Officer)
Earnest Mathis, Jr. and Director
/s/ Van R. Perkins Vice President, Secretary and Director February 26, 2001
--------------------------
Van R. Perkins
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EXHIBIT INDEX
Exhibit No. Title ----------- ----- 3.01 Articles of Incorporation of the Registrant 3.02 Bylaws of the Registrant 5.01 Opinion of Gary A. Agron regarding legality 10.01 Master Agency Agreement with Key Com, Inc. 10.02 Stock Option Plan 10.03 Escrow Agreement 23.01 Consent of Gary A. Agron (see 5.01 above) 23.02 Consent of Ehrhardt Keefe Steiner & Hottman, PC |
Exhibit 3.01
ARTICLES OF INCORPORATION
OF
INSTANET, INC.
The undersigned who, if a natural person, is eighteen years of age or older, hereby establishes a corporation pursuant to the Nevada Revised Statutes and adopts the following Articles of Incorporation:
The name of the corporation is: Instanet, Inc.
The corporation shall have and may exercise all of the rights, powers and privileges now or hereafter conferred upon corporations organized under the laws of Nevada. In addition, the corporation may do everything necessary, suitable or proper for the accomplishment of any of its corporate purposes. The corporation may conduct part or all of its business in any part of Nevada, the United States or the world and may hold, purchase, mortgage, lease and convey real and personal property in any of such places.
1. Authorized Shares of Common Stock. The aggregate number of shares of stock which the corporation shall have authority to issue is 50,000,000 shares of $.001 par value Common Stock. The shares of this class of Common Stock shall have unlimited voting rights and shall constitute the sole voting group of the corporation, except to the extent any additional voting group or groups may hereafter be established in accordance with the Nevada Revised Statutes. The shares of this class shall also be entitled to receive the net assets of the corporation upon dissolution.
2. Voting Rights; Denial of Preemptive Rights. Each shareholder of record shall have one vote for each share of stock standing in his name on the books of the corporation and entitled to vote, except that in the election of directors each shareholder shall have as many votes for each share held by him as there are directors to be elected and for whose election the shareholder has a right to vote. Cumulative voting shall not be permitted in the election of directors or otherwise. Preemptive rights to purchase additional shares of stock are denied.
3. Authorized Shares of Preferred Stock. The corporation shall have the authority to issue 5,000,000 shares of $.001 par value Preferred Stock, which may be issued in one or more series at the discretion of the board of directors. In establishing a series, the board of directors shall give to it a distinctive designation so as to distinguish it from the shares of all other series and classes, shall fix the number of shares in such series, and the preferences,
rights and restrictions thereof. All shares of any one series shall be alike in every particular except as otherwise provided by these Articles of Incorporation or the Nevada Revised Statutes.
The number of directors of the corporation shall be fixed by the bylaws, or if the bylaws fail to fix such a number, then by resolution adopted from time to time by the board of directors, provided that the number of directors shall not be less than one. Two directors shall constitute the initial board of directors. The following persons are elected to serve as the Corporation's initial directors until the first annual meeting of shareholders or until their successors are duly elected and qualified:
Name Address
---- -------
Earnest Mathis 26 West Dry Creek Circle, Suite 600
Littleton, Colorado 80120
Van Perkins 26 West Dry Creek Circle, Suite 600
Littleton, Colorado 80120
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The street address of the initial registered office of the corporation is 1100 East William Street, Suite 207, Carson City, Nevada 89701. The name of the initial registered agent of the Corporation at such address is the National Registered Agents, Inc. of Nevada.
The address of the initial principal office of the corporation is 26 West Dry Creek Circle, Suite 600, Littleton, Colorado 80120.
The following provisions are inserted for the management of the business and for the conduct of the affairs of the corporation, and the same are in furtherance of and not in limitation or exclusion of the powers conferred by law.
1. Conflicting Interest Transactions. As used in this paragraph,
"conflicting interest transaction" means any of the following: (i) a loan or
other assistance by the corporation to a director of the corporation or to an
entity in which a director of the corporation is a director or officer or has a
financial interest; (ii) a guaranty by the corporation of an obligation of a
director of the corporation or of an obligation of an entity in which a director
of the corporation is a director or officer or has a financial interest; or
(iii) a contract or transaction between the corporation and a director of the
corporation or between the corporation and an entity in which a director of the
corporation is a director or officer or has a financial interest. No conflicting
interest transaction shall be void or voidable, be enjoined, be set aside, or
give rise to an award of damages or other sanctions in a proceeding by a
shareholder or by or in the right of the corporation, solely because the
conflicting interest transaction involves a director of the corporation or an
entity in which a director of the corporation is a director or officer or has a
financial interest, or solely because the director is present at or participates
in the meeting of the corporation's board of directors or of the committee of
the board of directors which authorizes, approves or ratifies a conflicting
interest transaction, or solely because the director's vote is counted for such
purpose if: (A) the material facts as to the director's relationship or interest
and as to the conflicting interest transaction are disclosed or are known to the
board of directors or the committee, and the board of directors or committee in
good faith authorizes, approves or ratifies the conflicting interest transaction
by the affirmative vote of a majority of the disinterested directors, even
though the disinterested directors are less than a quorum; or (B) the material
facts as to the director's relationship or interest and as to the conflicting
interest transaction are disclosed or are known to the shareholders entitled to
vote thereon, and the conflicting interest transaction is specifically
authorized, approved or ratified in good faith by a vote of the shareholders; or
(C) a conflicting interest transaction is fair as to the corporation as of the
time it is authorized, approved or ratified by the board of directors, a
committee thereof, or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes, approves or ratifies the
conflicting interest transaction.
2. Indemnification. The corporation shall indemnify, to the maximum extent permitted by law, any person who is or was a director, officer, agent, fiduciary or employee of the corporation against any claim, liability or expense arising against or incurred by such person made party to a proceeding because he is or was a director, officer, agent, fiduciary or employee of the corporation or because he is or was serving another entity or employee benefit plan as a director, officer, partner, trustee, employee, fiduciary or agent at the corporation's request. The corporation shall further have the authority to the maximum extent permitted by law to purchase and maintain insurance providing such indemnification.
3. Limitation on Director's or Officer's Liability. No director or officer
of the corporation shall be personally liable to the corporation or any of its
shareholders for damages for breach of fiduciary duty as a director or officer
involving any act or omission of any such director or officer provided, however,
that the foregoing provision shall not eliminate or limit the liability of a
director or officer for acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or the payment of dividends in violation of
Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of
this Article by the shareholders of the corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director or officer of the corporation for acts or omissions prior to such
repeal or modification.
The name and address of the incorporator is:
Michael J. Tauger 5445 DTC Parkway, Suite 520 Greenwood Village, CO 80111
Dated this 8th day of January 2001.
INCORPORATOR:
National Registered Agents, Inc. of Nevada hereby accepts appointment as Registered Agent for the above-named corporation.
REGISTERED AGENT:
Exhibit 3.02
BYLAWS
OF
INSTANET, INC.,
a Nevada Corporation
TABLE OF CONTENTS
Page
ARTICLE I......................................................................1
Offices .............................................................1
ARTICLE II.....................................................................1
Shareholders..........................................................1
Section 1. Annual Meeting...................................1
Section 2. Special Meetings.................................2
Section 3. Place of Meeting.................................2
Section 4. Notice of Meeting................................2
Section 5. Fixing of Record Date............................3
Section 6. Voting Lists.....................................4
Section 7. Recognition Procedure for Beneficial Owners......4
Section 8. Quorum and Manner of Acting......................4
Section 9. Proxies..........................................5
Section 10. Voting of Shares................................6
Section 11. Corporation's Acceptance of Votes...............6
Section 12. Informal Action by Shareholders.................7
Section 13. Meetings by Telecommunication...................8
ARTICLE III....................................................................8
Board of Directors....................................................8
Section 1. General Powers...................................8
Section 2. Number, Qualifications and Tenure................8
Section 3. Vacancies........................................9
Section 4. Regular Meetings.................................9
Section 5. Special Meetings.................................9
Section 6. Notice...........................................9
Section 7. Quorum..........................................10
Section 8. Manner of Acting................................10
Section 9. Compensation....................................10
Section 10. Presumption of Assent..........................10
Section 11. Committees.....................................10
Section 12. Informal Action by Directors...................11
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Section 13. Telephonic Meetings............................11
Section 14. Standard of Care...............................11
ARTICLE IV....................................................................12
Officers and Agents..................................................12
Section 1. General.........................................12
Section 2. Appointment and Term of Office..................12
Section 3. Resignation and Removal.........................12
Section 4. Vacancies.......................................13
Section 5. President.......................................13
Section 6. Vice Presidents.................................13
Section 7. Secretary.......................................13
Section 8. Treasurer.......................................14
ARTICLE V.....................................................................15
Stock ............................................................15
Section 1. Certificates....................................15
Section 2. Consideration for Shares........................15
Section 3. Lost Certificates...............................16
Section 4. Transfer of Shares..............................16
Section 5. Transfer Agent, Registrars and Paying Agents....16
ARTICLE VI....................................................................16
Indemnification of Certain Persons...................................16
Section 1. Indemnification.................................16
Section 2. Right to Indemnification........................17
Section 3. Effect of Termination of Action.................17
Section 4. Groups Authorized to Make Indemnification
Determination................................18
Section 5. Court-Ordered Indemnification...................18
Section 6. Advance of Expenses.............................18
Section 7. Additional Indemnification to Certain
Persons Other Than Directors.................19
Section 8. Witness Expenses................................19
Section 9. Report to Shareholders..........................19
ARTICLE VII...................................................................19
Provisions of Insurance..............................................19
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Section 1. Provision of Insurance..........................19
ARTICLE VIII..................................................................20
Miscellaneous........................................................20
Section 1. Seal............................................20
Section 2. Fiscal Year.....................................20
Section 3. Amendments......................................20
Section 4. Receipt of Notices by the Corporation...........20
Section 5. Gender..........................................20
Section 6. Conflicts.......................................20
Section 7. Definitions.....................................20
Effective: January 9, 2001
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BYLAWS
OF
INSTANET, INC.
ARTICLE I
Offices
The principal office of the corporation shall be designated from time to time by the corporation and may be within or outside of Nevada.
The corporation may have such other offices, either within or outside Nevada, as the board of directors may designate or as the business of the corporation may require from time to time.
The registered office of the corporation required by the Nevada General Corporation Law to be maintained in Nevada may be, but need not be, identical with the principal office, and the address of the registered office may be changed from time to time by the board of directors.
ARTICLE II
Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders shall be held during the month of January of each year on a date and at a time fixed by the board of directors of the corporation (or by the president in the absence of action by the board of directors), beginning with the year 2002, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the election of directors is not held on the day fixed as provided herein for any annual meeting of the shareholders, or any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as it may conveniently be held.
A shareholder may apply to the district court in the county in Nevada where the corporation's principal office is located or, if the corporation has no principal office in Nevada, to the district court of the county in which the corporation's registered office is located to seek an order that a shareholder meeting be held (i) if an annual meeting was not held within six months after the close of the corporation's most recently ended fiscal year or fifteen months after its last annual meeting, whichever is earlier, or (ii) if the shareholder participated in a proper call of or proper demand for a special meeting and notice of the special meeting was not given within thirty days after the date of the call or the date the last of the demands necessary to require calling of the meeting was received by the corporation pursuant to Nevada corporate law, or the special meeting was not held in accordance with the notice.
Section 2. Special Meetings. Unless otherwise prescribed by statute, special meetings of the shareholders may be called for any purpose by the president or by the board of directors. The president shall call a special meeting of the shareholders if the corporation receives one or more written demands for the meeting, stating the purpose or purposes for which it is to be held, signed and dated by holders of shares representing at least ten percent of all the votes entitled to be cast on any issue proposed to be considered at the meeting.
Section 3. Place of Meeting. The board of directors may designate any place, either within or outside Nevada, as the place for any annual meeting or any special meeting called by the board of directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or outside Nevada, as the place for such meeting. If no designation is made, or if a special meeting is called other than by the board, the place of meeting shall be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place, date, and hour of the meeting shall be given not less than ten nor more than sixty days before the date of the meeting, except that (i) if the number of authorized shares is to be increased, at least thirty days' notice shall be given, or (ii) any other longer notice period is required by the Nevada General Corporation Law. The secretary shall be required to give such notice only to shareholders entitled to vote at the meeting except as otherwise required by the Nevada General Corporation Law.
Notice of a special meeting shall include a description of the purpose or purposes of the meeting. Notice of an annual meeting need not include a description of the purpose or purposes of the meeting except the purpose or purposes shall be stated with respect to (i) an amendment to the articles of incorporation of the corporation, (ii) a merger or share exchange in which the corporation is a party and, with respect to a share exchange, in which the corporation's shares will be acquired, (iii) a sale, lease, exchange or other disposition, other than in the usual and regular course of business, of all or substantially all of the property of the corporation or of another entity which this corporation controls, in each case with or without the goodwill, (iv) a dissolution of the corporation, (v) restatement of the articles of incorporation, or (vi) any other purpose for which a statement of purpose is required by the Nevada General Corporation Law. Notice shall be given personally or by mail, private carrier, telegraph, teletype, electronically transmitted facsimile or other form of wire or wireless communication by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed and if in a comprehensible form, such notice shall be deemed to be given and effective when deposited in the United States mail, properly addressed to the shareholder at his address as it appears in the corporation's current record of shareholders, with first class postage prepaid. If notice is given other than by mail, and provided that such notice is in a comprehensible form, the notice is given and effective on the date actually received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the secretary shall give notice thereof at corporate expense. No notice need be sent to any shareholder if three successive notices mailed to the last known address of such shareholder have been returned as undeliverable until such time as another address for such shareholder is made known to the corporation by such
shareholder. In order to be entitled to receive notice of any meeting, a shareholder shall advise the corporation in writing of any change in such shareholder's mailing address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need not be given of the new date, time or place if the new date, time or place of such meeting is announced before adjournment at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which may have been transacted at the original meeting. If the adjournment is for more than 120 days, or if a new record date is fixed for the adjourned meeting, a new notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time and date of the meeting by a writing signed by such shareholder. Such waiver shall be delivered to the corporation for filing with the corporate records, but this delivery and filing shall not be conditions to the effectiveness of the waiver. Further, by attending a meeting either in person or by proxy, a shareholder waives objection to lack of notice or defective notice of the meeting unless the shareholder objects at the beginning of the meeting to the holding of the meeting or the transaction of business at the meeting because of lack of notice or defective notice. By attending the meeting, the shareholder also waives any objection to consideration at the meeting of a particular matter not within the purpose or purposes described in the meeting notice unless the shareholder objects to considering the matter when it is presented.
Section 5. Fixing of Record Date. For the purpose of determining shareholders entitled to (i) notice of or vote at any meeting of shareholders or any adjournment thereof, (ii) receive distributions or share dividends, (iii) demand a special meeting, or (iv) make a determination of shareholders for any other proper purpose, the board of directors may fix a future date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days, and, in case of a meeting of shareholders, not less than ten days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is fixed by the directors, the record date shall be the day before the notice of the meeting is given to shareholders, or the date on which the resolution of the board of directors providing for a distribution is adopted, as the case may be. When a determination of shareholders entitled to vote at any meeting of shareholders is made as provided in this section, such determination shall apply to any adjournment thereof unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. Unless otherwise specified when the record date is fixed, the time of day for such determination shall be as of the corporation's close of business on the record date.
Notwithstanding the above, the record date for determining the shareholders entitled to take action without a meeting or entitled to be given notice of action so taken shall be the date a writing upon which the action is taken is first received by the corporation. The record date for determining shareholders entitled to demand a special meeting shall be the date of the earliest of any of the demands pursuant to which the meeting is called.
Section 6. Voting Lists. After a record date is fixed for a shareholders' meeting, the secretary shall make, at the earlier of ten days before such meeting or two business days after notice of the meeting has been given, a complete list of the shareholders entitled to be given notice of such meeting or any adjournment thereof. The list shall be arranged by voting groups and within each voting group by class or series of shares, shall be in alphabetical order within each class or series, and shall show the address of and the number of shares of each class or series held by each shareholder. For the period beginning the earlier of ten days prior to the meeting or two business days after notice of the meeting is given and continuing through the meeting and any adjournment thereof, this list shall be kept on file at the principal office of the corporation, or at a place (which shall be identified in the notice) in the city where the meeting will be held. Such list shall be available for inspection on written demand by any shareholder (including for the purpose of this Section 6 any holder of voting trust certificates) or his agent or attorney during regular business hours and during the period available for inspection. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board of directors may adopt by resolution a procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. The resolution may set forth (i) the types of nominees to which it applies, (ii) the rights or privileges that the corporation will recognize in a beneficial owner, which may include rights and privileges other than voting, (iii) the form of certification and the information to be contained therein, (iv) if the certification is with respect to a record date, the time within which the certification must be received by the corporation, (v) the period for which the nominee's use of the procedure is effective, and (vi) such other provisions with respect to the procedure as the board deems necessary or desirable. Upon receipt by the corporation of a certificate complying with the procedure established by the board of directors, the persons specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the registered holders of the number of shares specified in place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. A majority of the votes entitled to be cast on a matter by a voting group represented in person or by proxy, shall constitute a quorum of that voting group for action on the matter. If less than a majority of such votes are represented at a meeting, a majority of the votes so represented may adjourn the meeting from time to time without further notice,
for a period not to exceed 120 days for any one adjournment. If a quorum is present at such adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, unless the meeting is adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of directors by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast within the voting group opposing the action, unless the vote of a greater number or voting by classes is required by law or the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder may vote by proxy by signing an appointment form or similar writing, either personally or by his duly authorized attorney- in-fact. A shareholder may also appoint a proxy by transmitting or authorizing the transmission of a telegram, teletype, or other electronic transmission providing a written statement of the appointment to the proxy, a proxy solicitor, proxy support service organization, or other person duly authorized by the proxy to receive appointments as agent for the proxy, or to the corporation. The transmitted appointment shall set forth or be transmitted with written evidence from which it can be determined that the shareholder transmitted or authorized the transmission of the appointment. The proxy appointment form or similar writing shall be filed with the secretary of the corporation before or at the time of the meeting. The appointment of a proxy is effective when received by the corporation and is valid for eleven months unless a different period is expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of an appointment of a proxy may be substituted for or used in lieu of the original appointment for any purpose for which the original appointment could be used.
Revocation of a proxy does not affect the right of the corporation to accept the proxy's authority unless (i) the corporation had notice that the appointment was coupled with an interest and notice that such interest is extinguished is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment, or (ii) other notice of the revocation of the appointment is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment. Other notice of revocation may, in the discretion of the corporation, be deemed to include the appearance at a shareholders' meeting of the shareholder who granted the proxy and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment.
The corporation shall not be required to recognize an appointment made irrevocable if it has received a writing revoking the appointment signed by the shareholder (including a shareholder who is a successor to the shareholder who granted the proxy) either personally or by his attorney-in-fact, notwithstanding that the revocation may be a breach of an obligation of the shareholder to another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's authority appearing on the appointment form, the corporation is entitled to accept the proxy's vote or other action as that of the shareholder making the appointment.
Section 10. Voting of Shares. Each outstanding share, regardless of class, shall be entitled to one vote, except in the election of directors, and each fractional share shall be entitled to a corresponding fractional vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or classes are limited or denied by the articles of incorporation as permitted by the Nevada Business Corporation Code. Cumulative voting shall not be permitted in the election of directors or for any other purpose. Each record holder of stock shall be entitled to vote in the election of directors and shall have as many votes for each of the shares owned by him as there are directors to be elected and for whose election he has the right to vote.
At each election of directors, that number of candidates equaling the number of directors to be elected, having the highest number of votes cast in favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a finding that the purpose of this Section would not be violated in the circumstances presented to the court, the shares of the corporation are not entitled to be voted if they are owned, directly or indirectly, by a second corporation, domestic or foreign, and the first corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation except to the extent the second corporation holds the shares in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a vote, consent, waiver, proxy appointment, or proxy appointment revocation corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, proxy appointment or proxy appointment revocation and give it effect as the act of the shareholder. If the name signed on a vote, consent, waiver, proxy appointment or proxy appointment revocation does not correspond to the name of a shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, proxy appointment or proxy appointment revocation and to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-tenants or fiduciaries, and the person signing appears to be acting on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment or
proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this
Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy appointment or proxy appointment revocation if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or rejects a vote, consent, waiver, proxy appointment or proxy appointment revocation in good faith and in accordance with the standards of this Section is liable in damages for the consequences of the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if before or after the action, a written consent (or counterparts thereof) that sets forth the action so taken is signed by shareholders holding at least a majority of the voting power entitled to vote with respect to the subject matter thereof except if a different proportion of voting power is required for such an action at a meeting, then that proportion of written consents is required. Such consent shall have the same force and effect as a vote of the shareholders and may be stated as such in any document. Action taken
under this Section 12 is effective as of the date the last writing necessary to effect the action is received by the corporation, unless all of the writings specify a different effective date, in which case such specified date shall be the effective date for such action. The record date for determining shareholders entitled to take action without a meeting is the date the corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to action taken pursuant to this Section 12 may revoke such consent by a writing signed by the shareholder describing the action and stating that the shareholder's prior consent thereto is revoked, if such writing is received by the corporation before the effectiveness of the action.
In no instance where action is authorized by written consent need a meeting of shareholders be called or notice given.
Section 13. Meetings by Telecommunication. Any or all of the shareholders may participate in an annual or special shareholders' meeting by, or the meeting may be conducted through the use of, any means of communication by which all persons participating in the meeting may hear each other during the meeting. A shareholder participating in a meeting by this means is deemed to be present in person at the meeting.
ARTICLE III
Board of Directors
Section 1. General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, its board of directors, except as otherwise provided in the Nevada General Corporation Law or the articles of incorporation.
Section 2. Number, Qualifications and Tenure. The number of directors of the corporation shall be fixed from time to time by the board of directors, within a range of no less than one or more than nine, but no decrease in the number of directors shall have the effect of shortening the term of any incumbent director. A director shall be a natural person who is eighteen years of age or older. A director need not be a resident of Nevada or a shareholder of the corporation.
Directors shall be elected at each annual meeting of shareholders. Each director shall hold office until the next annual meeting of shareholders following his election and thereafter until his successor shall have been elected and qualified. Directors shall be removed in the manner provided by the Nevada General Corporation Law. Any director may be removed by the shareholders of the voting group that elected the director, with or without cause, at a meeting called for that purpose. The notice of the meeting shall state that the purpose or one of the purposes of the meeting is removal of the director. A director may be removed only if the number of votes cast in favor of removal exceeds the number of votes cast against removal.
Section 3. Vacancies. Any director may resign at any time by giving written notice to the secretary. Such resignation shall take effect at the time the notice is received by the secretary unless the notice specifies a later effective date. Unless otherwise specified in the notice of resignation, the corporation's acceptance of such resignation shall not be necessary to make it effective. Any vacancy on the board of directors may be filled by the affirmative vote of a majority of the shareholders at a special meeting called for that purpose or by the board of directors. If the directors remaining in office constitute fewer than a quorum of the board, the directors may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. If elected by the directors, the director shall hold office until the next annual shareholders' meeting at which directors are elected. If elected by the shareholders, the director shall hold office for the unexpired term of his predecessor in office; except that, if the director's predecessor was elected by the directors to fill a vacancy, the director elected by the shareholders shall hold office for the unexpired term of the last predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of directors shall be held without notice immediately after and at the same place as the annual meeting of shareholders. The board of directors may provide by resolution the time and place, either within or outside Nevada, for the holding of additional regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of directors may be called by or at the request of the president or any one (1) of the directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or outside Nevada, as the place for holding any special meeting of the board of directors called by them.
Section 6. Notice. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at his
business address, or by notice transmitted by private courier, telegraph, telex,
electronically transmitted facsimile or other form of wire or wireless
communication. If mailed, such notice shall be deemed to be given and to be
effective on the earlier of (i) five days after such notice is deposited in the
United States mail, properly addressed, with first class postage prepaid, or
(ii) the date shown on the return receipt, if mailed by registered or certified
mail return receipt requested, provided that the return receipt is signed by the
director to whom the notice is addressed. If notice is given by telex,
electronically transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be effective when
sent, and with respect to a telegram, such notice shall be deemed to be given
and to be effective when the telegram is delivered to the telegraph company. If
a director has designated in writing one or more reasonable addresses or
facsimile numbers for delivery of notice to him, notice sent by mail, telegraph,
telex, electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time and date of the meeting by a writing signed by such director. Such waiver shall be delivered to the secretary for filing with the corporate records, but such delivery and filing shall not be conditions to the effectiveness of the waiver. Further, a director's attendance at or participation in a meeting waives any required notice to him of the meeting unless at the beginning of the meeting, or
promptly upon his later arrival, the director objects to holding the meeting or transacting business at the meeting because of lack of notice or defective notice and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by the board of directors pursuant to Article III, Section 2 or, if no number is fixed, a majority of the number in office immediately before the meeting begins, shall constitute a quorum for the transaction of business at any meeting of the board of directors.
Section 8. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors.
Section 9. Compensation. By resolution of the board of directors, any director may be paid any one or more of the following: his expenses, if any, of attendance at meetings, a fixed sum for attendance at each meeting, a stated salary as director, or such other compensation as the corporation and the director may reasonably agree upon. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors or committee of the board at which action on any corporate matter is taken shall be presumed to have assented to all action taken at the meeting unless (i) the director objects at the beginning of the meeting, or promptly upon his arrival, to the holding of the meeting or the transaction of business at the meeting and does not thereafter vote for or assent to any action taken at the meeting, (ii) the director contemporaneously requests that his dissent or abstention as to any specific action taken be entered in the minutes of the meeting, or (iii) the director causes written notice of his dissent or abstention as to any specific action to be received by the presiding officer of the meeting before its adjournment or by the secretary promptly after the adjournment of the meeting. A director may dissent to a specific action at a meeting, while assenting to others. The right to dissent to a specific action taken at a meeting of the board of directors or a committee of the board shall not be available to a director who voted in favor of such action.
Section 11. Committees. By resolution adopted by a majority of all the directors in office when the action is taken, the board of directors may designate from among its members an executive committee and one or more other committees, and appoint one or more members of the board of directors to serve on them. To the extent provided in the resolution, each committee shall have all the authority of the board of directors, except that no such committee shall have the authority to (i) authorize distributions, (ii) approve or propose to shareholders actions or proposals required by the Nevada General Corporation Law to be approved by shareholders, (iii) fill vacancies on the board of directors or any committee thereof, (iv) amend articles of incorporation, (v) adopt, amend or repeal the bylaws, (vi) approve a plan of merger not requiring shareholder approval, (vii) authorize or approve the reacquisition of shares unless pursuant
to a formula or method prescribed by the board of directors, or (viii) authorize or approve the issuance or sale of shares, or contract for the sale of shares or determine the designations and relative rights, preferences and limitations of a class or series of shares, except that the board of directors may authorize a committee or officer to do so within limits specifically prescribed by the board of directors. The committee shall then have full power within the limits set by the board of directors to adopt any final resolution setting forth all preferences, limitations and relative rights of such class or series and to authorize an amendment of the articles of incorporation stating the preferences, limitations and relative rights of a class or series for filing with the Secretary of State under the Nevada General Corporation Law.
Sections 4, 5, 6, 7, 8 or 12 of Article III, which govern meetings, notice, waiver of notice, quorum, voting requirements and action without a meeting of the board of directors, shall apply to committees and their members appointed under this Section 11.
Neither the designation of any such committee, the delegation of authority to such committee, nor any action by such committee pursuant to its authority shall alone constitute compliance by any member of the board of directors or a member of the committee in question with his responsibility to conform to the standard of care set forth in Article III, Section 14 of these bylaws.
Section 12. Informal Action by Directors. Any action required or permitted to be taken at a meeting of the directors or any committee designated by the board of directors may be taken without a meeting if a written consent (or counterparts thereof) that sets forth the action so taken is signed by all of the directors entitled to vote with respect to the action taken. Such consent shall have the same force and effect as a unanimous vote of the directors or committee members and may be stated as such in any document. Unless the consent specifies a different effective time or date, action taken under this Section 12 is effective at the time or date the last director signs a writing describing the action taken, unless, before such time, any director has revoked his consent by a writing signed by the director and received by the president or the secretary of the corporation.
Section 13. Telephonic Meetings. The board of directors may permit any director (or any member of a committee designated by the board) to participate in a regular or special meeting of the board of directors or a committee thereof through the use of any means of communication by which all directors participating in the meeting can hear each other during the meeting. A director participating in a meeting in this manner is deemed to be present in person at the meeting.
Section 14. Standard of Care. A director shall perform his duties as a director, including without limitation his duties as a member of any committee of the board, in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. In performing his duties, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by the persons herein designated. However, he shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause such reliance to be unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if, in connection with such action or omission, he performs his duties in compliance with this Section 14.
The designated persons on whom a director is entitled to rely are (i) one or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented, (ii) legal counsel, public accountant, or other person as to matters which the director reasonably believes to be within such person's professional or expert competence, or (iii) a committee of the board of directors on which the director does not serve if the director reasonably believes the committee merits confidence.
ARTICLE IV
Officers and Agents
Section 1. General. The officers of the corporation shall be a president, a secretary and a treasurer, and may also include one or more vice presidents, each of which officer shall be appointed by the board of directors and shall be a natural person eighteen years of age or older. One person may hold more than one office. The board of directors or an officer or officers so authorized by the board may appoint such other officers, assistant officers, committees and agents, including a chairman of the board, assistant secretaries and assistant treasurers, as they may consider necessary. Except as expressly prescribed by these bylaws, the board of directors or the officer or officers authorized by the board shall from time to time determine the procedure for the appointment of officers, their authority and duties and their compensation, provided that the board of directors may change the authority, duties and compensation of any officer who is not appointed by the board.
Section 2. Appointment and Term of Office. The officers of the corporation
to be appointed by the board of directors shall be appointed at each annual
meeting of the board held after each annual meeting of the shareholders. If the
appointment of officers is not made at such meeting or if an officer or officers
are to be appointed by another officer or officers of the corporation, such
appointments shall be made as determined by the board of directors or the
appointing person or persons. Each officer shall hold office until the first of
the following occurs: his successor shall have been duly appointed and
qualified, his death, his resignation, or his removal in the manner provided in
Section 3.
Section 3. Resignation and Removal. An officer may resign at any time by giving written notice of resignation to the president, secretary or other person who appoints such officer. The resignation is effective when the notice is received by the corporation unless the notice specifies a later effective date.
Any officer or agent may be removed at any time with or without cause by the board of directors or an officer or officers authorized by the board. Such removal does not affect the contract rights, if any, of the corporation or of the person so removed. The appointment of an officer or agent shall not in itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may be filled by the board of directors, or by the officer or officers authorized by the board, for the unexpired portion of the officer's term. If an officer resigns and his resignation is made effective at a later date, the board of directors, or officer or officers authorized by the board, may permit the officer to remain in office until the effective date and may fill the pending vacancy before the effective date if the board of directors or officer or officers authorized by the board provide that the successor shall not take office until the effective date. In the alternative, the board of directors, or officer or officers authorized by the board of directors, may remove the officer at any time before the effective date and may fill the resulting vacancy.
Section 5. President. The president shall preside at all meetings of shareholders and all meetings of the board of directors unless the board of directors has appointed a chairman, vice chairman, or other officer of the board and has authorized such person to preside at meetings of the board of directors. Subject to the direction and supervision of the board of directors, the president shall be the chief executive officer of the corporation, and shall have general and active control of its affairs and business and general supervision of its officers, agents and employees. Unless otherwise directed by the board of directors, the president shall attend in person or by substitute appointed by him, or shall execute on behalf of the corporation written instruments appointing a proxy or proxies to represent the corporation, at all meetings of the stockholders of any other corporation in which the corporation holds any stock. On behalf of the corporation, the president may in person or by substitute or by proxy execute written waivers of notice and consents with respect to any such meetings. At all such meetings and otherwise, the president, in person or by substitute or proxy, may vote the stock held by the corporation, execute written consents and other instruments with respect to such stock, and exercise any and all rights and powers incident to the ownership of said stock, subject to the instructions, if any, of the board of directors. The president shall have custody of the treasurer's bond, if any. The president shall have such additional authority and duties as are appropriate and customary for the office of president and chief executive officer, except as the same may be expanded or limited by the board of directors from time to time.
Section 6. Vice Presidents. The vice presidents shall assist the president and shall perform such duties as may be assigned to them by the president or by the board of directors. In the absence of the president, the vice president, if any (or, if more than one, the vice presidents in the order designated by the board of directors, or if the board makes no such designation, then the vice president designated by the president, or if neither the board nor the president makes any such designation, the senior vice president as determined by first election to that office), shall have the powers and perform the duties of the president.
Section 7. Secretary. The secretary shall (i) prepare and maintain as permanent records the minutes of the proceedings of the shareholders and the board of directors, a record of all actions taken by the shareholders or board of directors without a meeting, a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation, and a record of all waivers of notice of meetings of shareholders and of the board of directors or any committee thereof, (ii) see that all notices are duly given in accordance with the provisions of these bylaws and as required by law, (iii) serve as custodian of the corporate records and of the seal of the corporation and affix the seal to all documents when authorized by the board of directors, (iv) keep at the corporation's registered office or principal place of business a record containing the names and addresses of all shareholders in a form that permits preparation of a list of shareholders
arranged by voting group and by class or series of shares within each voting group, that is alphabetical within each class or series and that shows the address of, and the number of shares of each class or series held by, each shareholder, unless such a record shall be kept at the office of the corporation's transfer agent or registrar, (v) maintain at the corporation's principal office the originals or copies of the corporation's articles of incorporation, bylaws, minutes of all shareholders' meetings and records of all action taken by shareholders without a meeting for the past three years, all written communications within the past three years to shareholders as a group or to the holders of any class or series of shares as a group, a list of the names and business addresses of the current directors and officers, a copy of the corporation's most recent corporate report filed with the Secretary of State, and financial statements showing in reasonable detail the corporation's assets and liabilities and results of operations for the last three years, (vi) have general charge of the stock transfer books of the corporation, unless the corporation has a transfer agent, (vii) authenticate records of the corporation, and (viii) in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the secretary. The directors and/or shareholders may however respectively designate a person other than the secretary or assistant secretary to keep the minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in written form or in any form capable of being converted into written form within a reasonable time.
Section 8. Treasurer. The treasurer shall be the principal financial officer of the corporation, shall have the care and custody of all funds, securities, evidences of indebtedness and other personal property of the corporation and shall deposit the same in accordance with the instructions of the board of directors. Subject to the limits imposed by the board of directors, he shall receive and give receipts and acquittances for money paid in on account of the corporation, and shall pay out of the corporation's funds on hand all bills, payrolls and other just debts of the corporation of whatever nature upon maturity. He shall perform all other duties incident to the office of the treasurer and, upon request of the board, shall make such reports to it as may be required at any time. He shall, if required by the board, give the corporation a bond in such sums and with such sureties as shall be satisfactory to the board, conditioned upon the faithful performance of his duties and for the restoration to the corporation of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. He shall have such other powers and perform such other duties as may from time to time be prescribed by the board of directors or the president. The assistant treasurers, if any, shall have the same powers and duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the corporation. He shall prescribe and maintain the methods and systems of accounting to be followed, keep complete books and records of account as required by the Nevada General Corporation Law, prepare and file all local, state and federal tax returns, prescribe and maintain an adequate system of internal audit and prepare and furnish to the president and the board of directors statements of account showing the financial position of the corporation and the results of its operations.
ARTICLE V
Stock
Section 1. Certificates. The board of directors shall be authorized to issue any of its classes of shares with or without certificates. The fact that the shares are not represented by certificates shall have no effect on the rights and obligations of shareholders. If the shares are-represented by certificates, such shares shall be represented by consecutively numbered certificates signed, either manually or by facsimile, in the name of the corporation by the president. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, such certificate may nonetheless be issued by the corporation with the same effect as if he were such officer at the date of its issue. All certificates shall be consecutively numbered, and the names of the owners, the number of shares, and the date of issue shall be entered on the books of the corporation. Each certificate representing shares shall state upon its face:
(i) That the corporation is organized under the laws of Nevada;
(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of the series, if any, that the certificate represents;
(iv) The par value, if any, of each share represented by the certificate;
(v) Any restrictions imposed by the corporation upon the transfer of the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time following the issue or transfer of such shares, the corporation shall send the shareholder a complete written statement of all of the information required to be provided to holders of uncertificated shares by the Nevada General Corporation Law.
Section 2. Consideration for Shares. Certificated or uncertificated shares shall not be issued until the shares represented thereby are fully paid. The board of directors may authorize the issuance of shares for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed or other securities of the corporation. Future services shall not constitute payment or partial payment for shares of the corporation. The promissory note of a subscriber or an affiliate of a subscriber shall not constitute payment or partial payment for shares of the corporation unless the note is negotiable and is secured by collateral, other than the shares being purchased, having a fair market value at least equal to the principal amount of the note. For purposes of this Section 2, "promissory note" means a negotiable instrument on which there is an obligation to pay independent of collateral and does not include a non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock, the board of directors may direct the issuance of a new certificate in lieu thereof upon such terms and conditions in conformity with law as the board may prescribe. The board of directors may in its discretion require an affidavit of lost certificate and/or a bond in such form and amount and with such surety as it may determine before issuing a new certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or to a transfer agent of the corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, and receipt of such documentary stamps as may be required by law and evidence of compliance with all applicable securities laws and other restrictions, the corporation shall issue a new certificate to the person entitled thereto, and cancel the old certificate. Every such transfer of stock shall be entered on the stock books of the corporation which shall be kept at its principal office or by the person and at the place designated by the board of directors.
Except as otherwise expressly provided in Article II, Sections 7 and 11, and except for the assertion of dissenters' rights to the extent provided in Article 113 of the Nevada General Corporation Law, the corporation shall be entitled to treat the registered holder of any shares of the corporation as the owner thereof for all purposes, and the corporation shall not be bound to recognize any equitable or other claim to, or interest in, such shares or rights deriving from such shares on the part of any person other than the registered holder, including without limitation any purchaser, assignee or transferee of such shares or rights deriving from such shares, unless and until such other person becomes the registered holder of such shares, whether or not the corporation shall have either actual or constructive notice of the claimed interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board may at its discretion appoint one or more transfer agents, registrars and agents for making payment upon any class of stock, bond, debenture or other security of the corporation. Such agents and registrars may be located either within or outside Nevada. They shall have such rights and duties and shall be entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification of Certain Persons
Section 1. Indemnification. For purposes of Article VI, a "Proper Person" means any person (including the estate or personal representative of a director) who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, by reason of the fact that he is or was a director, officer, employee, fiduciary or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any foreign or domestic profit or nonprofit corporation or of any partnership, joint venture, trust, profit or nonprofit unincorporated association, limited liability company, or other enterprise or employee benefit plan. The corporation
shall indemnify any Proper Person against reasonably incurred expenses
(including attorneys' fees), judgments, penalties, fines (including any excise
tax assessed with respect to an employee benefit plan) and amounts paid in
settlement reasonably incurred by him in connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that he conducted himself in good faith and that he reasonably believed
(i) in the case of conduct in his official capacity with the corporation, that
his conduct was in the corporation's best interests, or (ii) in all other cases
(except criminal cases), that his conduct was at least not opposed to the
corporation's best interests, or (iii) in the case of any criminal proceeding,
that he had no reasonable cause to believe his conduct was unlawful. Official
capacity means, when used with respect to a director, the office of director
and, when used with respect to any other Proper Person, the office in a
corporation held by the officer or the employment, fiduciary or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. Official capacity does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in or beneficiaries of the plan is conduct that satisfies the requirement in (ii) of this Section 1. A director's conduct with respect to an employee benefit plan for a purpose that the director did not reasonably believe to be in the interests of the participants in or beneficiaries of the plan shall be deemed not to satisfy the requirement of this section that he conduct himself in good faith.
No indemnification shall be made under this Article VI to a Proper Person with respect to any claim, issue or matter in connection with a proceeding by or in the right of a corporation in which the Proper Person was adjudged liable to the corporation or in connection with any proceeding charging that the Proper Person derived an improper personal benefit, whether or not involving action in an official capacity, in which he was adjudged liable on the basis that he derived an improper personal benefit. Further, indemnification under this section in connection with a proceeding brought by or in the right of the corporation shall be limited to reasonable expenses, including attorneys' fees, incurred in connection with the proceeding.
Section 2. Right to Indemnification. The corporation shall indemnify any Proper Person who was wholly successful, on the merits or otherwise, in defense of any action, suit, or proceeding as to which he was entitled to indemnification under Section 1 of this Article VI against expenses (including attorneys' fees) reasonably incurred by him in connection with the proceeding without the necessity of any action by the corporation other than the determination in good faith that the defense has been wholly successful.
Section 3. Effect of Termination of Action. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person seeking indemnification did not meet the standards of conduct described in Section 1 of this Article VI. Entry of a judgment by consent as part of a settlement shall not be deemed an adjudication of liability, as described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification Determination. Except where there is a right to indemnification as set forth in Sections 1 or 2 of this Article or where indemnification is ordered by a court in Section 5, any indemnification shall be made by the corporation only as determined in the specific case by a proper group that indemnification of the Proper Person is permissible under the circumstances because he has met the applicable standards of conduct set forth in Section 1 of this Article. This determination shall be made by the board of directors by a majority vote of those present at a meeting at which a quorum is present, which quorum shall consist of directors not parties to the proceeding ("Quorum"). If a Quorum cannot be obtained, the determination shall be made by a majority vote of a committee of the board of directors designated by the board, which committee shall consist of two or more directors not parties to the proceeding, except that directors who are parties to the proceeding may participate in the designation of directors for the committee. If a Quorum of the board of directors cannot be obtained and the committee cannot be established, or even if a Quorum is obtained or the committee is designated and a majority of the directors constituting such Quorum or committee so directs, the determination shall be made by (i) independent legal counsel selected by a vote of the board of directors or the committee in the manner specified in this Section 4 or, if a Quorum of the full board of directors cannot be obtained and a committee cannot be established, by independent legal counsel selected by a majority vote of the full board (including directors who are parties to the action) or (ii) a vote of the shareholders.
Authorization of indemnification and advance of expenses shall be made in the same manner as the determination that indemnification or advance of expenses is permissible except that, if the determination that indemnification or advance of expenses is permissible is made by independent legal counsel, authorization of indemnification and advance of expenses shall be made by the body that selected such counsel.
Section 5. Court-Ordered Indemnification. Any Proper Person may apply for indemni- fication to the court conducting the proceeding or to another court of competent jurisdiction for mandatory indemnification under Section 2 of this Article, including indemnification for reasonable expenses incurred to obtain court-ordered indemnification. If a court determines that the Proper Person is entitled to indemnification under Section 2 of this Article, the court shall order indemnification, including the Proper Person's reasonable expenses incurred to obtain court-ordered indemnification. If the court determines that such Proper Person is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he met the standards of conduct set forth in Section 1 of this Article or was adjudged liable in the proceeding, the court may order such indemnification as the court deems proper except that if the Proper Person has been adjudged liable, indemnification shall be limited to reasonable expenses incurred in connection with the proceeding and reasonable expenses incurred to obtain court-ordered indemnification.
Section 6. Advance of Expenses. Reasonable expenses (including attorneys'
fees) incurred in defending an action, suit or proceeding as described in
Section 1 may be paid by the corporation to any Proper Person in advance of the
final disposition of such action, suit or proceeding upon receipt of (i) a
written affirmation of such Proper Person's good faith belief that he has met
the standards of conduct prescribed by Section 1 of this Article VI, (ii) a
written undertaking, executed personally or on the Proper Person's behalf, to
repay such advances if it is ultimately determined that he did not meet the
prescribed standards of conduct (the undertaking shall be an unlimited general
obligation of the Proper Person but need not be secured and may be accepted without reference to financial ability to make repayment), and (iii) a determination is made by the proper group (as described in Section 4 of this Article VI) that the facts as then known to the group would not preclude indemnification. Determination and authorization of payments shall be made in the same manner specified in Section 4 of this Article VI.
Section 7. Additional Indemnification to Certain Persons Other Than Directors. In addition to the indemnification provided to officers, employees, fiduciaries or agents because of their status as Proper Persons under this Article, the corporation may also indemnify and advance expenses to them if they are not directors of the corporation to a greater extent than is provided in these bylaws, if not inconsistent with public policy, and if provided for by general or specific action of its board of directors or shareholders or by contract.
Section 8. Witness Expenses. The sections of this Article VI do not limit the corporation's authority to pay or reimburse expenses incurred by a director in connection with an appearance as a witness in a proceeding at a time when he has not been made or named as a defendant or respondent in the proceeding.
Section 9. Report to Shareholders. Any indemnification of or advance of expenses to a director in accordance with this Article VI, if arising out of a proceeding by or on behalf of the corporation, shall be reported in writing to the shareholders with or before the notice of the next shareholders' meeting. If the next shareholder action is taken without a meeting at the instigation of the board of directors, such notice shall be given to the shareholders at or before the time the first shareholder signs a writing consenting to such action.
ARTICLE VII
Provisions of Insurance
Section 1. Provision of Insurance. By action of the board of directors, notwithstanding any interest of the directors in the action, the corporation may purchase and maintain insurance, in such scope and amounts as the board of directors deems appropriate, on behalf of any person who is or was a director, officer, employee, fiduciary or agent of the corporation, or who, while a director, officer, employee, fiduciary or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any other foreign or domestic profit or nonprofit corporation or of any partnership, joint venture, trust, profit or nonprofit unincorporated association, limited liability company, other enterprise or employee benefit plan, against any liability asserted against, or incurred by, him in that capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of Article VI or applicable law. Any such insurance may be procured from any insurance company designated by the board of directors of the corporation, whether such insurance company is formed under the laws of Nevada or any other jurisdiction of the United States or elsewhere, including any insurance company in which the corporation has an equity interest or any other interest, through stock ownership or otherwise.
ARTICLE VIII
Miscellaneous
Section 1. Seal. The board of directors may adopt a corporate seal, which shall contain the name of the corporation and the words, "Seal, Nevada."
Section 2. Fiscal Year. The fiscal year of the corporation shall be as established by the board of directors.
Section 3. Amendments. The board of directors shall have power, to the maximum extent permitted by the Nevada General Corporation Law, to make, amend and repeal the bylaws of the corporation at any regular or special meeting of the board unless the shareholders, in making, amending or repealing a particular bylaw, expressly provide that the directors may not amend or repeal such bylaw. The shareholders also shall have the power to make, amend or repeal the bylaws of the corporation at any annual meeting or at any special meeting called for that purpose.
Section 4. Receipt of Notices by the Corporation. Notices, shareholder writings consenting to action, and other documents or writings shall be deemed to have been received by the corporation when they are actually received: (1) at the registered office of the corporation in Nevada; (2) at the principal office of the corporation (as that office is designated in the most recent document filed by the corporation with the secretary of state for Nevada designating a principal office) addressed to the attention of the secretary of the corporation; (3) by the secretary of the corporation wherever the secretary may be found; or (4) by any other person authorized from time to time by the board of directors or the president to receive such writings, wherever such person is found.
Section 5. Gender. The masculine gender is used in these bylaws as a matter of convenience only and shall be interpreted to include the feminine and neuter genders as the circumstances indicate.
Section 6. Conflicts. In the event of any irreconcilable conflict between these bylaws and either the corporation's articles of incorporation or applicable law, the latter shall control.
Section 7. Definitions. Except as otherwise specifically provided in these bylaws, all terms used in these bylaws shall have the same definition as in the Nevada General Corporation Law.
Exhibit 5.01
February 22, 2001
Instanet, Inc.
26 West Dry Creek Circle, Suite 600
Littleton, CO 80120
Ladies and Gentlemen:
We are counsel for Instanet, Inc., a Nevada corporation (the "Company") in connection with its proposed public offering under the Securities Act of 1933, as amended, of up to 500,000 shares of its common stock ("Common Stock") through a Registration Statement on Form SB-2 ("Registration Statement") as to which this opinion is a part, to be filed with the Securities and Exchange Commission (the "Commission").
In connection, with rendering our opinion as set forth below, we have reviewed and examined originals or copies identified to our satisfaction of the following:
(1) Articles of Incorporation, and amendment thereto, of the Company as filed with the Secretary of State of the State of Nevada.
(2) Corporate minutes containing the written deliberations and resolutions of the Board of Directors and shareholders of the Company.
(3) The Registration Statement and the Preliminary Prospectus contained within the Registration Statement.
(4) The other exhibits to the Registration Statement.
We have also examined such other documents and records, instruments and certificates of public officials, officers and representatives of the Company, and have made such other investigations as we have deemed necessary or appropriate under the circumstances.
Based upon the foregoing and in reliance thereon, it is our opinion that the Common Stock will, upon the purchase, receipt of full payment, issuance and delivery in accordance with the terms of the offering described in the Registration Statement, be fully and validly authorized, legally issued fully paid and non-assessable.
We hereby consent to the use of this opinion, as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus constituting a part thereof.
Very truly yours,
Gary A. Agron
Exhibit 10.01
MASTER AGENCY AGREEMENT
This MASTER AGENCY AGREEMENT ("Agreement") is made this day of 29th day of January, 2001 by and between KeyCom, Inc., a corporation with offices at 5707 Corsa Avenue, Suite 103, Westlake Village, California 91362 ("KeyCom") and Instanet, Inc., a Nevada corporation of 26 West Dry Creek Circle, Suite 600, Littleton, Colorado 80120 ("Instanet") to-wit:
WHEREAS, KeyCom has developed an electronic cash transmission system known as XTRAN which deploys a proprietary software-driven Point-of-Sale counter top devices that notifies parties of cash remittances with attendant security and cash distribution directions; and
WHEREAS, Instanet has developed certain business relationships and technical capabilities complementary to the core business of KeyCom and XTRAN;
WHEREAS, KeyCom desires to appoint Instanet as KeyCom's Exclusive Merchant for extending cash remittance transactions on the XTRAN system throughout the world by making possible execution of funds transfer transactions over World Wide Web on a website to be constructed and maintained by Instanet;
WHEREAS, KeyCom desires to appoint Instanet as its Master Agent to expand and extend XTRAN's, presence throughout the world by virtue of expanding and extending the number of Xtran Locations complementary, supplementary and in addition to the existing strategic locations KeyCom; and
WHEREAS, Instanet desires to accept the appointment as Master Agent and Exclusive Agent on behalf of KeyCom pursuant to the terms of this Agreement, to-wit:
In consideration of the mutual promises made herein KeyCom and Instanet agree as follows:
DEFINITIONS
The terms used in this Agreement shall have the usual and ordinary meaning attributed to them, unless specially defined in this Paragraph.
A. The term Master Agent shall mean Instanet's assistance in complementing and supplementing Xtran existing Locations complementary and supplementary with KeyCom's strategic plan of expanding the services of Xtran within and outside the United States.
B. The term XTRAN shall mean that cash transmission notification system developed by KeyCom deployed by proprietary software-driven Point-of-Sale terminals for the remittance of funds and payments of funds through established merchants inside and outside the United States.
C. The term merchant shall mean any party authorized, or the party's authorized agent eligible to execute the remittance or payout of a funds transfer transaction over the Xtran system.
D. The term Locations shall mean those points of sale for the remittance and payout of funds transfer transactions established by Instanet and executed over the Xtran System (i) whether inside or outside of the US; (ii) whether by placement of a POS terminal or software download to an existing compatible terminal; (iii) whether for remittance or for pay out of funds transfer transactions established by Instanet in addition to the currently existing Xtran locations as of the date of this agreement.
E. The term Exclusive Merchant shall mean the only merchant granted the right by KeyCom eligible to execute Xtran funds transfer transactions, whether remittance or payout transactions via a website connected to the World Wide Web.
1. BACKGROUND INTENT OF PARTIES TO THIS AGREEMENT.
1.1 KeyCom hereby appoints Instanet as Master Agent (i) to undertake the specific objectives set forth in this Agreement (ii) to assist KeyCom in maximizing the growth of Xtran by virtue of providing market extensions being the provision of Locations to Xtran's network which are complementary with the strategic plan of KeyCom including, but not limited to extending the distribution points of Xtran in the United States and Europe including remittance locations to expatriates living abroad, remittance locations in targeted expatriate enclaves or neighborhoods and payout locations in the expatriates' native countries.
1.2 KeyCom hereby grants Instanet the status of the Exclusive Merchant of Xtran, initially, to execute remittance of funds transfer transactions over World Wide Web, also commonly referred to as the Internet. Instanet intends to construct and implement a website or portal whereby merchant remittance of funds transfer transactions of Xtran may be executed for delivery to Xtran existing and future payout locations whether at such locations as set forth in Definition "D" in this agreement or otherwise any location now or existing in the future of Xtran.
2. APPOINTMENT OF INSTANET AS EXCLUSIVE MERCHANT AND MASTER AGENT OF KEYCOM.
2.1 KeyCom hereby appoints Instanet, Inc. as Exclusive Merchant with those duties, rights and privileges as herein set forth herein.
2.1.1. Grant of Exclusive Rights to Instanet. KeyCom hereby grants to Instanet the exclusive right to execute remittance of funds transfer transactions over World Wide Web on behalf of Xtran. KeyCom hereby grants Instanet the status of the Exclusive Merchant to execute remittance of funds transfer transactions over World Wide Web.
2.1.2 Trademarks KeyCom hereby grants Instanet the exclusive use of the Xtran trademarks and such other vendor trademarks (the "trademarks") used in the ordinary course of KeyCom's business. Such exclusive use of the trademarks shall be limited to Instanet's status as Exclusive Merchant to execute remittance of funds transfer transactions and ultimately payout of such funds tranfer tranactions over World Wide Web. Such use of KeyCom's trademarks and other trademarks granted Instanet shall in no other way interfere with or prohibit the use of KeyCom trademarks or other trademarks in any other way or for any other means. Should additional trademarks become available to KeyCom in the future, such additional trademarks may be used by Instanet, as Exclusive Merchant, to promote and execute remittance of funds transfer transactions over World Wide Web, provided Instanet has received written consent of KeyCom. KeyCom will not unreasonably withhold consent to the use of additional trademarks for the purpose of promotion of Exclusive Merchant's website.
2.1.3 Exclusive Right to Sell Additional and New Products of Xtran: Should Xtran offer new or additional products sold over the Xtran POS driven wide area networks utilized by Xtran for funds transfer services, Instanet shall have the exclusive right to sell such new and additional products of KeyCom over the World Wide Web through the website of the Instanet. However, Instanet shall not have the obligation to undertake the sale of new and additional products in its sole discretion.
2.1.4 Instanet shall have the right to enter into agreements with other web-based entities desiring to link business prospects for the purpose of executing Xtran remittance of funds transfer transactions over World Wide Web from the Instanet website. Such rights and business relationship granted potential web-based partners for the sale and execution of remittance of funds transfer transactions over World Wide Web sale of Xtran services shall be at the sole discretion of Instanet. Should Instanet enter into revenue sharing agreements with web-based entities, Xtran shall be solely responsible for revenue sharing and KeyCom shall have no liability or obligation for the payments to any third parties as a result of the business operations of Instanet.
2.1.5 The primary feature of the Instanet website shall be the solicitation and execution of Xtran remittance of funds transfer transactions over World Wide Web. A directory of payout and remittance locations of Xtran will be maintained on the Instanet website. Such directory of Xtran locations shall be updated monthly. The data contained in such directory shall be provided in tab delimited, comma delimited or other format file complementary to Instanet, by KeyCom from time to time. The Instanet website shall be operable as soon as reasonably practicable, but not later than 4 months from the date hereof.
2.1.6 Functionality of Instanet Website. The primary functionality will be the execution of Xtran remittance of funds transfer transactions over World Wide Web. The Instanet website will provide for the collection and payment of funds, less commissions, of the funds to be remitted to an Xtran payout location in the manner currently utilized by Xtran thereby providing the customer with a
transaction number, security code, a "2 minute" phone card for relaying of the particular transaction number and security code to the recipient. Instanet and KeyCom will fully cooperate and use their best effort to make possible the delivery of appropriate scripts compatible and interfaced with KeyCom servers as whereby the website functions in principal as an Xtran POS. Instanet and KeyCom, at their own expense, shall be responsible for integration of data, technical support, documentation and continuing maintenance whereby information generated by Instanet's website is translated and interfaced into the KeyCom servers and communicates the appropriate functionality back to the Instanet website consistent with information provided by the typical Xtran POS.
2.2 KeyCom hereby appoints Instanet as Master Agent with those duties, rights and privileges as herein set forth herein. KeyCom grants Instanet the right to negotiate and secure Locations. Instanet will inform KeyCom as to the target Locations prior to their acceptance by KeyCom.
2.2.1 Such Locations shall be those points of sale and payout secured by Instanet that conform to the long term and short term strategic plan of KeyCom, whether falling within the scope of strategic targets currently pursued by KeyCom or otherwise the development of Locations that fall within the scope of the long term strategy of KeyCom.
2.2.3 Instanet shall initially concentrate on establishing Locations in the United States and Europe whereby Instanet will use its best effort to identify significant concentrated populations of expatriates inhabiting unique geographical areas and will use its best efforts to establish and synchronize pay out Locations through the development of strategic relationships with financial services companies serving the targeted expatriates' country or domain.
2.2.4 Instanet shall also focus on the development of multiple Locations among retail chain store operations whereby there is some degree of overlap between the expatriate targeted markets. The longer term focus will provide execution of remittance and payout of funds transfer transaction Locations within the United States.
2.2.5 Instanet shall inform KeyCom frequently of the particulars of any given set of Locations pursued by Instanet. KeyCom will notify Instanet immediately should Locations pursued by Instanet interfere with KeyCom's strategic
objectives. Should KeyCom notify Instanet of a conflict, the parties agree to discuss the conflict of interest in good faith with a view to working together toward accomplishing KeyCom's strategic objectives.
3. FINANCIAL ARRANGEMENTS BETWEEN KEYCOM AND INSTANET
3.1. Location Fee: Instanet will be paid a fee from KeyCom of $225 per Xtran Location established by Instanet: (i) whether Locations serve customers inside or outside of the US; (ii) whether by placement of a POS terminal or software download to an existing terminal; (iii) whether the lead for a location is generated by KeyCom or Instanet, (iv) whether such location is a remittance or pay out location.
3.2. Commissions: Should Locations result in funds transfer transactions whereby any part of an Xtran funds transfer transaction is executed outside the United States, Instanet shall be paid a fee of 9% of the Xtran transaction fee earned, for every transaction executed at the Location, during the existence of such Location. Should funds transfer transactions result in Xtran funds transfer transaction solely within the US, Instanet shall receive 5% of the Xtran transaction fee earned, for every transactions executed at the Location, during the existence of such Location.
3.3 Commissions on Exclusive Merchant Transactions: Instanet shall be paid, in addition to commissions payable to Instanet set forth in Paragraph 3.2., the standard merchant commission fee set forth in KeyCom's promotional materials in the customary manner KeyCom merchants are paid by KeyCom. KeyCom reserves the right to adjust merchant commissions and Xtran transaction fees at any time.
3.4. In consideration of Instanet's representation of KeyCom, Instanet shall be paid a monthly fee in the amount of $3,000 per month, plus approved expenses for location services in Florida. Such monthly retainer is expected to defray the costs inherent in Xtran's current location activities in Florida. It is agreed that Xtran's current location activities will cease at a point in the future. The Florida location activities may or may not be the central focus of Instanet's ordinary course of business, rather such monthly sum is paid Instanet
for Florida location services in accordance with KeyCom's ongoing strategic objective. Nevertheless Instanet shall be paid in accordance with Paragraphs 3.1 and 3.2. KeyCom may terminate payment for ancillary location services on 30 day's notice to Instanet.
4. RESPONSIBILITY FOR COSTS AND EXPENSES:
4.1 Instanet shall pay it's own cost of implementation and maintenance of its website location and the cost attendant to the generation of Locations on behalf of KeyCom.
4.1. KeyCom shall be responsible for all advertising, customer service, branding and marketing with respect to the Locations whether generated by Instanet or otherwise including all costs of branding of Xtran in general.
5. EFFECTIVE DATE OF AGREEMENT.
This Agreement will become effective on the date first above written, and will continue in effect so long as Instanet remains in business unless terminated as hereinafter provided.
6. KEY COM SHALL BE SOLE SUPPLIER OF XTRAN TERMINALS AND SOFTWARE.
KeyCom shall be the sole supplier to Instanet of XTRAN Terminals. KeyCom shall pay all of costs attendant to XTRAN funds transfer executions. KeyCom shall also be responsible for the costs of software downloads to the established Locations of Instanet Instanet shall not be responsible for any costs beyond the specified costs set forth in this agreement.
7. INDEMNITIES
KeyCom shall not be liable to Instanet, or to anyone who may claim any right due to a relationship with Instanet, for any acts or omissions in the performance of services under the terms of this Agreement or on the part of employees or agents of Instanet unless such acts or omissions are due to willful misconduct. Instanet shall not be liable to KeyCom, or to anyone who may claim any right due to a relationship with KeyCom, for any acts or omissions in the performance of services under the terms of this Agreement or on the part of employees or agents
of KeyCom unless such acts or omissions are due to willful misconduct. Instanet will hold KeyCom free and harmless from any obligations, costs, claims, judgments, attorneys' fees, and attachments arising from, growing out of, or in any way connected with the services rendered by Instanet under the terms of this Agreement, unless Instanet is judged by a court of competent jurisdiction to be guilty of willful misconduct. KeyCom will hold Instanet free and harmless from any obligations, costs, claims, judgments, attorneys' fees, and attachments arising from, growing out of, or in any way connected with the services rendered by KeyCom under the terms of this Agreement, unless KeyCom is judged by a court of competent jurisdiction to be guilty of willful misconduct.
8. ASSIGNMENT
Neither this Agreement nor any duties or obligations under this Agreement may be assigned by Instanet or KeyCom without the prior written consent of the parties.
9. LOCATIONS TO REMAIN PROPERTY OF KEYCOM
9.1 With the sole exception of the Instanet website and all rights granted Instanet, which shall remain the sole property of Instanet, KeyCom shall provide XTRAN Terminals, all of which shall remain the property of KeyCom. KeyCom will provide promotional materials, displays and informational pamphlets as needed for promoting the Locations. KeyCom will provide logistic support and arrange training providers. KeyCom will upgrade software as required and provide service to the XTRAN system if required. KeyCom shall not be liable for the errors or omissions of Instanet, its customers, agents, servants or employees in the operation of XTRAN. Instanet shall net be liable for the errors or omission of KeyCom, its customers, agents, servants or employees in the operation of Xtran. KeyCom shall make available at its office to Instanet or its authorized representatives such books and records of KeyCom as are relevant to issues raised in this Agreement, such as accounting, confidential information regarding KeyCom's operations during regular business hours and upon reasonable notice in writing to KeyCom by KeyCom.
10. TERMINATION OF MASTER AGENT AGREEMENT
Unless otherwise terminated as provided for in this Agreement shall remain in force indefinitely. However, not withstanding the provisions of this Paragraph or other parts of this Agreement, this Agreement shall terminate automatically on the occurrence of (1) bankruptcy or insolvency of either party; (2) assignment of this Agreement by either party without the express written consent of the other party; or the Default of Instanet. should Instanet default in the performance of this Agreement or materially breach any of its provisions, KeyCom, at KeyCom's option, may terminate this Agreement by giving written notification to Instanet. For the purposes of this paragraph, material breach of this Agreement shall include, but not be limited to consulting or advising any entity which is direct competition with KeyCom. Should KeyCom default in the performance of this Agreement or materially breach any of its provisions, Instanet, at Instanet's option, may terminate this Agreement by giving written notification to KeyCom. For the purposes of this paragraph, material breach of this Agreement shall include, but not be limited to failure to pay Instanet all or any part of the compensation as provided in t his Agreement when due, Instanet, at Instanet's option, may terminate this Agreement if the failure is not remedied by KeyCom within 30 days of such notice.
11. NON-DISCLOSURE AND NON-CIRCUMVENTION
11.1 Non-Circumvention. KeyCom and Instanet, intending to be legally bound, hereby irrevocably agree not to attempt to circumvent, avoid or bypass each other, directly, or indirectly for the purpose of avoiding payment of fees or commissions, or otherwise, by way of any KeyCom, trust partnership, or other entity, or individually, by either party to the other, in conjunction with transaction or transactions of business involving said parties.
11.2 Non-Disclosure. Instanet or KeyCom will neither disclose nor reveal to any third party, in any manner, any confidential information provided by the other, including, but not limited to, names, address, telexes, facsimile, and telephone numbers or any means or access thereto, including bank information, software information, code or reference and/or privileged information without the specific prior written consent of the other party as required by law.
12. GENERAL PROVISIONS
12.1 Notices. Any notices to be given hereunder by either party to the other may be effected either by personal delivery or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses appearing in the introductory paragraph of this Agreement, but each party may change that address by written notice in accordance with this paragraph. Notices delivered personally shall be deemed communicated as of the date of actual receipt; mailed notices shall be deemed communicated as of three (3) days after the date of mailing.
12.2 Entire Agreement. This Agreement supersedes any and all agreements, either oral or in writing, between the parties hereto with respect to the rendering of services by Instanet for KeyCom, and contains all of the covenants and agreements between the parties with respect to the rendering of such services in any manner whatsoever. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding. Any modification of this Agreement shall be effective only should such agreement be amended in writing by the parties hereto.
12.3 Partial Invalidity. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.
12.4 Successors. This Agreement shall be binding on the parties' successors in interest and assigns.
12.5 Arbitration. Any controversy between the parties hereto involving the construction or application of any of the terms, covenants, or conditions of this Agreement will, on the written request of one party served on the other, be submitted to arbitration. The arbitration will comply with and be governed by the provisions of the California Arbitration Act, Sections 1280 through 1294.2 of the California Code of Civil Procedure. The parties will each appoint one person to hear and determine the dispute and if they are unable to agree, then
the two persons so chosen will select a third impartial arbitrator whose decision will be final and conclusive on both parties. The cost of arbitration will be borne in such proportions as the arbitrators decide.
12.6 Attorneys' Fees. If any action at law or in equity, including an action for declaratory relief, is brought to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, which may be set by the court in the same action or in a separate action brought for that purpose, in addition to any other relief to which that party may be entitled.
12.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Executed at Los Angeles County, California, on the date and year first above written
12.8 Independent Contractor. Instanet is an independent contractor by virtue of this contract. No other legal relationship is created or to be inferred or construed by the existence of this agreement.
Accepted and Agreed: Accepted and Agreed: Instanet, Inc. KeyCom, Inc. By:___________________________ By:______________________________ President President |
Exhibit 10.02
INSTANET, INC.
2001 STOCK OPTION PLAN
1.1 Establishment. Instanet, Inc., a Nevada corporation (the "Company"), hereby establishes a stock option plan for officers, directors, employees and consultants who provide services to the Company, as described herein, which shall be known as the 2001 Stock Option Plan (the "Plan"). It is intended that certain of the options issued under the Plan to employees of the Company shall constitute "Incentive Stock Options" within the meaning of section 422A of the Internal Revenue Code ("Code"), and that other options issued under the Plan shall constitute "Nonstatutory Options" under the Code. The Board of Directors of the Company (the "Board") shall determine which options are to be Incentive Stock Options and which are to be Nonstatutory Options and shall enter into option agreements with recipients accordingly.
1.2 Purpose. The purpose of this Plan is to enhance the Company's stockholder value and financial performance by attracting, retaining and motivating the Company's officers, directors, key employees and consultants and to encourage stock ownership by such individuals by providing them with a means to acquire a proprietary interest in the Company's success through stock ownership.
2.1 Definitions. Whenever used herein, the following capitalized terms shall have the meanings set forth below, unless the context clearly requires otherwise.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee provided for by Article IV hereof.
(d) "Company" means Instanet, Inc., a Nevada corporation.
(e) "Consultant" means any person or entity, including an officer or director of the Company who provides services (other than as an Employee) to the Company and shall include a Nonemployee Director, as defined below.
(f) "Date of Exercise" means the date the Company receives notice, by an Optionee, of the exercise of an Option pursuant to section 8.1 of the Plan. Such notice shall indicate the number of shares of Stock the Optionee intends to exercise.
(g) "Employee" means any person, including an officer or director of the Company who is employed by the Company.
(h) "Fair Market Value" means the fair market value of Stock upon which an Option is granted under this Plan.
(i) "Incentive Stock Option" means an Option granted under this Plan which is intended to qualify as an "incentive stock option" within the meaning of section 422A of the Code.
(j) "Nonemployee Director" means a member of the Board who is not an employee of the Company at the time an Option is granted hereunder.
(k) "Nonstatutory Option" means an Option granted under the Plan which is not intended to qualify as an Incentive Stock Option within the meaning of section 422A of the Code. Nonstatutory Options may be granted at such times and subject to such restrictions as the Board shall determine without conforming to the statutory rules of section 422A of the Code applicable to Incentive Stock Options.
(l) "Option" means the right, granted under the Plan, to purchase Stock of the Company at the option price for a specified period of time. For purposes of this Plan, an Option may be either an Incentive Stock Option or a Nonstatutory Option.
(m) "Optionee" means an Employee or Consultant holding an Option under the Plan.
(n) "Parent Corporation" shall have the meaning set forth in section 425(e) of the Code with the Company being treated as the employer corporation for purposes of this definition.
(o) "Significant Shareholder" means an individual who, within the meaning of section 422A(b)(6) of the Code, owns securities possessing more than ten percent of the total combined voting power of all classes of securities of the Company. In determining whether an individual is a Significant Shareholder, an individual shall be treated as owning securities owned by certain relatives of the individual and certain securities owned by corporations in which the individual is a shareholder; partnerships in which the individual is a partner; and estates or trusts of which the individual is a beneficiary, all as provided in section 425(d) of the Code.
(p) "Stock" means the $0.001 par value common stock of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology when used in this Plan also shall include the feminine gender, and the definition of any term herein in the singular also shall include the plural.
3.1 Eligibility and Participation. All Employees are eligible to participate in this Plan and receive Incentive Stock Options and/or Nonstatutory Options hereunder. All Consultants are eligible to participate in this Plan and receive Nonstatutory Options hereunder. Optionees in the Plan shall be selected by the Board from among those Employees and Consultants who, in the opinion of the Board, are in a position to contribute materially to the Company's continued growth and development and to its long-term financial success.
4.1 Administration. The Board shall be responsible for administering the Plan.
The Board is authorized to interpret the Plan; to prescribe, amend, and rescind rules and regulations relating to the Plan; to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company; and to make all other determinations necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. Determinations, interpretations or other actions made or taken by the Board, pursuant to the provisions of this Plan, shall be final and binding and conclusive for all purposes and upon all persons.
The Plan shall be administered by the Board until the Board establishes a Compensation Committee of the Board (the "Committee") which will be an executive committee of the Board, consisting of not less than three (3) members of the Board, at least two of whom are not executive officers or salaried employees of the Company. The members of the Committee may be directors who are eligible to receive Options under the Plan, but Options may be granted to such persons only by action of the full Board and not by action of the Committee. The Committee shall have full power and authority, subject to the limitations of the Plan and any limitations imposed by the Board, to construe, interpret and administer the Plan and to make determinations which shall be final, conclusive and binding upon all persons, including, without limitation, the Company, the stockholders, the directors and any persons having any interests in any Options which may be granted under the Plan, and, by resolution or resolution providing for the creation and issuance of any such Option, to fix the terms upon which, the time or times at or within which, and the price or prices at which any Stock may be purchased from the Company upon the exercise of Options, which terms, time or times and price or prices shall, in every case, be set forth or incorporated by reference in the instrument or instruments evidencing such Option, and shall be consistent with the provisions of the Plan.
The Board may from time to time remove members from or add members to, the Committee. The Board may terminate the Committee at any time. Vacancies on the Committee, howsoever caused, shall be filled by the Board. The Committee shall select one of its members as Chairman, and shall hold meetings at such times and places as the Chairman may determine. A majority of the Committee at which a quorum is present, or acts reduced to or approved in writing by all of the
members of the Committee, shall be the valid acts of the Committee. A quorum shall consist of two- thirds (2/3) of the members of the Committee.
Where the Committee has been created by the Board, references herein to actions to be taken by the Board shall be deemed to refer to the Committee as well, except where limited by the Plan or the Board.
The Board shall have all of the enumerated powers of the Committee but shall not be limited to such powers. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it.
4.2 Special Provisions for Grants to Officers or Directors. Rule 16b-3 under the Securities and Exchange Act of 1934 (the "Act") provides that the grant of a stock option to a director or officer of a company subject to the Act will be exempt from the provisions of section 16(b) of the Act if the conditions set forth in said Rule are satisfied. Unless otherwise specified by the Board, grants of Options hereunder to individuals who are officers or directors of the Company shall be made in a manner that satisfies the conditions of said Rule.
5.1 Number. The total number of shares of Stock hereby made available and reserved for issuance under the Plan shall be 250,000. The aggregate number of shares of Stock available under this Plan shall be subject to adjustment as provided in section 5.3. The total number of shares of Stock may be authorized but unissued shares of Stock, or shares acquired by purchase as directed by the Board from time to time in its discretion, to be used for issuance upon exercise of Options granted hereunder.
5.2 Unused Stock. If an Option shall expire or terminate for any reason without having been exercised in full, the unpurchased shares of Stock subject thereto shall (unless the Plan shall have terminated) become available for other Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in the outstanding shares of Stock by reason of a stock dividend or split, recapitalization, reclassification or other similar corporate change, the aggregate number of shares of Stock set forth in section 5.1 shall be appropriately adjusted by the Board to reflect such change. The Board's determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share. In any such case, the number and kind of shares of Stock that are subject to any Option (including any Option outstanding after termination of employment) and the Option price per share shall be proportionately and appropriately adjusted without any change in the aggregate Option price to be paid therefor upon exercise of the Option.
6.1 Duration of the Plan. The Plan shall be in effect until January 31, 2011 unless extended by the Company's shareholders. Any Options outstanding at the end of said period shall remain in effect in accordance with their terms. The Plan shall terminate before the end of said period, if all Stock subject to it has been purchased pursuant to the exercise of Options granted under the Plan.
7.1 Grant of Options. Subject to section 5.1, Options may be granted to Employees or Consultants at any time and from time to time as determined by the Board; provided, however, that Consultants may receive only Nonstatutory Options, and may not receive Incentive Stock Options. The Board shall have complete discretion in determining the number of Options granted to each Optionee. In making such determinations, the Board may take into account the nature of services rendered by such Employees or Consultants, their present and potential contributions to the Company, and such other factors as the Board in its discretion shall deem relevant. The Board also shall determine whether an Option is to be an Incentive Stock Option or a Nonstatutory Option.
In the case of Incentive Stock Options the total Fair Market Value (determined at the date of grant) of shares of Stock with respect to which incentive stock options are exercisable for the first time by the Optionee during any calendar year under all plans of the Company under which incentive stock options may be granted (and all such plans of any Parent Corporations and any subsidiary corporations of the Company) shall not exceed $100,000. (Hereinafter, this requirement is sometimes referred to as the "$100,000 Limitation.")
Nothing in this Article VII shall be deemed to prevent the grant of Options permitting exercise in excess of the maximums established by the preceding paragraph where such excess amount is treated as a Nonstatutory Option.
The Board is expressly given the authority to issue amended or replacement Options with respect to shares of Stock subject to an Option previously granted hereunder. An amended Option amends the terms of an Option previously granted (including an extension of the terms of such Option) and thereby supersedes the previous Option. A replacement Option is similar to a new Option granted hereunder except that it provides that it shall be forfeited to the extent that a previously granted Option is exercised, or except that its issuance is conditioned upon the termination of a previously granted Option.
7.2 No Tandem Options. Where an Option granted under the Plan is intended to be an Incentive Stock Option, the Option shall not contain terms pursuant to which the exercise of the Option would affect the Optionee's right to exercise another Option, or vice versa, such that the Option intended to be an Incentive Stock Option would be deemed a tandem stock option within the meaning of the regulations under section 422A of the Code.
7.3 Option Agreement; Terms and Conditions to Apply Unless Otherwise
Specified. As determined by the Board on the date of grant, each Option shall be
evidenced by an Option agreement (the "Option Agreement") that includes the
nontransferability provisions required by section 10.2 hereof and specifies:
whether the Option is an Incentive Stock Option or a Nonstatutory Option; the
Option price; the term (duration) of the Option; the number of shares of Stock
to which the Option applies; any vesting or exercisability restrictions which
the Board may impose; in the case of an Incentive Stock Option, a provision
implementing the $100,000 Limitation; and any other terms or conditions which
the Board may impose. All such terms and conditions shall be determined by the
Board at the time of grant of the Option.
If not otherwise specified by the Board, the following terms and conditions shall apply to Options granted under the Plan:
(a) Term. The Option shall be exercisable to purchase Stock for a period of ten years from the date of grant, as evidenced by the execution date of the Option Agreement.
(b) Exercise of Option. Unless an Option is terminated as provided hereunder, an Optionee may exercise his Option for up to, but not in excess of, the number of shares of Stock subject to the Option specified below, based on the Optionee's number of years of continuous service with the Company from the date on which the Option is granted. In the case of an Optionee who is an Employee, continuous service shall mean continuous employment; in the case of an Optionee who is a Consultant, continuous service shall mean the continuous provision of consulting services. In applying said limitations, the amount of shares, if any, previously purchased by the Optionee under the Option shall be counted in determining the amount of shares the Optionee can purchase at any time. The Optionee may exercise his Option in the following amounts:
(i) After one (1) year of continuous services to the Company, the Optionee may purchase up to 33.3% of the shares of Stock subject to the Option;
(ii) After two (2) years of continuous services to the Company, the Optionee may purchase up to 66.6% of the shares of Stock subject to the Option;
(iii) After three years of continuous services to the Company, the Optionee may purchase all shares of Stock subject to the Option.
The Board may specify terms and conditions other than those set forth above, in its discretion.
All Option Agreements shall incorporate the provisions of the Plan by reference, with certain provisions to apply depending upon whether the Option Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.
7.4 Option Price. No Incentive Stock Option granted pursuant to this Plan shall have an Option price that is less than the Fair Market Value of the Stock on the date the Option is granted. Incentive Stock Options granted to Significant Stockholders shall have an Option price of not less than 110 percent of the Fair Market Value of the Stock on the date of grant. The Option price for Nonstatutory Options shall be established by the Board and shall not be less than 100 percent of the Fair Market Value of the Stock on the date of grant.
7.5 Term of Options. Each Option shall expire at such time as the Board shall determine, provided, however, that no Option shall be exercisable later than ten years from the date of its grant.
7.6 Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Board shall in each instance approve, which need not be the same for all Optionees.
7.7 Payment. Payment for all shares of Stock shall be made at the time that an Option, or any part thereof, is exercised, and no shares shall be issued until full payment therefor has been made. Payment shall be made (i) in cash or certified funds, or (ii) if acceptable to the Board, in Stock or in some other form; provided, however, in the case of an Incentive Stock Option, that said other form of payment does not prevent the Option from qualifying for treatment as an Incentive Stock Option within the meaning of the Code.
8.1 Written Notice. An Optionee wishing to exercise an Option shall give written notice to the Company, in the form and manner prescribed by the Board. Full payment for the shares exercised pursuant to the Option must accompany the written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after the receipt of written notice and payment, the Company shall deliver to the Optionee or to a nominee of the Optionee a certificate or certificates for the requisite number of shares of Stock.
8.3 Privileges of a Stockholder. An Optionee or any other person entitled to exercise an Option under this Plan shall not have stockholder privileges with respect to any Stock covered by the Option until the date of issuance of a stock certificate for such stock.
Except as otherwise expressly specified by the Board for Nonstatutory Options, all Options granted under this Plan shall be subject to the following termination provisions:
9.1 Death. If an Optionee's employment in the case of an Employee, or provision of services as a Consultant, in the case of a Consultant, terminates by reason of death, the Option may thereafter be exercised at any time prior to the expiration date of the Option or within 12 months after the date of such death, whichever period is the shorter, by the person or persons entitled to do so under the Optionee's will or, if the Optionee shall fail to make a testamentary disposition of an Option or shall die intestate, the Optionee's legal representative or representatives. The Option shall be exercisable only to the extent that such Option was exercisable as of the date of Optionee's death.
9.2 Termination Other Than For Cause or Due to Death. In the event of an Optionee's termination of employment, in the case of an Employee, or termination of the provision of services as a Consultant, in the case of a Consultant, other than by reason of death, the Optionee may exercise such portion of his Option as was exercisable by him at the date of such termination (the "Termination Date") at any time within three (3) months of the Termination Date; provided, however, that where the Optionee is an Employee, and is terminated due to disability within the meaning of Code section 422A, he may exercise such portion of his Option as was exercisable by him on his Termination Date within one year of his Termination Date. In any event, the Option cannot be exercised after the expiration of the term of the Option. Options not exercised within the applicable period specified above shall terminate.
In the case of an Employee, a change of duties or position within the Company, shall not be considered a termination of employment for purposes of this Plan. The Option Agreements may contain such provisions as the Board shall approve with reference to the effect of approved leaves of absence upon termination of employment.
9.3 Termination for Cause. In the event of an Optionee's termination of employment, in the case of an Employee, or termination of the provision of services as a Consultant, in the case of a Consultant, which termination is by the Company for cause, any Option or Options held by him under the Plan, to the extent not exercised before such termination, shall forthwith terminate.
10.1 Service. Nothing in this Plan shall interfere with or limit in any way the right of the Company to terminate any Employee's employment, or any Consultant's services, at any time, nor confer upon any Employee any right to continue in the employ of the Company, or upon any Consultant any right to continue to provide services to the Company.
10.2 Nontransferability. Except as otherwise specified by the Board for Nonstatutory Options, Options granted under this Plan shall be nontransferable by the Optionee, other than by will or the laws of descent and distribution, and shall be exercisable during the Optionee's lifetime only by the Optionee.
11.1 Optionee-Employee's Transfer or Leave of Absence. For Plan purposes:
(a) A transfer of an Optionee who is an Employee within the Company, or
(b) a leave of absence for such an Optionee (i) which is duly authorized in writing by the Company, and (ii) if the Optionee holds an Incentive Stock Option, which qualifies under the applicable regulations under the Code which apply in the case of Incentive Stock Options,
shall not be deemed a termination of employment. However, under no circumstances may an Optionee exercise an Option during any leave of absence, unless authorized by the Board.
12.1 Amendment, Modification, and Termination of the Plan. The Board may at any time terminate, and from time to time may amend or modify the Plan, provided, however, that no such action of the Board, without approval of the stockholders, may:
(a) increase the total amount of Stock which may be purchased through Options granted under the Plan, except as provided in Article V;
(b) change the class of Employees or Consultants eligible to receive Options;
No amendment, modification or termination of the Plan shall in any manner adversely affect any outstanding Option under the Plan without the consent of the Optionee holding the Option.
13.1 Acquisition. In the event that an Acquisition occurs with respect to the Company, the Company shall have the option, but not the obligation, to cancel Options outstanding as of the effective date of Acquisition, whether or not such Options are then exercisable, in return for payment to the Optionees of an amount equal to a reasonable estimate of an amount (hereinafter the "Spread") equal to the difference between the net amount per share of Stock payable in the Acquisition, or as a result of the Acquisition, less the exercise price of the Option. In estimating the Spread, appropriate adjustments to give effect to the existence of the Options shall be made, such as deeming the Options to have been exercised, with the Company receiving the exercise price payable thereunder, and
treating the shares receivable upon exercise of the Options as being outstanding in determining the net amount per share. For purposes of this section, an "Acquisition" shall mean any transaction in which substantially all of the Company's assets are acquired or in which a controlling amount of the Company's outstanding shares are acquired, in each case by a single person or entity or an affiliated group of persons and/or entities. For purposes of this section a controlling amount shall mean more than 50% of the issued and outstanding shares of stock of the Company. The Company shall have such an option regardless of how the Acquisition is effectuated, whether by direct purchase, through a merger or similar corporate transaction, or otherwise. In cases where the acquisition consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before the liquidation can be completed.
Where the Company does not exercise its option under this section 13.1, the remaining provisions of this Article XIII shall apply, to the extent applicable.
13.2 Merger or Consolidation. Subject to any required action by the stockholders, if the Company shall be the surviving corporation in any merger or consolidation, any Option granted hereunder shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to the Option would have been entitled in such merger or consolidation.
13.3 Other Transactions. A dissolution or a liquidation of the Company or a merger and consolidation in which the Company is not the surviving corporation shall cause every Option outstanding hereunder to terminate as of the effective date of such dissolution, liquidation, merger or consolidation. However, the Optionee either (i) shall be offered a firm commitment whereby the resulting or surviving corporation in a merger or consolidation will tender to the Optionee an option (the "Substitute Option") to purchase its shares on terms and conditions both as to number of shares and otherwise, which will substantially preserve to the Optionee the rights and benefits of the Option outstanding hereunder granted by the Company, or (ii) shall have the right immediately prior to such dissolution, liquidation, merger, or consolidation to exercise any unexercised Options whether or not then exercisable, subject to the provisions of this Plan. The Board shall have absolute and uncontrolled discretion to determine whether the Optionee has been offered a firm commitment and whether the tendered Substitute Option will substantially preserve to the Optionee the rights and benefits of the Option outstanding hereunder. In any event, any Substitute Option for an Incentive Stock Option shall comply with the requirements of Code section 425(a).
14.1 Securities Registration. In the event that the Company shall deem it necessary or desirable to register under the Securities Act of 1933, as amended, or any other applicable statute, any Options or any Stock with respect to which an Option may be or shall have been granted or exercised, or to qualify any such Options or Stock under the Securities Act of 1933, as amended, or any other
statute, then the Optionee shall cooperate with the Company and take such action as is necessary to permit registration or qualification of such Options or Stock.
Unless the Company has determined that the following representation is unnecessary, each person exercising an Option under the Plan may be required by the Company, as a condition to the issuance of the shares pursuant to exercise of the Option, to make a representation in writing (a) that the Optionee is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof, (b) that before any transfer in connection with the resale of such shares, the Optionee will obtain the written opinion of counsel for the Company, or other counsel acceptable to the Company, that such shares may be transferred. The Company may also require that the certificates representing such shares contain legends reflecting the foregoing.
15.1 Tax Withholding. Whenever shares of Stock are to be issued in satisfaction of Options exercised under this Plan, the Company shall have the power to require the recipient of the Stock to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements.
16.1 Indemnification. To the extent permitted by law, each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company's approval, or paid by him in satisfaction of judgment in any such action, suit or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's articles of incorporation or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
17.1 Requirements of Law. The granting of Options and the issuance of shares of Stock upon the exercise of an Option shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
17.2 Governing Law. The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Georgia.
18.1 Effective Date. The Plan shall be effective on February 1, 2001.
19.1 Compliance with Code. Incentive Stock Options granted hereunder are intended to qualify as Incentive Stock Options under Code section 422A. If any provision of this Plan is susceptible to more than one interpretation, such interpretation shall be given thereto as is consistent with Incentive Stock Options granted under this Plan being treated as Incentive Stock Options under the Code.
20.1 No Obligation to Exercise. The granting of an Option shall impose no obligation upon the holder thereof to exercise such Option.
Dated at Littleton, Colorado, February 1, 2001.
INSTANET, INC.
INSTANET, INC.
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE 2001 STOCK OPTION PLAN
Between:
The Company hereby grants to the Employee an option (the "Option") to purchase __________ shares of the Company's no par value common stock ("Stock") under the Instanet, Inc. 2001 Stock Option Plan (the "Plan") upon the following terms and conditions:
1. Purchase Price. The purchase price of the Stock shall be _____ per share, which is not less than the fair market value of the Stock on the date of this Agreement.
2. Incentive Stock Option. The Option shall be an Incentive Stock Option, as defined in the Plan.
3. Period of Exercise. The Option will expire ten years from the date of this Agreement. The Option may be exercised only while the Employee is actively employed by the Company and as provided in Section 6, dealing with termination of employment.
The Option may be exercised for up to, but not in excess of, the amounts of shares subject to the Option specified below, based on the Employee's number of years of continuous employment with the Company from the date hereof. In applying the following limitations, the amount of shares, if any, previously purchased by Employee shall be counted in determining the amount of shares the Employee can purchase at any time in accordance with said limitations. The Employee may exercise the Option in the following amounts and in accordance with the conditions set forth in paragraph 7.3 of the Plan:
(i) After one (1) year of continuous services to the Company, the Employee may purchase up to 33.3% of the shares of Stock subject to the Option;
(ii) After two (2) years of continuous services to the Company, the Employee may purchase up to 66.6% of the shares of Stock subject to the Option;
(iii) After three years of continuous services to the Company, the Employee may purchase all shares of Stock subject to the Option.
This Option may not be exercised for less than fifty shares at any time unless the number of shares purchased is the total number purchasable at the time under the Option.
Where the Employee holds (whether under this Option alone or under this Option in conjunction with other incentive stock options) incentive stock options upon shares of the Company's common stock having an aggregate fair market value (determined at the time of grant of each option) exceeding $100,000, the $100,000 Limitation set forth in Section 4 below may impose additional limitations upon the exercisability of this Option and any other incentive stock options granted to the Employee. Such limitations are in addition to, and not in lieu of, the limitations set forth in this Section 3.
4. $100,000 Limitation. Notwithstanding anything to the contrary contained herein, the total fair market value (determined as of the date of grant of an option) of shares of stock with respect to which this Option (and any other incentive stock options granted by the Company) shall become exercisable for the first time during any calendar year shall not exceed $100,000. (Hereinafter this limitation is sometimes referred to as the "$100,000 Limitation.") If in any calendar year shares of stock having a fair market value of more than $100,000 first would become exercisable, but for the limitations of this section, this Option shall be exercisable in such calendar year only for shares having a fair market value not exceeding $100,000. (Hereinafter, shares with respect to which this Option is not exercisable in a calendar year due to the $100,000 Limitation are referred to as "Excess Shares.")
This Option shall become exercisable with respect to Excess Shares from a calendar year in the next succeeding calendar year (subject to any other restrictions on exercise which may be contained herein), provided that the $100,000 limitation shall also be applied to such succeeding calendar year. Subject to the term of this Option, such carryovers of Excess Shares shall be made to succeeding calendar years, including carryovers of any Excess Shares from previous calendar years, without limitation.
If as of the date of this Agreement the Employee already holds incentive stock options granted by the Company (hereinafter any such incentive stock options are referred to as "Prior Options"), and the fair market value (determined as the date of grant of each option) of the shares subject to this Option and the Prior Options held by the Employee is such that the $100,000 Limitation must be imposed, the $100,000 Limitation shall be applied as follows unless a special provision is made on Exhibit A attached hereto. If no special provision is made on Exhibit A, the $100,000 Limitation shall be applied by giving priority to options which first become exercisable during a calendar year under the Prior Options. Thus, in applying the $100,000 Limitation under this Option, the fair market value (determined as of the date of grant) of the shares
of stock with respect to which options first become exercisable under the Prior Options during the calendar year shall first be determined. Only the balance remaining for the calendar year of the $100,000 Limitation, if any, may be exercisable under this Option for the calendar year, with any excess to be carried over as provided in the preceding paragraph, but with such carryover also to be subject to the provisions of this paragraph.
Employee acknowledges that it is possible that he or she may be granted incentive stock options by the Company after the date of this Agreement. (Hereinafter such options are referred to as "Subsequent Options.") If the exercise price of a Subsequent Option is less than the exercise price of this Option, and if permitted under the regulations and decisions applicable to the $100,000 Limitation, Employee agrees that the Company may reduce the number of shares of stock for which this Option is exercisable in specified calendar years, so that all or part of the $100,000 limitation for said calendar years may be applied to such Subsequent Option, permitting earlier exercise of such Subsequent Option than would otherwise be possible. Where such reductions are made, Employee agrees to enter into any appropriate documentation to implement such reductions.
Employee further acknowledges that, as provided in the Plan, in certain circumstances connected with a dissolution or liquidation of the Company, or a merger, consolidation or other form of reorganization in which the Company is not the surviving corporation, the imposition of the $100,000 Limitation may result in the termination of all or part of this Option or other incentive stock options.
5. Transferability. This Option is not transferable except by will or the laws of descent and distribution and may be exercised during the lifetime of the Employee only by him or her.
6. Termination of Employment. In the event that employment of the Employee with the Company is terminated, the Option may be exercised (to the extent exercisable at the date of his termination) by the Employee within three months after the date of termination; provided, however, that:
(a) If the Employee's employment is terminated because he is disabled within the meaning of Internal Revenue Code section 422A, the Employee shall have one year rather than three months to exercise the Option (to the extent exercisable at the date of his termination).
(b) If the Employee dies, the Option may be exercised (to the extent exercisable by the Employee at the date of his death) by his legal representative or by a person who acquired the right to exercise such option by bequest or inheritance or by reason of the death of the Employee, but the Option must be exercised within one year after the date of the Employee's death.
(c) If the Employee's employment is terminated for cause, this Option shall terminate immediately.
(d) In no event (including death of the Employee) may this Option be exercised more than ten years from the date hereof.
7. No Guarantee of Employment. This Agreement shall in no way restrict the right of the Company to terminate Employee's employment at any time.
8. Investment Representation; Legend. The Employee (and any other purchaser under paragraphs 6(a) or 6(b) hereof) represents and agrees that all shares of Stock purchased by him under this Agreement will be purchased for investment purposes only and not with a view to distribution or resale. The Company may require that an appropriate legend be inscribed on the face of any certificate issued under this Agreement, indicating that transfer of the Stock is restricted, and may place an appropriate stop transfer order with the Company's transfer agent with respect to the Stock.
9. Method of Exercise. The Option may be exercised, subject to the terms and conditions of this Agreement, by written notice to the Company. The notice shall be in the form attached to this Agreement and will be accompanied by payment (in such form as the Company may specify) of the full purchase price of the Stock to be issued, and in the event of an exercise under the terms of paragraphs 6(a) or 6(b) hereof, appropriate proof of the right to exercise the Option. The Company will issue and deliver certificates representing the number of shares purchased under the Option, registered in the name of the Employee (or other purchaser under paragraph 6 hereof) as soon as practicable after receipt of the notice.
10. Withholding. In any case where withholding is required or advisable under federal, state or local law in connection with any exercise by Employee hereunder, the Company is authorized to withhold appropriate amounts from amounts payable to Employee, or may require Employee to remit to the Company an amount equal to such appropriate amounts.
11. Incorporation of Plan. This Agreement is made pursuant to the provisions of the Plan, which Plan is incorporated by reference herein. Terms used herein shall have the meaning employed in the Plan, unless the context clearly requires otherwise. In the event of a conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of the Plan shall govern.
INSTANET, INC.
ACCEPTED:
INSTANET, INC.
NON-STATUTORY STOCK OPTION AGREEMENT
UNDER THE 2001 STOCK OPTION PLAN
Between:
INSTANET, INC. (the "Company") and________________________________________ (the "Consultant") dated ____________________________.
The Company hereby grants to the Consultant an option (the "Option") to purchase __________ shares of the Company's common stock under the Instanet, Inc. 2001 Stock Option Plan (the "Plan") upon the following terms and conditions:
1. Purchase Price. The purchase price of the Stock shall be __________ per share, which is not less than the fair market value of the Stock on the date of this Agreement.
2. Non-Statutory Option. The Option shall be a Non-Statutory Option, as defined in the Plan.
3. Period of Exercise. The Option will expire ten years from the date of this Agreement. The Option may be exercised only while the Consultant is actively providing consulting services to the Company and as provided in Section 5, dealing with termination of services.
4. The Option may be exercised for up to, but not in excess of, the amounts of shares subject to the Option specified below, based on the Consultant's number of years of continuous services with the Company from the date hereof. In applying the following limitations, the amount of shares, if any, previously purchased by Consultant shall be counted in determining the amount of shares the Consultant can purchase at any time in accordance with said limitations. The Consultant may exercise the Option in the following amounts and in accordance with the conditions set forth in paragraph 7.3 of the Plan:
(1) After one (1) year of continuous services to the Company, the Consultant may purchase up to 33.3% of the shares of Stock subject to the Option;
(2) After two (2) years of continuous services to the Company, the Consultant may purchase up to 66.6% of the shares of Stock subject to the Option;
(3) After three years of continuous services to the Company, the Consultant may purchase all shares of Stock subject to the Option.
In the event the Consultant's services with the Company are terminated due to Consultant's disability or death as described in paragraphs 5(a) and 5(b), the foregoing vesting schedule shall be accelerated and the Option shallupon such disability or death become exercisable in whole or in part, but it shall not be exercisable after the expiration of four (4) years from the date hereof. This Option may not be exercised for less than fifty shares at any time unless the number of shares purchased is the total number purchasable at the time under the Option.
5. Transferability. This Option is not transferable except by will or the laws of descent and distribution and may be exercised during the lifetime of the Consultant only by him.
6. Termination of Services. In the event of a termination in the providing of consulting services by Consultant, including serving as a Non-employee Director as defined in the Plan, to the Company, the Option may be exercised (to the extent exercisable at the date of his termination) by the Consultant within three months after the date of such termination; provided, however, that:
(a) If the Consultant's consulting relationship is terminated because he is disabled within the meaning of Internal Revenue Code section 422A, the Consultant shall have one year rather than three months to exercise the Option (to the extent exercisable at the date of his termination).
(b) If the Consultant dies, the Option may be exercised (to the extent exercisable by the Consultant at the date of his death) by his legal representative or by a person who acquired the right to exercise such option by bequest or inheritance or by reason of the death of the Consultant, but the Option must be exercised within one year after the date of the Consultant's death.
(c) If the Consultant's consulting relationship is terminated for cause, this Option shall terminate immediately.
(d) In no event (including death of the Consultant) may this Option be exercised more than ten years from the date hereof.
7 No Guarantee of Services. This Agreement shall in no way restrict the right of the Company or any Subsidiary Corporation to terminate Consultant's consulting relationship at any time.
8 Investment Representation; Legend. The Consultant (and any other purchaser under paragraphs 5(a) or 5(b) hereof) represents and agrees that all shares of Stock purchased by him under this Agreement will be purchased for investment purposes only and not with a view to distribution or resale. The Company may require that an appropriate legend be inscribed on the face of any certificate issued under this Agreement, indicating that transfer of the Stock is restricted, and may place an appropriate stop transfer order with the Company's transfer agent with respect to the Stock.
9 Method of Exercise. The Option may be exercised, subject to the terms and conditions of this Agreement, by written notice to the Company. The notice shall be in the form attached to this Agreement and will be accompanied by payment (in such form as the Company may specify) of the full purchase price of the Stock to be issued, and in the event of an exercise under the terms of paragraphs 5(a) or 5(b) hereof, appropriate proof of the right to exercise the Option. The Company will issue and deliver certificates representing the number of shares purchased under the Option, registered in the name of the Consultant (or other purchaser under paragraph 5 hereof) as soon as practicable after receipt of the notice.
10 Incorporation of Plan. This Agreement is made pursuant to the provisions of the Plan, which Plan is incorporated by reference herein. Terms used herein shall have the meaning employed in the Plan, unless the context clearly requires otherwise. In the event of a conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of the Plan shall govern.
INSTANET, INC.
ACCEPTED:
INSTANET, INC.
NOTICE OF EXERCISE OF STOCK OPTION ISSUED
UNDER THE 2001 STOCK OPTION PLAN
To: Compensation Committee
Instanet, Inc.
26 West Dry Creek Circle, Suite 600
Littleton, CO 80210
I hereby exercise my Option dated __________ to purchase __________ shares of no par value common stock of the Company at the option exercise price of $_______per share. Enclosed is a certified or cashier's check in the total amount of $_______ , or payment in such other form as the Company has specified.
I represent to you that I am acquiring said shares for investment purposes and not with a view to any distribution thereof. I understand that my stock certificate may bear an appropriate legend restricting the transfer of my shares and that a stock transfer order may be placed with the Company's transfer agent with respect to such shares.
I request that my shares be issued in my name as follows:
Exhibit 10.03
KEY BANK NATIONAL ASSOCIATION
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and executed this ______ day of _______________________, 2001, by and among Instanet, Inc. (the "Company"), whose address is 26 West Dry Creek Circle, Suite 600, Littleton, Colorado 80120 and CORPORATE STOCK TRANSFER, INC., a Colorado corporation ("CST"), whose address is 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209 (collectively, the "Depositors"), and KEY BANK NATIONAL ASSOCIATION, Cherry Creek Branch ("Escrow Holder"), whose address is 3300 East First Avenue, Denver, Colorado 80206, Attention: Denise Garcia (facsimile number 303-329-5325).
1. Deposits. Depositors shall deposit with Escrow Holder the funds described below (the "Funds"), which Funds shall be held and disbursed in accordance with and subject to the terms and conditions of this Agreement. Such Funds constitute the following: Funds generated by the sale of shares of its common stock by the Company to subscribers pursuant to the Registration Statement on Form SB-2 declared effective by the Securities and Exchange Commission on _______________, 2001, a copy of which has been delivered to Escrow Holder. Escrow Holder will hold all Funds in the escrow account free from any lien, claim or offset until the conditions set forth in this Agreement have been fully satisfied.
The Escrow Holder shall be provided the name and address of each subscriber and amounts to be deposited into the escrow by CST. CST shall also confirm that all subscribers have been accepted.
2. Disbursements. The Funds are to be disbursed by Escrow Holder as follows upon the occurrence of the following events:
The escrow account will remain open until receipt by the Escrow Holder of Funds totaling a minimum of $150,000 at which time Escrow Holder shall provide written notice to all parties to this Agreement at such time as the collected Funds of $150,000 have been deposited and shall deliver the $150,000 directly to the Company.
Following receipt of the $150,000, the escrow account may remain open until the close of the selling period set forth in the Registration Statement, which is _________________, 2001. In such event the Escrow Holder will continue to disburse Funds received to the Company on a weekly basis.
3. Automatic Termination of Escrow. If at least $150,000 has not been deposited in the escrow account by __________________ , 2001, then Escrow Holder shall mail the Funds to the subscribers without deduction or interest.
All Funds shall be returned to the subscribers referred to in paragraph 1 at a fee of $10.00 per check payable by the Company.
Upon mailing Funds to the proper persons or entities pursuant to this paragraph 3, Escrow Holder shall be relieved of and released from any and all further obligations, duties and liability pursuant to this Agreement, and, subject to the survival of paragraph 8 below, this Agreement immediately shall terminate and shall be of no further force and effect.
4. Notices. Any notice required or desired to be given to any party to this Agreement may be given either by personal delivery, or by telegram, by facsimile transmission, or by certified mail, return receipt requested, postage prepaid; provided, however, any notice given by facsimile transmission, to be effective, shall be followed by delivery of same by personal delivery or by certified mail, return receipt requested. All such notices shall be sent to a party at its address noted above, and such notice shall for all purposes be as effectual as though served upon such party in person at the time of personal delivery, or on the date of receipt in the case of transmission by telegram, or on the date of receipt of the original, in the case of transmission by facsimile, or two business days after the date of deposit in the U.S. mail, as applicable.
5. Limitations on Duties. Escrow Holder shall hold and disburse the Funds in accordance with the terms and conditions of this Agreement. If at any time in the performance of its duties as set forth in this Agreement it is necessary for Escrow Holder to receive, accept or act upon any notice or writing purported to have been executed or issued by or on behalf of any of the parties hereto, it shall not be necessary for Escrow Holder to ascertain whether or not the person or persons who have executed, signed or otherwise issued or authenticated the writing had the authority to so execute, sign or otherwise issue or authenticate said writing, or that they are the same persons named therein or otherwise to pass upon any requirements of such instruments that may be essential for their validity. Further, Escrow Holder shall have no responsibility or liability for the sufficiency or correctness as to form, manner, execution or validity of any instrument deposited or delivered pursuant to this Agreement, nor as to the truth or accuracy of any information contained therein, nor as to the identity, authority, capacity or rights of any person executing the same, nor for the failure to comply with the provisions, requirements or conditions of any agreement, contract or other instrument deposited with or delivered to Escrow Holder or referred to herein. Rather, the duties of Escrow Holder pursuant to this Agreement in all events shall be limited to the safekeeping of the Funds, documents and other items actually received by Escrow Holder and the disposition of same in accordance with the instructions set forth above.
6. No Liability for Actions Taken in Good Faith. Escrow Holder shall not be personally liable for any act it may do or omit to do hereunder while acting in good faith and in the exercise of its own subjective best judgment, and any act done or omitted by it pursuant to the advice of its own attorney shall be conclusive evidence of such good faith and best judgment.
7. Notices and Warnings. Escrow Holder is hereby expressly authorized and directed to disregard any and all notices or warnings given by any of the parties hereto, or by any other person or entity, except as otherwise expressly set forth in this Agreement and except for orders or process of court, and Escrow Holder is expressly authorized to comply with and obey any and all orders, judgments or decree of any court. Escrow Holder shall not be liable to any of the parties hereto or to any other person or entity by reason of compliance with any order, judgment or decree of any court, even if such order, judgment or decree is reversed, modified, annulled, set aside or vacated, or is found to have been entered without jurisdiction.
8. Indemnity. In consideration of the acceptance of this escrow by Escrow Holder, the Company covenants and agrees to pay Escrow Holder its charges, costs and expense hereunder and to indemnify and hold Escrow Holder harmless as to any liability by it incurred to any person or entity by reason of its having accepted the same, or in connection with any performance by Escrow Holder in its capacity as the escrow holder pursuant to this Agreement. Further, the Company covenants and agrees to reimburse Escrow Holder for all costs and expenses, including, among other things, counsel fees and court costs incurred in connection with this Agreement and/or the deposited Funds. In case of any suit, proceeding, cause of action, demand or other claim to which Escrow Holder is or at any time may be a party, the Company agrees to pay, promptly upon Escrow Holder's demand, any and all costs and expenses, including without limit attorneys' fees, incurred by Escrow Holder in connection with same. Notwithstanding any contrary provision of this Agreement, the provisions of this paragraph 10 shall survive the expiration and/or termination of this Agreement.
9. Interpleader. If at any time a dispute shall exist as to the duty of Escrow Holder under the terms of this Agreement, or if at any time conflicting demands are served upon Escrow Holder, whether verbally or in writing, concerning the possession of, title to or proceeds of any or all of the Funds, or if any dispute arises between or among the parties and/or any other person or entity relating in any way to any item deposited, held or disbursed pursuant to or otherwise relating to this Agreement, Escrow Holder may deposit this Agreement and the items then or thereafter held by it pursuant to this Agreement with the Clerk of the District Court of the City and County of Denver, State of Colorado, and may interplead the parties hereto. Upon so depositing this Agreement and such items and filing its complaint in interpleader, Escrow Holder shall be relieved of and released from all liability under the terms hereof as to the items so deposited. If the Court does not provide for reimbursement to Escrow Holder for its attorney fees, costs and expenses related to the interpleader action out of the interplead Funds, then Escrow Holder shall have a claim enforceable by separate action in Court against the parties, jointly and severally, for said attorney fees, costs and expenses.
10. FDIC Insurance. In consideration of the fee paid to Escrow Holder as set forth in this Agreement and the covenants and agreements of the parties as set forth above, Escrow Holder agrees to hold the Funds in accordance and subject to the terms of this Agreement. During the escrow period, the Funds will be deposited in an FDIC-insured depository (which depository may be Escrow Holder or any other bank owned or controlled by Key Corp.). Under no circumstances shall Escrow Holder have liability for loss of Funds due to bank, savings and loan association or other depository failure, suspension or cessation of business, or any action or inaction on the part of the bank, savings and loan association or other depositor, or any delivery service transporting Funds to and from such depository.
11. Successors; No Third Party Rights. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. This Agreement is only for the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns, and no other person or entity shall be entitled to rely on, receive any benefit from or to enforce against any party hereto any provisions of this Agreement.
12. Applicable Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Nevada.
13. Entire Agreement; Waiver. This Agreement constitutes the entire understanding between the parties with respect to the escrow arrangement contemplated herein, and all prior or contemporaneous oral agreements, understandings, discussions, representations and statements relating to said escrow are superseded by this Agreement. The waiver of any particular condition precedent, provision or remedy provided by this Agreement shall not constitute the waiver of any other.
14. Business Day. If any date herein set forth for the performance of any obligation by Escrow Holder or for the delivery of any Funds, instrument or notice as herein provided, is a Saturday, Sunday or legal holiday, the compliance with such obligation or delivery shall be deemed acceptable if effected on the next business day following such Saturday, Sunday or legal holiday. As used herein, the term "legal holiday" means any state or federal holiday for which financial institutions or post offices are generally closed in the State of Colorado for observance thereof.
15. Construction. This Agreement shall not be construed more strictly against one party than against any other merely by virtue of the fact that it may have been prepared by counsel for one of the parties, it being recognized that Escrow Holder and the Company have contributed substantially and materially to the preparation of this Agreement. The headings of various paragraphs in this Agreement are for convenience only and are not to be utilized in construing the content or meaning of the substantive provisions hereof.
16. Time is of the Essence. All times, wherever specified herein, are of the essence of this Agreement.
17. Validity. If any term or provision of this Agreement shall be held illegal and unenforceable or inoperative as a matter of law, the remaining terms and provisions of this Agreement shall not be affected thereby, but each such term and provision shall be valid and shall remain in full force and effect.
18. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall be taken to be one and the same instrument, to the same effect as if all of the parties hereto had signed the same signature page. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Agreement identical in form hereto but having attached to it one or more additional signature pages.
19. Escrow Fee. The parties agree that Escrow Holder's fee for its services pursuant to this Agreement shall be $ ______________ , payable in full upon the Company's execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement on the date first above written.
ESCROW AGENT: KEY BANK NATIONAL ASSOCIATION
By:
---------------------------------------
Name:
Its:
THE COMPANY: INSTANET, INC.
By:
---------------------------------------
Earnest Mathis, President
CORPORATE STOCK TRANSFER INC.
By:
---------------------------------------
Carylyn K. Bell, President
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Exhibit 23.02
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Instanet, Inc. on Form SB-2 of our report dated February 9, 2001 on the financial statements of Instanet, Inc., appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
Denver, Colorado
February 21, 2001
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