This summary highlights selected information contained elsewhere in this
prospectus. To understand this offering fully, you should read the entire
prospectus carefully, including the risk factors and financial statements.
Unless otherwise indicated in this prospectus, or the context otherwise
requires, references to "we," "us" or "our" refer to BigString Corporation and
its subsidiary, Email Emissary, Inc., and not to the selling stockholders.
Our Business
Our company has developed an innovative email service, referred to as
"BigString," that allows users to easily send, recall, erase, self-destruct and
secure email transmissions, as well as provide additional privacy and security
through non-printable emails. Similar to other leading email service providers,
in addition to our free email service product, we offer premium email service
products and applications such as spam filters, virus protection, additional
storage, multiple email addresses and secure mail, which are offered in several
different packages at various prices and may be purchased by the users of our
BigString email service. We believe that our BigString email service is
currently the only email service that is recallable and cancelable. This
recallable and cancelable application should differentiate us from our
competitors. We believe that this unique application should allow us to capture
market share from existing email service providers, especially those providers
offering premium services products.
We have filed for a patent with the United States Patent and Trademark
Office seeking to protect our intellectual property rights associated with our
BigString email service. Specifically, this patent covers the BigString
software, methodology and business process for recallable, erasable email.
The company markets its BigString email service to various providers and
customers throughout the world. The company currently has over 500 paying
customers.
BigString's principal office is located at 2150 Highway 35, Suite 250, Sea
Girt, New Jersey 08750, and our telephone number at such location is (732)
359-0270.
Our History and Plans for the Near Future
BigString was incorporated in the State of Delaware on October 8, 2003
under the name "Recall Mail Corporation." The company's name was formally
changed to BigString Corporation in July 2005. The company was formed, together
with Email Emissary, Inc., incorporated in the State of Oklahoma on August 7,
2003, to develop technology that would allow the user of email services to have
comprehensive control, security and privacy relating to the email generated by
the user. Email Emissary was later acquired by BigString in July 2004 and is
currently BigString's only subsidiary. In March 2004, the BigString email
service was introduced to the market.
The company recently raised approximately $1,750,000 though the private
placement of shares of its common stock. The company will use these proceeds to
continue the development of its email service through the addition of new
features as well as the enhancement of existing
3
features. The company also contemplates using a portion of the proceeds to
increase exposure of the BigString email service through general advertisements
and other marketing promotions.
Purpose of the Offering
The company is currently registering shares of its common stock that were
previously issued by the company in private placements. Pursuant to registration
rights agreements entered into by the company and several investors in the
company's common stock, the company is obligated to register such investors'
shares for sale. In addition to the investors who have entered into registration
rights agreements with the company, the company has allowed certain other
investors to include for registration certain of their shares of BigString
common stock. It is anticipated that these selling stockholders will sell
certain of their shares in this offering. However, the company will not sell any
shares of its common stock in this offering and, therefore, will not receive any
of the proceeds from the sale of shares of common stock offered hereby by the
selling stockholders. See "Use of Proceeds."
4
Summary of the Offering
Common Stock Being Offered by
Selling Stockholders................... Up to 11,869,125 shares.
Price.................................. The selling stockholders will offer
their shares of common stock covered by
this prospectus at a price of $0.48 per
share until the earlier of (1) ninety
days following the date of this
prospectus, and (2) the inclusion of our
common stock on the OTC Bulletin Board.
Thereafter, shares of common stock may
be offered from time to time through
public or private transactions at
prevailing market prices or at privately
negotiated prices.
Use of Proceeds........................ The company will not receive any of the
proceeds from the sale of shares of
common stock offered hereby by the
selling stockholders. See "Use of
Proceeds."
Risk of Investment..................... The purchase of the shares of common
stock offered hereby involves certain
significant risks. See "Risk Factors."
Plan of Distribution................... Each selling stockholder is entitled to
sell the shares as they deem
appropriate. See "Plan of Distribution."
Expiration Date of Offering............ The offering by the selling stockholders
will expire one year from the date of
this prospectus (________ ___, 2006).
5
RISK FACTORS
An investment in our common stock is speculative and involves a high degree of
risk and uncertainty. You should carefully consider the risks described below,
together with the other information contained in this prospectus, including the
consolidated financial statements and notes thereto of our company, before
deciding to invest in our common stock. The risks described below are not the
only ones facing our company. Additional risks not presently known to us or that
we presently consider immaterial may also adversely affect our company. If any
of the following risks occur, our business, financial condition and results of
operations and the value of our common stock could be materially and adversely
affected.
Risks Related to the Operation of Our Business
We cannot assure you that we will become profitable since we have a
limited operating history, insignificant revenue and plan to increase our
expenses to develop our business.
Our limited operating history, lack of significant revenue to date and the
uncertainty of the market in which we operate, make it very difficult for us to
predict our future results of operations or whether we will achieve
profitability. We expect to considerably increase our operating expenses in the
future, particularly expenses relating to licensing and developing technology,
payroll, sales and marketing, general corporate matters and compliance with
applicable securities laws. You may lose all or substantially all of your
investment if we are unable to continue to develop our business and generate a
profit.
We may need additional capital to fund our operations until we are able to
generate a profit.
We do not expect that our revenue will cover our expenses during the next
year. As a result, we expect to incur losses which may require us to raise
additional capital. We cannot assure you that we will be able to raise
additional capital on terms favorable to us or at all. Our inability to raise
capital could require us to significantly curtail our operations. In addition,
any future sale of our equity securities would dilute the ownership and control
of your shares and could be at prices substantially below the price you paid for
your shares.
If search engines were to alter their algorithms or otherwise restrict the
flow of consumers visiting our website, our financial results would suffer.
Search engines and portals serve as origination websites for consumers in
search of information. We rely heavily on search engines for a substantial
portion of the users visiting BigString.com. If Google (the primary search
engine directing traffic towards our website), or other search engines were to
decide to change the algorithms responsible for directing search/queries, or if
they were to restrict the flow of consumers visiting BigString.com, we would
experience a significant decrease in traffic and revenues which would in turn
adversely affect our financial condition.
6
If we do not continue to develop and provide products and services that
are useful to users, especially the BigString erasable, recallable email
application, we may not remain competitive, and our revenues and operating
results could suffer.
Our success depends on developing and providing products and services,
especially the BigString erasable, recallable email application. Several of our
competitors, such as America Online, Yahoo, Microsoft and Hotmail.com, continue
to develop innovations. As a result, we must continue to invest resources in
research and development in order to enhance our product technology and
introduce further innovative, easy-to-use products and services. If we are
unable to further develop our BigString application and services, users may
become dissatisfied and cease using our products.
Our business depends on our ability to strengthen our brand. If we are not
able to enhance public awareness of our products and services, we will be unable
to increase user traffic and will fail to attract advertisers, which may result
in lost revenues.
Expanding and strengthening public awareness of our brand is critical to
the success of our business. Strengthening our brand may require us to make
substantial investments and these investments may not be successful. If we are
unable to continuously deliver quality services, at reasonable costs, our brand
name will suffer.
We are dependent upon maintaining and expanding our computer and
communications systems. Failure to do so could result in interruptions and
failures of our products and services which would make our products and services
less attractive to consumers, and, therefore, subject us to lost revenue as a
result of a loss of customers, including advertisers.
Our ability to provide high quality customer service largely depends on
the efficient and uninterrupted operation of our computer and communications
systems to accommodate the customers, including advertisers, using our products
and services. Our failure to maintain high capacity data transmission without
system downtime and improve our network infrastructure would adversely affect
our business and results of operations.
If we were to lose the services of our key personnel, we may not be able
to execute our business strategy which could result in the failure of our
business.
Our future ability to execute our business plan depends upon the continued
service of our executive officers, including Darin M. Myman, our President and
Chief Executive Officer, David Daniels, our Chief Technology Officer, Todd M.
Ross, our Chief Financial Officer and Treasurer, Adam M. Kotkin, our Chief
Operating Officer and Secretary, and Charles A. Handshy, Jr., our Chief
Information Officer, and other key technology, marketing, sales and support
personnel. If we lost the services of one or more of our key employees, or if
one or more of our executive officers or employees joined a competitor or
otherwise competed with us, our business may be adversely affected. In
particular, the services of key members of our research and development team
would be difficult to replace. We cannot assure you that we will be able to
retain or replace our key personnel.
7
Our patent application may not be granted.
We have applied for United States' patent protection for the software
design which is the primary focus of our company's development and business
activities. The application remains pending. There can be no assurance that the
patent application will be granted, or, if granted, will provide adequate
protection to the company. We also intends to rely on whatever protection the
law affords to trade secrets, including unpatented know-how. Other companies,
however, may independently develop equivalent or superior technologies or
processes and may obtain patents or similar rights with respect thereto.
Third parties could claim that our company is infringing on their
intellectual property rights, which could result in substantial costs, diversion
of significant managerial resources and significant harm to the company's
reputation.
Although we believe that our technology has been developed independently
and does not infringe on the patents of others, there can be no assurance that
the technology does not and will not infringe on the patents of others. In the
event of infringement, we could, under certain circumstances, be required to
modify the infringing process or obtain a license. There can be no assurance
that we would be able to do either of these things in a timely manner or at all,
and failure to do so could have a material adverse effect on the company and its
business. In addition, there can be no assurance that the company will have the
financial or other resources necessary to enforce or defend a patent
infringement or proprietary rights violation action. If any of the products
developed by the company infringe upon the patent or proprietary rights of
others, the company could, under certain circumstances, be enjoined or become
liable for damages, which would have a material adverse effect on the company.
Misappropriation of our intellectual property could harm our reputation,
affecting our competitive position and resulting in us having to expend money.
Our ability to compete with other software companies depends in part upon
the strength of our proprietary rights in our technologies. We believe that our
intellectual property will be critical to our success and competitive position.
We rely on a combination of U.S. and foreign patents, copyrights, trademark and
trade secret laws to establish and protect our proprietary rights. If we are
unable to protect our intellectual property against unauthorized use by third
parties, our reputation could be damaged and our competitive position adversely
affected.
Attempts may be made to copy aspects of our products and services or to
obtain and use information that we regard as proprietary. Accordingly, we may
not be able to prevent misappropriation of our technology or deter others from
developing similar technology. Our strategy to deter misappropriation could be
undermined if:
o the proprietary nature or protection of our methodologies are not
recognized in the United States or foreign countries;
o third parties misappropriate our proprietary methodologies and such
misappropriation is not detected; and
o competitors create applications similar to ours but which do not
technically infringe on our legally protected rights.
8
If these risks materialize, we could be required to spend significant
amounts to defend our rights and divert critical managerial resources. In
addition, the company's proprietary methodologies may decline in value or its
rights to them may become unenforceable. If any of the foregoing were to occur,
our business could be materially adversely affected.
Government regulation and legal uncertainties may require us to incur
significant expenses in complying with any new regulations.
The laws and regulations applicable to the Internet and our products and
services are evolving and unclear and could damage our business. There are
currently few laws or regulations directly applicable to access to, or commerce
on, the Internet. Due to the increasing popularity and use of the Internet, it
is possible that laws and regulations may be adopted, covering issues such as
user privacy, pricing, taxation, content regulation, quality of products and
services, and intellectual property ownership and infringement. This legislation
could expose us to substantial liability as well as dampen the growth in use of
the Internet, decrease the acceptance of the Internet as a communications and
commercial medium, or require us to incur significant expenses in complying with
any new regulations. Because the increased use of the Internet has burdened the
existing telecommunications infrastructure and many areas with high Internet
usage have begun to experience interruptions in phone services, local telephone
carriers have petitioned the United States Federal Communications Commission to
regulate the Internet and to impose access fees. Increased regulation or the
imposition of access fees could substantially increase the costs of
communicating on the Internet, potentially decreasing the demand for our
products and services. A number of proposals have been made at the federal,
state and local level that would impose additional taxes on the sale of goods
and services through the Internet. Such proposals, if adopted, could
substantially impair the growth of electronic commerce and could adversely
affect us. Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, copyright, defamation, obscenity
and personal privacy is uncertain. We may be subject to claims that our products
violate such laws. Any new legislation or regulation in the United States or
abroad or the application of existing laws and regulations to the Internet could
damage our business and cause our stock price to decline.
Due to the global nature of the Internet, it is possible that the
governments of other states and foreign countries might attempt to regulate its
transmissions or prosecute us for violations of their laws. We might
unintentionally violate these laws. Such laws may be modified, or new laws may
be enacted, in the future. Any such development could damage our business.
Our compliance with the Sarbanes-Oxley Act of 2002 and Securities and
Exchange Commission rules and regulations concerning internal controls and
reporting may be time consuming, difficult and costly for us.
We are a new company and our officer and directors have had limited
dealings with public company compliance with applicable federal and state
securities laws, including the Sarbanes-Oxley Act of 2002. It may be time
consuming, difficult and costly for us to develop and implement the internal
controls and reporting procedures required by the Sarbanes-Oxley Act and other
applicable securities laws. We may need to hire additional financial reporting,
internal controls and other finance staff in order to develop and implement
appropriate internal controls and reporting procedures. If we are unable to
comply with the internal controls requirements of the Sarbanes-Oxley Act, we may
not be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires publicly-traded companies to
9
obtain. If we fail to be fully compliant with applicable federal securities
laws, trading in our common stock would be adversely affected and the value of
our common stock would likely decrease.
Risks Related to Trading in Our Common Stock
Since there is no trading market for our common stock, you may not be able
to resell any of the shares you purchase or may have to sell your shares at a
substantially reduced price.
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 intend to work with one or more registered
broker-dealers in order to apply for listing of our common stock on the OTC
Bulletin Board pursuant to Rule 15c2-11 of the Securities Exchange Act of 1934,
as amended. However, there can be no assurance we will obtain such a listing.
Even if our common stock is listed on the OTC Bulletin Board, the OTC
Bulletin Board tends to be highly illiquid, in part because there is no national
exchange or 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 OTC
Bulletin Board as opposed to a national exchange or quotation system. This
volatility may be caused by a variety of factors, including: the lack of readily
available price quotations; the absence of consistent administrative supervision
of "bid" and "ask" quotations; lower trading volume; and general market
conditions. If no market for our shares materializes, you may not be able to
sell your shares of BigString common stock or may have to sell your shares at a
significantly lower price. Therefore, shares of our common stock should be
purchased only by those persons who can afford to hold such shares for an
indefinite period and who do not have a need for liquidity of their investment.
Our common stock may be considered a "penny stock" and may be difficult to
sell.
The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be an equity security that has a market
price of less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to specific exemptions. The market price of our common stock is
expected to be less than $5.00 per share and, therefore, it may be designated as
a "penny stock" according to Securities and Exchange Commission rules. This
designation requires any broker-dealer selling these securities to disclose
certain information concerning the transaction, obtain a written agreement from
the purchaser and determine that the purchaser is reasonably suitable to
purchase the securities. These rules may restrict the ability of brokers-dealers
to sell our common stock and may affect the ability of investors to sell their
shares.
Risks Related to Our Capital Structure
Insiders have substantial control over us, and they could delay or prevent
a change in our corporate control even if our other stockholders wanted it to
occur.
Our executive officers and directors beneficially owned as of August 15,
2005, in the aggregate, approximately 53.54% of our outstanding common stock.
These stockholders will be
10
able to exercise significant control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. This could delay or prevent an outside party from
acquiring or merging with us even if our other stockholders wanted it to occur.
Provisions under Delaware law could discourage a takeover that
stockholders may consider favorable.
Delaware law could make it more difficult for a third party to acquire us.
Specifically, Section 203 of the Delaware General Corporation Law, to which our
company is subject, may have an anti-takeover effect with respect to
transactions not approved in advance by our board of directors, including
discouraging attempts that might result in a premium over the market price for
the shares of common stock held by our stockholders.
11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under the sections in this prospectus captioned
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis or
Plan of Operation," "Description of Business and Services" and elsewhere in this
prospectus constitute forward-looking statements. Those statements could be
affected by known and unknown risks, uncertainties and other factors that may
cause our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels or activity, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, those listed under "Risk Factors" and
elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "could," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, nether we nor any other person
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus.
12
USE OF PROCEEDS
The company is not selling any of the shares of common stock offered
hereby, and, therefore, will not receive any of the proceeds from the sale of
shares of common stock covered by this prospectus.
MARKET FOR COMMON STOCK
Although we intend to work with one or more registered broker-dealers in
order to apply for listing of our common stock on the OTC Bulletin Board, there
is currently no public market for our common stock. We cannot provide any
assurance that our common stock will be listed on the OTC Bulletin Board or that
a market will develop for our common stock.
As of August 15, 2005, the number of registered holders of the company's
common stock was one hundred.
DIVIDENDS
It is anticipated that cash dividends will not be declared on the
company's common stock in the foreseeable future. Our dividend policy is subject
to certain regulatory considerations and the discretion of our board of
directors and depends upon a number of factors, including operating results,
financial condition and general business conditions. Holders of common stock are
entitled to receive dividends as, if and when declared by our board of directors
out of funds legally available therefor. We may pay cash dividends if net income
available to stockholders fully funds the proposed dividends, and the expected
rate of earnings retention is consistent with capital needs, asset quality and
overall financial condition.
DETERMINATION OF OFFERING PRICE
There is currently no established public market for the shares of common
stock being offered hereby. As a result, the offering price and other terms and
conditions of our shares have been arbitrarily determined and do not necessarily
bear any relationship to assets, earnings, book value or any other objective
criteria of value. In addition, no investment banker, appraiser or other
independent third party has been consulted concerning the offering price for the
shares or the fairness of the price used for the shares.
13
SELECTED FINANCIAL DATA
The following selected financial data of BigString as of and for the year
ended December 31, 2004 and 2003 and for the year ended December 31, 2004 and
the period October 8, 2003 (date of formation) through December 31, 2003, are
derived from the audited consolidated financial statements of BigString.
Operating results for the six months ended June 30, 2005 and 2004 are derived
from consolidated financial statements that have not been audited by independent
accountants. However, in the opinion of management, the selected financial data
for such periods includes all adjustments (which include normal recurring
adjustments) necessary for a fair presentation of the data. Operating results
for the six months ended June 30, 2005 are not necessarily indicative of results
that may be expected for the entire year ending December 31, 2005. The selected
financial data as of December 31, 2004 and 2003 and for the year ended October
31, 2004 and the period October 8, 2003 (date of formation) through December 31,
2003, and as of June 30, 2004 and for the six months ended June 30, 2004 and
2003, should be read in conjunction with the consolidated financial statements
of the company and the related notes thereto and management's discussion and
analysis thereof appearing elsewhere in this prospectus.
Period
October 8,
2003 (Date of
Formation)
Six Months Ended Year Ended through
June 30, December 31, December 31,
---------------------------- ------------ ------------
2005 2004 2004 2003
------------ ------------ ------------ ------------
(unaudited) (unaudited)
Income Statement Data:
Total revenue .................. $ 3,488 $ -- $ 2,522 $ --
Operating costs and expenses ... 269,094 123,998 304,954 29,583
------------ ------------ ------------ ------------
Operating (loss) from
continuing operations ...... (265,606) (123,998) (302,432) (29,583)
Net (loss) from continuing
operations ..................... $ (263,971) $ (123,998) $ (302,397) $ (29,567)
============ ============ ============ ============
Per share data:
Net (loss) basic and diluted ... $ (0.01) $ (0.01) $ (0.01) $ (0.00)
As of June 30, As of December 31,
-------------- ----------------------------
2005 2004 2003
-------------- ------------ ------------
(unaudited)
Balance Sheet Data:
Total assets ................... $ 1,117,387 $ 88,789 $ 21,840
Total liabilities .............. 1,070,421 39,502 6,407
Stockholders' equity ........... 46,966 49,287 15,433
14
MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION
The following plan of operation is intended to describe the company's
anticipated plan of operation for the twelve months following the date of this
prospectus. In addition to our plan of operation, we have provided below
information about the company's financial condition and results of operations
for the six months ended June 30, 2005 and 2004 and the year ended December 31,
2004 and the period October 8, 2003 (date of formation) through December 31,
2003. This information should be read in conjunction with the company's
unaudited consolidated financial statements for the six months ended June 30,
2005, including the related notes thereto, which are included on pages F-14
through F-21 of this prospectus, and the company's audited consolidated
financial statements for the year ended December 31, 2004 and the period October
8, 2003 (date of formation) through December 31, 2003, including the related
notes thereto, which are included on pages F-2 through F-13 of this prospectus.
Background
BigString was incorporated in the State of Delaware on October 8, 2003
under the name "Recall Mail Corporation." The company's name was formally
changed to BigString Corporation in July 2005. The company was formed, together
with Email Emissary, incorporated in the State of Oklahoma on August 7, 2003, to
develop technology that would allow the user of email services to have
comprehensive control, security and privacy relating to the email generated by
the user. Email Emissary was later acquired by BigString in July 2004 and is
currently BigString's only subsidiary.
Critical Accounting Policies
See "Summary of Significant Accounting Policies" in the notes to the
company's audited consolidated financial statements for the years ended December
31, 2004 and 2003 appearing elsewhere in this prospectus for our critical
accounting policies. These policies include use of estimates, revenue
recognition, calculation of depreciation, determination of compensation expense
for stock-based compensation, recognition of deferred income taxes, expensing of
research and development costs, valuation of long-lived assets, computation of
earnings (loss) per common share and reporting of good will and other
intangibles. No significant changes in our critical accounting policies have
occurred since December 31, 2004.
Plan of Operation
We commenced operations on October 8, 2003. For the year ended December
31, 2003, we had no revenue and $29,583 in expenses. We incurred expenses in
connection with organizing our company, researching and developing our BigString
email service and products and implementing initial marketing strategies. Most
of these expenses were funded through issuances by the company of shares of its
common stock.
For the year ended December 31, 2004, we had $2,522 in revenue and
$304,954 in expenses, as we introduced our BigString email services to the
market in March 2004 and continued developing such service and products and
implementing our marketing strategies. Our net loss for the year ended December
31, 2004 was $302,397.
15
For the six months ended June 30, 2005, we had $3,488 in revenue and
$269,094 in expenses, as we continued to create a presence in this market for
our BigString email service and products. During the first six months of 2005,
we also expended approximately $20,000 in preparing the company for its
reporting and other obligations as a publicly traded company.
As we grow, our operating expenses will increase in connection with sales
and marketing, technology licensing and development and general and
administrative needs to support our growth. Therefore, our plan of operation for
the twelve months following the date of this prospectus includes:
o Increased sales and marketing expenses.
o Increased general and administrative expenses.
o Increased research and development expenses.
Sales and marketing expenses consist primarily of compensation for sales
and marketing persons and costs associated with travel, public relations, sales
and other promotional materials, trade shows, advertising and other sales and
marketing programs. During the next twelve months, we expect to increase our
sales and marketing expenses in connection with a comprehensive advertising
campaign to promote our BigString email service and products. We also anticipate
increasing the size of our sales force.
General and administrative expenses consist primarily of compensation for
personnel and fees for outside professional advisors. During the next twelve
months, we expect that general and administrative expenses will increase as we
add staff and infrastructure to support our expected business growth. We also
expect legal and accounting costs to increase substantially over the next twelve
months, and in future periods, as a result of our company's compliance with
applicable federal and state securities laws.
Research and development expenses consist primarily of compensation for
our technology staff, costs associated with the application for our patent and
other intellectual property related expenses. We expect to increase our research
and development expenses in the next twelve months as we continue to enhance and
modify our software technology and products.
We do not plan to make any significant additions to our property or
equipment in the next twelve months.
We anticipate that we will incur net losses at least until the end of
2005. The extent of these losses will be contingent, in part, on the amount of
net revenue generated from customers. It is possible that our operating losses
will increase in the future and that we will never achieve or sustain
profitability.
Our limited operating history makes predicting future operating results
very difficult. We believe that you should not rely on our current operating
results to predict our future performance. You must consider our prospects in
light of the risks, expenses and difficulties encountered by companies in new
and rapidly evolving markets. We may not be successful in addressing these risks
and difficulties.
16
Our actual expenditures and business plan may differ from this plan of
operation. Our board of directors may decide not to pursue this plan, or may
decide to modify it based on new information or limits in the amount of
available financing.
Results of Operations
For the Six Months Ended June 30, 2005 and 2004
Net Loss. For the six months ended June 30, 2005, our net loss from
operations was $265,606 as compared to a $123,998 net loss for the same period
in 2004, primarily due to increased development and administrative costs and
professional fees.
Revenues. For the six months ended June 30, 2005, our total revenues were
$3,488, as compared to no revenues for the same period in 2004. We did not begin
to generate revenue from the utilization of our BigString service and products
until the third quarter of 2004.
Expenses. Total expenses for the six months ended June 30, 2005 were
$269,094, a $145,096 increase over total expenses of $123,998 incurred in the
same period in 2004, primarily due to increased development and administrative
costs and professional fees.
Interest Income. Interest income was $1,675 for the six months ended June
30, 2005, as compared to no interest income for the same prior year period. This
increase in interest income was due to the significant increase in the company's
cash balance resulting from several private placements conducted by the company
during the six months ended June 30, 2005.
Income Taxes. No tax provision has been recorded for 2005 and 2004 as a
result of our accumulated operating losses.
For the Year Ended December 31, 2004 and the Period
October 8, 2003 (Date of Formation) through December 31, 2003
Net Loss. For the year ended December 31, 2004, our net loss from
operations was $302,954, as compared to a $29,583 net loss for the period
October 8, 2003 (date of formation) through December 31, 2003, primarily due to
increased development and administrative costs and professional fees.
Revenues. For the year ended December 31, 2004, our total revenues were
$2,522, as compared to no revenues for the period October 8, 2003 (date of
formation) through December 31, 2003. We did not begin to generate revenue from
the utilization of our BigString service and products until the third quarter of
2004.
Expenses. Total expenses for the year ended December 31, 2004 were
$304,954, a $275,371 increase over total expenses of $29,583 incurred in the
period October 8, 2003 (date of formation) through December 31, 2003, primarily
due to increased development and administrative costs and professional fees.
Interest Income. Interest income was $35 for the year ended December 2004,
as compared to $16 income for 2003. This increase in interest income was due to
the increase in the Company's cash balance resulting from several private
placements conducted by the Company during the year ended December 31, 2004.
17
Income Taxes. No tax provision has been recorded for 2004 and 2003 as a
result of our accumulated operating losses.
Liquidity and Capital Resources
Our operating and capital requirements have exceeded our cash flow from
operations as we have been building our business. Since inception, we have
expended approximately $560,000 for operating and investing activities, which
has been primarily funded by investments of approximately $2,000,000 from our
stockholders. The company recently raised approximately $1,750,000 though the
private placement of shares of its common stock. The company will use these
proceeds to implement its plan of operation.
Our cash balance as of June 30, 2005 was $1,022,121. Management believes
the current cash balance, together with gross proceeds of $500,000 which the
company raised in a private placement conducted in August, 2005, is sufficient
to fund the current minimum level of operations through December 31, 2006;
however, in order to advance our business plan, additional revenue will be
needed. We hope to achieve this revenue through increased sales of our BigString
products and services.
If future revenue is not sufficient to fund the growth of our business. We
may need additional funds. 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.
Our officers and directors have not, as of the date of this filing, loaned
any funds to the company. There are no formal commitments or arrangements to
advance or loan funds to the company or repay any such advances or loans.
18
PRINCIPAL STOCKHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of August 15, 2005, with
respect to the beneficial ownership (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of the company's common stock, which is the
only class of the company's capital stock with shares issued and outstanding, by
(i) each director of the company, (ii) the president and chief executive officer
of the company (represents the only person who qualifies as a "named executive
officer" under applicable federal securities laws), and (iii) all directors and
executive officers of the company as a group:
Beneficial Ownership of Common Stock
---------------------------------------
Percent of
Name of Beneficial Owner - Directors and Officers (1) No. of Shares (2) Class
----------------------------------------------------- ----------------- -----------------
Darin M. Myman (3) (4) (5) ........................... 9,000,000 17.06%
David Daniels (3) (6) (7) ............................ 8,000,000 15.16%
Charles A. Handshy, Jr. (3) (8) (9) .................. 8,000,000 15.16%
Todd M. Ross (3) (10) ................................ 1,625,000 3.08%
Adam Kotkin (3) (11) ................................. 700,000 1.33%
Marc Dutton (3) ...................................... 650,000 1.33%
Barbara Musco (3) (12) ............................... 305,000 .58%
All Directors and Executive Officers as a Group
(7 persons) (5) (7) (9) .......................... 28,280,000 53.54%
(1) Each person listed in this table maintains a mailing address at 2150
Highway 35, Suite 250, Sea Girt, New Jersey 08750.
(2) In accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, a person is deemed to be the beneficial owner, for purposes of
this table, of any shares of BigString's common stock if he or she has
voting or investment power with respect to such security. This includes
shares (a) subject to options exercisable within 60 days, and (b)(1) owned
by a spouse, (2) owned by other immediate family members, or (3) held in
trust or held in retirement accounts or funds for the benefit of the named
individuals, over which shares the person named in the table may possess
voting and/or investment power.
(3) Such person serves as a director of the company.
(4) Mr. Myman serves as the President and Chief Executive Officer of the
company.
(5) Includes 100,000 shares registered in the name of Mr. Myman's wife, Jo
Myman, and 900,000 shares held by Mr. Myman for the benefit of Mr. and
Mrs. Myman's children
19
under the Uniform Transfers to Minors Act. Mr. Myman disclaims any beneficial
interest in the shares held by his wife and the shares held by him as custodian
for his children.
(6) Mr. Daniels serves as Chief Technology Officer of the company.
(7) Includes 4,000,000 shares registered in the name of Mr. Daniels' wife,
Deborah Daniels, as to which shares he disclaims any beneficial interest.
(8) Mr. Handshy serves as Chief Information Officer of the company.
(9) Includes 4,000,000 shares registered in the name of Mr. Handshy's wife,
June Handshy, as to which shares he disclaims any beneficial interest.
(10) Mr. Ross serves as Chief Financial Officer and Treasurer of the company.
(11) Mr. Kotkin serves as Chief Operating Officer and Secretary of the company.
(12) Includes 50,000 shares subject to a currently exercisable warrant.
20
The following table sets forth information as of August 15, 2005, with
respect to the beneficial ownership (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of the company's common stock by each person
or group of persons known by the company to be the beneficial owner of more than
5% of the company's outstanding common stock.
Beneficial Ownership of BigString's
Common Stock
----------------------------------------
Percent of
Name of Beneficial Owner - 5% Stockholders No. of Shares (1) Class
------------------------------------------ ----------------- -----------------
Darin M. Myman (2) (3) ................... 9,000,000 17.06%
Jo Myman (3) (4) ......................... 9,000,000 15.16%
David Daniels (5) (6) .................... 8,000,000 15.16%
Deborah Daniels (6) (7) .................. 8,000,000 15.16%
Charles A. Handshy, Jr. (8) (9) .......... 8,000,000 15.16%
June Handshy (9) (10) .................... 8,000,000 15.16%
Alfred Pantaleone (11) (12) .............. 6,700,000 12.70%
(1) In accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, a person is deemed to be the beneficial owner, for purposes of
this table, of any shares of BigString Common Stock if he or she has
voting or investment power with respect to such security. This includes
shares (a) subject to options exercisable within 60 days, and (b)(1) owned
by a spouse, (2) owned by other immediate family members, or (3) held in
trust or held in retirement accounts or funds for the benefit of the named
individuals, over which shares the person named in the table may possess
voting and/or investment power.
(2) See footnotes (1), (3), (4) and (5) of the table set forth under the
caption "Name of Beneficial Owner - Directors and Officers."
(3) Darin M. Myman and Jo Myman are husband and wife and together beneficially
own a total of 9,000,000 shares of the company's common stock, which
represents 17.06% of the company's outstanding common stock.
(4) Includes (a) 8,000,000 shares registered in the name of her husband, Darin
M. Myman, and (b) 900,000 shares held by Mr. Myman for the benefit of Mr.
and Mrs. Myman's children under the Uniform Transfers to Minors Act, as to
which shares Mrs. Myman disclaims any beneficial ownership.
(5) See footnotes (3), (6) and (7) of the table set forth under the caption
"Name of Beneficial Owner - Directors and Officers."
21
(6) David Daniels and Deborah Daniels are husband and wife and together
beneficially own a total of 8,000,000 shares of the company's common
stock, which represents 15.16% of the company's outstanding common stock.
(7) Includes 4,000,000 shares registered in the name of her husband, David
Daniels, as to which shares she disclaims any beneficial interest.
(8) See footnotes (3), (8) and (9) of the table set forth under the caption
"Name of Beneficial Owner - Directors and Officers."
(9) Charles A. Handshy, Jr. and June Handshy are husband and wife and together
beneficially own a total of 8,000,000 shares of the company's common
stock, which represents 15.16% of the company's outstanding common stock.
(10) Includes 4,000,000 registered in the name of her husband, Charles A.
Handshy, Jr., as to which shares she disclaims any beneficial interest.
(11) Alfred Pantaleone maintains a mailing address at 25 Ely Road, Holmdel, New
Jersey 07733.
(12) Includes 1,200,000 shares held by Mr. Pantaleone as custodian for the
benefit of his children under the Uniform Transfers to Minor Act, as to
which shares he disclaims any beneficial interest.
22
DESCRIPTION OF BUSINESS AND SERVICES
Background
BigString Corporation has developed an innovative email service, referred
to as "BigString," that allows users to easily send, recall, erase,
self-destruct and secure email transmissions, as well as provide additional
privacy. The concept of recallable email was conceived a few years ago by one of
BigString's founders and current President and Chief Executive Officer, Darin M.
Myman. After inadvertently sending an email to a prospective client which
contained sensitive pricing and customer information, Mr. Myman unfortunately
learned that there was no way for him to retrieve the email before the
prospective client had the opportunity to review the contents thereof. As a
result of this frustrating experience, Mr. Myman and certain other members of
the company's management team focused on developing a technology that would
allow users to have comprehensive control, security and privacy of their email.
Business Strategy
In the past several years, the email industry has migrated from an
advertising model to a blended model that includes advertising and
subscriptions. Many of the leading email service providers offer premium service
products which include, among other features, value-added services such as
advanced spam filters, advanced virus protection, additional storage, multiple
email addresses and secure email.
For premium email service products, many of the leading companies charge
users an annual fee of between $20 and $50 per account, payable in monthly or
annual installments. The premium email service products market is a rapidly
growing segment of the overall email service market, and many of our competitors
are attempting to differentiate their businesses by adding a greater number of
premium email service products and related services.
Similar to other leading email service providers, in addition to our free
email service product, we offer premium email service products and applications
such as spam filters, virus protection, additional storage, multiple email
addresses and secure mail, which are offered in several different packages at
various prices and may be purchased by the users of our BigString email service.
We believe that our BigString email service is currently the only email service
that is recallable and cancelable. This recallable and cancelable application
should differentiate us from our competitors. We believe that this unique
application should allow us to capture market share from existing email service
providers, especially those providers offering premium services products.
We expect to attract a large number of customers who will want to try our
unique BigString email service products. Increasing our customer base will allow
us to establish advertising and marketing affiliations with large advertising
and marketing firms. By allowing our marketing affiliates to advertise through
our BigString web site, we believe that we will generate significant advertising
revenue.
23
In addition to our plan to establish advertising and marketing
affiliations, we currently offer the following three partnership programs:
o Co-branding. Allows BigString to jointly market the BigString email
service with other companies. The other companies will display a
"Powered by BigString" label, when using the BigString email
service.
o Private Label. Allows other companies to offer the BigString
functionality under their own brand name. The BigString brand will
be transparent to the end user.
The company can quickly integrate into any partner's existing email
platform, with little or no maintenance provided by the partner, and a very
quick deployment process. Depending of the program, the partner can either
co-brand with BigString or our service can run in the background. In addition,
the company can embed into a partner's existing email system select
functionality such as erasability, self-destructing and non-printable.
Products and Services
BigString Email Service - BigString is a web-based, POP3 (a protocol used
to retrieve email from a mail server) server email service solution. Our patent
pending technology provides a user with the ability to manage and control
content sent by email. The user's email will execute through the BigString
server but such execution will be transparent to the sender and recipients of
the email.
A user of our BigString email services will have his, her or its email
transposed from a text-based message through the company's server, and an exact,
replicated image of the email will be instantaneously streamed to the recipient.
The recipient never actually receives the content; but only receives images of
the content.
The user of the BigString email service and products can transparently
edit, recall, cancel, and erase the email as well as insert or delete
attachments, even after the email has been sent out and opened. All the
subsequent changes by the sender will be completely transparent to the
recipient. In addition, the sender has complete control over the life and
duration of the email. The sender can have the email self-destruct or disappear
after a defined number of views or after a certain time period.
The company currently offers services equivalent to those provided by its
competitors, such as anti-spam, anti-virus, non-printable, add and delete
attachments, opened report, set number of views and secure email. In addition,
we offer our erasable, recallable and self destroying applications which we
believe differentiate us from many of our competitors.
Products Offered - The company currently offers to its customers one of
four varying packages:
o BigString Free (No Charge).
o BigString Plus ($17.95 per year).
o BigString Premium ($29.95 per year).
24
o Business Account ($149.95 per year).
BigString Free comes with 5 MB of storage and permits the user to send
twenty emails per month. It is accessed by the user through the web and each
user is given one address. BigString Plus comes with 50 MB of storage and the
user can send 300 emails per month through this package. It also is accessed
through the web and each user is given one address. BigString Premium comes with
250 MB of storage and an unlimited number of emails may be sent by the user
through this package. It also is accessed by the user through the web or the
user can select to use a standard email client such as Outlook or Eudora and
each user is provided one address. The Business Account package is the most
complete package offered by the company. The Business Account package comes with
a component where BigString will act as the user's domain host. In addition,
this package provides five email addresses, with more available at an additional
cost. Further, business users can send an unlimited number of emails and have
250 MB of storage available per address with more storage available at
additional costs to the customer.
Technical and Customer Support - Customer support for BigString's email
service and products is available in three different ways:
o Live Chat. The ability for a BigString user to communicate through a
JAVA (a type of programming language) based instant messenger in
real time.
o Email Support. The ability for customers to contact BigString
support through email.
o Phone Support. The ability for customers to contact BigString
support via the telephone.
Historically, the customers of the company's services and products have
required very little support. For those customers who have requested support,
such request for support usually declined after the initial establishment of a
BigString account. The company continuously reviews its support capabilities and
updates and enhances such capabilities to meet the needs of the users of its
products and services. In the future, the company may outsource the support of
its products and services to cost effective call centers or service providers.
Also available on the BigString website is a Frequently Asked Questions
section and the company is currently composing a comprehensive BigString User
Guide. We believe that the company's Frequently Asked Questions section usually
can resolve most of a user's problems. As our business grows and we introduce
new products or enhancements to existing products, we expect our Frequently
Asked Questions section to be updated on a continuous basis.
Market
Email is the most widely used application in the world: Jupiter
Communications, a market research firm, estimates that 91% of all online
applications are email. According to International Data Corp., the number of
emails sent each day will grow from 9.7 billion in 2000 to over 35 billion in
2005. The company's products are easy to use, and through organic, grass-roots
marketing, the company is already experiencing high growth in new member
accounts. As the company expands its partnering opportunities with other
established email providers and
25
affiliates with advertising and marketing groups, the company believes that is
positioned for significant growth.
Since we began offering our BigString products, we have had strong
interest from users of the dating services as well as from the dating websites.
Currently, there is rampant growth in the social networking market, and there
are over 38 million Americans that visit Online Dating sites once a month. The
complexity, risks and dangers of social networking provide a perfect medium for
email that is recallable and erasable.
There were approximately 5.9 million small and medium-sized businesses in
the United States in 2003. Over 80% of all small and medium-sized business had
Internet connectivity, and almost 100% of business with over 20 employees had
Internet connectivity. The company believes that BigString's products and
pricing model will be very attractive solution for the small and medium-sized
business market. A small and medium-sized business firm can experience
unprecedented email security and privacy without having to expend considerable
resources.
BigString can easily integrate into many of the existing email platforms
such as Yahoo!, Google, MSN, etc. With the BigString technology, these leading
email providers can differentiate their businesses from competitors. An email
service provider that offers unique and useful products should be able to
attract and retain many new members.
Competition
General - We have existing competitors for our businesses who have greater
financial, personnel and other resources, longer operating histories, more
technological expertise, more recognizable names and more established
relationships in industries that we currently serve or may serve in the future.
Increased competition, our inability to compete successfully against current or
future competitors, pricing pressures or loss of market share could result in
increased costs and reduced operating margins, which could harm our business,
operating results, financial condition and future prospects. Many of these firms
are well established, have reputations for success and have significantly
greater financial, marketing, distribution, personnel, and other resources than
us. Further, we may experience price competition, and this competition may
adversely affect our financial position and results of operations or adversely
affect our revenues and profitability.
The markets for our services are highly competitive. With limited barriers
to entry we believe the competitive landscape will continue to increase both
from new entrants to the market as well as from existing players. We remain
focused on delivering better, more advanced and innovative services than our
competitors.
Specific - The company has identified five competitors who have products
similar to BigString's erasable, recallable email application. The first
competitor is Read-Notify. Read-Notify is an Australian company that focuses
primarily on certified email and email tracking. Read-Notify offers certain of
the self-destructing features found in the BigString products, but we believe
that Read-Notify is a much less user friendly application. A user must append
the recipient's email address with a string of codes to utilize this
application. In addition, Read-Notify emails are constructed using I-frames and
java script and they are stalked automatically by almost all spam filters.
26
A second competitor, America On Line (AOL), allows the user to recall an
email message. However, AOL's system only allows the recall of emails sent to an
AOL email account and this is allowed only until the message is read. Once the
message is read by the recipient, AOL does not allow the message to be recalled.
Two more competitors, Yahoo and HotMail.com, do not offer any version of
the patent pending technology that is offered by the company. These competitors
do not offer the recall feature, the self-destruct feature, the time delay
feature or the ability to change the email once it has been sent. In other
words, once the email is sent from either HotMail.com or Yahoo, the email is
final.
Finally, Microsoft's Outlook program provides a recall feature that is
similar to AOL's except that a message cannot be fully recalled after it is read
by the recipient. Although the Outlook program allows the sender to recall an
email, such sender may only recall an email sent to people on the same server as
the sender. After an email is recalled, the recipient can still read the email,
it just has a red line through it to indicate the sender recalled the email.
Accordingly, this feature is not a true recall feature, it just allows the
sender to notify the recipient that the email was sent in error.
Legal Proceedings
We are not a party to, and none of our property is the subject of, any
pending legal proceedings. To our knowledge, no governmental authority is
contemplating any such proceedings.
Employees
We have 6 full time employees and 1 part time employees. We believe that
our relationship with employees is satisfactory. We have not suffered any labor
problems since our inception.
Properties
We occupy office space at 2150 Highway 35, Suite 250, Sea Girt, New Jersey
08750. Our Sea Girt, New Jersey office has approximately 160 square feet of
office space. Our operating lease for these premises expires on September 30,
2005. The current monthly occupancy rate is approximately $5.36 per square foot.
We believe that this facility will be adequate to meet our requirements for the
foreseeable future and that suitable additional space will be available if
needed.
We also occupy office space at 113 W. Dawes, Suite 111, Bixby, Oklahoma
74008. Our Bixby, Oklahoma office has approximately 550 square feet of office
space. Our operating lease for these premises expires on December 31, 2005. The
current annual occupancy rate is approximately $8.73 per square foot. We believe
that this facility will be adequate to support our Oklahoma-based operation.
Other than the two named premises above, we do not own or lease any other
property or real estate.
27
GOVERNMENT REGULATION
We do not currently face direct regulation by any governmental agency,
other than laws and regulations generally applicable to businesses.
Due to the increasing popularity and use of the Internet, it is possible
that a number of laws and regulations may be adopted in the U.S. and abroad with
particular applicability to the Internet. It is possible that governments will
enact legislation that may be applicable to us in areas including network
security, encryption, data and privacy protection, electronic authentication or
"digital" signatures, access charges and retransmission activities. Moreover,
the applicability to the Internet of existing laws governing issues including
property ownership, content, taxation, defamation and personal privacy is
uncertain.
The majority of laws that currently regulate the Internet were adopted
before the widespread use and commercialization of the Internet and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies. Any export or import restrictions, new legislation or
regulation or governmental enforcement of existing regulations may limit the
growth of the Internet, increase our cost of doing business or increase our
legal exposure. Any of these factors could have a material adverse effect on our
business, financial condition and results of operations.
Violations of local laws may be alleged or charged by state or foreign
governments, and we may unintentionally violate local laws. Local laws may be
modified, or new laws enacted, in the future. Any of these developments could
have a material adverse effect on our business, results of operations and
financial condition.
28
MANAGEMENT
Executive Officers
The name, age and position of each person who serves as an executive
officer of the company are set forth below and brief summaries of their business
experience and certain other information with respect to each of them is set
forth in the information which follows the table:
Name Age Position
---- --- --------
Darin M. Myman 40 President and Chief Executive Officer
Adam Kotkin 26 Chief Operating Officer and Secretary
Todd M. Ross 32 Chief Financial Officer and Treasurer
Charles A. Handshy, Jr. 33 Chief Information Officer
David Daniels 59 Chief Technology Officer
There are no family relationships among the current executive officers of
BigString. None of the executive officers of BigString are directors of any
company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, or subject to the requirements of
Section 15(d) of the Securities Exchange Act of 1934, as amended, or any company
registered as an investment company under the Investment Company Act of 1940, as
amended.
Darin M. Myman, a co-founder of the company, has served as the President and
Chief Executive Officer of the company since its inception on October 8, 2003.
He also has served as a member of the company's board of directors since the
company's inception. Prior to co-founding the company, Mr. Myman was a
co-founder and Chief Executive Officer of LiveInsurance.com, the first online
insurance brokerage agency, from March 1999 until December 2000. Prior to
co-founding LiveInsurance.com, he served as a Vice President of the online
brokerage services unit of Westminster Securities Corporation.
Adam Kotkin, a co-founder of the company, has served as the Chief Operating
Officer of the company since its inception on October 8, 2003 and as Secretary
since August 17, 2005. He also has served as a member of the company's board of
directors since June 29, 2005. Prior to joining the company, Mr. Kotkin served
as business developer and sales manager at LiveInsurance.com from March 1999
until December 2000. Adam graduated with distinction from New York University
with a BA in Economics in May 2002.
Todd M. Ross has served as the Chief Financial Officer and Treasurer of the
company since January, 2005. He also has served as a member of the company's
board of directors since June 29, 2005. Since January, 2002, Mr. Ross also
serves as President and CEO of H.K. Ross Corp. Prior to his formation of H.K.
Ross Corp., Mr. Ross served as In-house Counsel and Chief Financial Officer for
LiveInsurance.com from January, 2000 to December, 2000. From January 1998 until
December, 1999, Mr. Ross worked for the NIA Group, one of the largest privately
held insurance brokerage firms in the United States. Mr. Ross graduated from the
University of
29
Wisconsin-Madison with a BA in Political Science in May, 1994 and
earned his JD at Hofstra University School of Law in May, 1997. Mr. Ross
anticipates receiving his MBA in Professional Accounting and Finance and a
Masters in Taxation from Fordham University Graduate School of Business in
December, 2005.
Charles A. Handshy, Jr., a co-founder of the company, has served as the Chief
Information Officer of the company since its inception on October 8, 2003. He
also has served as a member of the company's board of directors since the
company's inception. Prior to joining the company, Mr. Handshy founded Gravette
Online in November, 2001 and Green Country Internet in July, 1999, two internet
service providers located in the Midwest. In addition to his operation of these
companies, Mr. Handshy has provided computer consulting to fortune 500 companies
including CITGO, Black and Decker and Williams Telecommunications since 1990.
Mr. Handshy graduated from Northeastern Oklahoma A&M College with a degree in
computer science.
David Daniels, a co-founder of the company, has served as the Chief Technology
Officer of the company since its inception on October 8, 2003. He also has
served as a member of the company's board of directors since the company's
inception. In addition to serving as an officer and director of the company, Mr.
Daniels has owned INTERNETworks, a website hosting firm based in Oklahoma, since
its formation in October 1993. Prior to the formation of the company and
INTERNETworks, he was a technology consultant from 1979 to 1993. Mr. Daniels
also serves as a board member of the Oklahoma chapter of InfraGuard.
30
Executive Compensation
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the company for the
years ended December 31, 2004 and 2003 of the Chief Executive Officer and each
other executive officer whose total annual salary and bonus for the year ended
December 31, 2004 exceeded $100,000 (the "named executive officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
--------------------------------- --------------------------------------
Awards Payouts
----------------------- -----------
Other Restricted Securities
Annual Stock Underlying All Other
Year Compensa- Award(s) Options/ LTIP Payouts Compensa-
Name and Position (1) Salary ($) Bonus ($) tion ($) ($) SARs (#) ($) tion($)
----------------- ----- ----------- --------- --------- ---------- ---------- ------------ ----------
Darin M. Myman, 2004 $53,400 $ -- $ -- $ -- -- $ -- $
President and Chief 2003 $ 1,700 -- -- -- --
Executive Officer
(1) The company commenced operations on October 8, 2003.
Employment Agreements
Currently, none of the officers or employees of the company has an
employment agreement with the company. At the discretion of our board of
directors, the company may in the future enter into employment agreements with
one or more of their officers or other employees.
31
Board of Directors
The name, age, principal occupation or employment and biographical
information of each person who serves on the board of directors of the company
are set forth below:
Name and Address Age Principal Occupation or Employment
---------------- --- ----------------------------------
Darin M. Myman 40 President and Chief Executive Officer of
BigString Corporation
David Daniels 59 Chief Technology Officer of BigString
Corporation
Todd M. Ross 32 Chief Financial Officer of BigString
Corporation
Adam Kotkin 26 Chief Operating Officer of BigString
Corporation
Charles A. Handshy, Jr. 33 Chief Information Officer of BigString
Corporation
Marc Dutton 35 Managing Director - FJA-US Inc.
Barbara Musco 46 Vice President of Strategic Services at
Bethpage Federal Credit Union.
There are no family relationships among the current directors of the
company. None of the directors of the company are directors of any company
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, or subject to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, as amended, or any company registered as an investment
company under the Investment Company Act of 1940, as amended.
Darin M. Myman, see "Executive Officers."
David Daniels, see "Executive Officers."
Todd M. Ross, see "Executive Officers."
Adam Kotkin, see "Executive Officers."
Charles A. Handshy, Jr., see "Executive Officers."
Marc Dutton currently serves as Managing Director of FJA-US and FJA-US,
Australia (formerly known as Finansys), an industry leader in insurance
technology solutions. Mr. Dutton joined FJA-US in 1996 and prior to serving as
Managing Director, he served as Vice President of Sales and other sales
management positions. He received a Bachelor of Science Degree from the
University of Albany in May of 1991. Mr. Dutton has served on the board of
directors of BigString since June 29, 2005.
Barbara Musco currently serves as an Assistant Vice-President of Strategic
Services for Bethpage Federal Credit Union, which is Long Island's largest
credit union. Ms. Musco joined Bethpage Federal Credit Union in November, 2002.
Prior to joining Bethpage Federal Credit Union, from June, 1997 to November,
2002, Ms. Musco served as President and Chief Executive
32
Officer of Outsource Enterprises Limited, a consulting firm. She also worked for
NBC, from April, 1995 to September, 1997. Ms. Musco started her career at
Grumman Aerospace Corporation in June, 1982. Ms. Musco received a Bachelor of
Science Degree in business administration from the University of New England and
a Master in Business Administration from Dowling College, School of Business.
Ms. Musco has served on the board of directors of BigString since June 29, 2005.
Committees of Board of Directors
We currently do not have any committees of our board of directors. The
full board of directors assumes the duties that would be delegated to an audit
committee, a compensation committee and a nominating committee. In the next
several months, we intend to establish an audit committee, a compensation
committee and a nominating committee, and any other committees we believe will
facilitate the operations of the company.
Director Compensation
Currently we do not compensate our directors for serving on our board of
directors.
33
RELATED PARTY TRANSACTIONS
On July 16, 2004, the company issued to each of Darin M. Myman, the
President and Chief Executive Officer and a director of the company, David
Daniels, the Chief Technology Officer and a director of the company, Deborah
Daniels, his wife, Charles A. Handshy, Jr., the Chief Technology Officer and a
director of the company, and June Handshy, his wife, 4,000,000 shares of the
company's common stock. As a result of these stock acquisitions, BigString
became the owner of 100% of the outstanding common stock of Email Emissary.
David Daniels, the Chief Technology Officer and his wife, Deborah Daniels,
each own a 50% interest in INTERNETworks. BigString, in June 2005, entered into
a lease by and among INTERNETworks, as landlord, and the company and it
subsidiary Email Emissary, as tenants, for the lease of office space located at
Suite 111, 113 W. Dawes Street, Bixby Oklahoma.. The lease is for a term of six
and a half years with a annual lease fee of two thousand six hundred dollars.
34
DESCRIPTION OF COMMON STOCK
General
The authorized capital stock of the company consists of 250,000,000 shares
of capital stock, consisting of 249,000,000 shares of common stock, par value
$.0001 per share, and 1,000,000 shares of preferred stock, par value $.0001 per
share.
Common Stock
As of August 15, 2005, there were 52,770,125 shares of common stock issued
and outstanding. Holders of our common stock are entitled to one vote per share
on all matters to be voted upon by the stockholders, and there is no cumulative
voting for the election of our board of directors. Holders of our common stock
are entitled to receive ratably such dividends, if any, as may be declared by
our board of directors out of funds legally available therefor. We have not paid
any cash dividends on our common stock and do not expect to do so in the
foreseeable future. Upon our liquidation, dissolution, or winding up, the
holders of our common stock will be entitled to share ratably in our assets that
are legally available for distribution, after payment of all debts and other
liabilities and any preferential liquidation rights of any preferred stock then
outstanding. Holders of our common stock have no preemptive rights to purchase
shares of our capital stock. All of the outstanding shares of our common stock
are fully paid and nonassessable.
Preferred Stock
There are no shares of preferred stock outstanding. The board of directors
has the authority, without action by the stockholders, to designate and issue
the shares of preferred stock in one or more series and to designate the rights,
preferences and privileges of each series, any or all of which may be greater
than the rights of the common stock. It is not possible to state the actual
effect of the issuance of any of the shares of preferred stock upon the rights
of the holders of the common stock until the board of directors determines the
specific rights of the holders of such shares. However, the effects might
include restricting dividends on the common stock, diluting the voting power of
the common stock, impairing the liquidation rights of the common stock and
hindering or preventing a change of our control without further action by the
stockholders, thereby protecting management.
35
SELLING STOCKHOLDERS
We are registering for offer and sale 11,869,125 shares of our common
stock held by 43 of our existing stockholders. The following tables presents the
name of each of the selling stockholders and the number of shares of our common
stock beneficially owned by each as of August 15, 2005. To the best of our
knowledge, the named selling stockholders are the beneficial owners and have
sole voting and investment power over all shares or rights to the shares
reported.
Percent of
Shares of Shares of Class to be
Common Stock Shares of Common Stock Owned After
Name of Owned Prior to Common Stock Owned After Offering is
Beneficial Owner the Offering Being Offered the Offering(1) Completed(1)
---------------------------------------- -------------- ------------- --------------- -------------
AJW Offshore, Ltd. ..................... 430,313 430,313 0 0%
AJW Partners, LLC ...................... 299,531 299,531 0 0%
AJW Qualified Partners, LLC ............ 101,250 101,250 0 0%
David Matthew Adredge .................. 125,000 125,000 0 0%
David A. Arledge ....................... 1,250,000 1,250,000 0 0%
Susan Baran ............................ 600,000 600,000 0 0%
Jeffrey M. Barber and Jo Ann Barber .... 312,500 312,500 0 0%
Nicholas Codispoti ..................... 375,000 375,000 0 0%
Nicholas Codispoti, President, Codispoti
Foundation ......................... 750,000 750,000 0 0%
Nicholas Codispoti, IRA Account ........ 375,000 375,000 0 0%
Jon M. Conahan ......................... 1,250,000 1,250,000 0 0%
Dean G. Corsones ....................... 312,500 312,500 0 0%
Michael Dewhurst ....................... 125,000 125,000 0 0%
Marc Dutton(2) ......................... 650,000 120,000 530,000 1.0%
Theodore Fadool, Jr .................... 581,250 581,250 0 0%
Howard Greene .......................... 220,000 40,000 180,000 .34%
Harvey M. Goldfarb ..................... 80,000 80,000 0 0%
36
Percent of
Shares of Shares of Class to be
Common Stock Shares of Common Stock Owned After
Name of Owned Prior to Common Stock Owned After Offering is
Beneficial Owner the Offering Being Offered the Offering(1) Completed(1)
---------------------------------------- -------------- ------------- --------------- -------------
Charles Scott Guerrieri ................ 312,500 312,500 0 0%
Herd Family Partnerships ............... 31,250 31,250 0 0%
Glenn & Brenda Herd .................... 15,625 15,625 0 0%
Ronald Herd ............................ 38,750 38,750 0 0%
Steven Hoffman ......................... 55,000 55,000 0 0%
James R. Kaufman and Barbara Kaufman ... 312,500 312,500 0 0%
Jeffrey & Lisa Kay ..................... 72,000 72,000 0 0%
Gerald Kotkin .......................... 300,000 200,000 100,000 .19%
Paul A. Levis, PSP ..................... 40,000 40,000 0 0%
Joel Marcus ............................ 312,500 312,500 0 0%
Barbara A. Musco & Bernie E. Bazar(2) .. 255,000 205,000 50,000 .09%
Craig Myman ............................ 2,000,000 450,000 1,550,000 2.94%
New Millennium Capital Partners II, LLC 12,656 12,656 0 0%
Alfred Pantaleone ...................... 6,700,000(3) 450,000 6,250,000 11.84%
Sara Pasquarello ....................... 31,250 31,250 0 0%
Richard and George Petrone ............. 62,500 62,500 0 0%
David and Kim Prado .................... 312,500 312,500 0 0%
Lee Rosenberg .......................... 1,040,000 40,000 1,000,000 1.90%
Todd M. Ross (4) ....................... 1,625,000 125,000 1,500,000 2.84%
Marc Sandusky .......................... 62,500 62,500 0 0%
Adam Schaffer .......................... 40,000 40,000 0 0%
H. Joseph Sgroi ........................ 114,000 114,000 0 0%
Shefts Family LP. ...................... 625,000 625,000 0 0%
Thomas Shields ......................... 625,000 625,000 0 0%
37
Percent of
Shares of Shares of Class to be
Common Stock Shares of Common Stock Owned After
Name of Owned Prior to Common Stock Owned After Offering is
Beneficial Owner the Offering Being Offered the Offering(1) Completed(1)
---------------------------------------- -------------- ------------- --------------- -------------
Mark Yutko ............................. 156,250 156,250 0 0%
Bradley Zelenitz ....................... 210,000 40,000 170,000 .32%
(1) Assumes all shares registered are sold.
(2) Mr. Dutton and Ms. Musco serve as directors of the company.
(3) Includes all shares beneficially owned by Mr. Pantaleone. See footnote
(12) of the "Principal Stockholders and Security Ownership of Management -
5% Ownership Table."
(4) Mr. Ross serves as Chief Financial Officer and Treasurer of the company
and also as a member of the company's board of directors.
The selling shareholders may offer their shares on a continuous basis or
delayed basis pursuant to Rule 415 under the Securities Act of 1933, as amended.
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.
Registration Rights Agreements
In connection with a private placement of its common stock which ended on
July 20, 2005, the company entered into registration rights agreements with 21
investors who purchased shares of common stock in the private placement. These
registration rights agreements required the company to register the shares held
by the investors. To effect the registration, the company was and is required,
among other things, to file a registration statement on Form SB-2 with the
Securities and Exchange Commission by September 30, 2005, pay all costs of
registration, use its best efforts and to secure designation or listing of the
company's common stock on The American Stock Exchange, The New York Stock
Exchange, one of the Nasdaq markets or the OTC Bulletin Board. In addition, the
registration rights agreements provide that the company will indemnify an
investor for losses resulting from misleading or fraudulent disclosures in the
registration statement and other violations of the securities laws, except for
those misleading or fraudulent disclosures or violations resulting from
information provided by the investor.
38
PLAN OF DISTRIBUTION
The selling stockholders have not informed us of how they plan to sell
their shares. However, selling stockholders may sell their shares of common
stock either directly or through a broker-dealer or other agent at a price of
$.48 per share until the earlier of (1) ninety days following the date of this
prospectus and (2) the inclusion of our common stock on the OTC Bulletin Board
and, thereafter, at prices related to prevailing market prices, if a public
trading market develops and exists, or negotiated prices, in one or more of the
following kinds of transactions:
o Transactions in the over-the-counter market if the company's common
stock is included on the OTC Bulletin Board and a public trading
market develops.
o A block trade in which a broker or dealer will attempt to sell
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction.
o Purchases by a broker or dealer as principal and resale by a broker
or dealer for its account.
o Ordinary brokerage transactions and transactions in which a broker
solicits a buyer.
o In privately negotiated transactions not involving a broker or
dealer.
The selling stockholders 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, as amended, or the Securities Exchange Act of 1934, as
amended, or the rules and regulations thereunder.
Alternatively, the selling stockholders may sell all or any part of the
shares of our common stock offered 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
39
Exchange Act of 1934, as amended, 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
stockholder. These regulations may affect the marketability of these shares of
our common stock.
Some states may require that registration, exemption from registration or
notification requirements be met before selling stockholders may sell their
common stock. Some states may also require selling stockholders to sell their
common stock only through broker-dealers. We intend to seek qualification for
sale of the securities in those states that the securities will be offered.
To the extent required by laws, regulations or agreements we have made, we
will use our best efforts to file a prospectus supplement during the time the
selling stockholders are offering or selling shares covered by this prospectus
in order to add or correct important information about the plan of distribution
for the shares.
The company will pay all of the expenses incident to the registration and
offering of our common stock by the selling stockholders, other than commissions
or discounts of underwriters, broker-dealers or agents.
40
LEGAL MATTERS
The legality of the securities offered in this prospectus will be passed
upon by Giordano, Halleran & Ciesla, P.C., Red Bank, New Jersey.
EXPERTS
The consolidated financial statements of BigString Corporation for the
year ended December 31, 2004 and the period October 8, 2003 (date of formation)
through December 31, 2003 have been included in reliance upon the report of
Wiener, Goodman & Company, P.C., independent registered public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
41
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our amended and restated by-laws contain provisions obligating us to
indemnify our directors and officers to the fullest extent permitted by the
Delaware General Corporation Law. We believe that these provisions will assist
us in attracting and retaining qualified individuals to serve as directors.
We are subject to the State of Delaware's business combination statute. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a business combination with a person who is an interested
stockholder for a period of three years after the date of the transaction in
which that person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A business combination includes
a merger, asset sale or other transaction resulting in a financial benefit to
the interested stockholder. An interested stockholder is a person who, together
with affiliates, owns, or, within three years prior to the proposed business
combination, did own 15% or more of our voting stock. The statute could prohibit
or delay mergers or other takeovers or change in control attempts and
accordingly, may discourage attempts to acquire us.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the common stock
offered by the Selling Stockholders under this prospectus. The registration
statement and exhibits and schedules filed as a part thereof, which may be
inspected, without charge, at the Public Reference Section of the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Securities and Exchange Commission maintains a worldwide web site on the
Internet at http://www.sec.gov that contains reports, proxy and information
statements regarding registrants that file electronically with the Securities
and Exchange Commission. Copies of all or any portion of the registration
statement may be obtained from the public reference section of the Securities
and Exchange Commission upon payment of the prescribed fees.
42
INDEX TO FINANCIAL STATEMENTS
BIGSTRING CORPORATION
AND SUBSIDIARY
Consolidated Financial Statements
December 31, 2004
Report of Independent Registered Public Accounting Firm.....................................F-2
Consolidated Balance Sheets at December 31, 2004 and 2003...................................F-3
Consolidated Statements of Operations for the year ended December 31, 2004
and the period October 8, 2003 (Date of Formation) through December 31, 2004................F-4
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 2004 and the period October 8, 2003 (Date of Formation) through
December 31, 2004...........................................................................F-5
Consolidated Statements of Cash Flows for the year ended December 31, 2004 and
the period October 8, 2003 (Date of Formation) through December 31, 2004....................F-6
Notes to Consolidated Financial Statements..................................................F-7
June 30, 2005
Consolidated Balance Sheets at June 30, 2005 (unaudited) and December 31, 2004..............F-14
Consolidated Statements of Operations (unaudited) for the six months ended
June 30, 2005 and 2004......................................................................F-15
Consolidated Statements of Stockholders' Equity (unaudited) for the six months ended
June 30, 2005 and 2004......................................................................F-16
Consolidated Statements of Cash Flows (unaudited) for the six months ended
June 30, 2005 and 2004......................................................................F-17
Notes to Unaudited Consolidated Financial Statements........................................F-18
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
BigString Corporation
Sea Girt, New Jersey
We have audited the accompanying consolidated balance sheets of BigString
Corporation (formerly Recall Mail Corporation) and subsidiary (collectively, the
"Company") as of December 31, 2004 and 2003, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 2004 and for the period October 8, 2003 (Date of Formation) through
December 31, 2003. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2004
and 2003, and the results of their operations and their cash flows for the year
ended December 31, 2004, and for the period October 8, 2003 (Date of Formation)
through December 31, 2004 in conformity with accounting principles generally
accepted in the United States of America.
WIENER, GOODMAN & COMPANY, P.C.
Eatontown, New Jersey
July 31, 2005
F-2
BIGSTRING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31,
------------
2004 2003
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 13,808 $ 20,140
Property & equipment - net 17,356
Intangible assets - net 55,925
Other assets 1,700 1,700
--------- ---------
TOTAL ASSETS $ 88,789 $ 21,840
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,620 $
Accrued expenses 32,518 6,407
Unearned revenue 4,364
--------- ---------
Total current liabilities 39,502 6,407
Stockholders' equity:
Common Stock, $.0001 par value - authorized
50,000,000 shares; outstanding 42,305,000 and 21,250,000
shares, respectively 4,231 2,125
Additional paid in capital 377,020 52,875
Subscription receivable -- (10,000)
Deficit (331,964) (29,567)
--------- ---------
Total stockholders' equity 49,287 15,433
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 88,789 $ 21,840
========= =========
See notes to consolidated financial statements
F-3
BIGSTRING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Period
October 8, 2003
(Date of Formation)
Year Ended Through
December 31, 2004 December 31, 2003
------------------- -------------------
Net sales $ 2,522 $
------------------- -------------------
Costs and expenses:
Selling, general and
administrative expenses 304,954 29,583
------------------- -------------------
Loss from operations (302,432) (29,583)
Interest income 35 16
------------------- -------------------
Net loss $ (302,397) $ (29,567)
=================== ===================
Loss per common share - basic
and diluted $ (0.01) $ 0.00
=================== ===================
Weighted average common shares
outstanding - basic and diluted 21,770,529 21,210,000
=================== ===================
See notes to consolidated financial statements.
F-4
BIGSTRING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional
Common Stock Paid-In Subscription Retained
Total No of shares Amount Capital Receivable Earnings
------------ ------------ ------------ ------------ ------------ ------------
Balance, October 8, 2003 $ $ $ $ $
Issuance of common stock 21,210,000 2,121 (2,121)
(at $.001 per share)
Contribution of capital 45,000 45,000
Sale of common stock
(at $.25 per share) 40,000 4 9,996
Net loss (29,567) (29,567)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2003 15,433 21,250,000 2,125 52,875 (10,000) (29,567)
Sale of common stock
(at $.25 per share) 227,500 870,000 87 217,413 10,000
Issuance of common stock
for services ($.21 per share) 39,251 185,000 19 39,232
Issuance of common stock
in acquisition (at $.003 per share) 66,000 20,000,000 2,000 64,000
Issuance of warrants 3,500 3,500
Net loss (302,397) (302,397)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2004 $ 49,287 42,305,000 $ 4,231 $ 377,020 $ $ (331,964)
============ ============ ============ ============ ============ ============
See notes to consolidated financial statements.
F-5
BIGSTRING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period
October 8, 2003
(Date of Formation)
Year Ending Through
December 31, 2004 December 31, 2003
------------------ ------------------
Cash flows from operating activities:
Net loss $ (302,397) $ (29,567)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 7,496
Stock issued for services 39,251
Warrants issued 3,500
Changes in operating assets
and liabilities:
Increase in accrued expenses 28,163 6,407
(Increase) decrease in other assets 5,000 (1,700)
Increase in unearned revenue 4,364
------------------ ------------------
Net cash used in operating activities (214,623) (24,860)
Cash flows from investing activities:
Purchase of property, plant and
equipment (19,209)
Cash flows from financing activities:
Proceeds from issuance of common
stock 227,500 45,000
Net increase (decrease) in cash (6,332) 20,140
Cash - beginning of year 20,140
------------------ ------------------
Cash - end of year $ 13,808 $ 20,140
================== ==================
Supplementary Information:
Details of acquisition
Fair value of assets acquired
(excluding cash of $2,548) $ 4,431
Intangibles 61,569
------------------
Common stock issued to effect
acquisition $ 66,000
==================
Financing Information:
Common stock issued for services $ 39,251
==================
Common stock warrants issued $ 3,500
==================
See notes to consolidated financial statements.
F-6
BIGSTRING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
BigString Corporation (the "Company") was incorporated in the State of Delaware
on October 8, 2003 under the name "Recall Mail Corporation." The Company's name
was formally changed to BigString Corporation in July 2005. The Company was
formed, together with Email Emissary, Inc. ("Email Emissary"), incorporated in
the State of Oklahoma on August 7, 2003, to develop technology that would allow
the user of email services to have comprehensive control, security and privacy
relating to the email generated by the user. Email Emissary was later acquired
by the Company in July 2004 and is currently the Company's only subsidiary. In
March 2004, the BigString email service was introduced to the market.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All intercompany transactions and balances have
been eliminated.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
accounting principles accepted in the United States of America 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.
REVENUE RECOGNITION
The Company recognizes online service revenue over the period that services are
provided. Other revenues, which consist principally of electronic commerce and
advertising revenues, as well as data network service revenues, are recognized
as the services are performed. Unearned revenue consists primarily of prepaid
electronic commerce and advertising fees and annual prepaid subscription fees
billed in advance.
DEPRECIATION
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated primarily using the straight-line method over their
estimated useful lives of these assets. Property, plant and equipment are
reviewed periodically for possible impairment in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets."
F-7
STOCK BASED COMPENSATION
The Company issues shares of common stock to non-employees as stock-based
compensation. The Company accounts for the services using the fair market value
of the services rendered. For the year ended December 31, 2004, the Company
issued 185,000 shares of its common stock and recorded compensation expense of
$39,251 in connection with the issuance of these shares.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
under which deferred income taxes are recognized by applying enacted tax rates
applicable to future years to the differences between the financial statement
carrying amounts and the tax basis of reported assets and liabilities.
The principal items giving rise to deferred taxes are timing differences between
book and tax amortization of intangible assets which are not currently
deductible for income tax purposes and temporary differences caused by
capitalization of start-up expenditures as required by Section 195 the Internal
Revenue Code of 1986, as amended.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred, and are included in
selling, general and administrative expenses. All research and development is
performed internally for the benefit of the Company. The Company does not
perform such activities for others. The Company had software licensing costs of
$20,000 for the year ended December 31, 2003 and site development costs of
$51,000 for the year ended December 31, 2004. These costs have been incurred in
conjunction with the development of the e-mail products which the Company now
offers.
EVALUATION OF LONG-LIVED ASSETS
The Company reviews property and equipment for impairment whenever events or
changes in circumstances indicate the carrying value may not be recoverable in
accordance with the guidance provided in SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." If the carrying value of the
long-lived asset exceeds the present value of the related estimated future cash
flows, the asset would be adjusted to its fair value and an impairment loss
would be charged to operations in the period identified.
EARNINGS (LOSS) PER COMMON SHARE
Basic (loss) per common share is computed by dividing net (loss) by the weighted
average number of common shares outstanding during the year. Diluted (loss) per
common share is computed by dividing net (loss) by the weighted average number
of common shares and potential common shares outstanding during the year. All
potentially dilutive securities have been excluded from the computation, as
their effect is antidilutive.
F-8
BUSINESS COMBINATIONS
Business combinations which have been accounted for under the purchase method of
accounting include the results of operations of the acquired business from the
date of acquisition. Net assets of the companies acquired are recorded at their
fair value at the date of acquisition.
GOODWILL AND OTHER INTANGIBLES
In June 2001, the Financial Accounting Standards Board (the "FASB") issued SFAS
No. 142 "Goodwill and other Intangible Assets." SFAS No. 142 specifies the
financial accounting and reporting for acquired goodwill and other intangible
assets. Goodwill and intangible assets that have indefinite useful lives are not
amortized but rather are tested at least annually for impairment unless certain
impairment indicators are identified.
NEW FINANCIAL ACCOUNTING STANDARDS
In December 2004, the FASB issued SFAS No. 123(R), "Share Based Payment," that
will require compensation costs related to share-based payment transactions to
be recognized in the financial statements. With limited exceptions, the amount
of compensation cost will be measured based on the grant-date fair value of the
equity or liability instruments issued. In addition, if granted, liability
awards will be remeasured each reporting period. Compensation cost will be
recognized over the period that an employee provides service in exchange for the
reward. The statement also amends SFAS No. 95, "Statement of Cash Flows," to
require that excess tax benefits be reported as a financing cash inflow rather
than as a reduction of taxes paid. SFAS No. 123(R) is effective as to the
Company as of January 1, 2006. The Company is currently evaluating its position
and will make its determination to account for the compensation costs either
prospectively or retroactively at the time of adoption. The adoption of SFAS
123(R) is expected to have a material effect on the Company's results of
operations.
In December 2004, the FASB issued FASB Staff Position FAS 109-1, "Application of
FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on
Qualified Production Activities Provided by the American Jobs Creation Act of
2004" to provide guidance on the application of Statement 109 to the provision
within the American Jobs Creations Act of 2004 (the "Act") that provides tax
relief to U.S. domestic manufacturers. FAS 109-1 provides that a manufacturer's
deduction under the Act should be accounted for as a special deduction in
accordance with FASB Statement No. 109 and not as a tax rate reduction. FAS109-1
was effective upon issuance. The adoption of FAS 109-1 could have a material
effect on the Company's results of operations and financial position.
In December 2004, the FASB issued SFAS No. 153, an amendment of APB Opinion No.
29, "Exchanges of Nonmonetary Assets." SFAS No. 153 amends APB Opinion No. 29 by
eliminating the exception under APB Opinion No. 29 for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. SFAS No. 153 is
effective for periods beginning after June 15, 2005. The adoption of SFAS No.
153 is not expected to have a material effect on the Company's financial
position or results of operations.
F-9
2. ACQUISITION
On July 16, 2004, the Company completed the acquisition of Email Emissary, Inc.
("Email"). The Company purchased 100% of Email Emissary's stock for 20,000,000
shares of the Company's common stock. The Company acquired Email Emissary to
consolidate its marketing and development operations.. The purchase price of
$66,000 has been allocated to both tangible and intangible assets and
liabilities based on estimated fair values after considering various appraisals
by management; such intangible assets are being amortized over a period of five
years.
This acquisition will be accounted for using the purchase method of accounting
and, accordingly the results of operations of Email Emissary will be included in
the Company's financial statements from July 16, 2004, the date of closing.
The following unaudited pro forma summary results of operations assume that
Email Emissary had been acquired as of January 1, 2003.
Years Ended December 31,
2004 2003
---- ----
Net sales $ 3,850 $ 20,210
Net loss $ (300,579) $ (30,136)
Loss per share $ (0.0112) $ (0.0011)
The information above is not necessarily indicative of the results of operations
that would have incurred if the acquisition had been consummated as of January
1, 2003. Such information should not be construed as a representation of the
future results of operations of the Company.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31,
2004 2003
---- ----
Computer equipment and
internal software $ 16,106 $
Furniture and fixtures 3,103
-------- --------
19,209
Less accumulated depreciation 1,853
-------- --------
$ 17,356 $
======== ========
Depreciation expense for the years ended December 31, 2004 and 2003 was $1,853
and $ -0-, respectively.
F-10
4. GOODWILL AND OTHER INTANGIBLES
Other intangibles include patent fees. Amounts assigned to these intangibles
have been determined by management. Management considered a number of factors in
determining the allocations. Other intangibles are being amortized over 5 years.
Amortization expense was $5,644 for the year ended December 31, 2004.
Other intangible assets as of December 31, 2004 consist of the following:
Estimated amortization expense for intangible assets for the next five years are
as follows:
Years Ending Estimated Amortization
December 31, Expense
------------ -------
2005 $12,314
2006 $12,314
2007 $12,314
2008 $12,314
2009 $ 6,669
5. INCOME TAXES
At December 31, 2004, the Company has a net operating loss carry-forward of
approximately $181,000, which expire in various years through 2017. Deferred
income taxes reflect the impact of net operating carry-forwards. In recognition
of the uncertainty regarding the ultimate amount of income tax benefits to be
derived from the Company's net operating loss carry-forwards, the Company has
recorded a valuation allowance for the entire amount of the deferred tax asset.
6. COMMON STOCK
In October 2003, the month of the Company's formation, the Company issued
21,210,000 shares of its common stock, $.0001 par value, to principals of the
Company.
During 2003, the Company conducted a private placement of securities, pursuant
to which it sold 40,000 shares of the Company's common stock at a per share
purchase price of $0.25. The Company received $10,000 in gross proceeds as a
result of this private placement.
During 2004, the Company conducted a private placement of securities, pursuant
to which it sold 870,000 shares of the Company's common stock at a per share
purchase price of $0.25. The Company received $217,500 in gross proceeds as a
result of this private placement.
During 2004, the Company issued warrants to purchase 60,000 shares of the
Company's common stock with a per share exercise price of $.25. The Company
believes that the exercise price of these warrants was equal to the fair value
of the underlying shares of common stock at the time of issuance based on the
sale of common stock to third parties. The warrants expire on January 1, 2007.
Certain of these warrants were exercised, which resulted in 45,000 shares of
common
F-11
stock being issued to the holders thereof. As a result of these exercises, the
Company received $11,250 in gross proceeds . In connection with the issuance of
these warrants, the Company recorded an expense of $3,500 which is included in
the statement of operations for the year ended December 31, 2004. The fair value
of the warrants granted was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used: dividend yield of -0-%; expected volatility of 35%; risk free
rated return of 5%; and expected life of 2 years. The weighted average fair
value of the warrants granted during the year ended December 31, 2004 was $ .06
per share.
7. COMMITMENTS AND CONTINGENCIES
The Company leases its facility which require the Company to pay certain
executory costs (such as insurance and maintenance)
Future minimum lease payments for operating leases are approximately as follows:
Year Ending
December 31,
2005 $10,050
Rental expense was approximately $16,471 and $1,980 for the years ended December
31, 2004 and 2003, respectively.
8. SUBSEQUENT EVENTS
ISSUANCES OF COMMON STOCK
For the seven month period ended July 31, 2005, the Company conducted several
private placements pursuant to which it sold 967,000 shares of its common stock
at a per share purchase price of $0.25, and 6,323,125 shares of its common stock
at a per share purchase price of $0.16. As a result of these private placements,
the Company received $1,253,450 in gross proceeds.
For the seven month period ended July 31, 2005, the Company also issued 50,000
shares of its common stock to non-employees as stock-based compensation. The
Company accounts for the services using the fair market value of the services
rendered. The Company recorded compensation expense of $12,500 in connection
with the issuance of these shares.
GRANTS OF WARRANTS
On January 1, 2005, the Company granted two warrants to two consultants, as
payment for advisory services. Each warrant provides for the purchase of 50,000
shares of the Company's common stock at an exercise price of $.25 per share.
Each of these warrants is due to expire on January 1, 2007. In connection with
the issuance of these warrants, the Company recorded an expense of $7,400 which
is included in the Company's unaudited statement of operations for the six
months ended June 30, 2005. The fair value of the warrants granted was estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used: dividend yield of 0%; expected
volatility of 47%; risk free rated return of 5%; and expected life of 2 years.
The weighted average fair value of these warrants was $0.07 per share.
F-12
AMENDMENTS TO CERTIFICATE OF INCORPORATION
On July 18, 2005, the Company amended its Certificate of Incorporation to, among
other things, (1) change its name from Recall Mail Corporation to BigString
Corporation, and (2) increase the number of shares the Company is authorized to
issue from 50,000,000 shares to 250,000,000 shares, consisting of 249,000,000
shares of common stock, par value $0.0001 per share, and 1,000,000 shares of
preferred stock, par value $0.0001 per share. The board of directors has the
authority, without action by the stockholders, to designate and issue the shares
of preferred stock in one or more series and to designate the rights, preference
and privileges of each series, any or all of which may be greater than the
rights of the Company's common stock. Currently, there are no shares of
preferred stock outstanding.
F-13
BIGSTRING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 2005 December 31, 2004
------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,022,121 $ 13,808
Property & equipment - net 43,285 17,356
Intangible assets - net 50,281 55,925
Other assets 1,700 1,700
------------ ------------
TOTAL ASSETS $ 1,117,387 $ 88,789
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 60,527 $ 2,620
Accrued expenses 52,942 32,518
Unearned revenue 3,252 4,364
Subscriptions payable 953,700
------------ ------------
Total current liabilities 1,070,421 39,502
Stockholders' equity:
Common stock, $.0001 par value - authorized
50,000,000 shares; outstanding 43,322,000 and 42,305,000
shares, respectively 4,333 4,231
Additional paid in capital 638,568 377,020
Deficit (595,935) (331,964)
------------ ------------
Total stockholders' equity 46,966 49,287
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,117,387 $ 88,789
============ ============
See notes to consolidated financial statements
F-14
BIGSTRING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended
June 30,
2005 2004
---- ----
Net sales $ 3,488 $
------------ ------------
Costs and expenses:
Selling, general and
administrative expenses 269,094 123,998
------------ ------------
Loss from operations (265,606) (123,998)
Interest income 1,635
------------ ------------
Net loss $ (263,971) $ (123,998)
============ ============
Loss per common share - basic
and diluted $ (0.01) $ (0.01)
============ ============
Weighted average common shares
outstanding - basic and diluted 21,356,042 21,210,000
============ ============
See notes to consolidated financial statements
F-15
BIGSTRING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional
Paid-In Retained
Total No of shares Amount Capita Earnings
------------ ------------ ------------ ------------ ------------
---------------------------------------------------------------------------------------------------------------
Balance, December 31, 2003 $ 25,433 21,250,000 $ 2,125 $ 52,875 $ (29,567)
---------------------------------------------------------------------------------------------------------------
Sale of common stock
(at $.25 per share) 174,500 698,000 70 174,430
Issuance of warrants 3,500 3,500
Net loss (123,998) (123,998)
---------------------------------------------------------------------------------------------------------------
Balance, June 30, 2004 $ 79,435 21,948,000 $ 2,195 $ 230,805 $ (153,565)
===============================================================================================================
---------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004 $ 49,287 42,305,000 $ 4,231 $ 377,020 $ (331,964)
---------------------------------------------------------------------------------------------------------------
Sale of common stock
(at $.25 per share) 241,750 967,000 97 241,653
Issuance of common stock
for services (at $.25 per share) 12,500 50,000 5 12,495
Issuance of warrants 7,400 7,400
Net loss (263,971) (263,971)
---------------------------------------------------------------------------------------------------------------
Balance, June 30, 2005 $ 46,966 43,322,000 $ 4,333 $ 638,568 $ (595,935)
===============================================================================================================
See notes to consolidated financial statements
F-16
BIGSTRING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2005 2004
---- ----
Cash flows from operating activities:
Net loss $ (263,971) $ (123,998)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 6,571 778
Stock issued for services 12,500
Warrants issued 7,400 3,500
Changes in operating assets
and liabilities:
Increase in accounts payable 77,219 12,600
(Increase) decrease in other assets
Increase in unearned revenue
----------- -----------
Net cash used in operating activities (160,281) (107,120)
Cash flows from investing activities:
Purchase of property, plant and
equipment (26,856) (13,653)
Cash flows from financing activities:
Proceeds from issuance of common
stock 1,195,450 184,500
Net increase (decrease) in cash 1,008,313 63,727
Cash - beginning of year 13,808 20,140
----------- -----------
Cash - end of year $ 1,022,121 $ 83,867
=========== ===========
Financing Information:
Common stock issued for services $ 12,500 $ 12,600
=========== ===========
Common stock warrants issued $ 7,400 $ 3,500
=========== ===========
See notes to consolidated financial statements
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
BigString Corporation (the "Company") was incorporated in the State of Delaware
on October 8, 2003 under the name "Recall Mail Corporation." The Company's name
was formally changed to BigString Corporation in July 2005. The Company was
formed, together with Email Emissary, Inc. ("Email Emissary"), incorporated in
the State of Oklahoma on August 7, 2003, to develop technology that would allow
the user of email services to have comprehensive control, security and privacy
relating to the email generated by the user. Email Emissary was later acquired
by the Company in July 2004 and is currently the Company's only subsidiary. In
March 2004, the BigString email service was introduced to the market.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All intercompany transactions and balances have
been eliminated.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
accounting principles accepted in the United States of America 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.
REVENUE RECOGNITION
The Company recognizes online service revenue over the period that services are
provided. Other revenues, which consist principally of electronic commerce and
advertising revenues, as well as data network service revenues, are recognized
as the services are performed. Unearned revenue consists primarily of prepaid
electronic commerce and advertising fees and annual prepaid subscription fees
billed in advance.
DEPRECIATION
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated primarily using the straight-line method over their
estimated useful lives of these assets. Property, plant and equipment are
reviewed periodically for possible impairment in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets."
STOCK BASED COMPENSATION
The Company issues shares of common stock to non-employees as stock-based
compensation. The Company accounts for the services using the fair market value
of the services rendered. For
F-18
the six months ended June 30, 2005 the Company issued 50,000 shares of its
common stock and recorded compensation expense of $12,500 in connection with the
issuance of these shares.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
under which deferred income taxes are recognized by applying enacted tax rates
applicable to future years to the differences between the financial statement
carrying amounts and the tax basis of reported assets and liabilities.
The principal items giving rise to deferred taxes are timing differences between
book and tax amortization of intangible assets which are not currently
deductible for income tax purposes and temporary differences caused by
capitalization of start-up expenditures as required by Section 195 of the
Internal Revenue Code of 1986, as amended.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred, and are included in
selling, general and administrative expenses. All research and development is
performed internally for the benefit of the Company. The Company does not
perform such activities for others. The Company had software licensing costs of
$9,591 and site development costs of $36,000 for the six months ended June 30,
2005, as compared to software licensing costs of $1,537 and site development
costs of $16,500 for the six months ended June 30, 2004. These costs have been
incurred in conjunction with the development of the e-mail products which the
Company now offers.
EVALUATION OF LONG-LIVED ASSETS
The Company reviews property and equipment for impairment whenever events or
changes in circumstances indicate the carrying value may not be recoverable in
accordance with the guidance provided in SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". If the carrying value of the
long-lived asset exceeds the present value of the related estimated future cash
flows, the asset would be adjusted to its fair value and an impairment loss
would be charged to operations in the period identified.
EARNINGS (LOSS) PER COMMON SHARE
Basic (loss) per common share is computed by dividing net (loss) by the weighted
average number of common shares outstanding during the specified period. Diluted
(loss) per common share is computed by dividing net (loss) by the weighted
average number of common shares and potential common shares outstanding during
the specified period. All potentially dilutive securities have been excluded
from the computation, as their effect is antidilutive.
BUSINESS COMBINATIONS
Business combinations which have been accounted for under the purchase method of
accounting include the results of operations of the acquired business from the
date of acquisition. Net assets of the companies acquired are recorded at their
fair value at the date of acquisition.
F-19
GOODWILL AND OTHER INTANGIBLES
In June 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and other Intangible Assets." SFAS No. 142 specifies the financial
accounting and reporting for acquired goodwill and other intangible assets.
Goodwill and intangible assets that have indefinite useful lives are not
amortized but rather they are tested at least annually for impairment unless
certain impairment indicators are identified.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Six Months Ended
June 30,
2005 2004
---- ----
Computer equipment and
internal software $42,962 $10,331
Furniture and fixtures 3,103 3,305
------- -------
46,065 13,636
Less accumulated depreciation 2,780 778
------- -------
$43,285 $12,858
======= =======
Depreciation expense for the six months ended June 30, 2005 and 2004 was $927
and $778, respectively.
GOODWILL AND OTHER INTANGIBLES
Other intangibles include patent fees. Amounts assigned to these intangibles
have been determined by management. Management considered a number of factors in
determining the allocations. Other intangibles are being amortized over 5 years.
Amortization expense was $5,644 for the six months ended June 30, 2005.
Other intangible assets as of June 30, 2005 consist of the following:
On January 1, 2005, the Company granted two warrants to two consultants, as
payment for advisory services. Each warrant provides for the purchase of 50,000
shares of the Company's common stock at an exercise price of $.25 per share.
Each of these warrants is due to expire on January 1, 2007. In connection with
the issuance of these warrants, the Company recorded an expense of $7,400 which
is included in the Company's unaudited statement of operations for the six
months ended June 30, 2005. The fair value of the warrants granted was estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used: dividend yield of 0%; expected
volatility of 47%; risk free rated return of 5%;
F-20
and expected life of 2 years. The weighted average fair value of these warrants
was $0.07 per share.
For the six month period ended June 30, 2005, the Company conducted a private
placement pursuant to which it sold 967,000 shares of its common stock at a per
share purchase price of $0.25. As a result of this private placement, the
Company received $241,750 in gross proceeds.
For the six month period ended July 31, 2005, the Company also issued 50,000
shares of its common stock to a non-employee as stock-based compensation. The
Company accounts for the services using the fair market value of the services
rendered. The Company recorded compensation expense of $12,500 in connection
with the issuance of these shares.
4. COMMITMENTS AND CONTINGENCIES
The Company leases its facility which require the Company to pay certain
executory costs (such as insurance and maintenance)
Future minimum lease payments for operating leases are approximately as follows:
Years Ending
December 31,
2005 $10,050
Rental expense was approximately $10,209 and $6,385 for the six months ended
June 30, 2005 and 2004, respectively.
5. SUBSEQUENT EVENTS
ISSUANCES OF COMMON STOCK
For the month ended July 31, 2005, the Company concluded a private placement
pursuant to which it sold 6,323,125 shares of its common stock at a per share
purchase price of $0.16. As a result of this private placement, the Company
received $1,011,700 in gross proceeds.
AMENDMENTS TO CERTIFICATE OF INCORPORATION
On July 18, 2005, the Company amended its Certificate of Incorporation to, among
other things, (1) change its name from Recall Mail Corporation to BigString
Corporation, and (2) increase the number of shares the Company authorized to
issue from 50,000,000 shares to 250,000,000 shares, consisting of 249,000,000
shares of common stock, par value $0.0001 per share and 1,000,000 shares of
preferred stock, par value $0.0001 per share. The board of directors has the
authority, without action by the stockholders, to designate and issue the shares
of preferred stock in one or more series and to designate the rights, preference
and privileges of each series, any or all of which may be greater than the
rights of the Company's common stock. Currently, there are no shares of
preferred stock outstanding.
F-21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Sections 145(a) and (b) of the Delaware General Corporation Law permit us
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that the person is or was one of our directors, officers, employees or agents,
or is or was serving at our request as a director, officer, employee or agent of
another enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by the
person if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to our best interests, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful; provided, that with respect to actions or suits brought on
our behalf, the person may only be indemnified with respect to expenses
(including attorneys' fees) and may not be indemnified with respect to any
claim, issue or matter for which the person is adjudged to be liable unless a
court determines otherwise. Under Section 145(c) of the Delaware General
Corporation Law, to the extent that one of our present or former directors or
officers is successful on the merits or otherwise in defense of any of these
actions, suits or proceedings, or in defense of any claim, issue or matter, the
director or officer shall be indemnified against expenses (including attorneys'
fees) that the director or officer actually and reasonably incurs because of the
action, suit or proceeding.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
As permitted under Delaware law, Article Seventh of our certificate of
incorporation provides that our directors will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for:
- any breach of their duty of loyalty to the company or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
II-1
Article XI of our amended and restated by-laws requires us to indemnify
our officers, directors, employees and agents to the fullest extent allowed by
Section 145 of the Delaware General Corporation Law. Further, our amended and
restated by-laws permit our board of directors to advance funds pending
disposition of any action, suit or proceeding.
In addition to the indemnification provided for in our certificate of
incorporation and amended and restated by-laws, we may enter into
indemnification agreements with our existing and future directors and officers.
We also may obtain liability insurance for the benefit of our directors and
officers.
See Article XI of our amended and restated by-laws, filed as Exhibit 3.2
to this registration statement, for a complete description of the
indemnification provided by the company to its directors and officers.
Item 25. Other Expenses of Issuance and Distribution.
SEC registration fee ......................................... $ 671
Accounting fees and expenses (estimated) ..................... 20,000
Legal fees and expenses (estimated) .......................... 75,000
Printing and engraving costs (estimated) ..................... 7,500
Blue Sky fees and expenses (estimated) ....................... 2,500
Transfer Agent and Registrar fees and expenses (estimated) ... 2,500
Miscellaneous costs and expenses (estimated) ................. 10,000
----------
Total (estimated) ............................................ $ 118,171
==========
All of the expenses associated with the registration of securities covered
by this registration statement will be paid by BigString.
Item 26. Recent Sales of Unregistered Securities.
Since its inception on October 8, 2003, the company has issued a total of
52,770,125 shares of its common stock. These shares were issued in reliance on
the exemptions from registration provided by Rules 504 and 506 of Regulation D
and Section 4 (2) of the Securities Act of 1933, as amended (the "Securities
Act"). Set forth in the table and discussion below is additional information
with respect to the issuances of the unregistered shares.
II-2
-----------------------------------------------------------------------------------------
Date of Issuance Name of Stockholder Number of Shares Issued
-----------------------------------------------------------------------------------------
October 10, 2003 Darin M. Myman 4,000,000
-----------------------------------------------------------------------------------------
Kieran Vogel 225,000
-----------------------------------------------------------------------------------------
Alfred Pantaleone 8,000,000
-----------------------------------------------------------------------------------------
Jo Myman 1,000,000
-----------------------------------------------------------------------------------------
Peter DeAngelis 800,000
-----------------------------------------------------------------------------------------
Nirad Technology 400,000
-----------------------------------------------------------------------------------------
Adam M. Kotkin 1,000,000
-----------------------------------------------------------------------------------------
Todd M. Ross 1,500,000
-----------------------------------------------------------------------------------------
Craig Myman 2,000,000
-----------------------------------------------------------------------------------------
Gerri Yellen 175,000
-----------------------------------------------------------------------------------------
Marc Dutton 530,000
-----------------------------------------------------------------------------------------
Brad Zelenitz 170,000
-----------------------------------------------------------------------------------------
Lee Rosenberg 1,000,000
-----------------------------------------------------------------------------------------
Justin Daniels 100,000
-----------------------------------------------------------------------------------------
Thierry Maniase 300,000
-----------------------------------------------------------------------------------------
William Finkel 10,000
-----------------------------------------------------------------------------------------
December 9, 2003 Randee Gordon and Jonathan Gordon 40,000
-----------------------------------------------------------------------------------------
March 4, 2004 Thomas C. Sunday Jr. 4,000
-----------------------------------------------------------------------------------------
Thomas C. Sunday 8,000
-----------------------------------------------------------------------------------------
Thomas and Mary Ann Zukowski 20,000
-----------------------------------------------------------------------------------------
Brad T. Zukowski 12,000
-----------------------------------------------------------------------------------------
May 28, 2004 Lillian Vogel and Peter Albanese 24,000
-----------------------------------------------------------------------------------------
Lillian Darsey Vogel 28,000
-----------------------------------------------------------------------------------------
II-3
-----------------------------------------------------------------------------------------
Date of Issuance Name of Stockholder Number of Shares Issued
-----------------------------------------------------------------------------------------
June 3, 2004 Alan Kerr 4,000
-----------------------------------------------------------------------------------------
Richard Iglesias 8,000
-----------------------------------------------------------------------------------------
Lorraine Preston 8,000
-----------------------------------------------------------------------------------------
Michael Misson 8,000
-----------------------------------------------------------------------------------------
Ronny Hachadcorian 20,000
-----------------------------------------------------------------------------------------
Harvey M. Goldfarb 40,000
-----------------------------------------------------------------------------------------
Marc Dutton 80,000
-----------------------------------------------------------------------------------------
Philip Goldin 20,000
-----------------------------------------------------------------------------------------
Dr. Michael Hearns 20,000
-----------------------------------------------------------------------------------------
Murray and Cheryl Grashow 20,000
-----------------------------------------------------------------------------------------
Dale W. Dressler 20,000
-----------------------------------------------------------------------------------------
June 6, 2004 Carl Arndt Krapp 40,000
-----------------------------------------------------------------------------------------
Brett Goldin 40,000
-----------------------------------------------------------------------------------------
David Pisetzner 20,000
-----------------------------------------------------------------------------------------
Stephen C. Nitti 10,000
-----------------------------------------------------------------------------------------
Bradley Zelenitz 20,000
-----------------------------------------------------------------------------------------
June 15, 2004 Paul Levis (Warrant-unexercised) 15,000
-----------------------------------------------------------------------------------------
Steve Hoffman (Warrant-exercised; See August 15,000
1, 2004)
-----------------------------------------------------------------------------------------
H. Joseph Sgroi (Warrant-exercised; See 30,000
August 1, 2004)
-----------------------------------------------------------------------------------------
July 16, 2004 Darin M. Myman 4,000,000
-----------------------------------------------------------------------------------------
David Daniels 4,000,000
-----------------------------------------------------------------------------------------
Deborah Daniels 4,000,000
-----------------------------------------------------------------------------------------
II-4
-----------------------------------------------------------------------------------------
Date of Issuance Name of Stockholder Number of Shares Issued
-----------------------------------------------------------------------------------------
Charles Handshy, Jr. 4,000,000
-----------------------------------------------------------------------------------------
June Handshy 4,000,000
-----------------------------------------------------------------------------------------
August 1, 2004 John Delery 5,000
-----------------------------------------------------------------------------------------
David Shapiro 20,000
-----------------------------------------------------------------------------------------
Bradley Zelenitz 20,000
-----------------------------------------------------------------------------------------
Paul A. Levis PSP 40,000
-----------------------------------------------------------------------------------------
Steven Gilden 20,000
-----------------------------------------------------------------------------------------
H. Joseph Sgroi 84,000
-----------------------------------------------------------------------------------------
Steven Hoffman 40,000
-----------------------------------------------------------------------------------------
Neil Zelenitz 20,000
-----------------------------------------------------------------------------------------
Eric J. Sarner 20,000
-----------------------------------------------------------------------------------------
Michael Skurnick 20,000
-----------------------------------------------------------------------------------------
Arnold Boritz 32,000
-----------------------------------------------------------------------------------------
Sharon Wagner 20,000
-----------------------------------------------------------------------------------------
Howard Greene 220,000
-----------------------------------------------------------------------------------------
December 20, 2004 Howard Haberman 20,000
-----------------------------------------------------------------------------------------
January 1, 2005 Paul Quintal (Warrant-unexercised) 50,000
-----------------------------------------------------------------------------------------
Barbara Musco (Warrant-unexercised) 50,000
-----------------------------------------------------------------------------------------
April 15, 2005 Harvey M. Goldfarb 40,000
-----------------------------------------------------------------------------------------
Marc Dutton 40,000
-----------------------------------------------------------------------------------------
Stephen C. Nitti 10,000
-----------------------------------------------------------------------------------------
H. Joseph Sgroi 30,000
-----------------------------------------------------------------------------------------
Barbara Musco 130,000
-----------------------------------------------------------------------------------------
II-5
-----------------------------------------------------------------------------------------
Date of Issuance Name of Stockholder Number of Shares Issued
-----------------------------------------------------------------------------------------
Susan Baran 600,000
-----------------------------------------------------------------------------------------
Adam Schaffer 20,000
-----------------------------------------------------------------------------------------
Jeffrey Kay 52,000
-----------------------------------------------------------------------------------------
Lee Rosenberg 40,000
-----------------------------------------------------------------------------------------
May 15, 2005 Steven Hoffman 15,000
-----------------------------------------------------------------------------------------
June 29, 2005 Adam Schaffer 20,000
-----------------------------------------------------------------------------------------
Jeffrey Kay 20,000
-----------------------------------------------------------------------------------------
July 20, 2005 Barbara Musco 125,000
-----------------------------------------------------------------------------------------
Thomas Shields 625,000
-----------------------------------------------------------------------------------------
Nicholas Codispoti 375,000
-----------------------------------------------------------------------------------------
Nicholas Codispoti, IRA Account 375,000
-----------------------------------------------------------------------------------------
Nicholas Codispoti, President, Codispoti 750,000
Foundation
-----------------------------------------------------------------------------------------
Dean G. Corsones 312,500
-----------------------------------------------------------------------------------------
Jon M. Conahan 1,250,000
-----------------------------------------------------------------------------------------
Theodore Fadool Jr. 581,250
-----------------------------------------------------------------------------------------
David A. Arledge 1,250,000
-----------------------------------------------------------------------------------------
David Matthew Adredge 125,000
-----------------------------------------------------------------------------------------
Charles Scott Guerrieri 312,500
-----------------------------------------------------------------------------------------
Todd M. Ross 125,000
-----------------------------------------------------------------------------------------
July 31, 2005 Herd Family Partnership 31,250
-----------------------------------------------------------------------------------------
Sara Pasquarello 31,250
-----------------------------------------------------------------------------------------
Ronald Herd 38,750
-----------------------------------------------------------------------------------------
Glen Herd 15,625
-----------------------------------------------------------------------------------------
II-6
-----------------------------------------------------------------------------------------
Date of Issuance Name of Stockholder Number of Shares Issued
-----------------------------------------------------------------------------------------
August 10, 2005 James R. Kaufman and Barbara Kaufman 312,500
-----------------------------------------------------------------------------------------
Shefts Family LP 625,000
-----------------------------------------------------------------------------------------
Marc Sandusky 62,500
-----------------------------------------------------------------------------------------
Jeffrey M. Barber and Jo Ann Barber 312,500
-----------------------------------------------------------------------------------------
Michael Dewhurst 125,000
-----------------------------------------------------------------------------------------
David and Kim Prado 312,500
-----------------------------------------------------------------------------------------
Joel Marcus 312,500
-----------------------------------------------------------------------------------------
Richard and George Petrone 62,500
-----------------------------------------------------------------------------------------
AJW Offshore, LTD 430,313
-----------------------------------------------------------------------------------------
AJW Partners, LLC 299,531
-----------------------------------------------------------------------------------------
AJW Qualified Partners, LLC 101,250
-----------------------------------------------------------------------------------------
New Millennium Capital Partners II, LLC 12,656
-----------------------------------------------------------------------------------------
Mark Yutko 156,250
-----------------------------------------------------------------------------------------
Details of Issuance of Shares of Our Common Stock in Connection with the
Acquisition of EmailEmissary, Inc.
On July 16, 2004, we issued 4,000,000 shares of our common stock to each
of Darin M. Myman, the President and Chief Executive Officer and a director of
the company, David Daniels, the Chief Technology Officer and a director of the
company, Deborah Daniels, Mr. Daniel's wife, Charles A. Handshy, Jr., the Chief
Information Officer and a director of the company and June Handshy, Mr.
Handshy's wife, for their shares of EmailEmissary, Inc. common stock. As a
result of these stock acquisitions, the company became the owner of 100% of the
outstanding common stock of EmailEmissary, Inc. These shares were issued in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
Details of Issuance of Shares of Our Common Stock in Connection With Advisory
Services
We periodically issue shares of our common stock in lieu of cash payments
to consultants.
II-7
On August 1, 2004, we issued 5,000 shares to an individual for his
services to the company. On August 1, 2004, we issued 180,000 shares to an
individual for his public relations, advertising and business advisory services.
On April 15, 2005, we issued 50,000 shares to an individual for her business
advisory services. The registered public accounting firm has valued each of the
shares issued for advisory services at $.21 a share. All of these shares were
issued in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act.
Details of Issuance of Shares of Our Common Stock in Connection with Executive
Employment
We issued shares of our common stock to certain of our executive officers
as compensation for their service as executives of the company. On October 10,
2003, we issued to Darin M. Myman, our President and Chief Executive Officer,
4,000,000 shares of common stock, Adam M. Kotkin, our Chief Operating Officer,
1,000,000 shares of common stock, and Todd M. Ross, our Chief Financial Officer,
1,500,000 shares of common stock. These shares were issued in reliance on the
exemption from registration provided by Section 4 (2) of the Securities Act.
Details of Issuance of Shares of Our Common Stock to Investors
On October 10, 2003, we sold 14,710,000 shares of common stock to 13
investors. These shares were sold at .0001 per share. The total proceeds
received by the company as a result of the sale of these shares was $14.71.
These shares were issued in reliance on the exemption from registration provided
by Section 4 (2) of the Securities Act.
On December 9, 2003, we sold 40,000 shares of common stock to 1 investor.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $10,000. These shares were
issued in reliance on the exemption from registration provided by Rule 504 of
Regulation D of the Securities Act.
On March 4, 2004, we sold 44,000 shares of common stock to 4 investors.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $11,000. These shares were
issued in reliance on the exemption from registration provided by Rule 504 of
Regulation D of the Securities Act.
On May 28, 2004, we sold 52,000 shares of common stock to 2 investors.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $13,000. These shares were
issued in reliance on the exemption from registration provided by Rule 504 of
Regulation D of the Securities Act.
On June 3, 2004, we sold 248,000 shares of common stock to 11 investors.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $62,000. These shares were
issued in reliance on the exemption from registration provided by Rule 504 of
Regulation D of the Securities Act.
II-8
On June 6, 2004, we sold 130,000 shares of common stock to 5 investors.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $32,500. These shares were
issued in reliance on the exemption from registration provided by Rule 504 of
Regulation D of the Securities Act.
On August 1, 2004, we sold 376,000 shares of common stock to 12 investors.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $94,000. These shares were
issued in reliance on the exemption from registration provided by Rule 504 of
Regulation D of the Securities Act.
On December 20, 2004, we sold 20,000 shares of common stock to 1 investor.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $5,000. These shares were
issued in reliance on the exemption from registration provided by Rule 504 of
Regulation D of the Securities Act.
On April 15, 2005, we sold 912,000 shares of common stock to 9 investors.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $228,000. These shares were
issued in reliance on the exemption from registration provided by Rule 506 of
Regulation D of the Securities Act.
On May 15, 2005, we sold 15,000 shares of common stock to 1 investor.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $3,750. These shares were
issued in reliance on the exemption from registration provided by Rule 506 of
Regulation D of the Securities Act.
On June 29, 2005, we sold 40,000 shares of Common Stock to 2 investors.
These shares were sold at $.25 per share. The total proceeds received by the
company as a result of the sale of these shares was $10,000. These shares were
issued in reliance on the exemption from registration provided by Rule 506 of
Regulation D of the Securities Act.
On July 20, 2005, we sold 6,206,250 shares of common stock to 12
investors. These shares were sold at $.16 per share. The total proceeds received
by the company as a result of the sale of these shares was $993,000. These
shares were issued in reliance on the exemption from registration provided by
Rule 506 of Regulation D of the Securities Act.
On July 31, 2005, we sold 116,875 shares of common stock to 4 investors.
These shares were sold at $.16 per share. The total proceeds received by the
company as a result of the sale of these shares was $18,700. These shares were
issued in reliance on the exemption from registration provided by Rule 506 of
Regulation D of the Securities Act.
On August 10, 2005, we sold 3,125,000 shares of common stock to 13
investors. These shares were sold at $.16 per share. The total proceeds received
by the company as a result of the sale of these shares was $500,000. These
shares were issued in reliance on the exemption from registration provided by
Rule 506 of Regulation D of the Securities Act.
II-9
Details of the Exercise and Issuance of Warrants
On June 15, 2004, we agreed to grant to 3 consultants, as payment for
advisory services, 3 warrants to purchase 60,000 shares of common stock at an
exercise price of $.25 per share. Each of these warrants was set to expire on
January 1, 2007. Two of these warrants for 45,000 shares of common stock were
subsequently exercised. The total proceeds realized as a result of the exercise
of these warrants was $11,250. These warrants and the shares issued thereunder
were issued in reliance on the exemption from registration provided by Section 4
(2) of the Securities Act.
On January 1, 2005, we agreed to grant to 2 consultants, as payment for
advisory services 2 warrants each of which were to purchase 50,000 shares of
common stock at an exercise price of $.25 per share. Each of these warrants is
set to expire on January 1, 2007. These warrants were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
II-10
Item 27. Index to Exhibits
The following exhibits are filed as part of this registration statement:
Exhibit No. Description of Exhibit
----------- ----------------------
3.1.1 Certificate of Incorporation of BigString, placed into effect
on October 8, 2003.
3.1.2 Certificate of Amendment to the Certificate of Incorporation
of BigString, placed into effect on July 19, 2005.
3.2 Amended and Restated By-laws of BigString.
4.1 Specimen certificate representing BigString's common stock,
par value $.0001 per share.
5.1 Opinion of Giordano, Halleran & Ciesla, a Professional
Corporation, including the consent of such counsel.
10.1 Registration Rights Agreement, dated August 10, 2005, between
BigString and AJW Offshore, Ltd.
10.2 Registration Rights Agreement, dated August 10, 2005, between
BigString and AJW Partners, LLC.
10.3 Registration Rights Agreement, dated August 10, 2005, between
BigString and AJW Qualified Partners, LLC.
10.4 Registration Rights Agreement, dated June 17, 2005, between
BigString and David Matthew Adredge.
10.5 Registration Rights Agreement, dated June 17, 2005, between
BigString and David A. Arledge.
10.6 Registration Rights Agreement, dated July 31, 2005, between
BigString and Jeffrey M. Barber and Jo Ann Barber.
10.7 Registration Rights Agreement, dated June 17, 2005, between
BigString and Nicholas Codispoti.
10.8 Registration Rights Agreement, dated June 17, 2005, between
BigString and Nicholas Codispoti, IRA Account.
10.9 Registration Rights Agreement, dated June 17, 2005, between
BigString and Nicholas Codispoti, President, Codispoti
Foundation.
II-11
10.10 Registration Rights Agreement, dated June 17, 2005, between
BigString and Jon M. Conahan.
10.11 Registration Rights Agreement, dated July 31, 2005, between
BigString and Michael Dewhurst.
10.12 Registration Rights Agreement, dated June 17, 2005, between
BigString and Theodore Fadool, Jr.
10.13 Registration Rights Agreement, dated June 17, 2005, between
BigString and Charles S. Guerrieri.
10.14 Registration Rights Agreement, dated August 9, 2005, between
BigString and James R. Kauffman and Barbara Kauffman.
10.15 Registration Rights Agreement, dated July 31, 2005, between
BigString and Joel Marcus.
10.16 Registration Rights Agreement, dated August 10, 2005, between
BigString and New Millennium Capital Partners II, LLC.
10.17 Registration Rights Agreement, dated July 31, 2005, between
BigString and Richard and Georgia Petrone.
10.18 Registration Rights Agreement, dated July 31, 2005, between
BigString and David and Kim Prado.
10.19 Registration Rights Agreement, dated August 4, 2005, between
BigString and Marc Sandusky.
10.20 Registration Rights Agreement, dated August 6, 2005, between
BigString and Shefts Family LP.
10.21 Registration Rights Agreement, dated June 17, 2005, between
BigString and Thomas Shields.
10.22 Indenture of Lease between BigString, as Tenant, and Brook 35
Office Suites d/b/a Premier Executive Suites, as Landlord,
dated November 4, 2003, for the premises located at 2150
Highway 35, Suite 250, Sea Girt, New Jersey 08750.
10.23 Indenture of Lease between BigString, as Tenant, and
INTERNETworks, as Landlord, dated June 15, 2005, for the
premises located at 113 W. Dawes, Suite 111, Bixby, Oklahoma
74008.
10.24 Form of Agreement among Selling Stockholders.
21.1 Subsidiaries of BigString.
II-12
23.1 Consent of Wiener, Goodman and Company, independent registered
public accountants.
23.2 Consent of Giordano, Halleran & Ciesla, a Professional
Corporation (filed with Exhibit 5).
24.1 Powers of Attorney of officers and directors of BigString
(included in the signature page to this registration
statement).
Item 28. Undertakings.
The undersigned registrant, BigString Corporation (the "Registrant"),
hereby undertakes as follows:
(1) The Registrant will file, during any period in which it offers or
sells securities, a post-effective amendment to this Registration
Statement to:
(a) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the Registration Statement; and
(c) include any additional or changed material information on the
plan of distribution.
(2) The Registrant will, for determining liability under the Securities
Act, treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-13
(4) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was
declared effective.
(5) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-14
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and has authorized this
registration statement to be signed on its behalf by the undersigned, in the
Borough of Sea Girt, State of New Jersey, on August 29, 2005.
BIGSTRING CORPORATION
By: /s/ Darin M. Myman
-------------------------------------
Name: Darin M. Myman
Title: President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Darin M. Myman and Adam M. Kotkin and each of
them, his or her true and lawful attorneys-in-fact and agents for him or her and
in his or her name, place an stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this registration
statement on Form SB-2, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement was signed by the following persons in the
capacities and on the dates stated.
Signatures Title Date
---------- ----- ----
/s/ Darin M. Myman President and Chief Executive Officer August 29, 2005
------------------------- and Director (Principal Executive
Darin M. Myman Officer)
/s/ Todd M. Ross Chief Financial Officer, Treasurer and August 29, 2005
------------------------- Director (Principal Financial and
Todd M. Ross Accounting Officer)
II-15
Signatures Title Date
---------- ----- ----
/s/ David Daniels Director August 29, 2005
-------------------------
David Daniels
/s/ Adam M. Kotkin Director August 29, 2005
-------------------------
Adam M. Kotkin
/s/ Charles Handshy, Jr. Director August 29, 2005
-------------------------
Charles Handshy, Jr.
/s/ Marc Dutton Director August 29, 2005
-------------------------
Marc Dutton
/s/ Barbara Musco Director August 29, 2005
-------------------------
Barbara Musco
II-16
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
to
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
BIGSTRING CORPORATION
(Exact name of registrant as
specified in its charter)
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
----------- ----------------------
3.1.1 Certificate of Incorporation of BigString, placed into effect
on October 8, 2003.
3.1.2 Certificate of Amendment to the Certificate of Incorporation
of BigString, placed into effect on July 19, 2005.
3.2 Amended and Restated By-laws of BigString.
4.1 Specimen certificate representing BigString's common stock,
par value $.0001 per share.
5.1 Opinion of Giordano, Halleran & Ciesla, a Professional
Corporation, including the consent of such counsel.
10.1 Registration Rights Agreement, dated August 10, 2005, between
BigString and AJW Offshore, Ltd.
10.2 Registration Rights Agreement, dated August 10, 2005, between
BigString and AJW Partners, LLC.
10.3 Registration Rights Agreement, dated August 10, 2005, between
BigString and AJW Qualified Partners, LLC.
10.4 Registration Rights Agreement, dated June 17, 2005, between
BigString and David Matthew Adredge.
10.5 Registration Rights Agreement, dated June 17, 2005, between
BigString and David A. Arledge.
10.6 Registration Rights Agreement, dated July 31, 2005, between
BigString and Jeffrey M. Barber and Jo Ann Barber.
10.7 Registration Rights Agreement, dated June 17, 2005, between
BigString and Nicholas Codispoti.
10.8 Registration Rights Agreement, dated June 17, 2005, between
BigString and Nicholas Codispoti, IRA Account.
10.9 Registration Rights Agreement, dated June 17, 2005, between
BigString and Nicholas Codispoti, President, Codispoti
Foundation.
10.10 Registration Rights Agreement, dated June 17, 2005, between
BigString and Jon M. Conahan.
E-1
10.11 Registration Rights Agreement, dated July 31, 2005, between
BigString and Michael Dewhurst.
10.12 Registration Rights Agreement, dated June 17, 2005, between
BigString and Theodore Fadool, Jr.
10.13 Registration Rights Agreement, dated June 17, 2005, between
BigString and Charles S. Guerrieri.
10.14 Registration Rights Agreement, dated August 9, 2005, between
BigString and James R. Kauffman and Barbara Kauffman.
10.15 Registration Rights Agreement, dated July 31, 2005, between
BigString and Joel Marcus.
10.16 Registration Rights Agreement, dated August 10, 2005, between
BigString and New Millennium Capital Partners II, LLC.
10.17 Registration Rights Agreement, dated July 31, 2005, between
BigString and Richard and Georgia Petrone.
10.18 Registration Rights Agreement, dated July 31, 2005, between
BigString and David and Kim Prado.
10.19 Registration Rights Agreement, dated August 4, 2005, between
BigString and Marc Sandusky.
10.20 Registration Rights Agreement, dated August 6, 2005, between
BigString and Shefts Family LP.
10.21 Registration Rights Agreement, dated June 17, 2005, between
BigString and Thomas Shields.
10.22 Indenture of Lease between BigString, as Tenant, and Brook 35
Office Suites d/b/a Premier Executive Suites, as Landlord,
dated November 4, 2003, for the premises located at 2150
Highway 35, Suite 250, Sea Girt, New Jersey 08750.
10.23 Indenture of Lease between BigString, as Tenant, and
INTERNETworks, as Landlord, dated June 15, 2005, for the
premises located at 113 W. Dawes, Suite 111, Bixby, Oklahoma
74008.
10.24 Form of Agreement among Selling Stockholders.
21.1 Subsidiaries of BigString.
23.1 Consent of Wiener, Goodman and Company, independent registered
public accountants.
E-2
23.2 Consent of Giordano, Halleran & Ciesla, a Professional
Corporation (filed with Exhibit 5).
24.1 Powers of Attorney of officers and directors of BigString
(included in the signature page to this registration
statement).
E-3
EXHIBIT 3.1.1
CERTIFICATE OF INCORPORATION
OF
RECALL MAIL CORPORATION
FIRST: The name of the Corporation is Recall Mail Corporation.
SECOND: Its registered office is to be located at Suite 606, 1220 N. Market
Street, Wilmington, DE 19801, County of New Castle. The registered agent is
American Incorporators Ltd. whose address is the same as above.
THIRD: The nature of business and purpose of the organization is to engage in
any lawful act or activity for which corporations may be organized under the
Delaware General Corporation Laws.
FOURTH: The total number of shares of stock which the corporation shall have
authority to issue is fifty million (50,000,000). All such shares are to be with
par value of 0.0001 and are to be of one class.
FIFTH: The name and address of the incorporator are as follows:
Wendy Gragg
Suite 606
1220 N. Market St.
Wilmington, DE 19801
SIXTH: The powers of the undersigned incorporator will terminate upon filing of
the certificate of incorporation. The name and mailing address of the person(s)
who will serve as director(s) until the first annual meeting of the stockholders
or until a successor(s) is elected and qualified are:
Alfred Pantaleone
25 Ely Road
Holmdel, NJ 07733
SEVENTH: Each person who serves or has served as a director shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, provided that this provision shall
not eliminate or limit the liability of a director: (i) for any breach of
loyalty to the corporation or its stockholders; (ii) for acts or omission not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for unlawful payment of dividend or unlawful stock purchase or
redemption as such liability is imposed under Section 174 of the General
Corporation Laws of Delaware; or (iv) for any transaction from which the
director derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a corporation under the laws of
the State of Delaware, do make, file and record this certificate, and do certify
that the facts stated herein are true, and I have accordingly set my hand.
CERTIFICATE OF AMENDMENT TO
THE
CERTIFICATE OF INCORPORATION
OF
RECALL MAIL CORPORATION
Pursuant to Section 242 of
the Delaware General Corporation Law
TO: SECRETARY OF STATE
STATE OF DELAWARE
Recall Mail Corporation, a corporation incorporated and organized under
and by virtue of the laws of the State of Delaware (the "Corporation"), hereby
amends its Certificate of Incorporation as set forth in this Certificate of
Amendment. The Corporation's Certificate of Incorporation was filed and recorded
in the Office of the Secretary of State, State of Delaware on October 8, 2003.
The Corporation does hereby certify as follows:
ARTICLE I
AMENDMENTS
The following amendments to the Certificate of Incorporation of the
Corporation (the "Amendments") were adopted by a majority of the stockholders of
the Corporation pursuant to the written consent of such stockholders given in
accordance with Section 228 of the Delaware General Corporation Law.
ARTICLE FIRST of the Corporation's Certificate of Incorporation is amended
to read as follows:
The name of the Corporation is BigString Corporation.
ARTICLE FOURTH of the Corporation's Certificate of Incorporation is
amended to read as follows:
Section 4.1. Total Number of Shares of Stock. The total number of shares
of all classes of stock which the Corporation has authority to issue is two
hundred-fifty million (250,000,000), consisting of two hundred-forty nine
million (249,000,000) shares of Common Stock, par value $0.0001 per share
("Common Stock"), and one million (1,000,000) shares of Preferred Stock, par
value $0.0001 per share ("Preferred Stock").
Section 4.2. Common Stock.
(a) The holders of shares of Common Stock shall be entitled to one vote
for each share so held with respect to all matters voted on by the stockholders
of the Corporation.
(b) Subject to any prior or superior right of the Preferred Stock, upon
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, after
payment shall have been made to the holders of Preferred Stock of the full
amount to which they are entitled, the holders of Common Stock shall be entitled
to receive that portion of the remaining funds to be distributed. Such funds
shall be paid to the holders of Common Stock on the basis of the number of
shares of Common Stock held by each of them.
(c) Dividends may be paid on the Common Stock as and when declared by the
Board of Directors of the Corporation.
Section 4.3. Preferred Stock.
(a) The Preferred Stock may from time to time be divided into and issued
in series. The different series of Preferred Stock shall be established and
designated, and the variations in the relative rights and preferences as between
the different series shall be fixed and determined, by the Board of Directors of
the Corporation as hereinafter provided. In all other respects all shares of the
Preferred Stock shall be identical.
(b) The Board of Directors of the Corporation is hereby expressly
authorized, subject to the provisions hereof, to establish series of Preferred
Stock and to fix and determine by vote providing for the issuance of such
series:
(i) the distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased (except
where otherwise provided by the Board of Directors of the Corporation in
creating such series) or decreased (but not below the number of shares then
outstanding) from time to time by the Board of Directors of the Corporation;
(ii) the dividend rate or rates and preferences, if any, to which
the shares of such series shall be entitled, the times at and conditions upon
which dividends shall be paid, any limitations, restrictions or conditions on
the payment of dividends, and whether dividends shall be cumulative and, if
cumulative, the terms upon and dates from which such dividends shall be
cumulative, which dates may differ for shares of any one series issued at
different times;
(iii) whether or not the shares of such series shall be redeemable,
and, if redeemable, the redemption prices which the shares of such series shall
be entitled to receive and the terms and manner of redemption;
(iv) the preferences, if any, and the amounts which the shares of
such series shall be entitled to receive and all other special or relative
rights of the shares of such series, upon any voluntary or involuntary
liquidation, dissolution or winding up of, or upon any distribution of the
assets of, the Corporation;
(v) the obligation, if any, of the Corporation to maintain a
purchase, retirement or sinking fund for shares of such series and the
provisions with respect thereto;
(vi) the term, if any, upon which the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or classes or
of any other series of the same or any other class or classes of stock of the
Corporation, including the rate of conversion or exchange and the terms of
adjustments, if any;
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(vii) the terms and conditions of the voting rights, if any, of the
holders of the shares of such series, including the conditions under which the
shares of such series shall vote as a separate class; and
(viii) such other designating preferences, powers, qualifications
and special or relative rights or privileges of such series to the full extent
now or hereafter permitted by the laws of the State of Delaware.
(c) If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to holders
of shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
(d) Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the Common Stock with respect to the same
dividend period.
ARTICLE SEVENTH of the Corporation's Certificate of Incorporation is
amended to read as follows:
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not apply
to any liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
ARTICLE II
APPROVAL OF AMENDMENTS
The Corporation has 49,663,050 shares of Common Stock outstanding, the
affirmative vote of the holders of a majority of which is required to approve
the Amendments set forth in this Certificate of Amendment. Pursuant to the
written consent of the holders of a majority of the outstanding shares of Common
Stock given in accordance with Section 228 of the Delaware General Corporation
Law, the Amendments set forth in this Certificate of Amendment were approved by
the stockholders of the Corporation as of June 29, 2005. 30,200,000 of the
outstanding shares of Common Stock were voted in favor of the Amendments set
forth in this Certificate of Amendment.
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IN WITNESS WHEREOF, this Certificate of Amendment has been executed as of
this 19th day of July, 2005.
RECALL MAIL CORPORATION
By: /s/ Darin Myman
------------------------------------
Name: Darin Myman
Title: President and Chief Executive Officer
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EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
BIGSTRING CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of BigString
Corporation (the "Corporation") in the State of Delaware shall be located in the
County of New Castle at Suite 606, 1220 N. Market Street, Wilmington, Delaware
19801. The registered agent of the Corporation at the registered office is
American Incorporators Ltd.
Section 2. Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors of the Corporation (the "Board" or "Board of Directors") may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the stockholders for the
election of directors and for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders shall be held
in the month of May, on such day and at such time as the Board of Directors
shall designate, at which the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Notice of the annual meeting shall be
given by mailing, not more than sixty (60) days nor less than ten (10) days
prior thereto, a written notice stating the time and place thereof, directed to
each stockholder of record entitled to vote at the meeting at his, her or its
address as the same appears upon the records of the Corporation.
Section 4. List of Stockholders. At least ten (10) days prior to each
annual or special meeting of the stockholders, the officer who has charge of the
stock ledger of the Corporation shall prepare and make a complete list of the
stockholders entitled to vote at said meeting, which shall be arranged in
alphabetical order and include the address of and the number of shares
registered in the name of each stockholder. The list shall be produced and
available for examination for a period of at least ten (10) days prior to a
meeting. Further, the list shall be produced and kept at the time and place of
the meeting during the whole time thereof and may be inspected by any
stockholder who may be present.
Section 5. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, may be called by the Chairman of the Board or the
President, and shall be called by the President or Secretary at the request in
writing of a majority of the Board of Directors. Such request shall state the
purpose or purposes of the proposed meeting.
Section 6. Notice of Special Meeting. Written or telegraphic notice of a
special meeting of stockholders, stating the time, place and object thereof,
shall be given to each stockholder entitled to vote thereat, not more than sixty
(60) nor less than ten (10) days before the date fixed for the meeting.
Section 7. Business Transacted at a Special Meeting. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
Section 8. Quorum. Except as otherwise provided in the Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), a majority of the issued and outstanding shares of the
Corporation's common stock, par value $0.0001 per share (iCommon Stock"),
present in person or represented by proxy, shall constitute a quorum for the
transaction of business at any meeting of the stockholders; provided, that when
a specified matter is required to be voted on by a class or series of capital
stock, voting as a separate class or series, the holders of a majority of the
issued and outstanding shares of such class or series, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to such matter.
Section 9. Method of Voting. Each holder of Common Stock shall, at every
meeting of the stockholders, be entitled to one vote for each share of Common
Stock held by such stockholder.
Every stockholder entitled to vote at a meeting of stockholders or to
express consent without a meeting may authorize another person or persons to act
for him, her or it by proxy. Every proxy shall be executed in writing by the
stockholder or his, her or its agent, except that a proxy may be given by a
stockholder or his, her or its agent by telegram or cable or its equivalent.
Unless it is coupled with an interest, a proxy shall be revocable at will. A
proxy shall not be revoked by the death or incapacity of a stockholder but such
proxy shall continue in force until revoked by the personal representative or
guardian of the stockholder. The presence at any meeting of any stockholder who
has given a proxy shall not revoke such proxy unless the stockholder shall file
written notice of such revocation with the secretary of the meeting prior to the
voting of such proxy.
A person named in a proxy as the attorney or agent of a stockholder may,
if the proxy so provides, substitute another person to act in his, her or its
place, including any other person named as an attorney or agent in the same
proxy. The substitution shall not be effective until an instrument effecting it
is filed with the Secretary of the Corporation.
Section 10. Action at Meeting. When a quorum is present at any meeting,
the holders of a majority of the stock present or represented and voting on a
matter (or if there are two or more issues of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these
2
By-Laws. Any election of directors by stockholders shall be determined by a
plurality of the votes cast by the stockholders entitled to vote at the
election.
Section 11. Action by Stockholders Without a Meeting. Subject to the
provisions of Section 228 of the Delaware General Corporation Law, whenever the
vote of stockholders at a meeting thereof is required or permitted to be taken
in connection with any corporate action by any provision of the Delaware General
Corporation Law or of the Certificate of Incorporation, the meeting and the vote
of stockholders may be dispensed with and the action may be taken without a
meeting upon the written consent of stockholders who would have been entitled to
cast the minimum number of votes that would be necessary to authorize such
action at a meeting at which all shares entitled to be voted thereat were
present and voted.
Section 12. Conduct at Meetings. At each meeting of stockholders, the
Chairman of the Board of Directors, or in his or her absence the President of
the Corporation, or in his or her absence any Executive Vice President or Senior
Vice President of the Corporation, or in his or her absence a chairman chosen by
the vote of a majority in interest of the stockholders present in person or
represented by proxy and entitled to vote thereat, shall act as chairman. The
Secretary or in his or her absence an Assistant Secretary or in the absence of
the Secretary and all Assistant Secretaries a person whom the chairman of the
meeting shall appoint shall act as secretary of the meeting and keep a record of
the proceedings thereof. The Board of Directors shall be entitled to make such
rules or regulations for the conduct of meetings of stockholders as it shall
deem necessary, appropriate or convenient. Subject to such rules and
regulations, the chairman shall have the authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing an agenda or order of
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the Corporation and their duly authorized
and constituted proxies, and such other persons as the chairman shall permit,
restrictions on entry at the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. The chairman shall have
absolute authority over matters of procedure and there shall be no appeal from
the ruling of the chairman. The chairman may rule that a resolution, nomination
or motion not be submitted to the stockholders for a vote unless seconded by a
stockholder or a proxy for a stockholder. The chairman may require that any
person who is neither a bona fide stockholder nor a proxy for a bona fide
stockholder leave the meeting, and upon the refusal of a stockholder to comply
with a procedural ruling of the chairman which the chairman deems necessary for
the proper conduct of the meeting, may require that such stockholder leave the
meeting. The chairman may, on his or her own motion, summarily adjourn any
meeting for any period he or she deems necessary if he or she rules that orderly
procedures cannot be maintained at the meeting. Unless, and to the extent,
determined by the Board of Directors or the chairman of the meeting, meetings of
stockholders shall not be required to be held in accordance with rules of
parliamentary procedure.
Section 13. Procedure Necessary to Bring Business Before an Annual
Meeting. To be properly brought before an annual meeting of stockholders,
business must be either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
properly brought before the meeting by or at the direction of the Board, or (c)
properly brought before the meeting by a stockholder. In addition to any other
applicable
3
requirements, for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the Corporation not less than one hundred and twenty (120) days in
advance of the date of the Corporation's proxy statement released to
stockholders in connection with the previous year's annual meeting of
stockholders; provided, however, that if the Corporation did not release a proxy
statement in connection with the previous year's annual meeting then the
stockholder must give such notice not later than one hundred and twenty (120)
days prior to the anniversary date of the immediately preceding annual meeting.
A stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder,
and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in these By-laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 13 of Article II and any other applicable
requirements; provided, however, that nothing in this Section 13 of Article II
shall be deemed to preclude discussion by any stockholder of any business
properly brought before the annual meeting.
The chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 13 of Article II or
any other applicable requirements, which determination shall be conclusive, and,
as a result, any such business shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The number of directors which
shall constitute the whole Board shall be not less than one (1) nor more than
twelve (12) directors. The Board, upon adoption of these By-laws, shall consist
of seven (7) directors, and thereafter the number of directors which shall
constitute the whole Board may be increased or decreased by resolution of the
Board of Directors, but shall in no case be less than three (3) directors. The
directors shall be elected at the annual meeting of the stockholders or a
special meeting of the stockholders called for such purpose, except as provided
in Section 12 of this Article III, and each director elected shall hold office
until his or her successor is elected and qualifies. Directors need not be
stockholders.
Section 2. Nominations. Nominations for the election of directors may be
made by the Board of Directors or a committee appointed by the Board of
Directors or by a shareholder entitled to vote in the election of directors
generally.
Section 3. Regular Meetings. Regular meetings of the Board may be held on
five (5) days written notice, at such time as shall be from time to time
determined by the Chairman of the Board or the President. Written notice for any
such meeting shall state the place, date and hour of the meeting and shall be
delivered either personally or by first class mail or overnight courier service.
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Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President and shall be called
by the President or Secretary at the request in writing of a majority of the
directors then in office. Written notice of any special meeting shall be given,
either personally or by overnight courier service, to each director at least two
(2) days prior to the date thereof.
Section 5. Place of Meeting; Waiver of Notice. Meetings of the Board of
Directors shall be held at such place as shall be designated in the notice of
meeting if notice is required. Notice of any meeting, if required, need not be
given to any director who signs a waiver of notice before or after the meeting.
The attendance of any director at any meeting without the director protesting
prior to the conclusion of such meeting the lack of notice thereof shall
constitute a waiver of notice by such director.
Section 6. Quorum. Except as otherwise provided in the Certificate of
Incorporation, a majority of the directors then in office shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors.
Section 7. Manner of Acting. Except as otherwise provided in the
Certificate of Incorporation or herein, the act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 8. Action Without a Meeting. Any action required or permitted to
be taken by the Board of Directors or by a committee thereof may be taken
without a meeting if, prior to such action, all of the members of the Board or
committee consent in writing to a resolution authorizing the action. Such
written consents may be executed in counterparts, and shall be filed with the
minutes of the Corporation.
Section 9. Telephonic Attendance at Meeting. Any or all directors may
participate in a meeting of the Board of Directors or a committee of the Board
by means of conference telephone or any means of communication by which all
persons participating in the meeting are able to hear each other.
Section 10. Resignation. Any director may resign by delivering his or her
written resignation to the Corporation at its principal office or to the
Chairman, President or Secretary. Such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
Section 11. Removal. Except as otherwise provided by the Delaware General
Corporation Law, any one or more or all of the directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except that the directors elected by the holders of
a particular class or series of stock may be removed without cause only by vote
of the holders of a majority of the outstanding shares of such class or series.
Section 12. Vacancies. If the office of any director becomes vacant for
any reason, such vacancy shall be filled by a majority vote of the directors
remaining in office.
Section 13. Compensation of Directors. The directors may be paid their
expenses, if any, relating to their attendance at meetings of the Board of
Directors, and directors who are not full-time employees of the Corporation may
be paid a fixed sum for attendance at meetings of
5
the Board of Directors or a stated salary as a director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 14. Committees of Directors.
(a) Formation of Committees. The Board of Directors may, by
resolution passed by a majority of the Board, designate one or
more committees of the Board of Directors, including an
executive committee, each committee to consist of two (2) or
more directors of the Corporation. The Board may designate one
or more directors as alternative members of any committee who
may replace any absent or disqualified member at any meeting
of the committee. Any such committee, to the extent provided
in the enabling resolution and permitted under Section 141 the
Delaware General Corporation Law, shall have and may exercise
the powers of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report them to the Board
of Directors when required.
(b) Quorum. A majority of the members of a committee or
subcommittee shall constitute a quorum for the transaction of
business at any meeting of such committee or subcommittee.
(c) Required Vote. The act of a majority of the members present at
a meeting at which a quorum is present shall be the act of the
committee or subcommittee.
ARTICLE IV
OFFICERS
Section 1. Officers. The Corporation's officers shall be chosen by the
Board of Directors and shall be a Chairman of the Board, a President, one or
more Vice Presidents, a Treasurer, and a Secretary. The Board of Directors may
also choose one or more Assistant Treasurers and Assistant Secretaries, and may
designate one or more Vice Presidents to be Executive Vice Presidents or Senior
Vice Presidents. The Board may delegate its powers of appointment, as evidenced
by a resolution of the Board of Directors.
Section 2. Tenure. Except as otherwise provided by law, by the Certificate
of Incorporation or by these By-Laws, each officer shall hold office until his
or her successor is elected and qualified, unless a different term is specified
in the vote choosing or appointing him or her, or until his or her earlier
death, resignation or removal.
Section 3. Resignation and Removal. Any officer may resign by delivering
his or her written resignation to the Corporation at its principal office or to
the Chairman, President or
6
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his or her resignation or removal, or any right to damages
on account of such removal, whether his or her compensation be by the month or
by the year or otherwise, unless such compensation is expressly provided in a
duly authorized written agreement with the Corporation.
Section 4. Vacancies. Any vacancy in the offices of the Chairman, the
President or any other office shall be filled by the Board of Directors.
Section 5. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the shareholders and the Board of Directors. He or she shall,
in the absence or the disability of the President, perform the duties and
exercise the powers of the President unless the Board authorizes another officer
of the Company to perform such duties and exercise such powers, and shall
perform such other duties as may be delegated to him or her by the Board of
Directors.
Section 6. President. The President, who shall be the Chief Executive
Officer of the Corporation, shall in general, subject to the control of the
Board of Directors, supervise and control all of the business and affairs of the
Corporation. All other officers shall be subject to the authority and
supervision of the President. The President may enter into and execute in the
name of the Corporation contracts or other instruments in the regular course of
business or contracts or other instruments not in the regular course of business
which are authorized, either generally or specifically, by the Board of
Directors. The President shall have the general powers and duties of management
usually vested in the office of president of a corporation.
Section 7. Executive Vice Presidents, Senior Vice Presidents and Vice
Presidents. The Board of Directors may appoint one or more Executive Vice
Presidents, Senior Vice Presidents and Vice Presidents, each of whom shall
perform such duties and possess such powers as shall be assigned him or her by
the Board of Directors.
Section 8. Treasurer and Assistant Treasurer. The Treasurer shall have
charge and custody of, and be responsible for, all funds and securities of the
Corporation, shall keep or cause to be kept regular books of account for the
Corporation and shall perform such other duties and possess such other powers as
are incident to the office of the treasurer of a corporation or as shall be
assigned to the Treasurer by the Board of Directors. The Assistant Treasurer, or
if there shall be more than one, the Assistant Treasurers, in the order
determined by the Board of Directors, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer set forth
herein and as the Board of Directors from time to time may prescribe.
Section 9. Secretary and Assistant Secretary. The Secretary shall cause
notices of all meetings to be served as prescribed in these By-laws or by
statute, shall keep or cause to be kept the minutes of all meetings of the
stockholders and the Board of Directors, shall have charge of the corporate
records and seal of the Corporation and shall keep a register of the post-
7
office address of each stockholder which shall be furnished to the Secretary by
such stockholder. The Secretary shall perform such other duties and possess such
other powers as are incident to the office of the secretary of a corporation or
as are assigned by the Board of Directors. The Assistant Secretary, or if there
shall be more than one, the Assistant Secretaries, in the order determined by
the Board of Directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary set forth herein and
as the Board of Directors from time to time may prescribe.
Section 10. Subordinate Officers and Agents. The Board of Directors may
elect or appoint such other officers and agents as the Board shall deem
necessary or desirable, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors.
Section 11. Salaries. Officers of the Corporation shall be entitled to
such salaries, compensation or reimbursement as shall be fixed or allowed from
time to time by the Board of Directors, except that the Board of Directors may
delegate such duty to a committee of the Board or an officer or officers of the
Corporation.
ARTICLE V
EXECUTION OF DOCUMENTS
Section 1. Commercial Paper and Contracts. All checks, notes, drafts and
other commercial paper of the Corporation shall be signed by the President or
Treasurer of the Corporation or by such other person or persons as the Board of
Directors may from time to time designate.
Section 2. Other Instruments. All contracts, deeds, mortgages and other
instruments shall be executed by the President, any Vice President or any such
other person or persons as the Board of Directors may from time to time
designate, and, if necessary, by the Secretary or any Assistant Secretary.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year.
ARTICLE VII
CERTIFICATES REPRESENTING SHARES
Section 1. Issuance of Stock. Unless otherwise voted by the stockholders
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
Corporation, or the whole or any part of any unissued balance of the authorized
capital stock of the Corporation held in its treasury may be issued, sold,
transferred or otherwise disposed of by vote of the Board of Directors in such
manner, for such consideration and on such terms as the Board of Directors may
determine.
8
Section 2. Certificates of Stock. The shares of capital stock of the
Corporation shall be represented by certificates, provided that the Board of
Directors of the Corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates, and upon request, every
holder of uncertificated shares, shall be entitled to have a certificate
representing the number of shares held by such holder, which certificate shall
be signed by the appropriate offices of the Corporation. Any or all of the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate has ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the date of issue.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-laws,
applicable securities laws or any agreement among any number of stockholders or
among such holders and the Corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
Section 3. Transfers. Except as otherwise established by rules and
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the Corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these By-laws, the Corporation shall be
entitled to treat the record holder of stock as shown in its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the Corporation in accordance with the requirements of these By-laws.
Section 4. Lost, Stolen or Destroyed Certificates. The Corporation may
issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen, or destroyed, upon such terms and conditions
as the Board of Directors may prescribe, including the presentation of
reasonable evidence of such loss, theft or destruction and the giving of such
indemnity as the Board of Directors may require for the protection of the
Corporation or any transfer agent or registrar.
ARTICLE VIII
RECORD DATE
For the purpose of determining the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof, or to express
consent to or dissent from any proposal without any meeting or for the purpose
of determining stockholders entitled to receive payment of any dividend or
allotment of any right, or in order to make a determination of stockholders for
any other purpose, the Board of Directors shall fix, in advance, a date as the
9
record date for any such determination of stockholders. Such date shall not be
more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action or event to
which it relates. When a determination of stockholders of record for a
stockholders' meeting has been made as provided in this Article VIII, such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation
may pay, dividends or make other distributions on its outstanding shares of
capital stock in the manner and upon the terms and conditions provided by the
Certificate of Incorporation and by statute.
ARTICLE X
AMENDMENT
Section 1. By the Board of Directors. These By-Laws may be altered,
amended or repealed or new by-laws may be adopted by the affirmative vote of a
majority of the directors present at any regular or special meeting of the Board
of Directors at which a quorum is present.
Section 2. By the Stockholders. These By-Laws may be altered, appended or
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
ARTICLE XI
INDEMNIFICATION
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "Proceeding"), by reason of the fact:
(a) that he or she is or was a director or officer of the
Corporation, or
(b) that he or she, being at the time a director or officer of the
Corporation, is or was serving at the request of the
Corporation as a director, trustee, officer, employee or agent
of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to
an employee benefit plan (collectively, "Another Enterprise"
or "Other Enterprise"),
whether either in case (a) or in case (b) the basis of such Proceeding is
alleged action or inaction (x) in an official capacity as a director or officer
of the Corporation, or as a director, trustee,
10
officer, employee or agent of such Other Enterprise, or (y) in any other
capacity related to the Corporation or such Other Enterprise while so serving as
a director, trustee, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent permitted under Section 145 of
the Delaware General Corporation Law (or any successor provision or provisions)
as the same exists or may hereafter be amended (but, in the case of any such
amendment, with respect to actions taken prior to such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), against all expense,
liability and loss (including without limitation attorneys' fees, judgments,
fines, excise taxes assessed in connection with an employee benefit plan or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such person in connection therewith. The persons indemnified by this Article XI
are hereinafter referred to as "indemnitees." Such indemnification as to such
alleged action or inaction shall continue as to an indemnitee who has after such
alleged action or inaction ceased to be a director of officer of the
Corporation, or director, officer, employee or agent of such Other Enterprise;
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators. Notwithstanding the foregoing, except as may be provided in the
Certificate of Incorporation or by the Board of Directors, the Corporation shall
not indemnify any such indemnitee in connection with a proceeding (or portion
thereof) initiated by such indemnitee (but this prohibition shall not apply to a
counterclaim, cross-claim or third-party brought by the indemnitee in any
proceeding) unless such proceeding (or portion thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this Article XI:
(i) shall be a contract right; (ii) shall not be affected adversely to any
indemnitee by any amendment of these By-laws with respect to any action or
inaction occurring prior to such amendment; and (iii) shall, subject to any
requirements imposed by law and the Certificate of Incorporation, include the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition.
Section 2. Relationship to Other Rights and Provisions Concerning
Indemnification. The rights to indemnification and to the advancement of
expenses conferred in this Article XI shall not be exclusive of any other right
which any person may have or hereafter acquire under these By-laws or under any
statute, agreement, vote of stockholders or disinterested directors or
otherwise. The Certificate of Incorporation may contain such other provisions
concerning indemnification, including provisions specifying reasonable
procedures relating to and conditions to the receipt by indemnitees of
indemnification. In the event of a conflict between the indemnification
provision of these By-laws and an indemnification provision of the Certificate
of Incorporation, the Certificate of Incorporation shall prevail.
Section 3. Agents and Employees. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification, and to the advancement of expenses, to any employee or agent of
the Corporation (or any person serving at the Corporation's request as a
director, trustee, officer, employee or agent of Another Enterprise) or to
persons who are or were a director, officer, employee or agent of any of the
Corporation's affiliates, predecessor or subsidiary corporations or of a
constituent corporation absorbed by the Corporation in a consolidation or merger
or who is or was serving at the request of such affiliate, predecessor or
subsidiary corporation or of such constituent corporation as a director,
officer, employee or agent of Another Enterprise, in each case as determined by
the Board of Directors to the fullest extent of the provisions of this Article
XI in cases of the indemnification and advancement of expenses of directors and
officers of the Corporation, or to any lesser extent (or greater extent, if
permitted by law) determined by the Board of Directors.
11
ARTICLE XII
INTERESTED PARTIES
Section 1. Transactions with Interested Parties. No contract or
transaction between the Corporation and one or more of the directors or
officers, or between the Corporation any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the contract or transaction
or solely because his, her or their votes are counted for such purpose, if:
(a) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are
known to the Board of Directors or the committee, and the
Board or committee in good faith authorized the contract or
transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested
directors be less than a quorum;
(b) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith
by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the
Board of Directors, a committee of the Board of Directors, or
the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or at a committee which
authorizes the contract or transaction.
ARTICLE XIII
CORPORATE SEAL
The Corporate Seal shall be in such form as may be prescribed by the Board
of Directors. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE XIV
FORCE AND EFFECT OF BY-LAWS
These By-laws are subject to the provisions of the law of the State of
Delaware and the Corporation's Certificate of Incorporation, as it may be
amended from time to time. If any provision of these By-laws is inconsistent
with a provision in the Delaware statutes or the Certificate of Incorporation,
the provision of the Delaware statutes or the Certificate of Incorporation shall
govern.
12
Any determination that any provision of these By-Laws is for any reason
inapplicable, illegal or ineffective shall not affect or invalidate any other
provision of these By-Laws.
Amended and Restated: June 29, 2005
13
EXHIBIT 4.1
SPECIMEN CERTIFICATE REPRESENTING BIGSTRING'S
COMMON STOCK, PAR VALUE $.0001 PER SHARE
[FACE OF CERTIFICATE]
NUMBER
BS
COMMON STOCK
BIGSTRING CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SHARES
COMMON STOCK
CUSIP
SEE REVERSE FOR CERTAIN DEFINITIONS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE OF $0.0001
PER SHARE, OF BigString Corporation transferable on the books of the Corporation
by the holder hereof, in person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/sig to come/
SECRETARY
[SEAL]
/sig to come/
PRESIDENT
COUNTERSIGNED AND REGISTERED:
REGISTRAR AND TRANSFER COMPANY
(Cranford, NJ)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
[REVERSE OF CERTIFICATE]
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS,
A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT-....(Cust).... Custodian ....(Minor).... under Uniform Gifts
to
Minors Act ....(State)....
Additional abbreviations may also be used though not in the above list.
For value received, .... hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
shares of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint Attorney to transfer the said stock on the
books of the within named Corporation with full power of substitution in the
premises.
Dated
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
2
EXHIBIT 5.1
[LETTERHEAD OF GIORDANO, HALLERAN & CIESLA]
August 29, 2005
BigString Corporation
2150 Highway 35, Suite 250
Sea Girt, New Jersey 08750
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We have acted as counsel to BigString Corporation, a Delaware corporation (the
"Company"), in connection with the preparation and filing on this date by the
Company with the Securities and Exchange Commission (the "Commission") of a
Registration Statement on Form SB-2 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), to which Registration
Statement this opinion letter is attached as an exhibit, for the registration of
11,869,125 shares of the Company's common stock, par value $.0001 per share
(iCommon Stock"), which are currently issued and outstanding and held by certain
stockholders of the Company. The shares of Common Stock included for
registration in the Registration Statement are being registered by the Company
for the benefit of the holders thereof.
In rendering the opinion set forth below, we have examined and relied upon the
originals, specimens, or photostatic or certified copies of (a) the Registration
Statement, and (b) such certificates, corporate and public records, agreements
and instruments and other information and documents as we deemed relevant and
necessary as the basis for the opinion set forth below. In such examination, we
have assumed the genuineness of all signatures, the authenticity of each
document, agreement and instrument submitted to us as an original, the
conformity to the original of each document, agreement and instrument submitted
to us as a certified copy or
[LETTERHEAD]
BigString Corporation
August 29, 2005
Page 2
photostatic copy, the conformity of the text of each document filed with the
Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval System to the printed document reviewed by us, and the accuracy of the
matters set forth in the documents, agreements and instruments we reviewed. As
to any facts material to such opinion that were not known to us, we have relied
upon statements and representations of officers and other representatives of the
Company.
In addition, we have assumed, in rendering the opinion set forth below, that any
stock certificate evidencing any shares of the Company's Common Stock being
registered under the Registration Statement has been duly executed on behalf of
the Company.
We express no opinion concerning the laws of any jurisdiction other than those
of the United States of America, and the laws of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that the shares
of Common Stock being registered under the Registration Statement have been duly
authorized and are validly issued and non-assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the
Securities Act, or the General Rules and Regulations of the Commission.
Very truly yours,
/s/ Giordano, Halleran & Ciesla
A Professional Corporation
GIORDANO, HALLERAN & CIESLA
A Professional Corporation
PTC:bm
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August
10, 2005, by and between Recall Mail Corporation, a corporation incorporated and
organized under the laws of State of Delaware, with its principal executive
offices at 2150 Route 35, Suite 250, Sea Girt, New Jersey 08750 (the "Company"),
and AJW Offshore, Ltd., residing at 1044 Northern Boulevard, Suite 302, Roslyn,
New Jersey 11576 (the "Holder").
WHEREAS, in connection with the Holder's investment in the Company, the
Company has agreed to provide the Holder with certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of the Company's
common stock, par value $.0001 per share ("Common Stock"), held by the Holder as
of the date hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holder hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings provided next to such terms:
(a) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision or a governmental agency.
(b) "Principal Market" means The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., The Nasdaq National Market, The Nasdaq SmallCap
Market or the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board, whichever is the principal market on which the Common Stock is
traded.
(c) iRegistrable Securities" means the shares of Common Stock held by the
Holder on the date of this Agreement and any shares of capital stock issued or
issuable with respect to such shares of Common Stock, if any, as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, which have not been (i) included in a registration statement that has
been declared effective by the Securities and Exchange Commission (the "SEC"),
or (ii) sold under circumstances meeting all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the 1933 Act.
2. Registration on Form SB-2 or other Registration Form. The Company shall, as
soon as practicable, but not later than September 30, 2005, file with the SEC a
registration statement on Form SB-2 or other available form of registration
statement (the "Registration Statement"), covering the sale of all of the
Registrable Securities, which Registration Statement shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon stock splits, stock dividends or similar
transactions. The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective by the SEC within ninety (90) calendar
days after the date such Registration Statement is initially filed with the SEC.
3. Related Obligations. The Company shall have the following further
obligations:
(a) Continued Effectiveness. The Company shall keep the Registration
Statement effective pursuant to Rule 415 promulgated under the 1933 Act until
the earlier of (i) one year from the date the Registration Statement becomes
effective and (ii) the date on which the Holder shall have sold all the
Registrable Securities (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
(b) Amendments. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities of the Company covered by the Registration Statement.
(c) Information. The Company shall furnish to the Holder and his legal
counsel without charge: (i) at least one copy of the Registration Statement and
any amendment(s) thereto promptly after the Registration Statement or any
amendment thereto is filed with the SEC and, with regard to the Registration
Statement, any correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives promptly after issued or received by the
Company or its representatives, (ii) a reasonable number of copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto promptly after the effectiveness of the Registration
Statement, and (iii) such other documents as the Holder may reasonably request,
in writing, from time to time in order to facilitate the disposition of the
Registrable Securities.
(d) Blue Sky. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
the applicable securities or "blue sky" laws of such states of the United States
as specified by the Holder, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify
2
the Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (B) subject itself
to general taxation in any such jurisdiction, or (C) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
the Holder of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(e) Certain Events. As promptly as practicable after becoming aware of
such event, the Company shall (i) notify the Holder in writing of the happening
of any event as a result of which the prospectus included in the Registration
Statement includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (iRegistration Default"), (ii) use all diligent efforts to promptly
prepare a supplement or amendment to the Registration Statement and take any
other necessary steps to cure the Registration Default, and (iii) deliver a
reasonable number of copies of such supplement or amendment to the Holder. The
Company shall also promptly notify the Holder in writing (A) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when the Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to the Holder
by facsimile on the same day of such effectiveness and by overnight mail), (B)
of any request by the SEC for amendments or supplements to the Registration
Statement or related prospectus or related information, (C) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate, (D) in the event the Registration Statement is
no longer effective, or (E) the Registration Statement is stale for a period of
more than five (5) trading days as a result of the Company's failure to timely
file its financials.
(f) Stop Orders. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Holder who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) Review and Comment. The Company shall permit the Holder and a single
firm of counsel, as designated by him, to review and comment upon the
Registration Statement and all amendments and supplements thereto at least three
(3) business days prior to the filing thereof with the SEC, and not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit to the SEC a request for acceleration of the effectiveness of the
Registration Statement or file with the SEC the Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which approval shall not be unreasonably withheld.
(h) Availability of Information. The Company shall make available for
inspection by (i) the Holder and (ii) one firm of attorneys and one firm of
accountants or other agents retained by the Holder (collectively, the
"Inspectors"), all pertinent financial and other records,
3
and pertinent corporate documents and properties of the Company (collectively,
the "Records" and individually a "Record"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to the Holder) or use of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (A) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
the Registration Statement or is otherwise required under the 1933 Act, (B) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (C) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. The Holder agrees that he shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
(i) Confidentiality. The Company shall hold in confidence and not make any
disclosure of information concerning the Holder provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in the Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning the Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to the Holder and allow the Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(j) Listing or Quotation. The Company shall use its best efforts to secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Principal Market. If, despite the Company's best
efforts, the Company is unsuccessful in satisfying the preceding sentence, it
shall use its best efforts to cause all the Registrable Securities covered by
the Registration Statement to be listed on each other national securities
exchange and automated quotation system, if any, on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange
or system. If, despite the Company's best efforts, the Company is unsuccessful
in satisfying the two preceding sentences, it will use its best efforts to
secure the inclusion for quotation with Pink Sheets, LLC. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) Amendment of Registration Statement. If requested by the Holder, the
Company shall (i) as soon as reasonably practical incorporate in a prospectus
supplement or post-effective amendment such information as the Holder reasonably
determines should be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information with respect
to the offering of the Registrable Securities to be sold in such offering, (ii)
make all required filings of such prospectus supplement or post-effective
4
amendment as soon as notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to the Registration Statement if reasonably requested by the Holder.
(l) Other Approvals. The Company shall use its best efforts to cause the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
(m) Certain Financial Statements. The Company shall make generally
available to its security holders as soon as reasonably practical, but not later
than ninety (90) calendar days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158
promulgated under the 1933 Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.
(n) Compliance with SEC Regulations. The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
(o) Other Actions. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Holder of Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Holder.
(a) Required Information. At least five (5) calendar days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Holder in writing of the information the Company requires from the
Holder if the Holder elects to have any of the Holder's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of the Holder that the
Holder shall furnish in writing to the Company such information regarding
himself, the Registrable Securities held by him and the intended method of
disposition of the Registrable Securities held by him as shall reasonably be
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. The Holder covenants and agrees that, in connection with any
resale of Registrable Securities by him pursuant to the Registration Statement,
he shall comply with the "Plan of Distribution" section of the current
prospectus relating to the Registration Statement.
(b) Further Cooperation. The Holder shall cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement, unless the Holder has notified the Company
in writing of the Holder's election to exclude all of the Holder's Registrable
Securities from such Registration Statement.
(c) Discontinuance of Disposition in Certain Events. Upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(f) or the first sentence of 3(e), the Holder will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until the Holder's
5
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(f) or the first sentence of 3(e).
5. Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printing and accounting fees, and
fees and disbursements of counsel for the Company, shall be paid by the Company.
6. Indemnification. In the event any Registrable Securities are included in the
Registration Statement under this Agreement:
(a) Indemnification by Company. To the fullest extent permitted by law,
the Company will, and hereby does, indemnify, hold harmless and defend the
Holder and any agents or representatives thereof, and each Person, if any, who
controls the Holder within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act") (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several (collectively, "Claims"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not the Indemnified Person is or may
be a party thereto (iIndemnified Damages"), to which the Indemnified Person may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in the
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered, or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which the statements therein were made, not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to the Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by him, her or it in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (A) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (B) shall not be available to the
extent such Claim is based on (I) a failure of the Holder to deliver or to cause
to be delivered the prospectus
6
made available by the Company or (II) the Indemnified Person's use of an
incorrect prospectus despite being promptly advised in advance by the Company in
writing not to use such incorrect prospectus; and (C) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Holder pursuant to the
Registration Statement.
(b) Indemnification by Holder. In connection with the Registration
Statement in which the Holder is participating, the Holder agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each an "Indemnified
Party"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by the Holder or his agents or representatives expressly for use in
connection with the Registration Statement; and, subject to Section 6(c), the
Holder will reimburse any legal or other expenses reasonably incurred by any
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Holder, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the resale of the Registrable Securities by the Holder
pursuant to the Registration Statement. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus were corrected on a timely basis in the
prospectus, as then amended or supplemented.
(c) Indemnification Procedure. Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain his own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
counsel shall be selected by the Holder if the
7
Holder is entitled to indemnification hereunder, or the Company, if the Company
is entitled to indemnification hereunder, as applicable. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully appraised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without his written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition his
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim.
Following indemnification as provided for hereunder, the indemnifying party
shall be surrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in his, her or its ability to
defend such action.
(d) Payment of Indemnification. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
(e) Non-exclusivity. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which he, she or it would otherwise
be liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation; and (iii) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. Reports Under the 1934 Act. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Holder to sell securities
of the Company to the public without registration (iRule 144"), the Company
shall:
8
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
(c) furnish to the Holder, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Holder to sell such securities pursuant to Rule 144 without
registration.
9. No Assignment of Registration Rights. The rights under this Agreement shall
not be assignable.
10. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon the Holder and the
Company. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. Miscellaneous.
(a) Waivers and Communications. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided a confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); (iii) one (1) day after
deposit with a nationally recognized overnight delivery service; or (iv) five
(5) days after being deposited in the United States mail, with postage prepaid
thereon, in each case properly addressed to the party to receive such
communication. The addresses and facsimile numbers for such communications shall
be:
If to the Company:
Recall Mail Corporation
2150 Route 35, Suite 250
Sea Girt, New Jersey 08750
Attention: Darin Myman, President and Chief Executive Officer
Telephone: (732) 359-0270
Facsimile: (732) 359-0231
9
If to the Holder:
AJW Offshore, Ltd.
1044 Northern Boulevard, Suite 302
Roslyn, New Jersey 11576
Attn: Corey Ribosky
Each party shall provide five (5) days prior notice to the other party of
any change in address, phone number or facsimile number.
(b) Non-waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the State
of New Jersey, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that he is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to him
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(d) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein.
(e) Integration. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Counterparts. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
(h) Further Actions. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other
10
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.
Recall Mail Corporation
By: /s/ Darin Myman
----------------------------------------
Name: Darin Myman
Title: President and Chief Executive Officer
Holder
AJW Offshore, Ltd.
/s/ Corey Ribosky
----------------------------------------
President
(Signature)
Corey Ribosky
President
(Print Name)
11
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August
10, 2005, by and between Recall Mail Corporation, a corporation incorporated and
organized under the laws of State of Delaware, with its principal executive
offices at 2150 Route 35, Suite 250, Sea Girt, New Jersey 08750 (the "Company"),
and AJW Partners, LLC, residing at 1044 Northern Boulevard, Suite 302, Roslyn,
New Jersey 11576 (the "Holder").
WHEREAS, in connection with the Holder's investment in the Company, the
Company has agreed to provide the Holder with certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of the Company's
common stock, par value $.0001 per share ("Common Stock"), held by the Holder as
of the date hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holder hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings provided next to such terms:
(a) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision or a governmental agency.
(b) "Principal Market" means The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., The Nasdaq National Market, The Nasdaq SmallCap
Market or the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board, whichever is the principal market on which the Common Stock is
traded.
(c) "Registrable Securities" means the shares of Common Stock held by the
Holder on the date of this Agreement and any shares of capital stock issued or
issuable with respect to such shares of Common Stock, if any, as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, which have not been (i) included in a registration statement that has
been declared effective by the Securities and Exchange Commission (the "SEC"),
or (ii) sold under circumstances meeting all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the 1933 Act.
2. Registration on Form SB-2 or other Registration Form. The Company shall, as
soon as practicable, but not later than September 30, 2005, file with the SEC a
registration statement on Form SB-2 or other available form of registration
statement (the "Registration Statement"), covering the sale of all of the
Registrable Securities, which Registration Statement shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon stock splits, stock dividends or similar
transactions. The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective by the SEC within ninety (90) calendar
days after the date such Registration Statement is initially filed with the SEC.
3. Related Obligations. The Company shall have the following further
obligations:
(a) Continued Effectiveness. The Company shall keep the Registration
Statement effective pursuant to Rule 415 promulgated under the 1933 Act until
the earlier of (i) one year from the date the Registration Statement becomes
effective and (ii) the date on which the Holder shall have sold all the
Registrable Securities (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
(b) Amendments. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities of the Company covered by the Registration Statement.
(c) Information. The Company shall furnish to the Holder and his legal
counsel without charge: (i) at least one copy of the Registration Statement and
any amendment(s) thereto promptly after the Registration Statement or any
amendment thereto is filed with the SEC and, with regard to the Registration
Statement, any correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives promptly after issued or received by the
Company or its representatives, (ii) a reasonable number of copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto promptly after the effectiveness of the Registration
Statement, and (iii) such other documents as the Holder may reasonably request,
in writing, from time to time in order to facilitate the disposition of the
Registrable Securities.
(d) Blue Sky. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
the applicable securities or "blue sky" laws of such states of the United States
as specified by the Holder, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify
2
the Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (B) subject itself
to general taxation in any such jurisdiction, or (C) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
the Holder of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(e) Certain Events. As promptly as practicable after becoming aware of
such event, the Company shall (i) notify the Holder in writing of the happening
of any event as a result of which the prospectus included in the Registration
Statement includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading ("Registration Default"), (ii) use all diligent efforts to promptly
prepare a supplement or amendment to the Registration Statement and take any
other necessary steps to cure the Registration Default, and (iii) deliver a
reasonable number of copies of such supplement or amendment to the Holder. The
Company shall also promptly notify the Holder in writing (A) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when the Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to the Holder
by facsimile on the same day of such effectiveness and by overnight mail), (B)
of any request by the SEC for amendments or supplements to the Registration
Statement or related prospectus or related information, (C) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate, (D) in the event the Registration Statement is
no longer effective, or (E) the Registration Statement is stale for a period of
more than five (5) trading days as a result of the Company's failure to timely
file its financials.
(f) Stop Orders. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Holder who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) Review and Comment. The Company shall permit the Holder and a single
firm of counsel, as designated by him, to review and comment upon the
Registration Statement and all amendments and supplements thereto at least three
(3) business days prior to the filing thereof with the SEC, and not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit to the SEC a request for acceleration of the effectiveness of the
Registration Statement or file with the SEC the Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which approval shall not be unreasonably withheld.
(h) Availability of Information. The Company shall make available for
inspection by (i) the Holder and (ii) one firm of attorneys and one firm of
accountants or other agents retained by the Holder (collectively, the
"Inspectors"), all pertinent financial and other records,
3
and pertinent corporate documents and properties of the Company (collectively,
the "Records" and individually a "Record"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to the Holder) or use of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (A) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
the Registration Statement or is otherwise required under the 1933 Act, (B) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (C) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. The Holder agrees that he shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
(i) Confidentiality. The Company shall hold in confidence and not make any
disclosure of information concerning the Holder provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in the Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning the Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to the Holder and allow the Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(j) Listing or Quotation. The Company shall use its best efforts to secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Principal Market. If, despite the Company's best
efforts, the Company is unsuccessful in satisfying the preceding sentence, it
shall use its best efforts to cause all the Registrable Securities covered by
the Registration Statement to be listed on each other national securities
exchange and automated quotation system, if any, on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange
or system. If, despite the Company's best efforts, the Company is unsuccessful
in satisfying the two preceding sentences, it will use its best efforts to
secure the inclusion for quotation with Pink Sheets, LLC. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) Amendment of Registration Statement. If requested by the Holder, the
Company shall (i) as soon as reasonably practical incorporate in a prospectus
supplement or post-effective amendment such information as the Holder reasonably
determines should be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information with respect
to the offering of the Registrable Securities to be sold in such offering, (ii)
make all required filings of such prospectus supplement or post-effective
4
amendment as soon as notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to the Registration Statement if reasonably requested by the Holder.
(l) Other Approvals. The Company shall use its best efforts to cause the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
(m) Certain Financial Statements. The Company shall make generally
available to its security holders as soon as reasonably practical, but not later
than ninety (90) calendar days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158
promulgated under the 1933 Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.
(n) Compliance with SEC Regulations. The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
(o) Other Actions. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Holder of Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Holder.
(a) Required Information. At least five (5) calendar days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Holder in writing of the information the Company requires from the
Holder if the Holder elects to have any of the Holder's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of the Holder that the
Holder shall furnish in writing to the Company such information regarding
himself, the Registrable Securities held by him and the intended method of
disposition of the Registrable Securities held by him as shall reasonably be
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. The Holder covenants and agrees that, in connection with any
resale of Registrable Securities by him pursuant to the Registration Statement,
he shall comply with the "Plan of Distribution" section of the current
prospectus relating to the Registration Statement.
(b) Further Cooperation. The Holder shall cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement, unless the Holder has notified the Company
in writing of the Holder's election to exclude all of the Holder's Registrable
Securities from such Registration Statement.
(c) Discontinuance of Disposition in Certain Events. Upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(f) or the first sentence of 3(e), the Holder will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until the Holder's
5
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(f) or the first sentence of 3(e).
5. Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printing and accounting fees, and
fees and disbursements of counsel for the Company, shall be paid by the Company.
6. Indemnification. In the event any Registrable Securities are included in the
Registration Statement under this Agreement:
(a) Indemnification by Company. To the fullest extent permitted by law,
the Company will, and hereby does, indemnify, hold harmless and defend the
Holder and any agents or representatives thereof, and each Person, if any, who
controls the Holder within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act") (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several (collectively, "Claims"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not the Indemnified Person is or may
be a party thereto ("Indemnified Damages"), to which the Indemnified Person may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in the
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered, or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which the statements therein were made, not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to the Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by him, her or it in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (A) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (B) shall not be available to the
extent such Claim is based on (I) a failure of the Holder to deliver or to cause
to be delivered the prospectus
6
made available by the Company or (II) the Indemnified Person's use of an
incorrect prospectus despite being promptly advised in advance by the Company in
writing not to use such incorrect prospectus; and (C) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Holder pursuant to the
Registration Statement.
(b) Indemnification by Holder. In connection with the Registration
Statement in which the Holder is participating, the Holder agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each an "Indemnified
Party"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by the Holder or his agents or representatives expressly for use in
connection with the Registration Statement; and, subject to Section 6(c), the
Holder will reimburse any legal or other expenses reasonably incurred by any
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Holder, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the resale of the Registrable Securities by the Holder
pursuant to the Registration Statement. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus were corrected on a timely basis in the
prospectus, as then amended or supplemented.
(c) Indemnification Procedure. Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain his own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
counsel shall be selected by the Holder if the
7
Holder is entitled to indemnification hereunder, or the Company, if the Company
is entitled to indemnification hereunder, as applicable. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully appraised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without his written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition his
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim.
Following indemnification as provided for hereunder, the indemnifying party
shall be surrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in his, her or its ability to
defend such action.
(d) Payment of Indemnification. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
(e) Non-exclusivity. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which he, she or it would otherwise
be liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation; and (iii) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. Reports Under the 1934 Act. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Holder to sell securities
of the Company to the public without registration ("Rule 144"), the Company
shall:
8
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
(c) furnish to the Holder, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Holder to sell such securities pursuant to Rule 144 without
registration.
9. No Assignment of Registration Rights. The rights under this Agreement shall
not be assignable.
10. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon the Holder and the
Company. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. Miscellaneous.
(a) Waivers and Communications. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided a confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); (iii) one (1) day after
deposit with a nationally recognized overnight delivery service; or (iv) five
(5) days after being deposited in the United States mail, with postage prepaid
thereon, in each case properly addressed to the party to receive such
communication. The addresses and facsimile numbers for such communications shall
be:
If to the Company:
Recall Mail Corporation
2150 Route 35, Suite 250
Sea Girt, New Jersey 08750
Attention: Darin Myman, President and Chief Executive Officer
Telephone: (732) 359-0270
Facsimile: (732) 359-0231
9
If to the Holder:
AJW Partners, LLC
1044 Northern Boulevard, Suite 302
Roslyn, New Jersey 11576
Attn: Corey Ribosky
Each party shall provide five (5) days prior notice to the other party of
any change in address, phone number or facsimile number.
(b) Non-waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the State
of New Jersey, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that he is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to him
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(d) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein.
(e) Integration. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Counterparts. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
(h) Further Actions. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other
10
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.
Recall Mail Corporation
By: /s/ Darin Myman
----------------------------------------
Name: Darin Myman
Title: President and Chief Executive Officer
Holder
AJW Partners, LLC
/s/ Corey Ribosky
----------------------------------------
President
(Signature)
Corey Ribosky
President
(Print Name)
11
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August
10, 2005, by and between Recall Mail Corporation, a corporation incorporated and
organized under the laws of State of Delaware, with its principal executive
offices at 2150 Route 35, Suite 250, Sea Girt, New Jersey 08750 (the "Company"),
and AJW Qualified Partners, LLC, residing at 1044 Northern Boulevard, Suite 302,
Roslyn, New Jersey 11576 (the "Holder").
WHEREAS, in connection with the Holder's investment in the Company, the
Company has agreed to provide the Holder with certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of the Company's
common stock, par value $.0001 per share ("Common Stock"), held by the Holder as
of the date hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holder hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings provided next to such terms:
(a) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision or a governmental agency.
(b) "Principal Market" means The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., The Nasdaq National Market, The Nasdaq SmallCap
Market or the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board, whichever is the principal market on which the Common Stock is
traded.
(c) "Registrable Securities" means the shares of Common Stock held by the
Holder on the date of this Agreement and any shares of capital stock issued or
issuable with respect to such shares of Common Stock, if any, as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, which have not been (i) included in a registration statement that has
been declared effective by the Securities and Exchange Commission (the "SEC"),
or (ii) sold under circumstances meeting all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the 1933 Act.
2. Registration on Form SB-2 or other Registration Form. The Company shall, as
soon as practicable, but not later than September 30, 2005, file with the SEC a
registration statement on Form SB-2 or other available form of registration
statement (the "Registration Statement"), covering the sale of all of the
Registrable Securities, which Registration Statement shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon stock splits, stock dividends or similar
transactions. The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective by the SEC within ninety (90) calendar
days after the date such Registration Statement is initially filed with the SEC.
3. Related Obligations. The Company shall have the following further
obligations:
(a) Continued Effectiveness. The Company shall keep the Registration
Statement effective pursuant to Rule 415 promulgated under the 1933 Act until
the earlier of (i) one year from the date the Registration Statement becomes
effective and (ii) the date on which the Holder shall have sold all the
Registrable Securities (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
(b) Amendments. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities of the Company covered by the Registration Statement.
(c) Information. The Company shall furnish to the Holder and his legal
counsel without charge: (i) at least one copy of the Registration Statement and
any amendment(s) thereto promptly after the Registration Statement or any
amendment thereto is filed with the SEC and, with regard to the Registration
Statement, any correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives promptly after issued or received by the
Company or its representatives, (ii) a reasonable number of copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto promptly after the effectiveness of the Registration
Statement, and (iii) such other documents as the Holder may reasonably request,
in writing, from time to time in order to facilitate the disposition of the
Registrable Securities.
(d) Blue Sky. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
the applicable securities or "blue sky" laws of such states of the United States
as specified by the Holder, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify
2
the Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (B) subject itself
to general taxation in any such jurisdiction, or (C) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
the Holder of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(e) Certain Events. As promptly as practicable after becoming aware of
such event, the Company shall (i) notify the Holder in writing of the happening
of any event as a result of which the prospectus included in the Registration
Statement includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading ("Registration Default"), (ii) use all diligent efforts to promptly
prepare a supplement or amendment to the Registration Statement and take any
other necessary steps to cure the Registration Default, and (iii) deliver a
reasonable number of copies of such supplement or amendment to the Holder. The
Company shall also promptly notify the Holder in writing (A) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when the Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to the Holder
by facsimile on the same day of such effectiveness and by overnight mail), (B)
of any request by the SEC for amendments or supplements to the Registration
Statement or related prospectus or related information, (C) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate, (D) in the event the Registration Statement is
no longer effective, or (E) the Registration Statement is stale for a period of
more than five (5) trading days as a result of the Company's failure to timely
file its financials.
(f) Stop Orders. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Holder who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) Review and Comment. The Company shall permit the Holder and a single
firm of counsel, as designated by him, to review and comment upon the
Registration Statement and all amendments and supplements thereto at least three
(3) business days prior to the filing thereof with the SEC, and not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit to the SEC a request for acceleration of the effectiveness of the
Registration Statement or file with the SEC the Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which approval shall not be unreasonably withheld.
(h) Availability of Information. The Company shall make available for
inspection by (i) the Holder and (ii) one firm of attorneys and one firm of
accountants or other agents retained by the Holder (collectively, the
"Inspectors"), all pertinent financial and other records,
3
and pertinent corporate documents and properties of the Company (collectively,
the "Records" and individually a "Record"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to the Holder) or use of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (A) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
the Registration Statement or is otherwise required under the 1933 Act, (B) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (C) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. The Holder agrees that he shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
(i) Confidentiality. The Company shall hold in confidence and not make any
disclosure of information concerning the Holder provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in the Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning the Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to the Holder and allow the Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(j) Listing or Quotation. The Company shall use its best efforts to secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Principal Market. If, despite the Company's best
efforts, the Company is unsuccessful in satisfying the preceding sentence, it
shall use its best efforts to cause all the Registrable Securities covered by
the Registration Statement to be listed on each other national securities
exchange and automated quotation system, if any, on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange
or system. If, despite the Company's best efforts, the Company is unsuccessful
in satisfying the two preceding sentences, it will use its best efforts to
secure the inclusion for quotation with Pink Sheets, LLC. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) Amendment of Registration Statement. If requested by the Holder, the
Company shall (i) as soon as reasonably practical incorporate in a prospectus
supplement or post-effective amendment such information as the Holder reasonably
determines should be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information with respect
to the offering of the Registrable Securities to be sold in such offering, (ii)
make all required filings of such prospectus supplement or post-effective
4
amendment as soon as notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to the Registration Statement if reasonably requested by the Holder.
(l) Other Approvals. The Company shall use its best efforts to cause the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
(m) Certain Financial Statements. The Company shall make generally
available to its security holders as soon as reasonably practical, but not later
than ninety (90) calendar days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158
promulgated under the 1933 Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.
(n) Compliance with SEC Regulations. The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
(o) Other Actions. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Holder of Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Holder.
(a) Required Information. At least five (5) calendar days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Holder in writing of the information the Company requires from the
Holder if the Holder elects to have any of the Holder's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of the Holder that the
Holder shall furnish in writing to the Company such information regarding
himself, the Registrable Securities held by him and the intended method of
disposition of the Registrable Securities held by him as shall reasonably be
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. The Holder covenants and agrees that, in connection with any
resale of Registrable Securities by him pursuant to the Registration Statement,
he shall comply with the "Plan of Distribution" section of the current
prospectus relating to the Registration Statement.
(b) Further Cooperation. The Holder shall cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement, unless the Holder has notified the Company
in writing of the Holder's election to exclude all of the Holder's Registrable
Securities from such Registration Statement.
(c) Discontinuance of Disposition in Certain Events. Upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(f) or the first sentence of 3(e), the Holder will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until the Holder's
5
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(f) or the first sentence of 3(e).
5. Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printing and accounting fees, and
fees and disbursements of counsel for the Company, shall be paid by the Company.
6. Indemnification. In the event any Registrable Securities are included in the
Registration Statement under this Agreement:
(a) Indemnification by Company. To the fullest extent permitted by law,
the Company will, and hereby does, indemnify, hold harmless and defend the
Holder and any agents or representatives thereof, and each Person, if any, who
controls the Holder within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act") (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several (collectively, "Claims"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not the Indemnified Person is or may
be a party thereto ("Indemnified Damages"), to which the Indemnified Person may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in the
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered, or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which the statements therein were made, not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to the Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by him, her or it in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (A) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (B) shall not be available to the
extent such Claim is based on (I) a failure of the Holder to deliver or to cause
to be delivered the prospectus
6
made available by the Company or (II) the Indemnified Person's use of an
incorrect prospectus despite being promptly advised in advance by the Company in
writing not to use such incorrect prospectus; and (C) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Holder pursuant to the
Registration Statement.
(b) Indemnification by Holder. In connection with the Registration
Statement in which the Holder is participating, the Holder agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each an "Indemnified
Party"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by the Holder or his agents or representatives expressly for use in
connection with the Registration Statement; and, subject to Section 6(c), the
Holder will reimburse any legal or other expenses reasonably incurred by any
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Holder, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the resale of the Registrable Securities by the Holder
pursuant to the Registration Statement. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus were corrected on a timely basis in the
prospectus, as then amended or supplemented.
(c) Indemnification Procedure. Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain his own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
counsel shall be selected by the Holder if the
7
Holder is entitled to indemnification hereunder, or the Company, if the Company
is entitled to indemnification hereunder, as applicable. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully appraised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without his written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition his
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim.
Following indemnification as provided for hereunder, the indemnifying party
shall be surrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in his, her or its ability to
defend such action.
(d) Payment of Indemnification. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
(e) Non-exclusivity. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which he, she or it would otherwise
be liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation; and (iii) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. Reports Under the 1934 Act. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Holder to sell securities
of the Company to the public without registration ("Rule 144"), the Company
shall:
8
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
(c) furnish to the Holder, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Holder to sell such securities pursuant to Rule 144 without
registration.
9. No Assignment of Registration Rights. The rights under this Agreement shall
not be assignable.
10. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon the Holder and the
Company. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. Miscellaneous.
(a) Waivers and Communications. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided a confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); (iii) one (1) day after
deposit with a nationally recognized overnight delivery service; or (iv) five
(5) days after being deposited in the United States mail, with postage prepaid
thereon, in each case properly addressed to the party to receive such
communication. The addresses and facsimile numbers for such communications shall
be:
If to the Company:
Recall Mail Corporation
2150 Route 35, Suite 250
Sea Girt, New Jersey 08750
Attention: Darin Myman, President and Chief Executive Officer
Telephone: (732) 359-0270
Facsimile: (732) 359-0231
9
If to the Holder:
AJW Qualified Partners, LLC
1044 Northern Boulevard, Suite 302
Roslyn, New Jersey 11576
Attn: Corey Ribosky
Each party shall provide five (5) days prior notice to the other party of
any change in address, phone number or facsimile number.
(b) Non-waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the State
of New Jersey, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that he is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to him
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(d) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein.
(e) Integration. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Counterparts. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
(h) Further Actions. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other
10
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.
Recall Mail Corporation
By: /s/ Darin Myman
----------------------------------------
Name: Darin Myman
Title: President and Chief Executive Officer
Holder
AJW Qualified Partners, LLC
/s/ Corey Ribosky
----------------------------------------
President
(Signature)
Corey Ribosky
President
(Print Name)
11
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June
17, 2005, by and between Recall Mail Corporation, a corporation incorporated and
organized under the laws of State of Delaware, with its principal executive
offices at 2150 Route 35, Suite 250, Sea Girt, New Jersey 08750 (the "Company"),
and David Matthew Adredge, an individual residing at 1330 West Unit 2809, Miami
Beach, Florida 33139 (the "Holder").
WHEREAS, in connection with the Holder's investment in the Company, the
Company has agreed to provide the Holder with certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of the Company's
common stock, par value $.0001 per share ("Common Stock"), held by the Holder as
of the date hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holder hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings provided next to such terms:
(a) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision or a governmental agency.
(b) "Principal Market" means The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., The Nasdaq National Market, The Nasdaq SmallCap
Market or the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board, whichever is the principal market on which the Common Stock is
traded.
(c) "Registrable Securities" means the shares of Common Stock held by the
Holder on the date of this Agreement and any shares of capital stock issued or
issuable with respect to such shares of Common Stock, if any, as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, which have not been (i) included in a registration statement that has
been declared effective by the Securities and Exchange Commission (the "SEC"),
or (ii) sold under circumstances meeting all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the 1933 Act.
2. Registration on Form SB-2 or other Registration Form. The Company shall, as
soon as practicable, but not later than September 30, 2005, file with the SEC a
registration statement on Form SB-2 or other available form of registration
statement (the "Registration Statement"), covering the sale of all of the
Registrable Securities, which Registration Statement shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon stock splits, stock dividends or similar
transactions. The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective by the SEC within ninety (90) calendar
days after the date such Registration Statement is initially filed with the SEC.
3. Related Obligations. The Company shall have the following further
obligations:
(a) Continued Effectiveness. The Company shall keep the Registration
Statement effective pursuant to Rule 415 promulgated under the 1933 Act until
the earlier of (i) one year from the date the Registration Statement becomes
effective and (ii) the date on which the Holder shall have sold all the
Registrable Securities (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
(b) Amendments. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities of the Company covered by the Registration Statement.
(c) Information. The Company shall furnish to the Holder and his legal
counsel without charge: (i) at least one copy of the Registration Statement and
any amendment(s) thereto promptly after the Registration Statement or any
amendment thereto is filed with the SEC and, with regard to the Registration
Statement, any correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives promptly after issued or received by the
Company or its representatives, (ii) a reasonable number of copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto promptly after the effectiveness of the Registration
Statement, and (iii) such other documents as the Holder may reasonably request,
in writing, from time to time in order to facilitate the disposition of the
Registrable Securities.
(d) Blue Sky. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
the applicable securities or "blue sky" laws of such states of the United States
as specified by the Holder, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify
2
the Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (B) subject itself
to general taxation in any such jurisdiction, or (C) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
the Holder of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(e) Certain Events. As promptly as practicable after becoming aware of
such event, the Company shall (i) notify the Holder in writing of the happening
of any event as a result of which the prospectus included in the Registration
Statement includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading ("Registration Default"), (ii) use all diligent efforts to promptly
prepare a supplement or amendment to the Registration Statement and take any
other necessary steps to cure the Registration Default, and (iii) deliver a
reasonable number of copies of such supplement or amendment to the Holder. The
Company shall also promptly notify the Holder in writing (A) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when the Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to the Holder
by facsimile on the same day of such effectiveness and by overnight mail), (B)
of any request by the SEC for amendments or supplements to the Registration
Statement or related prospectus or related information, (C) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate, (D) in the event the Registration Statement is
no longer effective, or (E) the Registration Statement is stale for a period of
more than five (5) trading days as a result of the Company's failure to timely
file its financials.
(f) Stop Orders. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Holder who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) Review and Comment. The Company shall permit the Holder and a single
firm of counsel, as designated by him to review and comment upon the
Registration Statement and all amendments and supplements thereto at least three
(3) business days prior to the filing thereof with the SEC, and not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit to the SEC a request for acceleration of the effectiveness of the
Registration Statement or file with the SEC the Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which approval shall not be unreasonably withheld.
(h) Availability of Information. The Company shall make available for
inspection by (i) the Holder and (ii) one firm of attorneys and one firm of
accountants or other agents retained by the Holder (collectively, the
"Inspectors"), all pertinent financial and other records,
3
and pertinent corporate documents and properties of the Company (collectively,
the "Records" and individually a "Record"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to the Holder) or use of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (A) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
the Registration Statement or is otherwise required under the 1933 Act, (B) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (C) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. The Holder agrees that he shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
(i) Confidentiality. The Company shall hold in confidence and not make any
disclosure of information concerning the Holder provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in the Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning the Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to the Holder and allow the Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(j) Listing or Quotation. The Company shall use its best efforts to secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Principal Market. If, despite the Company's best
efforts, the Company is unsuccessful in satisfying the preceding sentence, it
shall use its best efforts to cause all the Registrable Securities covered by
the Registration Statement to be listed on each other national securities
exchange and automated quotation system, if any, on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange
or system. If, despite the Company's best efforts, the Company is unsuccessful
in satisfying the two preceding sentences, it will use its best efforts to
secure the inclusion for quotation with Pink Sheets, LLC. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) Amendment of Registration Statement. If requested by the Holder, the
Company shall (i) as soon as reasonably practical incorporate in a prospectus
supplement or post-effective amendment such information as the Holder reasonably
determines should be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information with respect
to the offering of the Registrable Securities to be sold in such offering, (ii)
make all required filings of such prospectus supplement or post-effective
4
amendment as soon as notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to the Registration Statement if reasonably requested by the Holder.
(l) Other Approvals. The Company shall use its best efforts to cause the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
(m) Certain Financial Statements. The Company shall make generally
available to its security holders as soon as reasonably practical, but not later
than ninety (90) calendar days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158
promulgated under the 1933 Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.
(n) Compliance with SEC Regulations. The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
(o) Other Actions. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Holder of Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Holder.
(a) Required Information. At least five (5) calendar days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Holder in writing of the information the Company requires from the
Holder if the Holder elects to have any of the Holder's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of the Holder that the
Holder shall furnish in writing to the Company such information regarding
himself, the Registrable Securities held by him and the intended method of
disposition of the Registrable Securities held by him as shall reasonably be
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. The Holder covenants and agrees that, in connection with any
resale of Registrable Securities by him pursuant to the Registration Statement,
he shall comply with the "Plan of Distribution" section of the current
prospectus relating to the Registration Statement.
(b) Further Cooperation. The Holder shall cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement, unless the Holder has notified the Company
in writing of the Holder's election to exclude all of the Holder's Registrable
Securities from such Registration Statement.
(c) Discontinuance of Disposition in Certain Events. Upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(f) or the first sentence of 3(e), the Holder will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until the Holder's
5
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(f) or the first sentence of 3(e).
5. Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printing and accounting fees, and
fees and disbursements of counsel for the Company, shall be paid by the Company.
6. Indemnification. In the event any Registrable Securities are included in the
Registration Statement under this Agreement:
(a) Indemnification by Company. To the fullest extent permitted by law,
the Company will, and hereby does, indemnify, hold harmless and defend the
Holder and any agents or representatives thereof, and each Person, if any, who
controls the Holder within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act") (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several (collectively, "Claims"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not the Indemnified Person is or may
be a party thereto ("Indemnified Damages"), to which the Indemnified Person may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in the
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered, or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which the statements therein were made, not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to the Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by him, her or it in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (A) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (B) shall not be available to the
extent such Claim is based on (I) a failure of the Holder to deliver or to cause
to be delivered the prospectus
6
made available by the Company or (II) the Indemnified Person's use of an
incorrect prospectus despite being promptly advised in advance by the Company in
writing not to use such incorrect prospectus; and (C) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Holder pursuant to the
Registration Statement.
(b) Indemnification by Holder. In connection with the Registration
Statement in which the Holder is participating, the Holder agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each an "Indemnified
Party"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by the Holder or his agents or representatives expressly for use in
connection with the Registration Statement; and, subject to Section 6(c), the
Holder will reimburse any legal or other expenses reasonably incurred by any
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Holder, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the resale of the Registrable Securities by the Holder
pursuant to the Registration Statement. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus were corrected on a timely basis in the
prospectus, as then amended or supplemented.
(c) Indemnification Procedure. Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain his own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
counsel shall be selected by the Holder if the
7
Holder is entitled to indemnification hereunder, or the Company, if the Company
is entitled to indemnification hereunder, as applicable. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully appraised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without his written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition his
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim.
Following indemnification as provided for hereunder, the indemnifying party
shall be surrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in his, her or its ability to
defend such action.
(d) Payment of Indemnification. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
(e) Non-exclusivity. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which he, she or it would otherwise
be liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation; and (iii) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. Reports Under the 1934 Act. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Holder to sell securities
of the Company to the public without registration ("Rule 144"), the Company
shall:
8
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
(c) furnish to the Holder, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Holder to sell such securities pursuant to Rule 144 without
registration.
9. No Assignment of Registration Rights. The rights under this Agreement shall
not be assignable.
10. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon the Holder and the
Company. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. Miscellaneous.
(a) Waivers and Communications. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided a confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); (iii) one (1) day after
deposit with a nationally recognized overnight delivery service; or (iv) five
(5) days after being deposited in the United States mail, with postage prepaid
thereon, in each case properly addressed to the party to receive such
communication. The addresses and facsimile numbers for such communications shall
be:
If to the Company:
Recall Mail Corporation
2150 Route 35, Suite 250
Sea Girt, New Jersey 08750
Attention: Darin Myman, President and Chief Executive Officer
Telephone: (732) 359-0270
Facsimile: (732) 359-0231
9
If to the Holder:
David Matthew Adredge
1330 West Unit 2809
Miami Beach, Florida 33139
Telephone: (305) 674-0285
Each party shall provide five (5) days prior notice to the other party of
any change in address, phone number or facsimile number.
(b) Non-waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the State
of New Jersey, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that he is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to him
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(d) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein.
(e) Integration. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Counterparts. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
(h) Further Actions. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other
10
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.
Recall Mail Corporation
By: /s/ Darin Myman
----------------------------------------
Name: Darin Myman
Title: President and Chief Executive Officer
Holder
/s/ David Matthew Adredge
----------------------------------------
(Signature)
David Matthew Adredge
(Print Name)
11
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June
17, 2005, by and between Recall Mail Corporation, a corporation incorporated and
organized under the laws of State of Delaware, with its principal executive
offices at 2150 Route 35, Suite 250, Sea Girt, New Jersey 08750 (the "Company"),
and David A. Arledge, an individual residing at 15176 Brolio Way, Naples,
Florida 34110 (the "Holder").
WHEREAS, in connection with the Holder's investment in the Company, the
Company has agreed to provide the Holder with certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of the Company's
common stock, par value $.0001 per share ("Common Stock"), held by the Holder as
of the date hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holder hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings provided next to such terms:
(a) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision or a governmental agency.
(b) "Principal Market" means The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., The Nasdaq National Market, The Nasdaq SmallCap
Market or the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board, whichever is the principal market on which the Common Stock is
traded.
(c) "Registrable Securities" means the shares of Common Stock held by the
Holder on the date of this Agreement and any shares of capital stock issued or
issuable with respect to such shares of Common Stock, if any, as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, which have not been (i) included in a registration statement that has
been declared effective by the Securities and Exchange Commission (the "SEC"),
or (ii) sold under circumstances meeting all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the 1933 Act.
2. Registration on Form SB-2 or other Registration Form. The Company shall, as
soon as practicable, but not later than September 30, 2005, file with the SEC a
registration statement on Form SB-2 or other available form of registration
statement (the "Registration Statement"), covering the sale of all of the
Registrable Securities, which Registration Statement shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon stock splits, stock dividends or similar
transactions. The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective by the SEC within ninety (90) calendar
days after the date such Registration Statement is initially filed with the SEC.
3. Related Obligations. The Company shall have the following further
obligations:
(a) Continued Effectiveness. The Company shall keep the Registration
Statement effective pursuant to Rule 415 promulgated under the 1933 Act until
the earlier of (i) one year from the date the Registration Statement becomes
effective and (ii) the date on which the Holder shall have sold all the
Registrable Securities (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
(b) Amendments. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities of the Company covered by the Registration Statement.
(c) Information. The Company shall furnish to the Holder and his legal
counsel without charge: (i) at least one copy of the Registration Statement and
any amendment(s) thereto promptly after the Registration Statement or any
amendment thereto is filed with the SEC and, with regard to the Registration
Statement, any correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives promptly after issued or received by the
Company or its representatives, (ii) a reasonable number of copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto promptly after the effectiveness of the Registration
Statement, and (iii) such other documents as the Holder may reasonably request,
in writing, from time to time in order to facilitate the disposition of the
Registrable Securities.
(d) Blue Sky. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
the applicable securities or "blue sky" laws of such states of the United States
as specified by the Holder, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify
2
the Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (B) subject itself
to general taxation in any such jurisdiction, or (C) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
the Holder of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(e) Certain Events. As promptly as practicable after becoming aware of
such event, the Company shall (i) notify the Holder in writing of the happening
of any event as a result of which the prospectus included in the Registration
Statement includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading ("Registration Default"), (ii) use all diligent efforts to promptly
prepare a supplement or amendment to the Registration Statement and take any
other necessary steps to cure the Registration Default, and (iii) deliver a
reasonable number of copies of such supplement or amendment to the Holder. The
Company shall also promptly notify the Holder in writing (A) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when the Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to the Holder
by facsimile on the same day of such effectiveness and by overnight mail), (B)
of any request by the SEC for amendments or supplements to the Registration
Statement or related prospectus or related information, (C) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate, (D) in the event the Registration Statement is
no longer effective, or (E) the Registration Statement is stale for a period of
more than five (5) trading days as a result of the Company's failure to timely
file its financials.
(f) Stop Orders. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Holder who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) Review and Comment. The Company shall permit the Holder and a single
firm of counsel, as designated by him to review and comment upon the
Registration Statement and all amendments and supplements thereto at least three
(3) business days prior to the filing thereof with the SEC, and not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit to the SEC a request for acceleration of the effectiveness of the
Registration Statement or file with the SEC the Registration Statement or any
amendment or supplement thereto without the prior approval of such counsel,
which approval shall not be unreasonably withheld.
(h) Availability of Information. The Company shall make available for
inspection by (i) the Holder and (ii) one firm of attorneys and one firm of
accountants or other agents retained by the Holder (collectively, the
"Inspectors"), all pertinent financial and other records,
3
and pertinent corporate documents and properties of the Company (collectively,
the "Records" and individually a "Record"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to the Holder) or use of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (A) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
the Registration Statement or is otherwise required under the 1933 Act, (B) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (C) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. The Holder agrees that he shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
(i) Confidentiality. The Company shall hold in confidence and not make any
disclosure of information concerning the Holder provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in the Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning the Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to the Holder and allow the Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(j) Listing or Quotation. The Company shall use its best efforts to secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Principal Market. If, despite the Company's best
efforts, the Company is unsuccessful in satisfying the preceding sentence, it
shall use its best efforts to cause all the Registrable Securities covered by
the Registration Statement to be listed on each other national securities
exchange and automated quotation system, if any, on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange
or system. If, despite the Company's best efforts, the Company is unsuccessful
in satisfying the two preceding sentences, it will use its best efforts to
secure the inclusion for quotation with Pink Sheets, LLC. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) Amendment of Registration Statement. If requested by the Holder, the
Company shall (i) as soon as reasonably practical incorporate in a prospectus
supplement or post-effective amendment such information as the Holder reasonably
determines should be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information with respect
to the offering of the Registrable Securities to be sold in such offering, (ii)
make all required filings of such prospectus supplement or post-effective
4
amendment as soon as notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to the Registration Statement if reasonably requested by the Holder.
(l) Other Approvals. The Company shall use its best efforts to cause the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
(m) Certain Financial Statements. The Company shall make generally
available to its security holders as soon as reasonably practical, but not later
than ninety (90) calendar days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158
promulgated under the 1933 Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.
(n) Compliance with SEC Regulations. The Company shall otherwise use its
best efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
(o) Other Actions. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Holder of Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Holder.
(a) Required Information. At least five (5) calendar days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Holder in writing of the information the Company requires from the
Holder if the Holder elects to have any of the Holder's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of the Holder that the
Holder shall furnish in writing to the Company such information regarding
himself, the Registrable Securities held by him and the intended method of
disposition of the Registrable Securities held by him as shall reasonably be
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. The Holder covenants and agrees that, in connection with any
resale of Registrable Securities by him pursuant to the Registration Statement,
he shall comply with the "Plan of Distribution" section of the current
prospectus relating to the Registration Statement.
(b) Further Cooperation. The Holder shall cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement, unless the Holder has notified the Company
in writing of the Holder's election to exclude all of the Holder's Registrable
Securities from such Registration Statement.
(c) Discontinuance of Disposition in Certain Events. Upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(f) or the first sentence of 3(e), the Holder will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until the Holder's
5
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(f) or the first sentence of 3(e).
5. Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printing and accounting fees, and
fees and disbursements of counsel for the Company, shall be paid by the Company.
6. Indemnification. In the event any Registrable Securities are included in the
Registration Statement under this Agreement:
(a) Indemnification by Company. To the fullest extent permitted by law,
the Company will, and hereby does, indemnify, hold harmless and defend the
Holder and any agents or representatives thereof, and each Person, if any, who
controls the Holder within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act") (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several (collectively, "Claims"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not the Indemnified Person is or may
be a party thereto ("Indemnified Damages"), to which the Indemnified Person may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in the
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered, or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which the statements therein were made, not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to the Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by him, her or it in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (A) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (B) shall not be available to the
extent such Claim is based on (I) a failure of the Holder to deliver or to cause
to be delivered the prospectus
6
made available by the Company or (II) the Indemnified Person's use of an
incorrect prospectus despite being promptly advised in advance by the Company in
writing not to use such incorrect prospectus; and (C) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the resale of the Registrable Securities by the Holder pursuant to the
Registration Statement.
(b) Indemnification by Holder. In connection with the Registration
Statement in which the Holder is participating, the Holder agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each an "Indemnified
Party"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by the Holder or his agents or representatives expressly for use in
connection with the Registration Statement; and, subject to Section 6(c), the
Holder will reimburse any legal or other expenses reasonably incurred by any
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Holder, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the resale of the Registrable Securities by the Holder
pursuant to the Registration Statement. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus were corrected on a timely basis in the
prospectus, as then amended or supplemented.
(c) Indemnification Procedure. Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain his own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
counsel shall be selected by the Holder if the
7
Holder is entitled to indemnification hereunder, or the Company, if the Company
is entitled to indemnification hereunder, as applicable. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully appraised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without his written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition his
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim.
Following indemnification as provided for hereunder, the indemnifying party
shall be surrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in his, her or its ability to
defend such action.
(d) Payment of Indemnification. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
(e) Non-exclusivity. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which he, she or it would otherwise
be liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation; and (iii) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. Reports Under the 1934 Act. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Holder to sell securities
of the Company to the public without registration ("Rule 144"), the Company
shall:
8
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
(c) furnish to the Holder, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Holder to sell such securities pursuant to Rule 144 without
registration.
9. No Assignment of Registration Rights. The rights under this Agreement shall
not be assignable.
10. Amendment of Registration Rights. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon the Holder and the
Company. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. Miscellaneous.
(a) Waivers and Communications. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided a confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); (iii) one (1) day after
deposit with a nationally recognized overnight delivery service; or (iv) five
(5) days after being deposited in the United States mail, with postage prepaid
thereon, in each case properly addressed to the party to receive such
communication. The addresses and facsimile numbers for such communications shall
be:
If to the Company:
Recall Mail Corporation
2150 Route 35, Suite 250
Sea Girt, New Jersey 08750
Attention: Darin Myman, President and Chief Executive Officer
Telephone: (732) 359-0270
Facsimile: (732) 359-0231
9
If to the Holder:
David A. Arledge
15176 Brolio Way
Naples, Florida 34110
Telephone: (239) 566-7220
Each party shall provide five (5) days prior notice to the other party of
any change in address, phone number or facsimile number.
(b) Non-waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the State
of New Jersey, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that he is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to him
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(d) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein.
(e) Integration. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Counterparts. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
(h) Further Actions. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other
10
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.
Recall Mail Corporation
By: /s/ Darin Myman
----------------------------------------
Name: Darin Myman
Title: President and Chief Executive Officer
Holder
/s/ David A. Arledge
----------------------------------------
(Signature)
David A. Arledge
(Print Name)
11
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July
31, 2005, by and between Recall Mail Corporation, a corporation incorporated and
organized under the laws of State of Delaware, with its principal executive
offices at 2150 Route 35, Suite 250, Sea Girt, New Jersey 08750 (the "Company"),
and Jeffrey M. Barber and Jo Ann Barber, residing at 30 W. Parsonage Way,
Manalapan, New Jersey 07726 (the "Holders").
WHEREAS, in connection with the Holders' investment in the Company, the
Company has agreed to provide the Holders with certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of the Company's
common stock, par value $.0001 per share ("Common Stock"), held by the Holders
as of the date hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
ovenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holders hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
meanings provided next to such terms:
(a) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision or a governmental agency.
(b) "Principal Market" means The American Stock Exchange, Inc., The New
York Stock Exchange, Inc., The Nasdaq National Market, The Nasdaq SmallCap
Market or the National Association of Securities Dealer's, Inc. OTC electronic
bulletin board, whichever is the principal market on which the Common Stock is
traded.
(c) "Registrable Securities" means the shares of Common Stock held by the
Holders on the date of this Agreement and any shares of capital stock issued or
issuable with respect to such shares of Common Stock, if any, as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, which have not been (i) included in a registration statement that has
been declared effective by the Securities and Exchange Commission (the "SEC"),
or (ii) sold under circumstances meeting all of the applicable conditions of
Rule 144 (or any similar provision then in force) under the 1933 Act.
2. Registration on Form SB-2 or other Registration Form. The Company shall, as
soon as practicable, but not later than September 30, 2005, file with the SEC a
registration statement on Form SB-2 or other available form of registration
statement (the "Registration Statement"), covering the sale of all of the
Registrable Securities, which Registration Statement shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon stock splits, stock dividends or similar
transactions. The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective by the SEC within ninety (90) calendar
days after the date such Registration Statement is initially filed with the SEC.
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