SCHEDULE 14A (Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
JAG MEDIA HOLDINGS, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or Schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
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[LOGO]
6865 SW 18th Street, Suite B13
Boca Raton, Florida 33433
(561) 393-0605
January 7, 2004
To the Stockholders of JAG Media Holdings, Inc.:
The Annual Meeting of Stockholders of JAG Media Holdings, Inc. will be
held on Wednesday, February 11, 2004, at 10:00 a.m. PST, in the law offices of
Jones Vargas located on the Twelfth Floor of 100 West Liberty Street in Reno,
Nevada.
Details of the business to be conducted at the Annual Meeting are
provided in the enclosed Notice of Annual Meeting of Stockholders and Proxy
Statement. Our 2003 Annual Report on Form 10-KSB is also enclosed and provides
additional information regarding our financial results during the fiscal year
ended July 31, 2003.
On behalf of our Board of Directors and employees, I cordially invite
all stockholders to attend the Annual Meeting. It is important that your shares
be voted on matters that come before the meeting. Whether or not you plan to
attend the meeting, I urge you to promptly complete, sign, date and return the
enclosed proxy card in the prepaid envelope provided.
Sincerely,
/s/ Gary Valinoti
Gary Valinoti
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on February 11, 2004
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of JAG
Media Holdings, Inc., a Nevada corporation (the "Company"), will be held on
Wednesday, February 11, 2004, at 10:00 a.m. PST, in the law offices of Jones
Vargas located on the Twelfth Floor of 100 West Liberty Street in Reno, Nevada,
for the following purposes:
i. To elect three directors to serve for the ensuing year;
ii. To consider and act upon a proposal to ratify the selection of J.H.
Cohn LLP as the Company's independent accountants for 2004;
iii. To consider and act upon a proposal to amend and restate Article
Fourth of the Articles of Incorporation of the Company to
(a) increase the aggregate authorized number of shares of all
classes of stock from 200,000,000 to 300,440,000 of which (w)
250,000,000 shares shall be designated common stock, par value
$0.00001 per share ("Common Stock"), (x) 400,000 shares shall
be designated Series 2 Class B common stock, par value
$0.00001 per share, (y) 40,000 shares shall be designated
Series 3 Class B common stock, par value $0.00001 per share
and (z) 50,000,000 shares shall be designated preferred stock,
par value $0.00001 per share; and
(b) reclassify each outstanding share of the Company's existing
Class A common stock, par value $0.00001 per share ("Class A
Common Stock") and Series 1 Class B common stock, par value
$0.00001 per share ("Series 1 Class B Common Stock") into one
share of Common Stock upon surrender of physical share
certificates representing the existing Class A Common Stock
and Series 1 Class B Common Stock for new Common Stock
certificates; and
iv. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on Monday, January 5, 2004 has been fixed as the
record date for determining the stockholders entitled to notice of and to vote
at the Annual Meeting. Only holders of record of Class A Common Stock and Series
1 Class B Common Stock of the Company at that date are entitled to vote at the
Annual Meeting or any adjournments thereof.
By Order of the Board of Directors,
/s/ Stephen J. Schoepfer
---------------------------------------
Stephen J. Schoepfer
Secretary
Boca Raton, Florida
January 7, 2004
Your vote is important. Please complete, sign, date and mail the enclosed Proxy
in the accompanying envelope even if you intend to be present at the meeting.
Returning the Proxy will not limit your right to vote in person or to attend the
Annual Meeting, but will ensure your representation if you cannot attend. If you
hold shares in more than one name, or if your stock is registered in more than
one way, you may receive more than one copy of the proxy material. If so, please
sign and return each of the proxy cards that you receive so that all of your
shares may be voted. The Proxy is revocable at any time prior to its use.
[LOGO]
JAG MEDIA HOLDINGS, INC.
6865 SW 18th Street, Suite B13
Boca Raton, Florida 33433
(561) 393-0605
January 7, 2004
PROXY STATEMENT
This Proxy Statement is being mailed on or about January 8, 2004, to
holders of record as of January 5, 2004 (the "Record Date"), of Class A common
stock, par value $0.00001 per share ("Class A Common Stock") and Series 1 Class
B common stock, par value $0.00001 per share ("Series 1 Class B Common Stock"),
of JAG Media Holdings, Inc. (the "Company" or "JAG Media") in connection with
the solicitation by the Board of Directors of the Company of a proxy in the
enclosed form for the Annual Meeting of Stockholders of the Company to be held
on February 11, 2004 (the "Annual Meeting").
A proxy card is enclosed for your use. YOU ARE REQUESTED ON BEHALF OF
THE BOARD OF DIRECTORS TO SIGN, DATE AND RETURN THE PROXY CARD IN THE
ACCOMPANYING ENVELOPE, which requires no postage if mailed in the United States.
If no instructions are specified on the proxy, shares represented
thereby will be voted for the election of the three nominees listed herein as
directors of the Company and for Proposals 2 and 3 described herein.
Any stockholder who has given a proxy may revoke his or her proxy by
executing a proxy bearing a later date or by delivering written notice of
revocation of his or her proxy to the Secretary of the Company at the Company's
executive offices at any time prior to the meeting or any postponement or
adjournment thereof. Any stockholder who attends in person the Annual Meeting or
any postponement or adjournment thereof may revoke any proxy previously given
and vote by ballot.
As of January 5, 2004, there were 40,545,778 shares of Class A Common
Stock and 997,286 shares of Series 1 Class B Common Stock issued and
outstanding. The presence of the holders of a majority of the issued and
outstanding shares of Class A Common Stock and Series 1 Class B Common Stock
entitled to vote at the Annual Meeting, either in person or represented by
properly executed proxies, is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker
"non-votes" (which result when a broker holding shares for a beneficial owner
has not received timely voting instructions on certain matters from such
beneficial owner) will be counted for purposes of determining the existence of a
quorum at the Annual Meeting. If there are not sufficient shares represented in
person or by proxy at the meeting to constitute a quorum, the meeting may be
postponed or adjourned in order to permit further solicitation of proxies by the
Company. Proxies given pursuant to this solicitation and not revoked will be
voted at any postponement or adjournment of the Annual Meeting in the manner set
forth above.
Nevada law specifies that directors must be elected by a plurality of
the votes cast by holders of shares of Class A Common Stock and Series 1 Class B
Common Stock. Cumulative voting for the election of directors is not permitted.
The ratification of the appointment of the Company's auditors (Proposal 2) will
require the affirmative vote of holders of a majority of the shares of Class A
Common Stock and Series 1 Class B Common Stock whose votes are cast on the
subject matter. The amendment and restatement of Article Fourth of the Company's
Articles of Incorporation (Proposal 3) will require the affirmative vote of a
majority of the outstanding shares of Class A Common Stock and Series 1 Class B
Common Stock.
Abstentions and broker non-votes will be treated as shares present and
will count for purposes of determining the presence of a quorum. Abstentions and
broker non-votes will not be counted for purposes of determining an affirmative
plurality vote with respect to Proposal 1 or majority vote with respect to
Proposal 2. Accordingly, in the case of shares that are present at the Annual
Meeting for quorum purposes, not voting such shares for a particular nominee for
director (Proposal 1) will not prevent the election of such nominee if other
stockholders vote for such nominee, nor will an abstention on the proposal to
ratify the appointment of the Company's auditors (Proposal 2) operate as a vote
"against" such proposal. However, because the affirmative vote of a majority of
the outstanding shares of Class A Common Stock and Series 1 Class B Common Stock
is required to approve the amendment and restatement of Article Fourth of the
Company's Articles of Incorporation (Proposal 3), abstentions and broker
non-votes will have the same effect as votes against such proposal.
The expense of preparing, printing and mailing proxy solicitation
materials will be borne by the Company. In addition, certain directors,
officers, representatives and employees of the Company may solicit proxies by
telephone and personal interview. Such individuals will not receive additional
compensation from the Company for solicitation of proxies, but may be reimbursed
for reasonable out-of-pocket expenses in connection with such solicitation.
Banks, brokers and other custodians, nominees and fiduciaries also will be
reimbursed by the Company for their reasonable expenses for sending proxy
solicitation materials to the beneficial owners of Class A Common Stock and
Series 1 Class B Common Stock.
The Company's Annual Report on Form 10-KSB for the year ended July 31,
2003 (the "Annual Report"), which contains the Company's financial statements
for such year, is being mailed to all stockholders entitled to vote at the
Annual Meeting with this Proxy Statement.
2
PROPOSAL 1
ELECTION OF DIRECTORS
The number of directors of the Company currently is fixed at three. The
Board of Directors has nominated the three persons named below to serve as
directors until the next Annual Meeting of Stockholders or until their earlier
resignation or removal. If any of the nominees should be unavailable to serve
for any reason (which is not anticipated), the Board of Directors may (i)
designate a substitute nominee or nominees, in which case the persons named on
the enclosed proxy card will vote all valid proxy cards for the election of such
substitute nominee, (ii) allow the vacancy to remain open until a suitable
candidate or candidates are located or (iii) by resolution provide for fewer
directors. Proxies for this Annual Meeting may not be voted FOR more than three
nominees.
Nominees for Election at this Annual Meeting.
Gary Valinoti, age 45, was a co-founder of the predecessor to JAG Media
Holdings, Inc. and has served as our President and Chief Executive Officer and
as a member of our Board of Directors since March 1999. Mr. Valinoti has been a
member of our Board of Directors since July 1999. From August 1992 until March
1999 Mr. Valinoti served as President, and as a member of the Board of
Directors, of JagNotes, Inc., the company that produced the JAGNotes fax service
throughout that period. Prior to his involvement with JagNotes, Inc., Mr.
Valinoti held positions with various firms in the securities industry including
Mosely, Hallgarten, Estabrook & Weeden where he was involved in institutional
and currency trading, and started the firm's arbitrage department. Mr. Valinoti
attended Wagner College.
Thomas J. Mazzarisi, age 46, has served as our Executive Vice President
and General Counsel since March 1999. Mr. Mazzarisi has also served as our Chief
Financial Officer since November 9, 2001. Mr. Mazzarisi has been a member of our
Board of Directors since July 1999. From 1997 until joining JAG Media Holdings,
Inc., Mr. Mazzarisi practiced law from his own firm in New York, specializing in
international commercial transactions. From 1988 until 1997, Mr. Mazzarisi was a
Senior Associate at the law firm of Coudert Brothers where he also specialized
in international commercial transactions. Prior to joining Coudert Brothers, Mr.
Mazzarisi was Deputy General Counsel of the New York Convention Center
Development Corporation. Mr. Mazzarisi is a graduate of Fordham University where
he received a B.A. in Political Economy and was elected to Phi Beta Kappa. Mr.
Mazzarisi received his J.D. from Hofstra University School of Law.
Stephen J. Schoepfer, age 44, has served as our Executive Vice
President, Chief Operating Officer and Secretary since July 1999. Mr. Schoepfer
has been a member of our Board of Directors since July 1999. Prior to joining
the Company in July 1999, he was a Financial Advisor with the investment firm of
Legg Mason Wood Walker. Prior to joining Legg Mason, Mr. Schoepfer served as a
Financial Advisor and Training Coordinator at Prudential Securities. Mr.
Schoepfer attended Wagner College.
3
Vote Required For Approval.
The vote of a plurality of holders of the outstanding shares of Class A
Common Stock and Series 1 Class B Common Stock present in person or represented
by duly executed proxies at the Annual Meeting for the election of a given
nominee is necessary to elect such nominee as a director of the Company.
Accordingly, the three director nominees receiving the greatest number of votes
cast will be elected, regardless of the number of votes withheld for the
election of such director nominees. Shares represented by an executed proxy in
the form enclosed will, unless otherwise directed, be voted for the election of
the three persons nominated to serve as directors.
The Board of Directors unanimously recommends that stockholders vote
FOR the election of the three persons nominated to serve as directors.
Board Organization And Meetings.
During the fiscal year ended July 31, 2003, the Board of Directors
acted on seven occasions by unanimous written consent.
The Company does not have a standing audit, nominating or compensation
committee. The Company does not believe it is feasible or in the best interest
of the Company to establish stand alone audit, nominating or compensation
committees given that as of November 1, 2003 the Company only had five
employees, three of whom serve as directors.
Our three directors and executive officers, Messrs. Mazzarisi,
Schoepfer and Valinoti, are responsible for reviewing and recommending potential
nominees to the Board of Directors, but do not follow any specific process in
identifying and evaluating the nominees. Historically, including for purposes of
this forthcoming Annual Meeting, nominations have never been submitted by the
Company's stockholders and our directors have therefore never considered any
such nominations. However if in the future stockholders would like to nominate
persons for election as directors they could submit such nominations in writing
either by mail to the Board of Directors, c/o Thomas J. Mazzarisi, JAG Media
Holdings, Inc., 6865 SW 18th Street, Suite B-13, Boca Raton, FL 33433. In order
to ensure that our Board has a reasonable opportunity to evaluate such
nominations, the Company requests that such nominations be submitted no later
than 120 days prior to the mailing of our proxy statement.
Stockholders may communicate with any or all members of the Board of
Directors by writing to the above address. We encourage our directors to attend
the annual meeting of stockholders. Two members of the Board of Directors
attended the annual meeting of stockholders held on January 31, 2003 (one in
person and one by telephone).
Directors' Remuneration.
The Company currently does not compensate its directors, all of whom
receive compensation as officers.
4
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, subject to ratification by the stockholders,
has appointed J.H. Cohn LLP as independent public accountants to examine the
Company's consolidated financial statements for the fiscal year ending July 31,
2004. J.H. Cohn LLP has served as the Company's independent public accountants
since April 1999 and performed the audit of the Company's 2003 financial
statements.
Vote Required For Approval.
The affirmative vote of holders of a majority of the shares of Class A
Common Stock and Series 1 Class B Common Stock whose votes are cast on this
proposal is required to ratify the appointment of the Company's independent
accountants. Shares represented by an executed proxy in the form enclosed will,
unless otherwise directed, be voted "FOR" the ratification of the appointment of
J.H. Cohn LLP as the Company's independent auditors.
The Board of Directors unanimously recommends that stockholders vote
FOR the ratification of the appointment of J.H. Cohn LLP as independent public
accountants to audit the Company's consolidated financial statements for the
fiscal year ending July 31, 2004.
Audit Fees.
The aggregate fees billed for the fiscal year ended July 31, 2003 for
professional services rendered by J.H. Cohn LLP for the audit of the our annual
financial statements and the review of the financial statements included in our
quarterly reports on Form 10-QSB were $67,634.
Audit Related Fees.
The aggregate fees billed for the fiscal year ended July 31, 2003 for
assurance and related services rendered by J.H. Cohn LLP related to the
performance of the audit or review of our financial statements were $29,153. The
services rendered by J.H. Cohn LLP in this regard were accounting services
relating to the preparation of various registration statements and other
regulatory filings made by the Company.
Tax Fees.
The aggregate fees billed for the fiscal year ended July 31, 2003 for
services rendered by J.H. Cohn LLP in connection with the preparation of our
federal and state tax returns were $3,855.
5
PROPOSAL 3
APPROVAL OF AN AMENDMENT AND RESTATEMENT OF ARTICLE FOURTH OF THE ARTICLES OF
INCORPORATION OF THE COMPANY WHICH WOULD INCREASE THE NUMBER OF OUR AUTHORIZED
SHARES AND EFFECT A RECAPITALIZATION OF OUR EXISTING CLASS A COMMON STOCK AND
SERIES B CLASS B COMMON STOCK
At the Annual Meeting, the stockholders of JAG Media will be asked to
consider and vote upon an amendment and restatement of Article Fourth of the
Company's Articles of Incorporation (the "Amended and Restated Articles") (see
Appendix A attached hereto). The effect of the Amended and Restated Articles
will be to:
o increase the aggregate authorized number of shares of all
classes of stock from 200,000,000 to 300,440,000 of which (a)
250,000,000 shares shall be designated common stock, par value
$0.00001 per share ("Common Stock"), (b) 400,000 shares shall
be designated Series 2 Class B common stock, par value
$0.00001 per share ("Series 2 Class B Common Stock"), (c)
40,000 shares shall be designated Series 3 Class B common
stock, par value $0.00001 per share ("Series 3 Class B Common
Stock") and (d) 50,000,000 shares shall be designated
preferred stock, par value $0.00001 per share ("Preferred
Stock"); and
o reclassify each outstanding share of the Company's existing
Class A Common Stock and Series 1 Class B Common Stock into
one share of Common Stock upon surrender of physical share
certificates representing the existing Class A Common Stock
and Series 1 Class B Common Stock for new Common Stock
certificates.
Vote Required For Approval of Amended and Restated Articles.
The affirmative vote of holders representing a majority of the
outstanding voting power of existing Class A Common Stock and Series 1 Class B
Common Stock at the Record Date is required to approve the Amended and Restated
Articles.
The Board of Directors unanimously recommends that stockholders vote
FOR approval of the Amended and Restated Articles.
Principal Effects of the Amended and Restated Articles.
Effective Time. If the Amended and Restated Articles are approved by
our stockholders at the Annual Meeting, the recapitalization will become
effective upon filing the Amended and Restated Articles with the Secretary of
State of the State of Nevada (the "Effective Time"), which will occur as soon as
practicable after the Annual Meeting following the qualification for trading of
the Common Stock on the Nasdaq OTC Bulletin Board and filing of a Form 8-A
Registration Statement relating to the Common Stock with the Securities and
Exchange Commission.
6
Change in Capital Structure. Approval of the Amended and Restated
Articles would have the following effects on our capital structure at the
Effective Time:
o the aggregate number of all classes of our authorized shares
will be increased from 200,000,000 to 300,440,000;
o the number of our authorized Common Stock will be 250,000,000
shares;
o the number of our authorized Class B common stock will be
440,000 shares, of which 400,000 have been designated as
Series 2 Class B Common Stock and 40,000 have been designated
as Series 3 Class B Common Stock;
o each share of our outstanding Class A Common Stock and each
share of our outstanding Series 1 Class B Common Stock will be
reclassified into one (1) share of Common Stock; and
o the number of our authorized Preferred Stock will be
50,000,000 shares.
If the recapitalization is approved by the stockholders, we will issue
new share certificates for the Common Stock upon surrender of physical share
certificates for the existing Class A Common Stock and Series 1 Class B Common
Stock. Our transfer agent, Computershare Trust Company, Inc., will make a record
of all stockholders of record holding old stock certificates by comparing
beneficial owner lists provided to them by brokers to the official position in
our shares as recorded by DTC and based on this information will determine which
stockholders are entitled to receive the new certificates representing Common
Stock.
The recapitalization will affect all of our outstanding Class A Common
Stock and Series 1 Class B Common Stock and the number of shares to be received
in the recapitalization will be the same for all of our Class A Common Stock and
Series 1 Class B Common Stock. The recapitalization will affect all of the
Company's stockholders uniformly and will not affect any stockholder's
percentage ownership interest in JAG Media.
No fractional shares will be issued or issuable in the recapitalization
because no fractional shares are currently outstanding.
Common Stock.
o The rights, preferences, privileges and restrictions of the
Common Stock are set forth in full in the proposed amendment
and restatement of Article Fourth of our Articles of
Incorporation set forth as Appendix A to this proxy statement.
The following summary should be read in conjunction with, and
is qualified in its entirety by reference to, the amendment
set forth in Appendix A.
o Each share of Common Stock will have rights, preferences,
privileges and restrictions identical to the existing Class A
Common Stock.
7
o All shares of Common Stock will be entitled to one vote on any
matter to be voted on by the stockholders of the Company.
There is no provision in the Amended and Restated Articles
permitting cumulative voting. Under our Articles of
Incorporation and the laws of the State of Nevada, the
affirmative vote of the holders representing a majority of the
outstanding voting power of Common Stock entitled to vote will
be required to amend our Articles of Incorporation.
o The Common Stock will not carry any preemptive rights enabling
a holder to subscribe for or receive shares of JAG Media of
any class or any other securities convertible into any class
of JAG Media's shares.
Class B Common Stock.
o The Amended and Restated Articles will not change the existing
rights, preferences, privileges and restrictions of the Series
2 Class B Common Stock and Series 3 Class B Common Stock.
Preferred Stock.
o Our Board of Directors is authorized to issue the Preferred
Stock and the terms of the Preferred Stock, including dividend
rates, conversion prices, voting rights, redemption prices and
similar matters, shall be determined by our Board of
Directors.
Dividends and Distributions. Each share of Common Stock, Series 2 Class
B Common Stock and Series 3 Class B Common Stock will be equal in respect to
dividends and other distributions in cash, stock or property, including
distributions in connection with any recapitalization and upon liquidation,
dissolution, or winding up of JAG Media.
Future Financings and Acquisitions.The Amended and Restated Articles
provide for 250,000,000 authorized shares of Common Stock, 440,000 authorized
shares of Class B common stock and 50,000,000 authorized shares of Preferred
Stock. Therefore, our Board of Directors may issue additional shares of Common
Stock and shares of Preferred Stock, from time to time in the future, for any
proper corporate purpose, including public and private equity offerings,
convertible debt offerings, stock splits, stock dividends, acquisitions,
warrants, stock option plans, and funding of employee benefit plans. No further
action or authorization by our stockholders would be necessary prior to the
issuance of additional shares of Common Stock or or the issuance of the
Preferred Stock. The future issuance by us of shares of Common Stock or
Preferred Stock may dilute the equity ownership position and the rights,
preferences and privileges of existing stockholders. Unissued shares of Common
Stock or Preferred Stock could be issued in circumstances that would serve to
preserve control of our existing management.
Anti-Takeover Effects. The Amended and Restated Articles could have a
potential anti-takeover effect with respect to JAG Media. The recapitalization
involves the authorization of 100,440,000 additional shares of stock. Without
further stockholder action, the Board of Directors of JAG Media could authorize
the issuance of all or any part of such additional shares, including Preferred
Stock with special voting rights by class or with more than one vote per share,
to a "white knight" in order to deter a potential buyer of JAG Media. As a
result, the recapitalization might have the effect of preventing or discouraging
an attempt by a party unable to obtain the approval of the Board of Directors of
JAG Media to take over or otherwise gain control of JAG Media. As of the date of
this proxy statement, management knows of no specific effort to accumulate
securities of JAG Media or to obtain control of JAG Media by means of a merger,
amalgamation, tender offer or solicitation in opposition to management or
otherwise.
8
Nasdaq OTC Bulletin Board; Registration Under the Securities Exchange
Act of 1934. In connection with the recapitalization, the Company will use its
best efforts to have the Common Stock qualified for trading on the Nasdaq OTC
Bulletin Board. It is expected that the Common Stock will begin trading at
approximately the same time as the existing Class A Common Stock is removed from
trading on the Nasdaq OTC Bulletin Board at or about the Effective Time.
The recapitalization of our Class A Common Stock and Series 1 Class B
Common Stock into Common Stock will be exempt from registration pursuant to
Section 3(a)(9) of the Securities Act of 1933, as amended. However, holders of
restricted shares of Class A Common Stock and Series 1 Class B Common Stock will
continue to hold restricted Common Stock. The Common Stock will be registered
under the Securities Exchange Act of 1934, as amended, and we will continue to
file periodic reports and proxy statements with the Securities and Exchange
Commission.
Effect on Market Value and Price. The market price of the Common Stock
after effectiveness of the Amended and Restated Articles will depend, as does
the price of existing Class A Common Stock prior to such time, on many factors,
including among others, the future performance of the Company, general market
conditions, and conditions relating to similar companies in our industry in
general. Accordingly, we cannot predict the prices or price range at which the
Common Stock will trade following the effectiveness of the Amended and Restated
Articles.
Fairness. Because the Class A Common Stock will be exchanged for Common
Stock, which will have substantially the same rights, preferences and privileges
as the existing Class A Common Stock, our Board of Directors believes that the
recapitalization is fair to the stockholders. In making this determination, our
Board of Directors, however, did not obtain an independent report, opinion or
appraisal relating to the fairness of the recapitalization.
Neither the Securities and Exchange Commission nor any state securities
commission has: (i) approved or disapproved of the recapitalization of JAG Media
Holdings, Inc.; (ii) passed on the merits of the merits or fairness of the
recapitalization; or (iii) passed upon the adequacy or accuracy of the
disclosure in this proxy statement. Any representation to the contrary is a
criminal offense.
9
Certain Federal Income Tax Consequences. The following is a summary of
certain U.S. federal income tax consequences to the stockholders of the Company
resulting from the recapitalization of existing Class A Common Stock and Series
1 Class B Common Stock for Common Stock. The following discussion is based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), its legislative history, administrative pronouncements, judicial
decisions and Treasury Regulations, all of which are subject to change, possibly
with retroactive effect. The following discussion assumes that the stockholders
hold their existing Class A Common Stock and Series 1 Class B Common Stock as
capital assets. The following discussion does not purport to be a complete
discussion of all U.S. federal income tax considerations resulting from the
recapitalization of existing Class A Common Stock and Series 1 Class B Common
Stock for Common Stock. The following discussion does not address the tax
consequences to the holders of any options or warrants to purchase existing
Class A Common Stock and Series 1 Class B Common Stock. The following discussion
also does not address the tax consequences resulting under state, local or
non-U.S. tax laws. In addition, the following discussion may not apply, in whole
or in part, to particular categories of our stockholders, such as dealers in
securities, insurance companies, non-U.S. persons, tax-exempt organizations,
traders in securities that elect to use a mark-to-market method of accounting
for their securities holdings, persons that own securities that are a hedge or
that are hedged against interest rate or currency risks, persons that own
securities as part of a straddle or conversion transaction for tax purposes,
persons whose functional currency for tax purposes is not the U.S. dollar,
financial institutions and stockholders that acquired existing Class A Common
Stock or Series 1 Class B Common Stock upon the exercise of compensatory stock
options or otherwise as compensation.
THE FOLLOWING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY. ALL
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC
TAX CONSEQUENCES RESULTING FROM THE RECAPITALIZATION OF EXISTING CLASS A COMMON
STOCK AND SERIES 1 CLASS B COMMON STOCK FOR COMMON STOCK, INCLUDING ANY STATE,
LOCAL OR NON-U.S. TAX CONSEQUENCES.
The recapitalization will constitute a "reorganization" within the
meaning of Section 368(a)(1)(E) of the Code. Accordingly, a stockholder will
recognize no gain or loss on the substitution of its existing Class A Common
Stock and Series 1 Class B Common Stock with Common Stock.
A stockholder's aggregate basis in the Common Stock will be the same as
the stockholder's aggregate basis in the Class A Common Stock and Series 1 Class
B Common Stock exchanged therefor. If a stockholder acquired its shares of
existing Class A Common Stock and Series 1 Class B Common Stock in different
lots at different prices, the basis of the shares of Common Stock received will
be calculated separately with respect to each lot of existing Class A Common
Stock and Series 1 Class B Common Stock replaced by Common Stock, provided such
stockholder takes adequate steps to identify the shares of Common Stock received
with respect to the different lots of existing Class A Common Stock and Series 1
Class B Common Stock. A stockholder's holding period for its Common Stock will
include such stockholder's holding period for its existing Class A Common Stock
and Series 1 Class B Common Stock.
Return of Shares of Class A Common Stock and Series 1 Class B Common
Stock for Shares of Common Stock. To complete the recapitalization, all
outstanding share certificates representing shares of our existing Class A
Common Stock and Series 1 Class B Common Stock must be returned to our transfer
agent, Computershare Investor Services, Inc., so that shares of the new Common
Stock may be issued.
10
If you are not a registered stockholder holding physical share
certificates, you should contact your broker and request your broker to obtain
physical share certificates prior to the Effective Time so that they can be
promptly submitted with the transmittal form to obtain your new share
certificates for the Common Stock.
Transmittal forms will be sent by our transfer agent to each
stockholder of record to be used in forwarding each stockholder's existing share
certificate(s) (the "Old Certificates") for surrender for certificate(s)
representing the appropriate number of shares of new Common Stock. After receipt
of such transmittal form, each holder should surrender his or her Old
Certificates. The transmittal forms will be accompanied by instructions
specifying other details of the surrender and replacement. The transmittal form
will also be posted on our website and can be downloaded from the website.
After the Effective Time, each Old Certificate that previously
represented shares of existing Class A Common Stock or Series 1 Class B Common
Stock will only represent the right to receive the shares of new Common Stock.
The holder of Old Certificates not surrendered will not be entitled to vote or
to receive any dividends or other distributions payable by us after the
Effective Time until the Old Certificates have been surrendered. Such dividends
and distributions, if any, will be accumulated, and at the time of the surrender
of the Old Certificates, all such unpaid dividends or distributions will be paid
without interest. After the Effective Time, neither Old Certificates nor any
existing Class A Common Stock will continue to trade on the Nasdaq OTC Bulletin
Board.
STOCKHOLDERS SHOULD NOT SEND THEIR SHARE CERTIFICATES TO THE TRANSFER AGENT
UNTIL THEY RECEIVE A TRANSMITTAL FORM OR DOWNLOAD A TRANSMITTAL FORM FROM OUR
WEBSITE.
11
Purposes of the Amended and Restated Articles.
After careful consideration of the potential advantages and disadvantages of the
recapitalization, our Board of Directors believes that the recapitalization is
in the best interest of the Company and its stockholders. The material
advantages and disadvantages of the recapitalization considered by the Board of
Directors are set forth below.
Advantages.
Flexibility in Structuring Future Financings and Acquisitions.
The Board of Directors believes increasing the overall number of
authorized shares of capital stock from 200,000,000 to 300,440,000 shares,
including the number of authorized shares of Preferred Stock from 15,000,000 to
50,000,000 shares, will improve the Company's ability to issue equity for sale,
conversion or acquisition purposes. For example, in connection with an
acquisition or financing our Board of Directors will have the ability to
negotiate and issue Preferred Stock with rights different from those rights
granted to the holders of Common Stock. Alternatively, we may find it more
beneficial at some point to sell Preferred Stock than Common Stock, which could
also be convertible into Common Stock. This flexibility will allow our Board of
Directors to be more creative in the structuring of an acquisition, sale of
equity or financing and to complete such transaction more quickly. We, however,
have no current agreements to issue additional equity or convertible debt
securities in connection with any acquisition or financing transaction.
Effort to Combat Naked Short Selling in the Company's Shares.
In late 2001, our Board of Directors began to suspect that the price of
the shares of our common stock trading on the Nasdaq OTC Bulletin Board might
have been artificially affected by abnormally high short selling by speculators
who were not stockholders of JAG Media. Our directors became concerned about
this possible problem after reviewing the trading activity in the Company's
shares over an extended period of time, consulting with the Company's advisors
and stockholders, making inquiries of various market makers in the Company's
stock, and examining trading records provided to the Company by DTC. The
directors were concerned that speculators might have been engaging in a practice
commonly known as "naked short selling," which means that certain brokers may
have been permitting their short selling customers to sell shares their
customers did not own and may have failed to borrow so that such customers were
not capable of delivering the shares sold to the purchaser of the shares. This
practice could result in a substantial number of purchasers who believe they are
stockholders of JAG Media, but who in fact would not be stockholders since their
brokers may never have received any shares of JAG Media in their account. Naked
short selling can be illegal if done with the conscious intention of leaving the
short position as a paper entry indefinitely. Because of these effects of naked
shorting which threatened the investment of our stockholders, including those
who believed they were our stockholders, and the integrity of the market for our
shares, our directors concluded that their fiduciary duties required them to
take steps to attempt to remedy the problem they perceived.
12
In part in order to combat this perceived naked short selling problem,
on April 8, 2002 the Company effected a recapitalization of its common stock
into shares of Class A Common Stock and Series 1 Class B Common Stock. In
connection with the recapitalization the Company issued new share certificates
for the Class A Common Stock and Series 1 Class B Common Stock upon surrender of
physical share certificates for the existing common stock.
In a press release dated January 24, 2003, we announced that our Board
had amended our Bylaws to adopt custody only trading effective as of such date.
The proposal to implement custody only trading of our shares of Class A Common
Stock had been earlier presented to our stockholders for consideration at our
Annual Meeting which was then held on January 31, 2003. In a straw vote, in
excess of 21,000,000 shares (representing more than 98% of the votes cast on the
matter) were voted in favor of the custody only trading proposal contained in
our proxy statement.
We effected a dividend of a new series of Class B common stock to our
stockholders of record as of the close of business on April 14, 2003 in the
ratio of one share of Series 2 Class B Common Stock for every 100 shares of
Class A Common Stock. Such shares of Series 2 Class B Common Stock were
non-voting, had dividend and liquidation rights equal to the Class A Common
Stock and were redeemable. The shares of Series 2 Class B Common Stock did not
have a CUSIP number and were issuable to registered beneficial stockholders and
to all beneficial owners who appeared on beneficial owner lists supplied by
their broker provided that list was consistent with the broker's share position
with DTC.
Some stockholders of the Company contacted members of our Board of
Directors to inform them that they had not received their Series 2 Class B
Common Stock dividend certificates. As our Board deliberated whether or not to
recommend the current recapitalization, our directors expressed concern about
the number and size of problems which emerged from the stock dividend. These
included the Series 2 Class B Common Stock certificates which can still not yet
be mailed to beneficial owners because certain brokers have either failed to
submit a beneficial owner list to our transfer agent or the list they have
submitted does not correspond to their official position in our shares as
recorded by DTC. Our Board believes that the problems that have arisen in
connection with the issuance of our dividend are indicative of continued open
naked short selling positions in the Company's shares. Our Board believes that
the current proposal to effect another recapitalization at this time, along with
the procedures described below will help combat this problem.
Since, if this proposal is adopted by our stockholders, the resulting
Amended and Restated Articles will affect the statements contained in
certificates for outstanding shares, our Board of Directors has exercised its
discretion as provided by Nevada law to require cancellation of outstanding
certificates for our shares and issuance of new certificates conforming to the
rights of our stockholders. Accordingly, we will issue new share certificates
for the Common Stock upon surrender of physical share certificates for the
existing Class A Common Stock. No stock certificate will be issued or entered
into the Company's books via its transfer agent in the name of Cede & Co., DTC
or any entity fulfilling a similar function unless the name of the ultimate
beneficial owner of the shares is reflected on the face of such certificate as
required by the Amended and Restated Articles and our Bylaws. No new
certificates will be issued to buyers of the Company's shares until the seller's
certificate for the same number of shares shall have been surrendered and
cancelled. This procedure will allow the transfer agent to make an accurate
record of all stockholders of record holding old share certificates and
determine accurately which stockholders are entitled to receive the new Common
Stock. It will also ensure that new purchasers of shares of our Common Stock in
fact become legal and valid holders of our Common Stock. If there are investors
who believe they hold shares in our Company but who are unable to obtain
physical certificates for their current shareholdings through their brokers,
this procedure may also result in short sellers being required to cover their
positions.
13
Our Board believes that without the physical delivery of the old share
certificates to ensure a stockholder's right to receive the new share
certificates for the Common Stock, customers of brokerage firms who have had
their shares borrowed, or who have purchased shares but have not received
delivery of the shares, may not be protected by back office journal entries or
similar record keeping and may therefore not ultimately be entitled to receive
the Common Stock resulting from the recapitalization. Our Board reserves its
right to exercise its further discretion as provided by Nevada law to fix a time
by which holders of outstanding certificates for shares of our Class A Common
Stock must surrender and exchange such certificates for new certificates
representing shares of Common Stock.
Disadvantages.
While the Board of Directors has determined that implementation of the
recapitalization is in the best interests of the Company and our stockholders,
the recapitalization may also be considered to have certain disadvantages,
including those set forth below.
As the new Common Stock would be issued and traded in certificated form
only, it may not be registered solely in the name of a nominee such as Cede &
Co. or DTC unless at all times the name of the beneficial owner of such shares
would be reflected on the face of the certificate. This form of "custody only"
trading may be considered to have certain disadvantages, including those set
forth below.
o Implementation of the recapitalization will restrict or limit
current or future stockholders from clearing purchases and
sales of our shares in the normal method used by
broker-dealers. Accordingly, implementation of this policy
could result in a reduction in the volume of trading in our
shares and we cannot predict the price or price range at which
the Common Stock will trade following the effectiveness of the
recapitalization.
o The implementation of the recapitalization could result in
delays in the processing and clearing of transactions
involving the company's shares, which could delay efforts by
the company's current or future stockholders to timely dispose
of their shares or to take advantage of favorable market
conditions.
o A decline in the trading volume of our shares caused by a
transition to "custody only" trading might have the effect of
discouraging an attempt by a third party to take over or
otherwise gain control of the Company.
14
o If enacted, this new trading policy could also adversely
affect the decision of certain investors, including
institutional investors, that would otherwise consider
investing in our stock. As a result of the practical
implications of the proposal, our stock may be deemed to be
less attractive to certain investors, including managers of
certain institutional investors who may hold their shares in
bank nominee names.
o If you are not already a registered stockholder, your broker
may charge you a fee if you choose to obtain and/or hold or
process physical share certificates in your own name through
your broker. In addition, you would have to execute a transfer
document when you want to sell your shares.
o We entered into a $10 million equity line financing
arrangement with Cornell Capital Partners, L.P. on April 9,
2002. The equity line purchase agreement provides for the
purchase by Cornell Capital of up to $10 million worth of our
shares over a 24-month period. It is a condition to the equity
line that on any given closing date, there shall be at least
one bid for our shares on the Nasdaq OTC Bulletin Board. If
this condition is not satisfied, we cannot require Cornell
Capital to purchase our shares. In addition, we note that the
obligation of Cornell Capital to complete its purchases under
the equity line is not secured or guaranteed. If the market
for our shares diminishes as a result of the recapitalization,
Cornell Capital might refuse to honor its obligation to us
under the equity line and we may not be able to force it to do
so or be able to obtain an award for damages in a timely
manner. If we are unable to draw in whole or in part on the
equity line purchase agreement, our cash, cash equivalents,
and securities will not be sufficient to meet our anticipated
cash needs unless we obtain alternative financing. If we
require additional funding and do not obtain it, we may be
forced to restructure, file for bankruptcy or cease
operations, any of which could cause you to lose all or part
of your investment in the Company.
o The implementation of the recapitalization will require the
Company to incur additional expenses, including legal fees,
printing costs and transfer agent fees and expenses incurred
in connection with the need to issue physical share
certificates and maintain the books and records of the
transfers of our Common Stock.
o The implementation of the recapitalization could result in a
short-term decline in the trading price of the Company's stock
as a result of sales of your securities by institutional
investors and others who are unwilling or who may find it
impractical to hold certificated positions.
o The implementation of the recapitalization could result in
market makers being unwilling to quote the company's stock,
and/or broker-dealers being unwilling to trade the Company's
stock, thus affecting the ability of the Company's current or
future stockholders to timely dispose of their shares or to
take advantage of favorable market conditions.
o The implementation of the recapitalization could limit the
ability of the Company's current or future stockholders or
others, such as market makers, to take bona fide short
positions in the company's stock for risk management or other
legitimate purposes.
15
o The implementation of the recapitalization could increase the
risk of the physical certificates being lost in the mail
and/or stolen.
o Finally, the implementation of the recapitalization could lead
to legal claims being brought against the Company and/or its
transfer agents by, among others, the Federal and state
securities regulators, the self regulatory organizations that
regulate the securities markets and securities market
professionals, and persons or entities currently holding
positions in the company's securities in uncertificated or
book entry form and/or the nominees through which those
persons hold those positions.
16
STOCK OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of our Class A Common Stock as of January 5, 2004 (except as otherwise
indicated) by (i) each person known by the Company to be the beneficial owner of
more than 5% of our Class A Common Stock, (ii) each director and nominee to be a
director, (iii) each named executive officer and (iv) all directors and
executive officers as a group. Except as otherwise indicated below, each of the
persons named in the table has sole voting and investment power with respect to
the shares set forth opposite such person's name. The address of each of the
beneficial owners named below is: c/o JAG Media Holdings, Inc., 6865 SW 18th
Street, Suite B-13, Boca Raton, Florida 33433.
Name and Address of Beneficial Owner Number of Shares Beneficially Owned(1) Percentage of Class(2)
- ------------------------------------ -------------------------------------- ----------------------
Gary Valinoti (President, CEO and Director) 5,087,000(3)(4) 12.1%
6865 SW 18th Street, Suite B13, Boca Raton,
Florida 33433
Thomas Mazzarisi (Executive Vice President, 610,000(5) 1.5%
Chief Financial Officer, General Counsel and
Director) 6865 SW 18th Street, Suite B13,
Boca Raton, Florida 33433
Stephen Schoepfer (Executive Vice President, 325,000(6) *
Chief Operating Officer and Director)
6865 SW 18th Street, Suite B13, Boca Raton,
Florida 33433
All executive officers and directors as a 6,022,000(3)(4)(5)(6) 14.1%
group (3 persons)
_____________________________
* Less than one percent
(1) Assumes the conversion of all shares of Series 1 Class B
Common Stock into shares of Class A Common Stock on a
one-for-one basis.
(2) Based on 40,545,778 shares of Class A Common Stock issued and
outstanding as of January 5, 2004, plus the number of shares
of Class A Common Stock which the beneficial owner has the
right to acquire within 60 days, if any.
(3) Includes 476,818 shares of Class A Common Stock and 47,682
shares of Series 1 Class B Common Stock (convertible on a
one-for-one basis into Class A shares) owned by Mr. Valinoti's
wife, Cathleen Valinoti.
(4) Includes 1,000,000 shares of Class A Common Stock issuable
upon the exercise of stock options.
(5) Includes 500,000 shares of Class A Common Stock issuable upon
the exercise of stock options.
(6) Includes 250,000 shares of Class A Common Stock issuable upon
the exercise of stock options.
17
TRADING MARKET AND PRICE
From March 26, 1999 through April 8, 2002, our common stock was traded
in the over-the-counter market on the Nasdaq OTC Bulletin Board under the symbol
JNOT. Prior to that date, the stock was traded under the symbol PFSS with only
limited and sporadic trading.
The following table reflects quarterly high and low sales prices of our
common stock from March 26, 1999 through April 8, 2002, the date of our initial
recapitalization. Such prices are inter-dealer quotations without retail
mark-ups, mark-downs or commissions, and may not represent actual transactions.
High Low
---- ---
Fiscal Year 2000
- ----------------
First Quarter, ending October 31, 1999 $8.19 $5.38
Second Quarter, ending January 31, 2000 8.00 3.38
Third Quarter, ending April 30, 2000 5.50 1.50
Fourth Quarter, ending July 31, 2000 2.88 0.81
Fiscal Year 2001
- ----------------
First Quarter, ending October 31, 2000 2.13 0.94
Second Quarter, ending January 31, 2001 1.16 0.13
Third Quarter, ending April 30, 2001 0.27 0.04
Fourth Quarter, ending July 31, 2001 0.45 0.04
Fiscal Year 2002
- ----------------
First Quarter, ending October 31, 2001 0.32 0.05
Second Quarter, ending January 31, 2002 0.49 0.05
Third Quarter, through April 8, 2002 1.40 0.34
On April 8, 2002, we effected an initial recapitalization of our common
stock pursuant to which each one and one-tenth (1.1) shares of our outstanding
common stock was reclassified into one (1) share of Class A Common Stock and
one-tenth (1/10th) of a share of Series 1 Class B Common Stock.
Our Class A Common Stock trades in the over-the-counter market on the
Nasdaq OTC Bulletin Board under the symbol JGMHA. The following table reflects
quarterly high and low sales prices of our Class A Common Stock from April 9,
2002 through July 31, 2002. Such prices are inter-dealer quotations without
retail mark-ups, mark-downs or commissions, and may not represent actual
transactions.
18
High Low
---- ---
April 9, 2002 through April 30, 2002 $1.50 $0.50
Fourth Quarter, ending July 31, 2002 0.82 0.23
Fiscal Year 2003
- ----------------
First Quarter, ending October 31, 2002 0.51 0.21
Second Quarter, ending January 31, 2003 1.48 0.25
Third Quarter, ending April 30, 2003 0.97 0.41
Fourth Quarter, ending July 31, 2003 0.87 0.34
Fiscal Year 2004
- ----------------
First Quarter, ending October 31, 2003 0.67 0.30
Second Quarter, through January 2, 2004 0.52 0.31
As of January 5, 2004, there were 1,495 stockholders of record of our
Class A Common Stock and 1,580 stockholders of record of our Series 1 Class B
Common Stock. On January 2, 2004, the closing bid price for our Class A Common
Stock was $0.36.
Dividend Policy
We have never paid any cash dividends on our Class A Common Stock and
anticipate that, for the foreseeable future, no cash dividends will be paid on
our Class A Common Stock. Payment of future cash dividends will be determined by
our Board of Directors based upon conditions then existing, including our
financial condition, capital requirements, cash flow, profitability, business
outlook and other factors. In addition, our future credit arrangements may
restrict the payment of dividends.
On March 18, 2003, we announced our intention to declare a special
stock dividend. To effect such dividend, we filed a Certificate of Designation
with the Secretary of State of the State of Nevada on April 11, 2003 which
designated a new series of Class B Common Stock, par value $0.00001 per share,
which was distributed by dividend to the our stockholders of record as of the
close of business on April 14, 2003 in the ratio of one share of Series 2 Class
B Common Stock for every 100 shares of Class A Common Stock.
19
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain summary information regarding
compensation paid to our Chief Executive Officer and certain executive officers
for services rendered during the fiscal years ended July 31, 2001, 2002 and
2003. Except as listed in the table below, no executive officer holding office
in fiscal year 2003 received total annual salary and bonus exceeding $100,000.
No such officers have been awarded any stock options, stock appreciation rights
or other long term or incentive compensation not reflected below.
Annual Compensation
-------------------
Long-Term
Compensation
Common Shares
Other Subject to
Fiscal Annual Options All Other
Name and Principal Position Year Salary Bonus Compensation Granted Compensation
- --------------------------- ---- ------ ----- ------------ ------- ------------
Gary Valinoti, President, 2003 $150,000 -- -- -- --
Chief Executive Officer,
President and director 2002 $150,000 -- -- 1,000,000(1)
2001 $150,000 -- -- 900,000(2) (3)
Stephen J. Schoepfer, 2003 $150,000 -- -- -- --
Executive Vice President,
Chief Operating Officer, 2002 $150,000 -- -- 1,000,000(1)
Secretary and director
2001 $150,000 -- -- 900,000(2) (3)
Thomas J. Mazzarisi, 2003 $150,000 -- -- -- --
Executive Vice President,
Chief Financial Officer, 2002 $150,000 -- -- 1,000,000(1) --
General Counsel and director
2001 $150,000 -- -- 900,000(2) (3)
Raymond G. Taylor, 2003 -- -- -- -- --
(Mr. Taylor served as Chief
Financial Officer of JAG 2002 $25,000 -- -- -- --
Media Holdings, Inc. from
April 1, 2001 to November 9, 2001 $65,000 -- -- -- --
2001, but is no longer
employed by JAG Media.)
(1) In lieu of the 900,000 options granted to the executive on
December 14, 2000, which options were cancelled effective
August 31, 2001, the executive was granted options to purchase
1,000,000 shares of our common stock at an exercise price of
$0.02 per share pursuant to an amended and restated employment
agreement dated August 31, 2001.
20
(2) Received a grant of options to purchase 900,000 shares of our
common stock at an exercise price of $0.25 per share on
December 14, 2000, pursuant to the terms of an employment
agreement with us, which options were cancelled effective
August 31, 2001.
(3) Received grant of a 5% equity interest in JAGfn Broadband LLC,
our former webcast subsidiary, on December 14, 2000 which had
no value at the time of grant.
Option Grants in Fiscal Year 2003
No freestanding SARs or restricted stock awards were granted to, or
exercised by, any of our named executive officers during the fiscal year ended
July 31, 2003.
The following table sets forth information regarding options to acquire
shares of our Class A Common Stock granted under our Long-Term Incentive Plan to
our Chief Executive Officer and our other three executive officers as of July
31, 2003.
OPTION GRANTS IN PERIOD BEGINNING AUGUST 1, 2002
AND ENDING JULY 31, 2003
Percentage of
Total
Options Granted to
Employees
in the period
Number of beginning
Securities August 1, 2002 and
Underlying ended Exercise or
Options July 31, Base Price Per Market Price on
Name Granted 2003 ($/Share) the Date of Grant Expiration Date
- ---- ------- ---- --------- ----------------- ---------------
Gary Valinoti 0 * * * *
Stephen J. Schoepfer 0 * * * *
Thomas J. Mazzarisi 0 * * * *
__________________
* Not applicable.
Report on Repricing of Options.
Our Board believes that the retention of executives who possess an in
depth knowledge of our operations, contacts within the professional financial
community for certain information that we provide to our subscribers and the
skills and expertise required to lead our organization is vital to our
competitive strength. It is the policy of our Board to award stock options to
our executive officers in order to align their interests with those of our
long-term investors and to help attract and retain these persons. It is our
Board's goal to preserve this incentive as an effective tool in compensating,
motivating and retaining our executives. We have granted these options at
exercise prices below the market price of our stock as a form of immediate
compensation to our executives.
We did not reprice any stock options during our fiscal year ended July
31, 2003.
21
Option Exercises in Fiscal Year 2003.
The following table sets forth certain information regarding the stock
options exercised during the fiscal year ended July 31, 2003 and the stock
options held as of July 31, 2003 by our Chief Executive Officer and our other
three executive officers.
AGGREGATE OPTION EXERCISES IN 2003 OPTION VALUES
Shares
Acquired Value Number of Shares Underlying Value of Unexercised In-the-Money
Name on Exercise Realized Unexercised Options at July 31, 2003 Options at July 31, 2003
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Gary Valinoti 0 0 1,000,000 0 $520,000 0
Stephen J. Schoepfer 250,000 $289,171 250,000 0 $62,500 0
Thomas J. Mazzarisi 0 0 500,000 0 $260,000 0
During January 2003, Mr. Schoepfer exercised options to purchase
250,000 shares of our Class A Common Stock.
As a result of the April 2002 recapitalization of our common stock into
Class A shares and Class B shares, all outstanding options entitling the holders
thereof to purchase shares of our common stock now enable such holders to
purchase, upon exercise of their options, the same number of shares of Class A
Common Stock.
Director Compensation
We currently do not compensate our directors for their services in such
capacity.
1999 Long-Term Incentive Plan
In October, 1999 the Board of Directors approved the 1999 Long-Term
Incentive Plan. This plan was most recently amended in April 2002. The purpose
of the plan is to allow us to attract and retain officers, employees, directors,
consultants and certain other individuals and to compensate them in a way that
provides additional incentives and enables such individuals to increase their
ownership interests in JAG Media. Individual awards under the plan may take the
form of:
o either incentive stock options or non-qualified stock options;
o stock appreciation rights;
o restricted or deferred stock;
22
o dividend equivalents;
o bonus shares and awards in lieu of our obligations to pay cash
compensation; and
o other awards, the value of which is based in whole or in part
upon the value of the common stock.
The plan will generally be administered by a committee appointed by the
board of directors, except that the board will itself perform the committee's
functions under the plan for purposes of grants of awards to directors who serve
on the committee. The board may also perform any other function of the
committee. The committee generally is empowered to select the individuals who
will receive awards and the terms and conditions of those awards, including
exercise prices for options and other exercisable awards, vesting and forfeiture
conditions, performance conditions, the extent to which awards may be
transferable and periods during which awards will remain outstanding. Awards may
be settled in cash, shares, other awards or other property, as the committee may
determine.
The maximum number of shares that may be subject to outstanding awards
under the plan will not exceed 6,000,000 shares of Class A Common Stock. As of
July 31, 2003, there were a total of 1,750,000 shares of common stock subject to
outstanding options granted under the plan. These options have an exercise price
of $0.02 per share. As a result of the recapitalization which was effected on
April 8, 2002, the foregoing options are now exercisable into 1,750,000 shares
of Class A Common Stock.
The plan will remain in effect until terminated by the board of
directors. The plan may be amended by the board of directors without the consent
of our stockholders, except that any amendment, although effective when made,
will be subject to stockholder approval if required by any Federal or state law
or regulation or by the rules of any stock exchange or automated quotation
system on which our common stock may then be listed or quoted. The number of
shares reserved or deliverable under the plan, the annual per-participant
limits, the number of shares subject to options automatically granted to
non-employee directors, and the number of shares subject to outstanding awards
are subject to adjustment in the event of stock splits, stock dividends and
other extraordinary corporate events.
We generally will be entitled to a tax deduction equal to the amount of
compensation realized by a participant through awards under the plan, except no
deduction is permitted in connection with incentive stock options if the
participant holds the shares acquired upon exercise for the required holding
periods; and deductions for some awards could be limited under the $1.0 million
deductibility cap of Section 162(m) of the Internal Revenue Code. This
limitation, however, should not apply to certain options, stock appreciation
rights and performance-based awards granted thereafter if JAG Media complies
with certain requirements under Section 162(m).
23
Employment Contracts
On August 31, 2001, we entered into amended and restated three-year
employment agreements with each of Gary Valinoti (our President and Chief
Executive Officer), Stephen J. Schoepfer (our Executive Vice President and Chief
Operating Officer) and Thomas J. Mazzarisi (our Executive Vice President, Chief
Financial Officer and General Counsel). These agreements amended and superseded
the original employment agreements, dated December 14, 2000, between us and the
executives named above. Each of these amended and restated employment agreements
expires on August 31, 2004 and provides for an annual base salary of $150,000.
In addition, each executive is entitled to receive annual incentive stock
bonuses as follows:
o 500,000 shares of Class A Common Stock if the average closing
bid price of our common stock for year 1 under the contract is
$1.00 or greater;
o 500,000 shares of Class A Common Stock if the average closing
bid price of our common stock for year 2 under the contract is
$2.00 or greater; and
o 500,000 shares of Class A Common Stock if the average closing
bid price of our common stock for year 3 under the contract is
$3.00 or greater.
No shares of Class A Common Stock have been earned in years 1 and 2. As
a result of the proposed recapitalization of our Class A Common Stock, the
annual incentive stock bonuses referred to above for year 3 will, if earned, be
issued as shares of Common Stock.
In addition, each executive is entitled to receive a 5% non-dilutable
interest (i.e., a constant percentage ownership interest) in any subsidiary
established by JAG Media for its Hispanic/Latin operations. The executives shall
also be granted an option to purchase a 5% ownership interest in any subsidiary
that JAG Media successfully creates and spins off during the term of their
employment contracts.
In addition, pursuant to these amended and restated employment
agreements, each of the above named executives is entitled to the same medical
and other benefits, including health and life insurance coverage, as are
provided to other employees of JAG Media. In the event JAG Media terminates the
employment of any of such executives without cause or such executive resigns for
good reason as defined in the employment agreements, such executive shall be
entitled to receive (i) continued medical and life insurance coverage for a
period equal to the greater of one year or the number of years and fractions
thereof between the date of such termination and the end of the term (the
Severance Period), (ii) a lump sum cash payment equal to the executive's highest
rate of annual salary in effect during the term multiplied by the Severance
Period, (iii) a lump sum cash payment equal to the number of accrued and unused
vacation days calculated at the executive's then current salary rate and (iv)
accelerated vesting of all of the executive's outstanding stock options. Such
cash payments will be made within 10 days of termination of employment, and
shall not be subject to offset for amounts earned by the executive in respect of
any subsequent employment, nor is the executive required to seek any such
subsequent employment.
24
Further, immediately prior to a "change in control" (as defined in our
Long-Term Incentive Plan) of JAG Media, each of the above-named executives shall
also be granted an option to acquire 1,000,000 shares of our Class A Common
Stock (subject to equitable adjustments for stock splits, etc.) at an exercise
price equal to 25% of the closing bid price of the stock immediately prior to
such change in control, which option shall be fully vested and immediately
exercisable in full and expire on a date which is the earlier of ten years from
such change in control and three years after termination of employment.
Generally, under our Long-Term Incentive Plan a "change in control" shall be
deemed to have occurred (i) if there is an acquisition 30% or more of our then
outstanding shares of Class A Common Stock, (ii) Messrs. Valinoti, Schoepfer and
Mazzarisi cease for any reason to constitute at least a majority of the members
of our Board, or (iii) a merger, consolidation, recapitalization,
reorganization, sale or disposition of all or a substantial portion of our
assets, or similar transaction shall have occurred. However, a change in control
shall not be deemed to have occurred if consummation of such a transaction would
result in at least 70% of the total voting power represented by the voting
securities of JAG Media outstanding immediately after such transaction being
beneficially owned by at least 75% of the holders of outstanding voting
securities of JAG Media immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing holders
not substantially altered in the transaction.
In the unlikely event that we issue to Cornell Capital under the equity
line more than approximately 17,400,000 shares of our Class A Common Stock and
Cornell Capital does not sell any such shares and we issue no other shares, such
issuance to Cornell Capital would result in the acquisition by Cornell Capital
of more than 30% of our then outstanding shares of Class A Common Stock and
would trigger the change in control provisions in the employment agreements of
our executive officers. As a result, each of Messrs. Valinoti, Schoepfer and
Mazzarisi would be granted an option to acquire 1,000,000 shares of our Class A
Common Stock at an exercise price equal to 25% of the closing bid price of the
stock immediately prior to such change in control, which option would be fully
vested and immediately exercisable in full and expire on a date which would be
the earlier of ten years from such change in control and three years after
termination of such person's employment. The occurrence of the change of control
would also permit each executive to resign from JAG Media if they so chose and
be entitled to all of the severance benefits described above, including medical
and life insurance coverage, accelerated vesting of outstanding stock options
and certain lump sum cash payments.
Pursuant to the terms and conditions of the amended and restated
employment agreements, we cancelled outstanding options granted to each of
Messrs. Valinoti, Schoepfer and Mazzarisi to purchase an aggregate of 900,000
shares of our common stock exercisable at a price per share of $0.25. In lieu of
these options, we granted on August 31, 2001 to each of Messrs. Valinoti,
Schoepfer and Mazzarisi to purchase an aggregate of 1,000,000 shares of our
common stock exercisable at a price per share of $0.02, all of which vested
immediately upon the execution of the amended and restated agreements. These
options are subject to the terms of our 1999 Long-Term Incentive Plan, as
amended, and may be exercised, in whole or in part, by the executives on a
cashless basis. In connection with this recapitalization, if approved, we expect
to provide that all such stock options would again be exercisable into Common
Stock in lieu of Class A Common Stock.
25
In connection with our first recapitalization which was effected on
April 8, 2002 we amended our Long-Term Incentive Plan to provide that all stock
options issued pursuant to the plan, including each of the executive options
referred to above, would be exercisable into shares of Class A Common Stock in
lieu of common stock.
Indemnification of Officers and Directors
Our Articles of Incorporation provide that we shall indemnify our
officers, directors, employees and agents to the full extent permitted by Nevada
law. Our Bylaws include provisions to indemnify our officers and directors and
other persons against expenses (including judgments, fines and amounts paid for
settlement) incurred in connection with actions or proceedings brought against
them by reason of their serving or having served as officers, directors or in
other capacities. We do not, however, indemnify them in actions in which it is
determined that they have not acted in good faith or have acted unlawfully or
not in JAG Media's best interest. In the case of an action brought by or in the
right of JAG Media, we shall indemnify them only to the extent of expenses
actually and reasonably incurred by them in connection with the defense or
settlement of these actions and we shall not indemnify them in connection with
any matter as to which they have been found to be liable to JAG Media, unless
the deciding court determines that, notwithstanding such liability, that person
is fairly entitled to indemnity in light of all the relevant circumstances.
We do not currently maintain director's and officer's liability
insurance but we may do so in the future.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors and officers pursuant to the foregoing
provisions, or otherwise, we have 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.
26
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, our directors,
executive officers and any person holding more than 10% of our common stock are
required to file initial forms of ownership of our common stock and reports of
changes in that ownership at the Securities and Exchange Commission. Specific
due dates for these forms have been established, and we are required to disclose
in this report any failure to file by these dates.
Based solely on our review of the copies of such forms received by it
with respect to fiscal 2003, or written representations from certain reporting
persons, to the best of our knowledge, all reports were filed on a timely basis.
27
CERTAIN TRANSACTIONS
On April 1, 2002, Thomas J. Mazzarisi, our Executive Vice President,
Chief Financial Officer and General Counsel, loaned us $200,000 out of proceeds
that he received from the sale of shares of our common stock in the open market.
The loan is subject to the terms and conditions of an unsecured promissory note
issued by us to Mr. Mazzarisi on such date. On October 14, 2003, Mr. Mazzarisi
agreed to extend the maturity date of the note to the earlier of (i) December
17, 2003 or (ii) the effective date of a "Change in Control" of JAG Media, as
such term is defined in our Long-Term Incentive Plan. In exchange for this
extension, we agreed to increase the interest rate of the notes from 2.69% to
9.0% retroactively to April 1, 2002.
On April 1, 2002, Stephen J. Schoepfer, our Executive Vice President
and Chief Operating Officer, loaned us $200,000 out of proceeds that he received
from the sale of shares of our common stock in the open market. The loan is
subject to the terms and conditions of an unsecured promissory note issued by us
to Mr. Schoepfer on such date. On October 14, 2003, Mr. Schoepfer agreed to
extend the maturity date of the note to the earlier of (i) December 17, 2003 or
(ii) the effective date of a "Change in Control" of JAG Media, as such term is
defined in our Long-Term Incentive Plan. In exchange for this extension, we
agreed to increase the interest rate of the notes from 2.69% to 9.0%
retroactively to April 1, 2002.
We have used the proceeds of these loans to fund existing payables and
for general corporate purposes.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal to be presented by a stockholder at the Company's 2005
Annual Meeting of Stockholders must be received by the Company no later than
September 10, 2004, so that it may be considered by the Company for inclusion in
its proxy statement and form of proxy relating to that meeting.
28
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be
presented for consideration at the Annual Meeting other than those described in
this proxy statement. Should any other matter properly come before the Annual
Meeting, however, the persons named in the form of proxy accompanying this proxy
statement will vote all shares represented by proxies in accordance with their
best judgment on such matters.
PROVISION OF CERTAIN ADDITIONAL INFORMATION
The Company's Annual Report for the fiscal year ended July 31, 2003 is
being furnished with this Proxy Statement and pages F-1 to F-26 thereof are
incorporated herein by reference.
By Order of the Board of Directors
/s/ Stephen J. Schoepfer
Stephen J. Schoepfer
Secretary
Dated: January 7, 2004
29
APPENDIX A
----------
ARTICLE FOURTH OF THE ARTICLES OF INCORPORATION OF JAG MEDIA HOLDINGS, INC. AS
PROPOSED TO BE AMENDED AND RESTATED:
FOURTH
The aggregate number of shares which the Corporation shall have the
authority to issue is Three Hundred Million Four Hundred Forty Thousand
(300,440,000) of which:
(a) Two Hundred Fifty Million (250,000,000) shares shall be common
stock, par value $0.00001;
(b) Four Hundred Forty Thousand (440,000) shares shall be Class B
common stock, par value $0.00001, of which (i) 400,000 shares shall be
designated as "Series 2 Class B common stock" and (ii) 40,000 shares shall be
designated as "Series 3 Class B common stock"; and
(c) Fifty Million (50,000,000) shares shall be preferred stock, par
value $0.00001.
Upon this Certificate of Amendment of Articles of Incorporation
becoming effective pursuant to the laws of the State of Nevada (the "Effective
Time"), each share of the Corporation's Class A common stock, par value
$0.00001, then issued, and each share of the Corporation's Series 1 Class B
common stock, par value $0.00001, then issued, in each case including shares
held in the treasury of the Corporation, shall be reclassified as one (1) share
of fully paid and nonassessable common stock. As soon as practicable after the
Effective Time, the Corporation's transfer agent shall mail a transmittal letter
to each record holder, as of immediately prior to the Effective Time, of the
Class A common stock and Series 1 Class B common stock requiring each holder to
exchange his or her certificate. Each holder of any certificate or certificates
that immediately prior to the Effective Time represented the Class A common
stock and Series 1 Class B common stock, upon surrender of a certificate or
certificates to the Corporation or its transfer agent and confirmation of the
name(s) of the record and beneficial owner(s) of the shares represented by such
certificate, shall be entitled to receive, subject to the succeeding sentence,
certificates representing a number of shares of common stock equal to the number
of shares of Class A common stock and the number of shares of Series 1 Class B
common stock reflected on the surrendered certificate or certificates. The
Corporation will not issue certificates representing fractional shares of common
stock. All stockholders of record on the record date must surrender the physical
share certificates representing shares of the Corporation's Class A common stock
and Series 1 Class B common stock for new share certificates representing the
common stock.
30
1. Common Stock.
The voting powers, designations, preferences, limitations, restrictions
and relative rights of the common stock shall be as follows:
(a) Voting Rights. Except as required by law, at every meeting of
stockholders of the Corporation, every holder of common stock shall be entitled
to one vote, in person or by proxy, for each share of common stock outstanding
in such holder's name on the stock transfer records of the Corporation.
(b) Distribution of Assets. Upon the dissolution, liquidation or
winding up of the Corporation, subject to the rights, if any, of the holders of
any other of the Corporation's securities, the holders of the common stock,
Series 2 Class B common stock and Series 3 Class B common stock will be entitled
to receive all the assets of the Corporation available for distribution to its
stockholders ratably in proportion to the number of shares held by them.
(c) Dividends. Holders of common stock, Series 2 Class B common stock
and Series 3 Class B common stock shall be entitled to receive, on an equal
basis, such dividends, payable in cash or otherwise, as may be declared thereon
by the Board of Directors from time to time out of the assets or funds of the
Corporation legally available therefor.
(d) Share Certificates. Share certificates shall be issued to represent
the common stock which will specify the number of shares represented by such
certificate and the name(s) of the record and beneficial owner(s) of such
shares. Shares of common stock may be transferred only on the books of the
Corporation in person or by duly authorized attorney upon surrender of said
certificate properly endorsed and specifying the new beneficial owner.
2. Series 2 Class B common stock
(a) Designation and Amount. The shares of such series shall be
designated as "Series 2 Class B common stock" and the number of shares
constituting such series shall be Four Hundred Thousand (400,000).
(b) No Voting Rights. Except as required by law, holders of shares of
Series 2 Class B common stock shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of the
Corporation.
(c) Distribution of Assets. Upon the dissolution, liquidation or
winding up of the Corporation, subject to the rights, if any, of the holders of
any of the Corporation's securities other than common stock, the holders of the
Series 2 Class B common stock, Series 3 Class B common stock and common stock
will be entitled to receive all the assets of the Corporation available for
distribution to its stockholders ratably in proportion to the number of shares
held by them.
(d) Dividends. Holders of Series 2 Class B common stock, Series 3 Class
B common stock and common stock shall be entitled to receive, on an equal basis,
such dividends, payable in cash or otherwise, as may be declared thereon by the
Board of Directors from time to time out of the assets or funds of the
Corporation legally available therefor.
31
(e) Mandatory Redemption. (1) No redemption of the Series 2 Class B
common stock shall be authorized or made except as provided herein. Each share
of the Series 2 Class B common stock must be redeemed by the Corporation, to the
fullest extent permitted by law, within six (6) months (or as soon thereafter as
permitted by law) following final resolution of the Corporation's lawsuit
against certain brokerage firms (JAG Media Holdings, Inc. v. A.G. Edwards & Sons
et al) which is, as of the date of this resolution, pending in U.S. District
Court for the Southern District of Texas or any successor or other lawsuit
relating to the subject matter thereof in which the Corporation (or any
successor-in-interest) is named as a plaintiff (the "Lawsuit"), which date shall
be determined by the Board of Directors (the "Redemption Date"). The Redemption
Price for each share of the Series 2 Class B common stock shall be equal to the
greater of (i) par value or (ii) the amount obtained by dividing (a) ninety
percent of the net proceeds to the Corporation of the Lawsuit after payment of
fees and expenses incurred in connection with such lawsuit and all taxes on net
income accrued or paid with respect to such amount, by (b) the total number of
shares of Series 2 Class B common stock issued and outstanding as of the
Redemption Date, which amount shall be rounded to the nearest whole cent. Notice
of the redemption by the Corporation of the outstanding shares of Series 2 Class
B common stock (the "Redemption Notice") shall be given by first class mail,
postage prepaid, mailed not less than 30 days prior to the Redemption Date, to
each holder of record of the shares to be redeemed, at such holder's address as
the same appears on the stock register of the Corporation; provided, however,
that no failure to give such notice, nor any deficiency therein, shall affect
the validity of the procedure for the redemption of any shares of Series 2 Class
B common stock to be redeemed except as to the holder or holders to whom the
Company has failed to give such notice or whose notice was defective. The
Redemption Notice shall state:
(A) the Redemption Price;
(B) the Redemption Date;
(C) that the holder is to surrender to the
Corporation, at the place or places, which
shall be designated in such redemption
notice, its certificates representing the
shares of Series 2 Class B common stock to
be redeemed;
(D) that dividends on the shares of the Series 2
Class B common stock to be redeemed shall
cease to accumulate on the day prior to the
Redemption Date unless the Corporation
defaults in the payment of the Redemption
Price; and
(E) the name of any bank or trust company
performing the duties referred to in
subsection (e)(5) below.
(2) On or before the Redemption Date, each holder of Series 2 Class B
common stock to be redeemed shall surrender the certificate or certificates
representing such shares of Series 2 Class B common stock to the Company, in the
manner and at the place designated in the Redemption Notice, and on the
Redemption Date the Redemption Price for such shares shall be payable to the
holder thereof whose name appears on such certificate or certificates and who
appears on the stock transfer records of the Corporation as the owner thereof,
and the shares represented by each surrendered certificate shall be returned to
authorized but unissued shares.
32
(3) Unless the Company defaults in the payment in full of the
Redemption Price, dividends on the Series 2 Class B common stock called for
redemption shall cease to accumulate on the day prior to the Redemption Date,
and the holders of such shares shall cease to have any further rights with
respect thereto on the Redemption Date, other than the right to receive the
Redemption Price, without interest.
(4) If a Redemption Notice shall have been duly given, and if, on or
before the Redemption Date specified therein, all funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart from
its other funds, in trust for the pro rata benefit of the holders of the Series
2 Class B common stock called for redemption so as to be and continue to be
available therefor, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancellation, all
shares so called for redemption shall no longer be deemed outstanding, and all
rights with respect to such shares shall forthwith on such Redemption Date cease
and terminate, except only the right of the holders thereof to receive the
amount payable on redemption thereof, without interest.
(5) If a Redemption Notice shall have been duly given or if the
Corporation shall have given to the bank or trust company hereinafter referred
to irrevocable authorization promptly to give such notice, and if on or before
the Redemption Date specified therein the funds necessary for such redemption
shall have been deposited by the Corporation with such bank or trust company in
trust for the pro rata benefit of the holders of the Series 2 Class B common
stock called for redemption, then, notwithstanding that any certificate for
shares so called for redemption shall not have been surrendered for
cancellation, from and after the time of such deposit, all shares so called, or
to be so called pursuant to such irrevocable authorization, for redemption shall
no longer be deemed to be outstanding and all rights with respect to such shares
shall forthwith cease and terminate, except only the right of the holders
thereof to receive from such bank or trust company at any time after the time of
such deposit the funds so deposited, without interest. The aforesaid bank or
trust company shall be organized and in good standing under the laws of the
United States of America or of any state thereof. Any interest accrued on such
funds shall be paid to the Corporation from time to time. Any funds so set aside
or deposited, as the case may be, and unclaimed at the end of three years from
such Redemption Date shall, to the extent permitted by law, be released or
repaid to the Corporation, after which repayment the holders of the shares so
called for redemption shall look only to the Corporation for payment thereof.
(6) All interpretations of the redemption provisions contained in this
Section (e) and all determinations required to be made in connection with the
Redemption Date and the Redemption Price, including, without limitation, the
determination of which successor or related actions or proceedings may
constitute a Lawsuit (as defined herein), shall be within the discretion of the
Board of Directors and any such determination by the Board of Directors shall be
final and conclusive, and actions by the Corporation in respect of this Section
(e) shall be taken at the direction of the Board of Directors. The Board of
Directors may, but need not, appoint such agents, attorneys-in-fact and trustees
as and with such revocable and irrevocable powers as it deems appropriate in its
sole discretion to carry out the redemption provided for herein.
33
(f) No Reissuance of Series 2 Class B common stock. None of the shares
of Series 2 Class B common stock acquired by the Corporation by reason of
redemption, purchase, or otherwise shall be reissued.
(g) Business Day. If any payment or redemption shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day. For the
purposes of this Resolution, Business Day shall mean any day other than a
Saturday, Sunday, national or relevant state holiday or any other day on which
commercial banks in New York City are authorized or required by law to be
closed.
(h) Share Certificates. Share certificates shall be issued to represent
the Series 2 Class B common stock which will specify the number of shares
represented by such certificate and the name of the beneficial owner of such
shares. Shares of Series 2 Class B common stock may be transferred only on the
books of the Corporation in person or by duly authorized attorney upon surrender
of said certificate properly endorsed and specifying the new beneficial owner.
(i) Legend. The Series 2 Class B common stock will bear a legend to the
following effect:
THE MANDATORY REDEMPTION PROVISIONS, DIVIDEND RIGHTS, VOTING POWERS,
PREFERENCES, LIMITATIONS, RESTRICTIONS AND OTHER RIGHTS OF THE SERIES 2 CLASS B
COMMON STOCK OF THE CORPORATION ARE SET FORTH IN FULL IN THE CERTIFICATE OF
DESIGNATION OF THE SERIES 2 CLASS B COMMON STOCK OF THE CORPORATION, WHICH IS ON
FILE WITH THE SECRETARY OF STATE OF THE STATE OF NEVADA AND AVAILABLE FREE OF
CHARGE FROM THE SECRETARY OF THE CORPORATION UPON THE REQUEST OF ANY STOCKHOLDER
OF THE CORPORATION.
3. Series 3 Class B common stock
(a) Designation and Amount. The shares of such series shall be
designated as "Series 3 Class B common stock" and the number of shares
constituting such series shall be Forty Thousand (40,000).
(b) No Voting Rights. Except as required by law, holders of shares of
Series 3 Class B common stock shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of the
Corporation.
(c) Distribution of Assets. Upon the dissolution, liquidation or
winding up of the Corporation, subject to the rights, if any, of the holders of
any of the Corporation's securities other than common stock, the holders of the
Series 3 Class B common stock, Series 2 Class B common stock and common stock
will be entitled to receive all the assets of the Corporation available for
distribution to its stockholders ratably in proportion to the number of shares
held by them.
34
(d) Dividends. Holders of Series 3 Class B common stock, Series 2 Class
B common stock and common stock shall be entitled to receive, on an equal basis,
such dividends, payable in cash or otherwise, as may be declared thereon by the
Board of Directors from time to time out of the assets or funds of the
Corporation legally available therefor.
(e) Mandatory Redemption. (1) No redemption of the Series 3 Class B
common stock shall be authorized or made except as provided herein. Each share
of the Series 3 Class B common stock must be redeemed by the Corporation, to the
fullest extent permitted by law, within six (6) months (or as soon thereafter as
permitted by law) following final resolution of the Corporation's lawsuit
against certain brokerage firms (JAG Media Holdings, Inc. v. A.G. Edwards & Sons
et al) which is, as of the date of this resolution, pending in U.S. District
Court for the Southern District of Texas or any successor or other lawsuit
relating to the subject matter thereof in which the Corporation (or any
successor-in-interest) is named as a plaintiff (the "Lawsuit"), which date shall
be determined by the Board of Directors (the "Redemption Date"). The Redemption
Price for each share of the Series 3 Class B common stock shall be equal to the
greater of (i) par value or (ii) .0025% of ten percent of the net proceeds to
the Corporation of the Lawsuit after payment of fees and expenses incurred in
connection with such lawsuit and all taxes on net income accrued or paid with
respect to such amount, which amount shall be rounded to the nearest whole cent.
Notice of the redemption by the Corporation of the outstanding shares of Series
3 Class B common stock (the "Redemption Notice") shall be given by first class
mail, postage prepaid, mailed not less than 30 days prior to the Redemption
Date, to each holder of record of the shares to be redeemed, at such holder's
address as the same appears on the stock register of the Corporation; provided,
however, that no failure to give such notice, nor any deficiency therein, shall
affect the validity of the procedure for the redemption of any shares of Series
3 Class B common stock to be redeemed except as to the holder or holders to whom
the Company has failed to give such notice or whose notice was defective. The
Redemption Notice shall state:
(A) the Redemption Price;
(B) the Redemption Date;
(C) that the holder is to surrender to the
Corporation, at the place or places, which shall be designated
in such redemption notice, its certificates representing the
shares of Series 3 Class B common stock to be redeemed;
(D) that dividends on the shares of the Series 3
Class B common stock to be redeemed shall cease to accumulate
on the day prior to the Redemption Date unless the Corporation
defaults in the payment of the Redemption Price; and
(E) the name of any bank or trust company performing
the duties referred to in subsection (e)(5) below.
35
(2) On or before the Redemption Date, each holder of Series 3 Class B
common stock to be redeemed shall surrender the certificate or certificates
representing such shares of Series 3 Class B common stock to the Company, in the
manner and at the place designated in the Redemption Notice, and on the
Redemption Date the Redemption Price for such shares shall be payable to the
holder thereof whose name appears on such certificate or certificates and who
appears on the stock transfer records of the Corporation as the owner thereof,
and the shares represented by each surrendered certificate shall be returned to
authorized but unissued shares.
(3) Unless the Company defaults in the payment in full of the
Redemption Price, dividends on the Series 3 Class B common stock called for
redemption shall cease to accumulate on the day prior to the Redemption Date,
and the holders of such shares shall cease to have any further rights with
respect thereto on the Redemption Date, other than the right to receive the
Redemption Price, without interest.
(4) If a Redemption Notice shall have been duly given, and if, on or
before the Redemption Date specified therein, all funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart from
its other funds, in trust for the pro rata benefit of the holders of the Series
3 Class B common stock called for redemption so as to be and continue to be
available therefor, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancellation, all
shares so called for redemption shall no longer be deemed outstanding, and all
rights with respect to such shares shall forthwith on such Redemption Date cease
and terminate, except only the right of the holders thereof to receive the
amount payable on redemption thereof, without interest.
(5) If a Redemption Notice shall have been duly given or if the
Corporation shall have given to the bank or trust company hereinafter referred
to irrevocable authorization promptly to give such notice, and if on or before
the Redemption Date specified therein the funds necessary for such redemption
shall have been deposited by the Corporation with such bank or trust company in
trust for the pro rata benefit of the holders of the Series 3 Class B common
stock called for redemption, then, notwithstanding that any certificate for
shares so called for redemption shall not have been surrendered for
cancellation, from and after the time of such deposit, all shares so called, or
to be so called pursuant to such irrevocable authorization, for redemption shall
no longer be deemed to be outstanding and all rights with respect to such shares
shall forthwith cease and terminate, except only the right of the holders
thereof to receive from such bank or trust company at any time after the time of
such deposit the funds so deposited, without interest. The aforesaid bank or
trust company shall be organized and in good standing under the laws of the
United States of America or of any state thereof. Any interest accrued on such
funds shall be paid to the Corporation from time to time. Any funds so set aside
or deposited, as the case may be, and unclaimed at the end of three years from
such Redemption Date shall, to the extent permitted by law, be released or
repaid to the Corporation, after which repayment the holders of the shares so
called for redemption shall look only to the Corporation for payment thereof.
(6) All interpretations of the redemption provisions contained in this
Section (e) and all determinations required to be made in connection with the
Redemption Date and the Redemption Price, including, without limitation, the
determination of which successor or related actions or proceedings may
constitute a Lawsuit (as defined herein), shall be within the discretion of the
Board of Directors and any such determination by the Board of Directors shall be
final and conclusive, and actions by the Corporation in respect of this Section
(e) shall be taken at the direction of the Board of Directors. The Board of
Directors may, but need not, appoint such agents, attorneys-in-fact and trustees
as and with such revocable and irrevocable powers as it deems appropriate in its
sole discretion to carry out the redemption provided for herein.
36
(f) No Reissuance of Series 3 Class B common stock. None of the shares
of Series 3 Class B common stock acquired by the Corporation by reason of
redemption, purchase, or otherwise shall be reissued.
(g) Business Day. If any payment or redemption shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day. For the
purposes of this Resolution, Business Day shall mean any day other than a
Saturday, Sunday, national or relevant state holiday or any other day on which
commercial banks in New York City are authorized or required by law to be
closed.
(h) Share Certificates. Share certificates shall be issued to represent
the Series 3 Class B common stock which will specify the number of shares
represented by such certificate and the name of the beneficial owner of such
shares. Shares of Series 3 Class B common stock may be transferred only on the
books of the Corporation in person or by duly authorized attorney upon surrender
of said certificate properly endorsed and specifying the new beneficial owner.
(i) Legend. The Series 3 Class B common stock will bear a legend to the
following effect:
THE MANDATORY REDEMPTION PROVISIONS, DIVIDEND RIGHTS, VOTING POWERS,
PREFERENCES, LIMITATIONS, RESTRICTIONS AND OTHER RIGHTS OF THE SERIES 3 CLASS B
COMMON STOCK OF THE CORPORATION ARE SET FORTH IN FULL IN THE CERTIFICATE OF
DESIGNATION OF THE SERIES 3 CLASS B COMMON STOCK OF THE CORPORATION, WHICH IS ON
FILE WITH THE SECRETARY OF STATE OF THE STATE OF NEVADA AND AVAILABLE FREE OF
CHARGE FROM THE SECRETARY OF THE CORPORATION UPON THE REQUEST OF ANY STOCKHOLDER
OF THE CORPORATION.
4. Preferred stock.
The voting powers, designations, preferences, limitations, restrictions
and relative rights of the preferred stock shall be as follows:
The preferred stock may be issued from time to time in one or more
series, the number of shares and any designation of each series and the voting
powers, designations, preferences and relative, participating, optional, and
other special rights of the shares of each series, and the qualifications,
limitations and restrictions thereof, to be stated and expressed in a resolution
or resolutions providing for the issue of such series adopted by the Board of
Directors, subject to the limitations prescribed by law.
37
PROXY
JAG MEDIA HOLDINGS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on February 11, 2004
The stockholder(s) whose signature(s) appear(s) on the reverse side of
this proxy form hereby appoint(s) Gary Valinoti and Stephen J. Schoepfer or
either of them as proxies, with full power of substitution, and hereby
authorize(s) them to represent and vote all shares of Class A Common Stock and
Series 1 Class B Common Stock of the Company which the stockholder(s) would be
entitled to vote on all matters which may come before the Annual Meeting of
Stockholders to be held in the law offices of Jones Vargas located on the
Twelfth Floor of 100 West Liberty Street in Reno, Nevada, at 10:00 a.m. PST, on
Wednesday, February 11, 2004, or at any adjournment thereof. The proxies shall
vote subject to the directions indicated on the reverse side of this card and
the proxies are authorized to vote in their discretion upon such other business
as may properly come before the meeting and any adjournments or postponements
thereof. The proxies will vote as the Board of Directors recommends where a
choice is not specified.
The nominees for Director are: Thomas J. Mazzarisi, Stephen J.
Schoepfer and Gary Valinoti.
(To Be Signed on Reverse Side.)
- -------------------------------------------------------------------------------
Please mark
A |X| your votes as in
this example.
The Board of Directors recommends that stockholders vote FOR ALL Directors , FOR Proposal 2 and FOR Proposal 3.
FOR WITHHOLD FOR
ALL ALL FOR AGAINST ABSTAIN
1. Election of Nominees: Thomas J. Mazzarisi 2. Selection of J.H. Cohn LLP --- --- ---
directors. ----- ----- Stephen J. Schoepfer as the Company's independent | | | | | |
| | | | Gary Valinoti accountants for 2004. --- --- ---
----- -----
INSTRUCTION: To withhold ____________________________________
authority to vote
for any individual
nominee or nominees, ____________________________________
write the names on
the space provided
FOR AGAINST ABSTAIN
3. Approval of the amendment
and restatement of Article --- --- ---
Fourth of the Articles of | | | | | |
Incorporation of the --- --- ---
Company.
Please complete, sign, date and mail the enclosed
Proxy in the accompanying envelope even if you
intend to be present at the meeting. Returning the
proxy will not limit your right to vote in person
or to attend the Annual Meeting, but will ensure
your representation if you cannot attend. If you
hold shares in more than one name, or if your
stock is registered in more than one way, you may
receive more than one copy of the proxy material.
If so, please sign and return each of the proxy
cards that you receive so that all of your shares
may be voted. The Proxy is revocable at any time
prior to its use.
SIGNATURE(S) _______________________________
_______________________________ DATE_________________________________
(Note: Please sign above exactly as the shares are issued. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give the full title as such.
If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership
name by authorized person.)