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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PLANET AMERICA, INC.
(Name of small business issuer in its charter)
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DELAWARE 7379
(State or jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
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98-0166438
(I.R.S. Employer Identification No.)
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1091 GORHAM STREET #302, SUITE 1825,
NEWMARKET, ONTARIO L3Y 7V1 THE LIBERTY BUILDING,
(905) 853-0349 BUFFALO, NEW YORK 14201
(Address and telephone number (Address of principal place of business
of principal executive offices) or intended principal place of business)
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SINCLAIR M. STEVENS, CHAIRMAN
1091 GORHAM STREET
SUITE 302
NEWMARKET, ONTARIO L3Y 7V1
(905) 853-0349
(Name, address and telephone number of agent for service)
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Copy to:
DAVID LEVENSON, ESQUIRE
MAYS & VALENTINE, L.L.P.
8201 GREENSBORO DRIVE
SUITE 800
MCLEAN, VIRGINIA 22102
(703) 734-4328
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after the
effective date of this Registration Statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS DOLLAR AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(5) OFFERING PRICE PER UNIT(2) AGGREGATE OFFERING PRICE REGISTRATION FEE
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Common Stock, no par
value(1)................... 15,475,714 $0.625 $9,672,321.25 $2,553
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Common Stock, no par
value(3)................... -- -- -- --
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Common Stock, no par
value(4)................... -- -- -- --
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Commitment Warrants(3)....... 490,000 $ 2.76 $1,352,400.00 $ 358
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Purchase Warrants(4)......... -- -- -- $2,911
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(1) Estimated amount of common shares issuable as Put Shares to Swartz Private
Equity, L.L.C. pursuant to the Investment Agreement. See "Investment
Agreement".
(2) Pursuant to Rule 457(c) under the Securities Act, the maximum offering price
has been calculated on the basis of the average of the bid and asked price
as of March 13, 2000 as reported on the OTC Bulletin Board.
(3) Issuable upon the exercise of Commitments issued to Swartz Private Equity,
L.L.C. pursuant to the Investment Agreement. See "Investment Agreement."
(4) Issuable upon the exercise of Purchase Warrants issuable to Swartz Private
Equity, L.L.C. pursuant to the Investment Agreement. See "Investment
Agreement".
(5) Pursuant to Rule 416, this Registration Statement also covers such
indeterminate number of shares of Common Stock as may be issuable pursuant
to the anti-dilution provisions of the warrants.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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PLANET AMERICA, INC.
CROSS REFERENCE SHEET
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FORM SB-2 ITEM CAPTION IN PROSPECTUS
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PART I
Item 1 Front of Registration Statement and
Outside Front Cover of Prospectus..... Front of Registration Statement and
Outside Front Cover of Prospectus
Item 2 Inside Front and Outside Back Cover
Pages of Prospectus................... Inside Front and Outside Back Cover
Pages of Prospectus
Item 3 Summary Information and Risk Factors.... Prospectus Summary; Risk Factors
Item 4 Use of Proceeds......................... Use of Proceeds
Item 5 Determination of Offering Price......... Not Applicable
Item 6 Dilution................................ Not Applicable
Item 7 Selling Security Holders................ Selling Security Holders
Item 8 Plan of Distribution.................... Plan of Distribution
Item 9 Legal Proceedings....................... Business-Legal Proceedings
Item 10 Directors, Executive Officers, Promoters
and Control Persons................... Management
Item 11 Security Ownership of Certain Beneficial
Owners and Management................. Principal Stockholders
Item 12 Description of Securities............... Description of Securities
Item 13 Interest of Named Experts and Counsel... Not Applicable
Item 14 Disclosure of Commission Position on
Indemnification....................... Indemnification of Officers and
Directors
Item 15 Organization Within Last Five Years..... Certain Transactions
Item 16 Description of Business................. Business
Item 17 Management's Discussion and Analysis or
Plan of Operation..................... Management's Discussion and Analysis of
Financial Conditions and Plan of
Operation
Item 18 Description of Property.................
Item 19 Certain Relationships and Related
Transactions.......................... Certain Transactions
Item 20 Market for Common Equity and Related
Stockholder Matters................... Market Information
Item 21 Executive Compensation.................. Management and Executive Compensation
Item 22 Financial Statements.................... Financial Statements
Item 23 Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure.................. Not Applicable
PART II
Item 24 Indemnification of Directors and
Officers..............................
Item 25 Other Expenses of Issuance and
Distribution..........................
Item 26 Recent Sales of Unregistered Securities
Item 27 Exhibits................................
Item 28 Undertakings............................
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The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and it is not an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 20, 2000
PROSPECTUS
PLANET AMERICA, INC.
15,475,714 SHARES OF COMMON STOCK, $.001 PAR VALUE
This Prospectus covers the resale, from time to time, of up to 15,000,000
shares of common stock, $.001 par value per share, of Planet America, Inc., a
Delaware corporation (the "Company" or "we"), issuable to Swartz Private Equity,
LLC ("Swartz") and up to 475,714 outstanding shares by twenty-six other
investors for their own accounts in transactions in the over-the-counter market,
at prevailing market prices, at negotiated prices or otherwise. The selling
price of any shares will be determined by market factors at the time of resale.
Swartz and the twenty-six other investors are sometime referred to as "Selling
Security Holders." To our knowledge, neither Swartz nor any of the other Selling
Security Holders has made any arrangement with any brokerage firm for the sale
of the shares. Swartz also may acquire and resell up to 490,000 shares upon
exercise of a Commitment Warrant we issued as compensation to Swartz to enter
into a commitment for the Investment Agreement. We issued the shares and the
warrants to Swartz pursuant to an Investment Agreement dated as of June 25, 1999
(the "Investment Agreement"). See "Investment Agreement." We issued the shares
to the private investors in various private offerings without registration since
1997. See "Selling Security Holders."
We will receive no proceeds from the sale of the shares by the Selling
Shareholders. However, we have received proceeds from the sale of shares that
are presently outstanding and may receive up to $25 million of proceeds from the
sale of shares to Swartz, and we may receive additional proceeds from the sale
to Swartz of shares issuable upon the exercise of any warrants that may be
exercised by Swartz.
There is currently only a limited trading market for the common stock. Our
common stock is quoted on the over-the-counter market. On March [ ],
2000, the last reported bid price of the common stock was $[ ] per
share. See "Market Information."
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SEE "RISK FACTORS" BEGINNING ON PAGE 5, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY INVESTORS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is March __, 2000
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 5
Use of Proceeds............................................. 10
Selling Security Holders.................................... 11
Management.................................................. 12
Business.................................................... 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Certain Transactions........................................ 26
Market Information.......................................... 27
Principal Stockholders...................................... 28
Plan of Distribution........................................ 29
Description of Securities................................... 29
Indemnification of Officers and Directors................... 30
Legal Matters............................................... 31
Experts..................................................... 31
Additional Information...................................... 31
Index to Financial Statements............................... F-1
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Until [90 DAYS AFTER THE EFFECTIVE DATE], all dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR SWARTZ. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE PURSUANT TO THIS PROSPECTUS SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROSPECTUS OR THAT THE
INFORMATION CONTAINED IN IT IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. It is not complete and does not contain all of the information that
you should consider before investing in our common stock. You should read the
entire prospectus carefully, especially the risks of investing in our common
stock discussed under "RISK FACTORS." References in this prospectus to the
"Company", "We", "Our" and "Us" refer to Planet America, Inc., a Delaware
corporation.
THE COMPANY
Planet America, Inc. (the "Company" or "Planet America") was incorporated
on August 9, 1995 under the laws of the State of Delaware as "Planet Today
Corporation" and we changed our name to "Planet America, Inc." in January 1997.
We are 87% owned by Planet Today, Inc. ("Planet Today"), a company incorporated
under the Canada Business Corporations Act. On July 1, 1998, we acquired all of
the outstanding shares of stock of Planet Newspapers Inc. ("Planet Newspapers"),
which was incorporated on April 29, 1988 under the Canada Business Corporations
Act.
We create Local Area Webs(TM) (LAWs(TM)) that are local versions of the
Worldwide Web customizable to specific local needs. LAWs(TM) help local
communities, citizens, businesses, non-profit organizations, and governments
take advantage of the Internet phenomenon in a more meaningful and practical
way. LAWs(TM) are built using IBM Corporation's ("IBM") Lotus Domino(TM)
software and are fundamentally designed for ease of use. Planet Today as agent
for Planet America engages in the marketing, sale and development of LAWs(TM) in
Canada. We engage in the marketing, sale and development of LAWs(TM) in the
United States.
Our LAWs(TM) enable local markets to take advantage, establish and
administrate online solutions that reflect and accommodate the needs of local
markets.
Consumers, associations, businesses, and governments will use our LAW(TM)
facilities to save time and money in carrying out their day-to-day
activities -- and we earn revenue for accommodating their needs -- in local
markets.
Our LAWs(TM) are the local counterpart to -- and an extension of -- the
Worldwide Web, and we have trademarked the term "Local Area Webs"(TM), or
LAWS(TM), to both define and differentiate our position in the online world.
LAWs(TM) use advanced technology originally designed to power corporate
Intranets to create a commercially viable platform that fulfills online,
commercial and non-commercial needs of communities; communities that cannot
escape the reality that their markets are predominantly local. LAWs(TM)
dramatically reduce the amount of time, frustration, and (literally) the number
of "clicks" spent accessing online content, products, and services. LAWs(TM)
also demystify the process of content creation, hosting and maintenance with
easy-to-use, self-serve, browser-based solutions.
We build our online solutions based on proven Web-based models, focusing on
the most cost effective and successful methodologies used to date, then apply
these models at the community level.
As a result, the Company believes it will deliver significant value to all
facets of local communities and local markets -- across North America. The
Company will leverage its core competencies and related technologies to generate
significant revenues and secure rapid future growth and long-term prosperity.
Planet Newspapers is an important aspect of our business plan and
development strategy. Planet Newspapers Inc. is principally engaged in the
business of marketing, selling and developing a monthly community-based magazine
in Canada and the United States called The Month Ahead -- Your Community &
Internet Guide. During the next three years, Planet Newspapers has identified
184 communities in Canada and in the United States that could accommodate
operating franchises using and served by The Month Ahead. These 184 communities
also correspond to the communities for which Planet America and Planet Today
intend to launch, or already have launched, their Internet LAW(TM) sites. The
Month Ahead and Internet LAWs(TM) will enhance each other's business and
development. Our LAW(TM) sites will allow commercial, municipal and residential
users of the Internet to participate in their own local
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community Internet. The Month Ahead will provide a monthly, ongoing and accurate
print version of events happening in the local community. Together, we will
build a strong foundation within the local community.
To date, we have earned a small amount of revenue from fees paid by
businesses for advertising in The Month Ahead and on existing LAWs(TM). However,
in addition to advertising revenues, we expect to derive significant revenues
from services, retailing, subscriptions, branding and sponsorships. We expect to
generate such revenues by facilitating interactions and transactions between
stakeholders in communities where we estimate 90% of daily personal activity
occurs. We expect to supplement these revenues by providing a means for national
businesses and associations to establish a local presence.
THE INVESTMENT AGREEMENT
On June 25, 1999, we entered into an Investment Agreement with Swartz,
under which we from time to time have the option to issue to Swartz shares of
our common stock up to a maximum aggregate offering amount of $25,000,000. Under
the terms and conditions of the Investment Agreement, we have the right, at our
sole discretion, to put shares of our common stock, $.001 par value per share (a
"Put"), to Swartz for a dollar amount of up to $2,000,000 in each Put, subject
to additional limitations on the timing of our exercise of Put rights and on the
number of shares Swartz is obligated to purchase, over a period of 36 months
beginning on the effective date of the registration statement of which this
prospectus is a part. The purchase price to be paid for the Put Shares by Swartz
is equal to the lesser of (i) the Market Price (as defined below), minus $.10,
or (ii) 91% of the Market Price. The "Market Price" for each Put equals the
lowest closing bid price of the our common stock on the principal trading
exchange or market for our common stock during the Pricing Period (as defined
below) for the applicable Put. The "Pricing Period" means, unless otherwise
shortened under the terms of the Investment Agreement, the period beginning on
the business day immediately following the Put Date (as defined below) and
ending on and including the date which is 20 business days after such Put Date.
The "Put Date" is the date that is specified in the written notice delivered to
Swartz (the "Put Notice") in which the Company will exercise a Put.
For each Put, Swartz will receive an amount of warrants (the "Purchase
Warrants") equal to 10% of the number of Put Shares purchased. The exercise
price of the Purchase Warrants shall initially be an amount equal to 110% of the
weighted average price for the 5 business days immediately preceding the Put
Date, with semi-annual reset provisions.
As compensation to enter into the commitment for the Investment Agreement,
we granted to Swartz a warrant to purchase 490,000 shares of common stock (the
"Commitment Warrants"). The initial exercise price for the Commitment Warrants
was $2.7594 per share; if the date of exercise is more than six months after the
date of issuance, the exercise price is the lesser of (i) the exercise price
then in effect or (ii) an amount equal to the weighted average price for the 5
trading days ending on the six month anniversary of the date of issuance, which
was $1 7/8 for the 5 trading days ending on December 24, 1999.
The Put Shares have demand registration rights and both Purchase Warrants
and Commitment Warrants have piggyback registration rights, semi-annual reset
provisions and a 5-year term.
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THE OFFERING
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Common Stock offered *........................ 15,000,000 shares
Common Stock Outstanding Prior to this
Offering.................................... 5,890,715 shares**
Common Stock Outstanding After this
Offering.................................... 20,890,715 shares
Use of Proceeds............................... For working capital needs, including funding
LAWs(TM), and short term investments.
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* Assumes the issuance of 13,000,000 Put Shares and the exercise by Swartz of
2,000,000 warrants to acquire common shares.
** Includes 475,714 shares to be offered by the Selling Security Holders other
than Swartz.
We will receive the proceeds of the sale of the Put Shares to Swartz and
the exercise of outstanding warrants by Swartz. We have received proceeds for
the private sale of shares to the other Selling Security Holders. We will not
receive any proceeds from any resale of any shares by Swartz or other Selling
Security Holders. Swartz and the other Selling Security Holders will receive all
proceeds from the resale of the shares, and will bear none of the offering
expenses. We will bear all of the offering expenses, estimated to be
$[ ] for registration, legal and accounting fees, printing costs and
other costs. See "Plan of Distribution."
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SUMMARY FINANCIAL DATA
The information set forth below for the years ended June 30, 1998 and 1999
and the six months ended December 31, 1998 and 1999 are derived from the audited
consolidated financial statements and the unaudited interim consolidated
financial statements, respectively included elsewhere in this prospectus. Unless
indicated otherwise, all financial information and dollar amounts in this
prospectus are in US dollars ("US$").
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12 MONTHS ENDED 6 MONTHS ENDED
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JUNE 30, 1999 JUNE 30, 1998 DECEMBER 31, 1999 DECEMBER 31, 1998
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STATEMENT OF OPERATIONS DATA
Advertising revenues............... $ 139,467 $ 124,766 107,898 81,548
License fee revenues............... $ 7,901 $ 9,252 -- 5,000
Loss for the period................ $(1,076,258) $(286,019) $(379,662) $(548,807)
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12 MONTHS ENDED
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JUNE 30, 1999 JUNE 30, 1998 DECEMBER 31, 1999
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BALANCE SHEET DATA
Assets.............................................. $969,801 $ 452,241 $1,150,709
Liabilities......................................... $218,196 $ 660,661 $ 315,735
Shareholders' Equity................................ $751,605 $(208,420) $ 834,974
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RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Only those persons able to lose their entire investment should purchase
these securities. Prospective investors should carefully consider the following
risk factors, as well as the other information contained in this prospectus,
before making an investment decision. This prospectus contains "forward-looking
statements" that involve risks and uncertainties. These statements appear
throughout this prospectus and include statements as to our intent, belief or
current expectations and the intent, belief or current expectations of our
directors, officers and management with respect to our future operations,
performance or position. Such forward-looking statements are not guarantees of
future events and involve risks and uncertainties. Actual events and results,
including the results of our operations, could differ materially from those
anticipated by such forward-looking statements, as a result of various factors,
including those set forth below and elsewhere in this prospectus. See
"-- Forward-Looking Statements and Associated Risk."
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES
We commenced operations on October 1, 1996 and, accordingly, have a limited
operating history. We have incurred operating losses since we commenced
operations of $286,019 for the year ended June 30, 1998, $1,076,258 (after
writing off deferred stock issue costs of $316,000) for the year ended June 30,
1999 and $379,662 for the six months ended December 31, 1999. As of December 31,
1999, we had an accumulated deficit of $6,477,827. We expect that we will
continue to incur operating losses at least through 2000. There can be no
assurance that we will achieve or sustain increased revenues or positive cash
flow in the future.
LIMITED WORKING CAPITAL; UNCERTAINTY OF REVENUES AND OPERATING RESULTS
As of December 31, 1999, we had net working capital of $41,448. We expect
to put shares to Swartz to meet our working capital needs for the remainder of
2000. There can be no assurance that we will achieve or sustain positive net
working capital in the future.
There can be no assurance that we can generate substantial revenue growth,
or that any revenue growth that is achieved can be sustained. We have increased,
and plan to increase further, our operating expenses in order to fund higher
levels of LAW(TM) development, increase our sales and marketing efforts, develop
new distribution channels, broaden our customer support capabilities and
increase our administrative resources in anticipation of future growth. To the
extent that increases in such expenses precede or are not subsequently followed
by increased revenues, our business, results of operations and financial
condition would be materially adversely affected.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
Our current cash resources and anticipated cash flows from operating
activities are not expected to be sufficient to meet our anticipated need for
working capital and accordingly, substantial doubt exists over our ability to
continue as a going concern. We entered into the Investment Agreement to secure
equity financing. However, we anticipate the need for additional financing in
the future in order to fund development of new or enhanced services, to respond
to competitive pressures or to acquire complementary businesses, technologies or
services. We cannot assure you that any required additional financing will be
available on terms favorable to us, or at all. If additional funds are raised by
our issuing equity securities, stockholders may experience dilution of their
ownership interest and such securities may have rights senior to those of the
holders of common stock. If additional funds are raised by our issuing debt, we
may be subject to certain limitations on our operations, including limitations
on the payment of dividends. If adequate funds are not available or not
available on acceptable terms, we may be unable to fund expansion, develop or
enhance services or respond to competitive pressures, which could have a
material adverse effect on our business, results of operations and financial
condition.
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DILUTION; ABSENCE OF DIVIDENDS
The Commitment Warrants and Purchase Warrants provide, during their
respective terms, an opportunity for the holder(s) of such warrants to profit
from a rise in the market price of the common stock with resulting dilution in
the ownership interest in the Company held by the then present shareholders.
Because the holder would most likely opt to exercise the warrants and receive
the underlying common stock at a time when we may be able to obtain capital by a
new offering of securities on terms more favorable than those provided by the
warrants, the terms on which we may be able to obtain additional capital would
be adversely affected.
We have not paid any dividends and we do not anticipate paying any cash
dividends in the foreseeable future. See "Dividend Policy".
POTENTIAL LIABILITY
The law relating to the liability of on-line service companies for
information carried on or disseminated through their networks currently is
unsettled, and while a number of private lawsuits seeking to impose such
liability have been litigated, the absence of decisional law in most
jurisdictions results in substantial uncertainty. As the law in this area
develops, the potential that liability might be imposed on us for information
carried on and disseminated through our network could require us to implement
measures to comply with applicable law and reduce our exposure to such
liability, which measures could require the expenditure of substantial resources
or the discontinuation or modification of certain service offerings. Any costs
incurred as a result of such expenditures or in contesting any such asserted
claims, the consequent imposition of liability, or any adverse publicity
resulting from any of the foregoing, could have a material adverse affect on us.
MANAGEMENT OF FUTURE GROWTH
We believe that our performance and success will depend in part on our
ability to manage future growth effectively. This, in turn, will require ongoing
enhancement of our operating, administrative, financial and accounting systems,
improvement of coordination among engineering, accounting, finance, marketing
and operations functions, and the expansion of our work force and the training
and management of our personnel. There can be no assurance that we will be able
to manage our growth effectively, or that our facilities, systems, procedures or
controls will be adequate to support our operations. Our inability to manage
growth effectively could have a material adverse effect on our business. We are
highly dependent on the technical and managerial skills of our key employees.
Therefore, the success of our business is highly dependent upon our ability to
retain such personnel and to identify, hire and retain additional personnel as
the need arises. Competition for key personnel, particularly persons having
technical expertise, is intense and there can be no assurance that we will be
able to retain existing personnel or to identify or hire additional qualified
personnel.
COMPETITION
We expect to compete successfully in our markets by offering the first
service of its kind to provide users with the latest community-based information
accessed with ease at home, at work, municipally or in school. Unlike many other
major online services we bring our service directly into the local communities
of the United States. In addition, we do not charge a usage fee for this service
and all calls in each community are within the community's local telephone
calling area. We offer computer users the ability to access local information
and purchase local products. We also offer local businesses, municipalities and
associations the ability to advertise their products and services locally and to
communicate their programs and activities locally. Finally, whereas, other
online services are controlled through a centralized system of operation, our
software will be operated in individual communities. However, there can be no
assurance that we will be able to compete effectively with current and future
competitors.
The market for Internet/intranet software is extremely competitive and
highly fragmented. Inasmuch as there are no significant barriers to entry, we
believe that competition in this market will intensify. We
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believe that our ability to compete successfully will depend on a number of
factors, including strong market presence in our targeted geographic regions;
the adequacy of our technical support services; the capacity, reliability and
security of our network infrastructure; the ease of access to and navigation of
the Internet provided by our software products and services; our pricing
policies and the pricing policies of our competitors and suppliers; the timing
of introductions of new services by us and by our competitors; our ability to
support existing and emerging industry standards; and industry and general
economic trends. There can be no assurance that we will have the financial
resources, technical expertise or marketing and support capabilities to compete
successfully.
We compete in the overall Internet/intranet software market, as well as in
each of the market segments where our products and services compete. We expect
competition to persist, increase and intensify in the future as markets for our
products and services continue to develop and as additional companies enter each
or our markets. We are aware of numerous major software developers as well as
smaller entrepreneurial companies that are focusing significant resources on
developing and marketing products and services that will compete with our
products and services. Numerous releases of products and services that compete
with our products and services can be expected in the near future. Intense price
competition may also develop in our markets.
We have multiple competitors for each of our products and services. Many of
our current and potential competitors in each of our markets have longer
operating histories and significantly greater financial, technical and marketing
resources, name recognition and installed product base than we have. We face
competition from companies that have been offering search services on the
Internet longer than we have. Our current competitors include AOL, Microsoft
Corporation and Netscape Communications Corporation, each of which provides or
has announced an intention to provide a range of software products based on
Internet protocols and to compete in the broad Internet/intranet software
market.
While we have multiple competitors as described above, none to the best of
our knowledge is operating LAWs(TM) specific to communities which provide local
information utilities which facilitate interactivity by users in their local
daily activities including e-commerce. Most of our close competitors simply
provide data or directories without highlighting the intra-activity that we
furnish.
In the market for information search and retrieval software, we may face
competition from database vendors should they offer intranet versions of the
information search and retrieval capabilities with their core databases. We may
also encounter competition from companies that currently sell document
management systems, groupware applications, Internet and intranet products and
operating systems if they decide to enhance their products and services similar
to our products and services.
We do not believe our markets will support the increasing number of
competitors and their products and services. In the past, a number of software
markets have become dominated by one or a small number of suppliers, and a small
number of suppliers or even a single supplier may dominate one or more of our
market segments. Our competitors may bundle their products with other software,
including operating system and browser software, in a manner that may discourage
users from purchasing our products. This strategy may be particularly effective
for companies with leading market shares in their respective markets, such as
AOL, Microsoft and Netscape. If we do not provide products and services that
achieve success in our markets in the short term, we could suffer an
insurmountable loss in potential market share and brand name acceptance, which
would result in a material adverse effect on our business, results of operations
and financial condition.
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
For over six years, our software has been developed and evolved from a
version that was print oriented to the creation of Smart Communities that were
Bulletin Boards with The Month Ahead print association. The present software
substantially developed by IBM is Internet related and enhances the worldwide
web by creating LAWs(TM) known as e-Property.
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The emerging market for Internet/intranet products and services is
characterized by rapid technological developments, evolving industry standards
and customer demands, and frequent new product introductions and enhancements.
In addition, many companies are expected to introduce new Internet/ intranet
products and services in the near future. Our success will depend on our ability
to design, develop, test, market, sell and support new products and services and
enhancements of current products and services on a timely basis in response to
both competitive products, services and evolving demands of the marketplace. In
addition, new products, services and enhancements must remain compatible with
standard platforms and file formats. Our ability to successfully develop and
release new products and services and enhancements in a timely manner is subject
to a variety of factors, including our ability to solve technical problems and
test products, our competing priorities, the availability of development and
other resources and other factors outside of our control. There can be no
assurance that we will not experience difficulties that could delay or prevent
the successful development, introduction or marketing of new products and
services and enhancements. If we are unable to develop new products and services
and enhancements to existing products and services or to complete products and
services currently under development, or if such new products and services or
enhancements do not achieve market acceptance, our business, results of
operations and financial condition would be materially adversely affected.
POSSIBLE TECHNOLOGICAL OBSOLESCENCE
The Internet and intranet industries, and software products and services
relating to the Internet and intranet industries, are characterized by rapid and
continuous technological change, short product cycles, frequent product
innovations and evolving industry standards. Such rapid and continuous change
frequently renders products and services obsolete. Our success will be dependent
on our ability to develop in a timely fashion enhancements to existing products
or introduce new products which are responsive to the demands of the marketplace
for software and services. There can be no assurance that we will be able to
develop successfully enhancements to existing products or introduce new products
or that any such products will be able to compete successfully. In addition,
technological advances by any one or more of our present or potential
competitors could render our products and services obsolete or less competitive.
PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
Our success depends significantly upon proprietary technology. We and our
providers, such as IBM, rely on a combination of patent, copyright, trademark
and trade secret laws, licensing agreements, non-disclosure agreements and other
contractual provisions to establish, maintain and protect our proprietary
rights, all of which afford only limited protection. There can be no assurance
that patents or trademarks will be issued from pending applications, if any, or
from any future applications or that, if issued, any claims will be sufficiently
broad to protect our rights in such technology. In addition, there can be no
assurance that any patents or trademarks that may be issued will not be
challenged, invalidated or circumvented, or that any rights granted under such
patents or trademarks would provide protection of our proprietary rights.
Failure of any patents to protect our rights in technology and licensing
arrangements may make it easier for our competitors to offer equivalent or
superior technology. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our products or services or
to obtain and use information that we regard as proprietary. Third parties may
also independently develop similar technology without breach of our proprietary
rights. Our plan to distribute certain software to users without charge makes
our software more susceptible to unauthorized copying and uses. Although we do
not believe we are infringing the intellectual property rights of others, claims
of infringement are becoming increasingly common as the software industry
develops and legal protections, including patents, are applied to software
products. Litigation may be necessary to protect our proprietary technology and
rights, and third parties may assert infringement claims against us with respect
to their proprietary rights. Any claims or litigation can be time consuming and
expensive regardless of their merit. Infringement claims against us can cause
product release delays, require us to redesign our products or require us to
enter into royalty or license agreements, which agreements may not be available
on terms acceptable to us or at all.
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<PAGE> 13
DEPENDENCE ON THE INTERNET AND INTRANETS
The markets for our products and services are highly dependent upon the
increased acceptance and use of the Internet, particularly for commercial
applications. Critical issues concerning the commercial use of the Internet,
including security, reliability, capacity, cost, ease of use, access, quality of
service and acceptance of advertising, remain unresolved and may retard the
growth of Internet use for commercial applications. If widespread commercial use
of the Internet does not develop or if widespread adoption of the Internet
causes the performance and reliability of the Internet to suffer, our business,
results of operations and financial condition would be materially adversely
affected.
We will also be substantially dependent on the development of markets for
products that support or increase the functionality of intranets. There can be
no assurance that intranets will be adopted by large numbers of organizations or
local communities, that organizations or local communities will seek to enable
users to collaborate over intranets or that our products will appeal to
organizations or local communities that do so. If intranets are not adopted by
large numbers of organizations or local communities, or if organizations or
local communities adopting intranets do not select our products, our business,
results of operations and financial condition would be materially adversely
affected.
POSSIBLE REGULATION OF THE INTERNET
Other than laws and regulations applicable to businesses generally, there
are currently few laws or regulations expressly applicable to access and
commerce on the Internet. Due to increased popularity and use of the Internet,
it is possible that new laws or regulations may be adopted with respect to the
Internet relating to issues such as user privacy, pricing and characteristics
and quality of products and services. The adoption of any such laws or
regulations may retard growth of use of the Internet, which could adversely
affect demand for our products and services. Such laws or regulations also could
result in significant additional costs and technological challenges in complying
with any mandatory requirements. In addition, claims have been brought, and
sometimes successfully pressed, against on-line services, for defamation,
negligence, copyright or trademark infringement or under other theories with
respect to materials disseminated through such services.
LISTING ON OTC BULLETIN BOARD; LIMITED TRADING MARKET
Our common stock was quoted on the OTC Bulletin Board from April 15, 1998
to March 9, 2000, and in the over-the-counter market since then, and has only a
limited trading market. There can be no assurance that a more active trading
market will develop or, if developed, that it will be maintained. No prediction
can be made as to the effect, if any, that the sale of shares of common stock or
shares of common stock issuable upon exercise of the Commitment Warrants or
Purchase Warrants or the availability of such securities for sale will have on
the market price of the common stock from time to time. As a result, an investor
might find it difficult to dispose of, or to obtain accurate quotations as to
the market value of, the common stock. See "Market Information."
In addition, as the common stock has no active trading market and the
trading price of the common stock is less than $5.00 per share, trading in the
common stock is subject to the requirements of Rule 15g-9 promulgated under the
Exchange Act. Under this rule, broker-dealers who recommend such low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchase
and receive the purchaser's written consent prior to the transaction. The common
stock is also subject to the Securities Enforcement Remedies and Penny Stock
Reform Act of 1990, which requires additional disclosure in connection with any
trades involving a stock defined as a "penny stock" (generally, any equity
security not traded on an exchange or quoted on Nasdaq that has a market price
of less than $5.00 per share, subject to certain exceptions), including the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the associated risks. Such requirements
could severely limit the market liquidity of the common stock and the ability of
purchasers in this offering to sell their securities in the secondary market.
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<PAGE> 14
REQUIREMENTS OF CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION IN CONNECTION
WITH EXERCISE OF WARRANTS
The shares we will issue to Swartz upon the exercise of the Commitment
Warrants or Purchase Warrants pursuant to the Investment Agreement and may be
publicly offered and sold only if (i) there is a current prospectus relating to
the securities offered under an effective registration statement filed with the
Commission, or (ii) such common stock is then qualified for sale or exempt
therefrom under applicable state securities laws of the jurisdictions in which
the various holders of such Commitment Warrants or Purchase Warrants reside.
While this prospectus is part of a current, effective registration statement,
after the registration statement becomes effective, it may require updating by
the filing of post-effective amendments and there can be no assurance, that we
will be successful in maintaining a current registration statement.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
This prospectus contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
which represent our expectations or beliefs, including statements regarding,
among other things, (i) our growth strategy or potential, (ii) anticipated
trends in our business, (iii) our ability to compete with our competitors and
(iv) our profitability and projected financial condition. Any statements
contained in this prospectus that are not statements of historical fact may be
deemed to be forward-looking statements. Words such as "may", "will", "expect",
"plan", "believe", "anticipate", "intend", "estimate" or "continue", the
negative or other variations or comparable terminology are intended to identify
forward-looking statements. These statements are based upon management's beliefs
at the time they are made as well as assumptions made by management based upon
information available to it. The current assumptions regarding our operations,
performance, development and results of our business include (i) the accuracy of
estimates of anticipated increases in our expenses due to the implementation of
our business plan, (ii) the successful completion of securities offerings
anticipated to be consummated through Swartz, (iii) the maintenance of market
conditions affecting our services and (iv) appropriate regulatory approvals.
Forward-looking statements are inherently subject to various risks and
uncertainties, including those described above, as well as potential changes in
economic or regulatory conditions that are largely beyond our control. Should
one or more of these risks materialize or changes occur, or should management's
assumptions prove to be incorrect, our actual results may vary materially from
those anticipated or projected.
USE OF PROCEEDS
The principal purposes of this offering are to obtain additional capital
and to create a more liquid public market for our common stock which will
facilitate future access by us to the public capital markets. We expect to use
the net proceeds from this offering for working capital, including funding
LAWs(TM), advertising and other general corporate purposes. In addition, we may
use a portion of the net proceeds to invest in joint ventures or other
collaborative arrangements, or to invest in or acquire businesses, technologies,
products or services.
We will have significant discretion in the use of the net proceeds of this
offering. Investors will be relying on the judgment of our management regarding
the application of the proceeds of this offering. Pending use of the net
proceeds as discussed above, we intend to invest these funds in short term,
interest-bearing, investment-grade obligations.
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<PAGE> 15
SELLING SECURITY HOLDERS
The following table sets forth certain information as of the date of this
Prospectus, with respect to Swartz and the other Selling Security Holders for
whom the Company is registering shares for resale to the public. Swartz and the
other Selling Security Holders propose selling all of their shares, in which
case each would beneficially own -0- or no shares after the offering.
<TABLE>
<CAPTION>
MAXIMUM NO. OF
SHARES BENEFICIALLY SHARES TO BE SOLD
NAME OF OWNED PRIOR TO PURSUANT TO THIS
SECURITY HOLDER OFFERING PROSPECTUS
- --------------- ------------------- -----------------
<S> <C> <C>
Swartz Private Equity, LLC.................................. 490,000* 490,000*
Ron Como.................................................... 44,500 44,500
William Drubel.............................................. 10,000 10,000
Hafeeza Beebeejaun.......................................... 2,000 2,000
Dan Ciriani................................................. 2,000 2,000
Ayoob Beebeejaun............................................ 3,500 3,500
Ralph Colosimo.............................................. 9,000 9,000
Elaine Lutsky............................................... 3,000 3,000
Alex Lutsky................................................. 3,000 3,000
David Edminson.............................................. 3,000 3,000
Victor Right................................................ 2,000 2,000
Victor Cayer................................................ 6,000 6,000
Randy Rowe.................................................. 3,000 3,000
Dennis W. Smith 6-152....................................... 1,000 1,000
Joan Foulkes................................................ 13,000 13,000
Shirley Cox................................................. 15,000 15,000
Alan Simons................................................. 15,000 15,000
Alice Patry................................................. 15,000 15,000
Shirley Schwartz............................................ 3,000 3,000
John Sullivan............................................... 47,000 47,000
Allied Capital Bermuda Ltd. ................................ 75,000 75,000
Kiwi Holdings Ltd........................................... 75,000 75,000
Milos and Ludmila Strapec................................... 50,000 50,000
Thomas and Ludmila Moryto**................................. 50,000 50,000
Richard Scott Glassco....................................... 8,238 8,238
Ali Jalai................................................... 8,238 8,238
John F. Madden.............................................. 8,238 8,238
</TABLE>
- ---------------
* Pursuant to the Investment Agreement, Swartz has the right to acquire up to
an estimated 15,000,000 shares of common stock subject to certain conditions
and up to 490,000 additional shares of common stock upon exercise of a
Commitment Warrant we granted to Swartz as compensation to enter into the
commitment for the Investment Agreement. The 15,000,000 shares includes Put
Warrants to purchase shares of common stock; for each Put, Swartz will
receive an amount of Put Warrants to purchase shares of common stock equal to
10% of the number of Put Shares purchased.
** Officer or director of the Company
All or a portion of the Shares offered by this prospectus may be offered
for sale, from time to time, by Swartz and the other Selling Security Holders,
pursuant to this prospectus, in one or more private or negotiated transactions,
in open market transactions in the over-the-counter market, in settlement of
short sale transactions, in settlement of options transactions, or otherwise, or
by a combination of these methods, at fixed prices that may be changed, at
market prices prevailing at the time of the sale, at prices related to such
market prices, at negotiated prices or otherwise. Swartz and the other Selling
Security Holders may
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<PAGE> 16
effect these transactions by selling shares directly to one or more purchasers
or to or through broker-dealers or agents. The compensation to a particular
broker-dealer or agent may be in excess of customary commissions. Each of Swartz
and the other Selling Security Holders is an "underwriter" within the meaning of
the Securities Act in connection with each's sale of their shares. Swartz and
the other Selling Security Holders will pay all commissions, transfer taxes and
other expenses associated with their sales.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Sinclair M. Stevens................... 73 Chairman
James G. Stevens...................... 44 President, Chief Executive Officer,
Chief Financial Officer and
Treasurer
Emmanuel Casalino..................... 32 Vice President of Marketing
Peter Palijenko....................... 39 Vice President of Business Strategy
and Development and Director
Noreen M. Stevens..................... 68 Secretary
Edward E. Loyst....................... 58 Director
Thomas Moryto......................... 44 Director
</TABLE>
Each director is elected to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified. All officers
serve at the discretion of the Board of Directors.
The following sets forth certain biographical information with respect to
the directors and executive officers of the Company:
Sinclair M. Stevens. Mr. Stevens has served as Chairman of the Board of the
Company since February 1996; he also served as President, Chief Executive
Officer and Treasurer until February 2000, a graduate from Osgoode Hall,
Canada's leading law school. Mr. Stevens was a Member of the Canadian Parliament
from 1972-1988 and served as president of the Treasury Board of Canada in
1979-1980 and as Minister of Regional Industrial Expansion between 1984-1986. He
is Chairman of Georgian Bancorp Inc., a financial services holding company
located in Newmarket, Ontario. Mr. Stevens has been employed by Georgian Bancorp
Inc. since 1988. In the financial world, Mr. Stevens is known as being the
creator and designer of the zero coupon bonds or strip bonds. In addition, Mr.
Stevens is Chairman of Planet Today. Mr. Stevens is married to Noreen Stevens.
James G. Stevens. Mr. Stevens has served as President, Chief executive
Officer, Chief Financial Officer and Treasurer of the Company since February
2000. He also is President and Chief Executive Officer of Georgian Bancorp Inc.
and Planet Today. From March 1995 to February 1999, Mr. Stevens was a Vice
President of RBC Dominion Securities and head of the Royal Bank of Canada's
Structured Finance Group specializing in global capital markets. From June 1991
to March 1995, he was Director of Risk Management Ontario Financing Authority,
which is the financing arm of the Ontario government. He is the nephew of
Sinclair and Noreen Stevens.
Emmanuel Casalino. Mr. Casalino has served as Vice President of Marketing
since February 1999. Mr. Casalino was an e-business solutions advisor for IBM
from May 1996 until February 1999. He has also had four years of Internet sales
experience with IBM and the Ontario Government. Mr. Casalino has specialized in
the area of Internet/Lotus Domino based professional services, particularly in
the government and health care related industries and high growth firms. While
at IBM, Mr. Casalino contributed to the development of IBM's World Wide Services
Offering and was responsible for the first implementation of a world wide
solution offering within North America. In 1998, he received the IBM Top
Achiever Award. Mr. Casalino holds a degree in Business Administration. In
addition, Mr. Casalino presently serves as Vice President of Marketing of Planet
Today.
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<PAGE> 17
Peter Palijenko. Mr. Palijenko has served as Vice President of Business
Strategy and Development since February 1999 and director since June 1999. Mr.
Palijenko, a former senior consultant in IBM e-business, brings 17 years of
experience in the information technology industry. Throughout his career, he has
played an active role in applying leading-edge technology to company business
problems. At IBM, Mr. Palijenko specialized in emerging trends in the Internet
marketplace and advised clients on strategies for developing e-business. He has
also held various management positions at Bell Canada, relating to strategic
technology planning and the development of mission critical solutions. He holds
an Honours B.Sc. in Computer Science and a Masters of Business Administration.
Mr. Palijenko also serves as Vice President of Business Strategy and Development
of Planet Today.
Noreen M. Stevens. Mrs. Stevens has served as Secretary since June 1999.
Mrs. Stevens was called to the Bar of the Province of Ontario in 1955 and has
practiced law continuously since that date she has a law degree from York
University in Toronto and is a Queens Counsel. Mrs. Stevens is currently a
partner in the law firm of Stevens & Stevens. Mrs. Stevens is married to
Sinclair M. Stevens.
Edward E. Loyst. Mr. Loyst has served as a Director since February 1996. He
presently is President and CEO of Franchise Bancorp Inc., a retail franchise
business. He has created, managed and acquired franchise systems for 28 years.
Mr. Loyst co-founded the Canadian Franchise Association which named him
"Executive of the Year" in 1990. He is a recipient of the Canadian Franchise
Industry "Hall of Fame Award" for his contribution to the industry.
Thomas Moryto. Mr. Moryto was appointed a Director of the Company in
February 2000. He has served as Vice President of Ram Forest Products Inc., one
of the Canada's largest producers of preservative treated wood products for
outdoor use for more than 5 years. He has held positions as Director of
Education for the Canadian Wood Council, the national association representing
the forest product industry, and Marketing Manager for Timber Specialties Ltd.,
a manufacturer of wood preservative chemicals. Mr. Moryto is a current director,
and past president, of the Canadian Institute of Treated Wood, the national
association representing the interests of the wood preserving industry, and a
member of the Canadian Standards Association (CSA) Committee on wood preserving
that sets preserved wood product standards for Canada. He holds a Bachelor of
Science and a Masters degree in Forest Products and a Masters of Business
Administration from the University of Toronto.
SIGNIFICANT EMPLOYEES
Attila Lewis Lendvai. Mr. Lendvai has served as our strategic and
communications Vice President since December 1997. From 1996 to 1997 he was with
the GEOS Language Corporation in Kyoto, Japan where he contributed original
material for the acclaimed Networks textbooks series. He received his Bachelor
of Arts with honours in English and Dramatic Arts from the University of Guelph
in 1995. In 1996 he received a diploma in Media Broadcasting and Communications
from the National Institute of Broadcasting in Toronto.
Jeff Pinto. Mr. Pinto has served as Chief System Administrator since June
1999. Mr. Pinto, a former Advisory I/T Specialist in the e-Business group of
IBM, brings six years of experience in the information technology industry and
four years of experience specializing in Internet and database technologies. He
is a Certified Lotus Professional on the Lotus Notes(TM)/Domino(TM) database and
server package. He has also developed interactive, multimedia design, using
tools such as HMTL, Javascript, Java, Visual Basic and Macromedia Flash. He has
also worked for multinational insurance and finance companies and large
corporations, as well as owning his own design company and working for small to
medium sized businesses. He is co-author of the technical paper, "A Technique
for Analyzing and Specifying Transactional Internet Sites" published as
intellectual property for IBM.
EXECUTIVE COMPENSATION
No compensation has been paid or accrued by us to any of our executive
officers for the four fiscal years ended June 30, 1999.
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<PAGE> 18
Sinclair M. Stevens received an annual salary of $72,000 Canadian Dollars
("Cdn") (about US $50,000) from Georgian Bancorp as Chief Executive Officer of
Georgian Bancorp for each of the three fiscal years ended June 30, 1997, 1998
and 1999. Georgian Bancorp is the parent corporation of the majority-owned
Planet Today which is our parent corporation and majority owner.
Peter Palijenko has received a monthly salary of $8,500 Cdn (about
US $5,900) from Planet Today as Vice President of Business Strategy and
Development of Planet Today since February 1999.
Emmanuel Casalino has received a monthly salary of $7,000 Cdn (about
US $4,825) from Planet Today as Vice President of Marketing of Planet Today
since February 1999.
DIRECTORS' COMPENSATION
Our directors are not compensated for their services. Our by-laws authorize
the Board of Directors to fix the compensation of directors and allow the
reimbursement of expenses for attendance at each meeting of the Board of
Directors.
BUSINESS
We intend to market, sell and develop shared electronic platform technology
("e-Property Technology") which is used to establish private community-based or
geographically-based local area Internet websites called Local Area Webs
("LAWs(TM)") in the United States and Canada. The e-Property Technology can be
described generally as a shared electronic platform that is capable of hosting a
full range of interactive services including collaborative information and file
sharing, e-commerce and e-business transactions, relationship building,
permission marketing and messaging between individuals, groups, business,
governments and associations. It is based on commercial intranet/extranet models
used by corporations to enhance business activities at local levels by servicing
e-commerce, e-business, and information technology needs of local or regional
businesses, governments and organizations. The e-Property Technology provides a
simple and low cost method for publishing, sharing, co-editing, integrating,
transacting, collecting and messaging information. This information can include
content distributed from a central location downward, or data collected locally
and channeled into a central database.
Our revenue to date has primarily come from advertising banners. In the
future, we also expect to receive revenues from other sources including
retailing, subscriptions and other service revenues. Retailing revenues will
result from license agreements with businesses to facilitate the sale of
products to LAW(TM) users. Subscription revenues will result from fees charged
for specialized online services requested by subscribers, such as personalized
electronic newspapers. Service revenues will consist of fees for support
services, ongoing training, advertising and consulting. Planet Newspapers Inc.
also derives its revenues primarily through advertising sales.
INDUSTRY BACKGROUND
The Internet and Web have emerged as mass communications and commerce
mediums enabling millions of people worldwide to share information, communicate
and conduct business electronically. The relatively lower costs required to
publish content on the Web compared to traditional media and the availability of
powerful new tools for the development and distribution of multimedia-rich
content, including video and audio, have led to a proliferation of more useful
and engaging information and services on the Internet. As the amount of content
and services on the Internet continues to grow at a rapid pace, greater numbers
of Internet users are attracted, fueling a cycle of growth where more users
demand more content and more content attracts more users.
Contemporaneously with the development of the Internet, universities and
other large organizations have been developing private data networks to serve
the needs of their organizations. These networks have been custom-built using
proprietary protocols to connect specific communities or groups of users through
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<PAGE> 19
local area networks ("LANs") and wide area networks ("WANs"). Private networks
are expensive to build and maintain, and the proprietary nature of these
networks and applications have made it difficult to manage and exchange
information between them. In addition, these networks use expensive leased
telephone lines, modem banks and other proprietary systems to connect
geographically distinct parts of the same private network and to permit access
by remote individual users.
Recognizing the benefits of platform-independent communications over the
Internet and the increasing availability of innovative software applications,
such as geographically-based browsers, that use Internet protocols, many
organizations have begun to create "intranets" by adopting Internet protocols on
their private networks. The adoption of Internet protocols to create intranets
generally can be accomplished without abandoning existing hardware, applications
and data in proprietary formats. Because the Internet and intranets use the same
protocols, intranets provide users with substantially increased access to
information and other users both inside an organization and, via the Internet,
throughout the world. Organizations have also begun to replace expensive leased
lines and communications equipment with Internet gateways to connect networks
and remote individual users.
Current solutions for searching and information retrieval from the Internet
and private data sources generally require the use of catalogs, search services
or other specially designed applications. We believe that the tools in use today
lack sufficient speed, accuracy, comprehensiveness or ease of use. In addition,
these products are not well suited to an integrated Internet/intranet
environment due to their inability to access seamlessly the vast amount of
information available at all levels of the work environment. We believe that the
rapid growth of intranets and their linkage to the Internet has created demand
for products capable of working across such networks in order to make the vast
amount of information on such networks more readily accessible to users.
BUSINESS OBJECTIVES AND STRATEGIES
By leveraging our ever-expanding network of LAWs(TM), our mission is to
become (1) the recognized time-and money-saving consumer brand name for
needs-based information, products and services in e-marketing and e-business and
(2) the platform of choice for businesses large and small. LAWs(TM) facilitate
individuals in local towns who have communities of interest, such as sports,
learning, or religion, to communicate and interact more effectively with one
another. LAWs(TM) are built on five pillars which exist in every community:
local business, including the local distributors and outlets of large national
companies; city hall; schools; community newspapers; and community groups, clubs
and associations, including sports associations, religious groups, non profits,
etc. The LAW(TM) acts as a local hub of interactive information and e-commerce
and as such offers these five pillars a simple low cost method for buying,
selling, publishing, sharing, co-editing, integrating, transacting, collecting
and messaging information. This information can include content distributed from
a central location downward, or data collected locally and channeled into a
central local database.
In February 2000, we entered into a strategic alliance agreement with
1stUp.com Corporation, an affiliate of CMGI, to provide free private label
Internet access to customers throughout North America. This service will allow
consumers, businessmen and associations instant free and unlimited access to
their LAWs(TM) (and the rest of the worldwide web) 24 hours a day 7 days a week.
Depending on the number of users, 1stUp will share a portion of its advertising
revenues with us.
Over the next two years, we desire to maximize our coverage of communities
within the United States and Canada. To accomplish this goal, we have adopted a
four phase development approach. As each subsequent phase rolls out, it builds
upon the features provided by the previous phase in a manner that is seamless to
the user. The first phase is the development of a LAW(TM) portal for easy
point-and-click access of local content from the worldwide web. We have
identified 56 such phase one sites in the United States.
The second phase is the development of a fully interactive local site. Our
fully interactive sites provide users free point and click access to needs-based
information. Community organizations and associations generate the needs-based
content through our self-serve websites that they update directly through their
browser (not requiring any programming expertise). Local businesses pay for
access to highly focused
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micro-markets through our self-serve websites that they update directly through
their browsers (not requiring programming expertise). Businesses get interactive
marketing capabilities that allow them to build relationships with online
consumers. Phase 2 also includes our publication, The Month Ahead, that contains
a calendar of events for the upcoming month, and is delivered to selected
households in the community.
The third phase is to enable e-commerce on the fully interactive local
site. During this phase, the LAW(TM) begins selling and hosting e-commerce and
e-business solutions. Businesses can then process complete end-to-end
transactions online. IBM provides back-end business capabilities which can
integrate merchant orders with local distribution centers or delivery services.
A phase 3 LAW(TM) enables users to purchase items online with quick and
inexpensive delivery of such items. Phase 3 LAWs(TM) focus on saving users and
community stakeholders time and money, as well as transforming traditional
businesses into e-businesses while generating e-commerce revenues in the
process.
The final phase is to provide bundled products and services at substantial
discounts on the fully interactive local site. Once a LAW(TM) is well
established and profitable through e-marketing, e-commerce and e-business
revenues, additional revenue streams are generated through additional value
added services to the customer such as bundled products (e.g., office supplies)
and services (e.g., airline, hotel and rental car reservations) offered at
substantial discounts through our discount clubs.
It is our objective to generate significant revenues by facilitating
interactions and transactions between stakeholders in communities where 90% of
the daily personal activity occurs and by facilitating national businesses and
associations who wish a local presence. We will galvanize our position as a
profit-leader in the Internet world by being a one-stop solution for any and all
stakeholders. In other words, we intend to be the premiere locally oriented
information utility -- or infomediary -- where most interactions and
transactions are and will be conducted. The single most important factor for our
success is our ability to attain a critical mass of repeat site visits by end
users. In order to accomplish this task, we will need to (i) provide visitors
with value-driven, accurate and timely information, (ii) educate local
associations, businesses and general users, (iii) gain acceptance and trust from
each local community, (iv) grow relationships between each member of the
community and (v) save community members time and money.
We will direct our marketing efforts at three levels, including national
concerns, local businesses and sponsorship. Our marketing efforts for national
concerns will be focused on businesses that have branches, distributors or
franchises in the local municipalities. Marketing to local businesses will be
focused on independent businesses that have a need to be interactive with their
customers. Sponsorship marketing will be focused on generating revenue through
the development of interactive programs for local associations, clubs and other
non-profit organizations.
UNIQUE VENTURES
A key feature of our business is our relationship with IBM. Under a
licensing agreement between Planet Today, our parent, and IBM, IBM's Community
Point(TM) (being a registered trademark of IBM), a Lotus Notes(TM)/Domino(TM)
based system designed for use by municipalities in Europe, has been embedded
into our e-Property Technology. Our LAWs(TM) are built using this technology.
The Company has outsourced the hosting, maintenance and support of LAWs(TM)
to IBM and IBM's partners. As a result, all LAWs(TM) that are rolled out are
monitored 24 hours a day, 7 days a week. IBM's Net Commerce Hosting software has
been incorporated into the overall LAW(TM) solution to leverage on-line commerce
capabilities and enhance the interactivity and value available to our community
participants. We are also an IBM Business Partner for the sale of hardware,
software and services. As a result of this partnership, IBM began promoting
LAWs(TM) as a world-wide product in November 1998.
Our collaboration with IBM has provided many benefits for our business
including the assistance of IBM's experts and client teams in accessing and
marketing to large national companies. IBM continues to market our LAW(TM)
concept using the name "e-property", through its worldwide solutions offerings
thus allowing us to benefit from IBM's advertising efforts. The flexibility and
scalability of the IBM software
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has enabled us to tailor our product quickly and inexpensively, in order to meet
the needs of our user and partner base.
Planet Newspapers is an important aspect of our business plan and
development strategy. Planet Newspapers is principally engaged in the business
of marketing, selling and developing a monthly community-based magazine in
Canada and the United States called The Month Ahead -- Your Community & Internet
Guide. Over the next three years, Planet Newspapers has identified 184
communities in Canada and in the United States that could accommodate operating
franchises using and served by The Month Ahead. These 184 communities include
the communities which Planet America and Planet Today (in Canada) intend to
launch, or already have launched, their Internet LAW(TM) sites. The Month Ahead
and Internet LAWs(TM) will enhance each other's business and development. Our
LAW(TM) sites will allow commercial, municipal and residential users of the
Internet to participate in their own local community Internet, an ability that
large corporations spend millions to achieve. The Month Ahead will provide a
monthly, ongoing and accurate print version of events happening in the local
community. Together with Planet Newspapers, we will build a strong foundation
within the local community.
QUALITY ASSURANCE PLAN
The quality of our LAW(TM) sites is paramount to the success of our
business. We intend to focus our quality efforts on site content and site
reliability. Site content quality focuses on the ease of navigation, simplicity
of design, interactivity and the accuracy, quantity and usefulness of the
content. Site reliability focuses on continuous access to the site, optimization
of hardware configurations, automated link/page availability checking, manual
confirmation of any errors, fast resolution of any detected or validated errors
and maintaining a high degree of site security. The preeminent concern of our
quality assurance program will be to provide users with useful and interesting
information on every visit to our sites.
Each LAW(TM) site must be available 24 hours a day, 7 days a week. We will
employ a two tier web database structure of a test and live environment to
minimize site disruptions. Additionally, particular attention must be given to
ensuring that link changes and dead links are monitored and updated quickly due
to the dynamic, comprehensive content of each site. The technical quality
assurance program will be focused on keeping our hosted servers at peak
performance and our sites free of dead or broken links.
The content quality assurance program will ensure that information provided
on each LAW(TM) is professional, clear and addresses the needs of a local
community. Our content will be monitored and maintained by content specialist
teams. Each team will consist of approximately 10 specialists. These groups will
be responsible for researching, creating and managing all of the content within
all of our LAW(TM) sites. As content is updated, these groups will be
responsible for unit testing specific content elements to ensure quality and
accessibility. Each team will employ quality assurance specialists who will be
responsible for functional testing of the LAW(TM) sites on a scheduled basis.
The schedule will be designed to ensure that the automated processes are
supplemented with a manual test of each site at least once a month. The
functional test will include a complete link check of the site to ensure that
site flow is intuitive, information does not become stale and other qualitative
criteria are met. Additionally, it will include conducting a unit test of each
content element in the site. This functional testing will also be a part of the
technical quality assurance program.
We will also provide a final structured level of testing at our
headquarters location. At the centralized location, a quality assurance leader
will conduct spot checks and site audits on all of our LAW(TM) sites. These
tasks will be in addition to the scheduled manual checks conducted by the
quality assurance specialists. The quality assurance leader will focus on sites
that contain unique information and on sites that have experienced a large
increase in content such as newly upgraded Phase 2 sites.
COMPETITION
The markets for our products and services are new, intensely competitive,
evolving quickly and subject to rapid technological change. We face competition
in the overall Internet/intranet software market, as well as each of the market
segments where our products and services compete. We expect competition to
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persist, increase and intensify in the future as the markets for our products
and services continue to develop and as additional companies enter our markets.
We expect to compete successfully in our markets by offering the first
service of its kind to provide users with the latest community-based information
accessed with ease at home, business, municipally or in school. Unlike many
other major online services we bring our service directly into the local
communities of the United States and Canada.
In addition, we do not charge a usage fee for this service and all calls in
each community are within the community's local telephone calling area. We offer
computer users the ability to access local information and purchase local
products. Finally, whereas, other online services are controlled through a
centralized system of operation, our software will be licensed-operated in
individual communities. However, there can be no assurance that we will be able
to compete effectively with current and future competitors.
We face competition in the overall Internet/intranet market by Microsoft
Corporation and Netscape Communications Corporation, among others. Both of these
companies provide or have announced intentions to provide a wide range of
software products based on Internet protocols and to compete in the broad
Internet/intranet software market as well as in specific market segments where
we compete. Both Microsoft and Netscape occasionally acquire technology and
products from other companies to augment their product lines, in addition to
developing their own technology and products.
We also face competition from America Online, Inc. ("AOL") (WebCrawler),
Yahoo! Inc. (Yahoo), Excite, Inc. (Excite), Inktomi Corporation and Wired
Ventures, Inc. (Hotbot), Infoseek Corporation (Infoseek and Ultraseek), Lycos,
Inc. (Lycos and a2z), The McKinley Group, Inc. (which has announced its
intention to merge with Excite, Inc.) (Magellan), and Open Text Corporation
(Open Text Index), among others. AOL, Excite, Inc., Infoseek Corporation, Lycos,
Inc. and Open Text Corporation have been offering search services on the
Internet longer than we have. Increased use and visibility of our services and
products depends in part on our ability to grow as the Web grows in size and
maintain optimum operational performance levels. We believe that significant
investments and business alliances will be essential to longer-term success to
keep up with the technological and operational demands imposed by the explosive
worldwide growth of the Web.
In the market for information search and retrieval software, we compete
with Excalibur Technologies Corporation, Fulcrum Technologies, Inc., Information
Dimensions, Inc., Open Text Corporation, Personal Library Software, Inc. and
Verity, Inc., among others. In the future, we may also compete with database
vendors should they offer intranet versions of the information search and
retrieval capabilities with their core databases. We may also encounter
competition from companies that currently sell document management systems,
groupware applications, Internet and intranet products and operating systems if
they decide to enhance their products and services similar to our products and
services.
We are aware of numerous other major software developers as well as smaller
entrepreneurial companies that are focusing significant resources on developing
and marketing software products and services that will compete with our products
and services. Certain of our current and potential competitors may bundle their
products with other software or hardware, including operating systems and
browsers, in a manner that may discourage users from purchasing our products.
Many of our current and potential competitors in each of our markets have longer
operating histories and significantly greater financial, technical and marketing
resources, name recognition and installed product base than us. There can be no
assurance that we will be able to compete effectively with current and future
competitors. If significant price competition were to develop, we would likely
be forced to lower our prices, which could have a material adverse effect on our
business, results of operations and financial condition.
PRODUCT DEVELOPMENT AND TECHNOLOGICAL ENHANCEMENTS
Our current product development efforts are focused on enhancing and
broadening our software, information and collaboration and communication
products. We intend to actively support industry
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standards and incorporate new standards-compliant features into our products.
Research and development work is conducted primarily in our facilities or in the
facilities of our parent corporation, Planet Today. The principal technologies
used in our products have been developed internally and combined with IBM's
technology to provide a complete local area network; we may also license and
incorporate third-party technology to supplement our own efforts.
Our ability to successfully develop and release new products and services
and enhancements in a timely manner is subject to a variety of factors including
our ability to solve technical problems and test products, the competing
priorities of our business, the availability of development and other resources
and other factors outside of our control. There can be no assurance that we will
not experience difficulties that could delay or prevent the successful
development, introduction or marketing of new products and services and
enhancements.
INTELLECTUAL PROPERTY
Our performance and ability to compete are dependent to a significant
degree on our proprietary knowledge. We rely or intend to rely on a combination
of patent, copyright, trademark and trade secret laws, non-disclosure agreements
and other contractual provisions to establish, maintain and protect our
proprietary rights, all of which afford only limited protection. There can be no
assurance that patents or trademarks will issue from these pending applications
or from any future applications or that, if issued, any claims will be
sufficiently broad to protect our rights in such technology. In addition, there
can be no assurance that any patents or trademarks that may be issued will not
be challenged, invalidated or circumvented, or that any rights granted under the
patents or trademarks would provide protection of our proprietary rights.
Failure of any patents or trademarks to protect our rights in technology and
cross licensing arrangements may make it easier for our competitors to offer
equivalent or superior technology.
GOVERNMENT REGULATION
We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to access to on-line
commerce. However, due to the increasing popularity and use of the Internet and
other on-line services, it is possible that a number of laws and regulations may
be adopted with respect to the Internet or other online services covering issues
such as user privacy, pricing, content, copyrights, distribution, and
characteristics and quality of products and services. Furthermore, the growth
and development of the market for online commerce may prompt more stringent
consumer protection laws that may impose additional burdens on those companies
conducting business online. The adoption of any additional laws or regulations
may decrease the growth of the Internet or other online services, which could,
in turn, decrease the demand for our products and services and increase our cost
of doing business, or otherwise have an adverse effect on us. Moreover, the
applicability to the Internet and other online services of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes and personal privacy is uncertain and may take years to resolve.
EMPLOYEES
As of December 31, 1999, we had a total of 17 full-time and 3 part-time
employees. In addition, we use independent contractors when needed. We currently
lack the personnel that will be necessary for our expected growth. Competition
for such personnel is intense and there can be no assurance that we will be able
to successfully attract, assimilate, or retain sufficiently qualified personnel.
In order to attract qualified personnel, we may be required to offer incentives
such as stock options, stock awards or other additional non-cash compensation.
The future success of the Company will depend on our ability to attract and
retain qualified personnel to operate the Company and manage our growth. If we
are unable to manage our growth effectively, it could have a material adverse
effect on our business, results of operations and financial condition. None of
our employees is represented by a labor union and we consider our employee
relations to be satisfactory.
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PROPERTIES
The corporate and head office of the Company is at Suite 1825, The Liberty
Building, Buffalo, New York 14202. This office is leased on a monthly basis for
a monthly rent of $1,479. The principal executive office of the Company is at
1091 Gorham Street, Suite 302, Newmarket, Ontario Canada L3Y 7V1. This office
space comprises approximately 3,335 square feet, and is shared by Georgian
Bancorp, Planet Today and the Company. We are not currently paying rent for the
use of this office space, but a portion of the rent has been allocated in the
consolidated financial statements.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and operations should
read be in conjunction with the consolidated financial statements and the
related notes included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors, including but not limited to, those
described under "Risk Factors" and elsewhere in this prospectus.
SUMMARY
We create local Area Webs LAWs(TM) that are local versions of the Worldwide
Web customizable to specific local needs town by town. Within local communities,
LAWs(TM) help citizens, businesses, non-profit organizations, and governments
take advantage of the Internet phenomenon in a more meaningful and practical
way.
LAWs(TM) use advanced technology originally designed to power corporate
Intranets to create a commercially viable platform that fulfills online,
commercial and non-commercial needs of communities; communities that cannot
escape the reality that their markets are predominantly local. LAWs(TM)
dramatically reduce the amount of time, frustration, and (literally) the number
of "clicks" spent assessing online content, products, and services. LAWs(TM)
also demystify the process of content creation, hosting and maintaining
easy-to-use, self-serve, browser-based solutions.
We build our online solutions based on proven Web-based models, focusing on
the most cost effective and successful methodologies used to date, then applying
these models at the community level.
As a result, we believe we will deliver significant value to all facets of
local communities and local markets -- across North America and eventually
throughout the world. We anticipate that the Company will leverage its core
competencies and related technologies to generate significant revenues and
secure rapid future growth and long-term prosperity.
We have a limited operating history and have generated only a limited
amount of revenues to date. We expect to incur significant operating expenses
over the next several years in connection with the continued development and
expansion of our business. In particular, we expect our sales, systems
enhancements and marketing expenses to increase.
We have sustained operating losses and negative cash flows from operations
since inception and expect these conditions to continue for the immediate
future. As of December 31, 1999, we had an accumulated deficit of $6,477,827.
The implementation of our business plan is dependent on obtaining additional
financing through public or private sources, strategic relationships and other
arrangements. Our current cash resources and anticipated cash flows from
operating activities are not expected to be sufficient to meet our anticipated
need for working capital and public or private financing will be required. We
have entered into various agreements with Swartz Private Equity LLC to secure
equity financing which are described in note 6 to the latest annual consolidated
financial statements and we are currently receiving support from our majority
stockholder to provide additional funds, as needed to cover our working capital
needs until the equity financing can be completed.
Since the majority of the company's future products and services relate to
providing Internet-related information, and facilitating e-commerce and
e-business services to community-based associations and organizations and
business located in those communities, its success is dependent on the continued
growth of the Internet e-commerce and e-business and the successful
implementation of its business plan.
We have generated revenue from the sale of advertising in our LAW(TM) sites
and e-business agreements. The e-business agreements provide for revenue sharing
in the form of transaction fees from sales made by business partners which are
recognized as revenue in the period that the underlying sales are made by the
business partners. No significant e-business revenues have been generated to
date.
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We expect our revenue in the immediate future will come from the
installation of free internet access points across Canada and the development of
e-Commerce applications for national chains in Canada and the United States and
the resale of copies of our software applications.
In the future we may generate revenue from other sources such as:
- Branding
- Subscriptions
- E-commerce
- Business to business commerce
- Sponsorships and advertising
- Canadian Government Community Access Program (CAPs) funding.
To date, we have funded our activities primarily through private equity
security offerings.
Product and Content Development Costs. These consist primarily of payroll
and related expenses for LAW(TM) site development and systems operations
personnel and consultants, systems infrastructure and costs for acquired
content. All costs associated with the development of content on our LAW(TM)
sites are expensed as incurred; such costs were $278,364 for the fiscal year
ended June 30, 1999 and $140,147 for the six months ended December 31, 1999.
Costs associated with the development of our websites software are capitalized;
such costs were nil for fiscal year ended June 30, 1999 and $41,601 for the six
months ended December 31, 1999.
General and Administrative Expenses. General and administrative expenses
consist primarily of employee salaries and related expenses for executive,
administrative, finance, information systems, facility costs, professional fees
and recruiting. General and administrative expenses were $316,363 for the fiscal
year ended June 30, 1999 and $81,209 for the six months ended December 31, 1999.
Liquidity and Capital Resources. From inception in October 1996 through
December 31, 1999, we financed our operations and met our capital expenditure
requirements primarily from the private sale of equity securities and the
infusion of assets totaling approximately $6 million. At June 30, 1999, we had
$3,244 in cash and cash equivalents; at December 31, 1999, our current assets
were $252,948 compared to $37,184 at June 30, 1999.
The expansion of our business will require significant additional capital
to fund operating losses, capital expenditures and working capital needs.
Net cash used in operating activities was $250,851 for the year ended June
30, 1999. Cash used in operating activities consisted primarily of net operating
losses due to systems developments, sales and marketing, and general and
administrative costs.
Cash flow from financing activities was $246,747 for the year ended June
30, 1999, leaving a net cash outflow of $4,104 for the year. For the six months
ended December 31, 1999 the net cash outflow was $1,631.
Subsequent to December 31, 1999, various investors bought or committed to
buy an additional $249,428 of our equity.
Our future capital requirements will depend on a variety of factors,
including market acceptance of LAW, the resources we devote to develop, market,
sell and support our current and future product offerings, and other factors. We
expect to devote substantial capital resources:
- For our sales and marketing efforts,
- To hire and expand our systems people, salaries and marketing and
customer support organizations,
- To further develop our service offerings, and
- For general corporate purposes.
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We believe that our cash and cash equivalents, the net proceeds from equity
sales subsequent to December 31, 1999 and the net proceeds from the Investment
Agreement will be sufficient to fund our operations for at least the next 12
months. Despite our expectations, we may need to raise additional capital before
that time. We may need to raise additional funds in order:
- To fund anticipated growth, including significant increases in personnel,
facilities and computer systems,
- To develop new or enhance existing services and products, including our
network infrastructure, and
- Acquire or invest in complementary businesses, technologies, services or
products.
In addition, in order to meet long term liquidity needs, we may need to
raise additional funds, establish a credit facility or seek other financing
arrangements. Additional funding may not be available on favorable terms, or at
all.
Year 2000 Readiness
Impact of Year 2000 Computer Problem. The Year 2000 computer problem refers
to the potential for system and processing failures of date-related data as a
result of computer-controlled systems using two digits rather than four to
define the applicable year. For example, the computer programs that have time
sensitive software may recognize a date represented as "00" as the year 1900
rather than the Year 2000. This could result in a system failure or
miscalculation causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices or engage in
similar normal business activities. We have designed our LAWs(TM) for use in the
Year 2000 and beyond and believe our LAWs(TM) are Year 2000 ready. We have
performed testing of our LAWs(TM) for the Year 2000 compliance. Our tests of our
LAWs(TM) have not revealed any significant year 2000 problems. We are not aware
of any significant systems that contain embedded chips that are not Year 2000
compliant.
Risks. Due to the general uncertainty inherent in the Year 2000 computer
problem, which results from the uncertainty of the Year 2000 readiness of
third-party suppliers and vendors, we are unable to determine at this time
whether the consequences of Year 2000 failures will have a material impact on
our business, results of operations or financial condition. No Year 2000
problems have been experienced to date.
The costs associated with remediating any Year 2000 problems have not been
material to date. Although we do not anticipate that these costs will be
material in the future, we cannot assure you that these costs will not be
material.
YEARS ENDED JUNE 30, 1998 AND 1999
For the years ended June 30, 1998 and 1999, we incurred a net loss in the
amounts of $286,019 and $1,076,258, respectively. Our net working capital
deficiency as of June 30, 1999 was $127,279 as compared to $535,288 as of June
30, 1998. Although current assets decreased from $125,373 as of June 30, 1998 to
$37,184 as of June 30, 1999, current liabilities decreased from $660,661 as of
June 30, 1998 to $164,463 as of June 30, 1999 because of a reduction from
$660,661 to $164,463 in the amount due to related parties, mainly as a result of
the Company's parent, Planet Today, forgiving $650,000 Cdn (US$441,550) of debt
which amount has been included in additional paid-in capital.
SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999
RESULTS OF OPERATIONS
To date, our revenue has been minimal and primarily it has come from
advertising sales. Advertising revenue is recognized on a straight-line basis
over the term of the advertising contract. For the years ended June 30, 1998 and
1999, advertising sales were $124,766 and $139,467 respectively, and $107,898
for the six month period ended December 31, 1999.
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Advertising revenues are generated from three main areas. The first main
area is through interactive electronic directories in each LAW(TM) community, an
electronic version of the "Yellow Pages". The second area is an interactive
classified "buy-sell" service offered to all members of the LAW(TM) community.
The third area is local and national sponsorships that are sold with respect to
many of the information services offered to the members. We anticipate that
advertising revenues will account for a substantial share of net revenues for
the foreseeable future.
In the future, we also expect to receive revenues from other sources
including retailing, subscriptions, branding, sponsorship and e-business
transaction fee and other service revenues. Retailing revenues will result from
license agreements with businesses to facilitate the sale of products to LAW(TM)
users. Subscription revenues will result from fees charged for specialized
online services requested by subscribers, such as personalized electronic
newspapers. Service revenues will consist of fees for support services, ongoing
training, advertising and consulting to the licensed.
Planet Newspapers also derives its revenue primarily from the sale of
advertising space in its publication, The Month Ahead. Revenues are expected to
increase with the expansion of LAW(TM) sites across the United States.
We plan to meet our objective of increasing revenues by expanding our
network of LAWs(TM) across the United States and by enhancing and tailoring the
services offered by each LAW(TM) to meet the specific needs of the community. In
an effort to maximize our coverage of communities within the United States over
the next two years, we have adopted a phased approach to developing our product
line. As each subsequent phase rolls out, it builds upon the features provided
by the previous phase in a manner that is seamless to the user. The first phase
is the development of a LAW(TM) portal for easy point-and-click access of local
content from the worldwide web; we also offer free Internet for our users. We
have completed the first phase of our development by establishing LAW(TM) sites
in 102 localities across North America. The second phase is the development of a
fully interactive local site. The third phase is to enable e-commerce on the
fully interactive local site. The final phase is to provide bundled products and
services at substantial discounts on the fully interactive local site. As the
development of our product line progresses, we expect the number of users and
the types of services requested from these users to increase significantly. See
"Business" and "Risk Factors."
We have undertaken a leading edge solution that will change the way
e-commerce is conducted in local communities. It is a solution that is
replicable within communities throughout North America and the world.
Recognizing the magnitude of this endeavor, we have taken time in 1999 to forge
the alliances required to deliver quality results on all fronts: from e-commerce
and B to B solutions, to content development, to promotion and advertising.
These alliances are summarized below:
1. Our 102 LAW(TM) sites include five phase two sites which are
operational with very local links, local directory information of
businesses and professionals, local classifieds, local real estate
information, local movie listings. All powered are by Infospace. These
sites have links to existing web pages that are relevant to each site. 56
of the sites are in the United States with 46 in Canada.
2. Five phase two sites operating in Canada are: Newmarket, Aurora,
Richmond Hill, London, Kitchener/Waterloo, Ontario, where we host pages of
17 non-profit organizations.
3. Our sites allow the participants within the community true
interaction with the site in a self-serve manner. For example, associations
can add themselves to the web site straight from the web site. Users can
add relevant links to the site themselves using a button on the site.
Businesses can register to advertise or add a link to their business site
themselves and be billed for a fee later. Our sites now contain an average
11,000 links, 5,500 content areas. For this volume of content, the site
speed has been improved to display the sought after page within 5 seconds.
4. We have an agreement with Canada's largest radio station network
which allows us to use the power of radio in two phase two sites, London
and Sudbury. The deal saves Planet promotional advertising costs at the 2
sites. Similar arrangements will be made at all sites.
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5. An automobile dealership template is under construction that will
be the first instance of building a sophisticated leading web facility that
allows a national franchisee to interact directly with the community and
conduct relationship marketing and the ensuing e-commerce. Replicating this
solution across all of our sites will be very profitable because of the
derived economies of scale. This capability is one of our core
differentiators that distinguish our sites from all our competitors. Other
retailing templates will be developed.
6. We have submitted an application to the Canadian government to
install 76 Community Access Program ("CAPs") points in Ontario. This
installation is expected to result in revenues of $1.3M. It will also allow
Planet Today to expand its on the ground operations into 15 additional
locations in the next 4 months: Oshawa, Ajax, Markham, Vaughan, downtown
Toronto, Hamilton, Sudbury, Niagara Falls, Woodstock, Cambridge, Brantford,
Guelph, Mont Forest, Caledonia and Lindsay, Ontario, reaching approximately
2 million more people.
7. These CAPs will be situated on the premises of YMCA, Boys and Girls
Clubs of Canada, John Howard society, community food banks, youth crisis
centers and hostels. These non-profit organizations will be hosting their
web pages on our sites throughout Canada.
8. One of the prime objectives of the Canadian government's CAP
program is to stimulate economic development via increased use of the
internet and e-commerce. We are uniquely positioned as a company with a
network of community portals that provide a platform for small businesses
to conduct e-commerce. In recognition of our advanced position in being
able to deliver the services specified by the CAP program and in
anticipation of the ensuing e-commerce opportunities via our platform, IBM,
Ericsson Professional Services and Cendant Inc. have advanced $262,000 (to
be repaid from future revenues) to support our operations.
9. We have assembled a one-stop shopping experience, by securing 60
affiliate marketing relationships with 60 e-commerce sites that offer name
brand goods in the following categories: art work, auto sales, books, cd's,
educational products, florists, gifts, online auctions, baby supplies,
health and beauty supplies, kitchen supplies, pet supplies, sport
equipment, toys, travel, mens wear, womens clothing, greeting cards, and
coupons.
10. Our Clix loyalty program rewards system can be applied to all of
our affiliate marketing programs to stimulate sales of our affiliates'
products from phase 1 sites. The clix rewards system uses an e-mail list of
1 million currently registered clix users to raise awareness that our 102
sites are open for business and to notify users that if they purchase our
affiliates' products they will get an additional incentive of clix points
which are redeemable monthly for cash or products.
Our operating objectives for the next 15 months will include the expansion
of phase one and two LAW(TM) sites at an estimated total cost of $27 million for
advertising and promotion. In addition the administration and general expenses
associated with these sites will total an estimated $5 million.
Over the next 15 months, we plan to enter into partnerships with several
national partners to provide subject matter content, expertise and e-commerce
enabled products and services to LAW(TM) communities. We have identified 200
potential national partners and plan to solicit partnerships with up to 50 of
them. An ideal national partner would not only contribute subject matter content
expertise to the LAWs(TM) but would also satisfy certain other criteria
including, but not limited to, providing products and services which are in
demand and purchased repetitively by consumers in the LAW(TM) communities. We
would make transactional revenue from such e-commerce.
The implementation of our business plan is dependent upon obtaining
additional financing through public or private sources, strategic relationships
and other arrangements. Our current cash resources and anticipated cash flows
from operating activities are not expected to be sufficient to meet our
anticipated need for capital. Our Investment Agreement with Swartz to secure
equity financing will help us raise this capital.
25
<PAGE> 30
FACTORS AFFECTING RESULTS OF OPERATIONS
We are likely to experience significant fluctuations in quarterly operating
results caused by many factors including the rate of growth, usage and
acceptance of intranets and the Internet, changes in the demand for our products
and services, introductions or enhancements of our products and services and our
competitors, delays in the introductions or enhancement of our products and
services and our competitors, changes in our pricing policies or those of our
competitors, changes in the distribution channels through which products are
sold, our ability to anticipate and effectively adapt to developing markets and
rapidly changing technologies, our ability to attract, retain and motivate
qualified personnel and changes in the mix of products and services sold. Our
expense levels are based in part on our expectations as to future orders and
sales, and our ability to find licensees, which given our limited operating
history, are also extremely difficult to predict. Our expense levels are to a
large extent fixed, and it will be difficult for us to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. Accordingly,
any significant shortfall in demand for our products and services in relation to
expectations would have an immediate adverse impact on our business, results of
operations and financial condition, which could be material.
CERTAIN TRANSACTIONS
During the year ended June 30, 1999, the Company entered into an agreement
with the York Region e-property limited partnership, a majority of whose
partners are directors and officers of the Company (Emmanuel Casalino, 14%,
Peter Palijenko, 14%, Noreen Stevens, 21% and Sinclair Stevens, 21%), under
which it has granted the partnership the exclusive right to use its community
software to develop and exploit a site in the Newmarket, Ontario area. The
agreement has an initial term of 10 years and the partnership has the right to
extend for two additional five-year terms for no additional consideration.
Consideration received totaled $337,500 Cdn (US $229,264) and comprised cash of
$70,000 Cdn (US $47,551), with the balance in notes payable by the partners. The
notes accrue interest at a non-compounded rate of 6.5% per annum and are
repayable out of net revenues earned by the partnership at the rate of 80% of
net revenues in each future annual accounting period, and in any event by
December 31, 2003. The partnership also has the ability to acquire similar right
in three additional areas namely the cities of Markham, Richmond Hill and
Vaughan all in the Region of York for the same consideration.
Planet Today, our parent, has entered into a management services agreement
dated December 2, 1998 under which it has agreed to take on the role of manager
of the York Region e-property limited partnership LAW site for a management fee
of $5,000 per month, as well as ongoing annual fees equal to 20% of net revenues
earned by the partnership over the period ending June 30, 2004, and 50% of net
revenues thereafter.
26
<PAGE> 31
MARKET INFORMATION
Our common stock has been quoted since April 15, 1998 on the OTC Bulletin
Board under the symbol "PNTC". The trading market has been limited and sporadic.
The table set forth below presents the high and low bid prices of the common
stock for the periods indicated based on information provided by the OTC
Bulletin Board. Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
TRADING PERIOD HIGH LOW
- -------------- ---- ---
<S> <C> <C>
April 15, 1998 -- June 30, 1998............................. 2 3/4 7/16
July 1, 1998 -- September 30, 1998.......................... 4 11/12 3/4
October 1, 1998 -- December 31, 1998........................ 2 1/2 7/8
January 1, 1999 -- March 31, 1999........................... 7 5/12 1 1/16
April 1, 1999 -- June 30, 1999.............................. 5 2
July 1, 1999 -- September 30, 1999.......................... 3 1/8 1 1/8
October 1, 1999 -- December 31, 1999........................ 2 3/8 1 5/16
January 1, 2000 -- March , 2000...........................
</TABLE>
On March [ ], 2000, the last reported bid price of the common stock was
$[ ].
As of March 9, 2000, our common stock no longer will be eligible for the
OTC Bulletin Board because we have not filed a registration statement with the
SEC under Section 12 of the Securities Exchange Act of 1934, as required for
eligibility. We intend to do so immediately upon effectiveness under the
Securities Act of 1933 of the registration statement of which this prospectus is
a part. We also will consider applying to include our common stock on the Nasdaq
Stock Market.
HOLDERS
As of February 21, 2000, there were 15 stockholders of record.
DIVIDEND POLICY
We have not declared or paid any dividends on our capital stock since
inception and do not expect to pay any cash dividends for the foreseeable
future. The payment of cash dividends, if any, in the future will be at the sole
discretion of the Board of Directors.
27
<PAGE> 32
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of the date of this
prospectus, by (i) any person who is known to the Company to be the beneficial
owner of more than five percent of the capital stock of the Company; (ii) each
director and executive officer of the Company; and (iii) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP* CLASS
- ------------------- --------------------- -------------
<S> <C> <C>
Planet Today Inc.**......................................... 5,000,000 85%
1091 Gorham Street, Suite 302
Newmarket, Ontario L3Y 7V1
Cede & Co................................................... 686,510 12%
P. O. Box 222
Bowling Green Station
New York, NY 10274
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
<S> <C> <C>
Sinclair M. Stevens**....................................... 5,000,000 85%
1091 Gorham Street, Suite 302
Newmarket, Ontario L3Y 7V1
James G. Stevens............................................ 60,000 ***
1091 Gorham Street, Suite 302
Newmarket, Ontario L3Y 7V1
Emmanuel Casalino........................................... -- 0%
1091 Gorham Street, Suite 302
Newmarket, Ontario L3Y 7V1
Peter Palijenko............................................. -- 0%
1091 Gorham Street, Suite 302
Newmarket, Ontario L3Y 7V1
Noreen M. Stevens........................................... -- 0%
1091 Gorham Street, Suite 302
Newmarket, Ontario L3Y 7V1
Edward E. Loyst............................................. -- 0%
1091 Gorham Street, Suite 302
Newmarket, Ontario L3Y 7V1
Thomas Moryto............................................... -- 0%
33 Hill Country Drive
R.R. #4
Stouffville, Ontario, L4A 7X5
Directors and Officers as a Group........................... 5,060,000 85%
</TABLE>
- ---------------
* Sole voting and investment power, except where indicated otherwise.
** Sinclair M. Stevens, who is Chairman of Planet Today, and James G. Stevens,
who is President and Chief Executive Officer of Planet Today each may be
deemed the beneficial owner of the 5,000,000 shares owned by Planet Today.
*** Less than 1%
Pursuant to the Investment Agreement, Swartz has the right to acquire up to
15,000,000 shares of common stock under certain circumstances, excluding certain
warrants. Assuming all such shares were
28
<PAGE> 33
issued, Swartz would own 15,000,000 of the 20,890,715 issued and outstanding
shares of common stock or approximately 72%. Planet Today would then own 24% and
Cede & Co. would own 3% of the issued and outstanding shares. Swartz also will
receive an amount of Put Warrants to purchase shares of common stock equal to
10% of the number of Put Shares purchased and was granted a Commitment Warrant
to purchase 490,000 shares of common stock. See "Investment Agreement".
PLAN OF DISTRIBUTION
We have been advised by Swartz and the other Selling Security Holders that
all or a portion of the Shares covered by this prospectus may be offered for
sale, from time to time, by them in one or more private or negotiated
transactions, in open market transactions, in settlement of short sale
transactions, in settlement of option prices that may be changed, at market
prices prevailing at the time of the sale.
To our knowledge, neither Swartz nor any of the other Selling Security
Holders has made any arrangement with any brokerage firm for the sale of the
Shares. We have been advised by Swartz and the other Selling Security Holders
that they presently intend to dispose of the Shares through broker-dealers in
ordinary brokerage transactions at market prices prevailing at the time of the
sale. However, depending on market conditions and other factors, Swartz may also
dispose of the Shares through one or more of the other methods described above.
Swartz is an "underwriter" within the meaning of the Securities Act in
connection with the sale of the Shares offered hereby. Any broker-dealers or
agents who act in connection with the sale of the Shares may also be deemed to
be underwriters. Profits on any resale of the shares by Swartz and any
discounts, commissions or concessions received by such broker-dealers or agents
may be deemed to be underwriting discounts and commissions under the Securities
Act.
Swartz will pay all commissions, transfer taxes and other expenses
associated with the sales of the shares by it. The shares offered hereby are
being registered pursuant to contractual obligations of the Company, and the
Company has agreed to pay the expenses of the preparation of this Prospectus. We
have also agreed to indemnify Swartz against certain liabilities, including,
without limitation, liabilities arising under the Securities Act.
We will not receive any of the proceeds from the sale of the Shares by
Swartz. However, we will receive the purchase price paid for Put Shares pursuant
to the Investment Agreement if, and to the extent, we sell such shares to
Swartz. The purchase price of the Put Shares issued and sold to Swartz pursuant
to the Investment Agreement shall be equal to the lesser of (i) the Market Price
for the Put Shares minus $.10 or (ii) 91% of the Market Price for such Put
Shares, as defined in the Investment Agreement.
DESCRIPTION OF SECURITIES
The following summary description of our capital stock is a summary and is
qualified in its entirety by reference to our Certificate of Incorporation and
By-Laws and the terms and conditions of the Investment Agreement. The shares to
which this prospectus relates are the Put Shares and the shares of common stock
issuable upon exercise of the Commitment Warrants and the Purchase Warrants, if
any, to be offered and sold from time to time by Swartz.
COMMON STOCK
The authorized capital stock of the Company consists of 50,000,000 shares
of common stock, par value $.001 per share. As of the date of this prospectus,
there were 5,890,715 issued and outstanding shares of common stock.
Holders of common stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. The holders of common stock are entitled
to receive such lawful dividends as may be declared by the Board of Directors.
In the event of liquidation, dissolution or winding up of the Company,
29
<PAGE> 34
the holders of shares of common stock shall be entitled to receive pro rata all
of the remaining assets of the Company available for distribution to our
stockholders. There are no redemption or sinking fund provisions applicable to
the common stock. All outstanding shares of common stock are fully paid and
nonassessable, and shares of common stock to be issued pursuant to the
Investment Agreement, when issued and fully paid for by Swartz, will be fully
paid and nonassessable.
WARRANTS
Purchase Warrants and Commitment Warrants are exercisable at any time
beginning on the date of issuance, and ending on the date that is five (5) years
after the date of issuance. The shares of common stock underlying such warrants,
when issued upon exercise in whole or in part, will be fully paid and
nonassessable.
Each of the warrants contains provisions that protect the holder against
dilution by adjustment of the exercise price. Such adjustments will occur in the
event, among others, of a merger, stock split or reverse stock split, stock
dividend or recapitalization. We are not required to issue fractional shares
upon the exercise of any warrant. The holder of the warrant will not possess any
rights as a stockholder of the Company until the holder exercises the warrant.
The warrant may be exercised upon surrender on or before the expiration date of
the warrant at the offices of the Company, with an exercise price for the number
of shares with respect to which the warrant is being exercised. The exercise
price is payable either by (i) cash exercise, (ii) cashless exercise, or (iii)
by a combination of them, at the election of the holder of the warrants.
Cashless exercise of the warrants occurs when that number of shares of common
stock underlying the warrant having a fair market value equal to the aggregate
exercise price are canceled as payment of the exercise price.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our By-Laws provide that the Company will indemnify each of its directors
and officers, whether or not then in office, with respect to expenses actually
and reasonably incurred by such person in any threatened, pending or completed
actions or proceedings and appeals, whether civil, criminal, administrative or
investigative, in accordance with and to the fullest extent permitted by the
General Corporation Law of the State of Delaware or other applicable law, as
such law now exists or may hereafter be adopted or amended.
Our Restated Certificate of Incorporation provides that pursuant to
Delaware law, our directors shall not be liable for monetary damages for breach
of the director's fiduciary duty as a director to the Company and our
stockholders. This provision in the Restated Certificate of Incorporation does
not eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain unavailable under Delaware law. In addition, each director will continue
to be subject to liability for breach of the director's duty of loyalty to the
Company for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
Provisions of the Investment Agreement also require the Company to
indemnify and hold harmless Swartz and all its stockholders, officers,
directors, employees and direct or indirect investors and any of their agents,
members, partners or other representatives from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages and related expenses, including reasonable attorney's fees and
disbursements, incurred as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of a representation or warranty made by the
Company in the Investment Agreement or any related documents, (b) any breach of
any covenant, agreement or obligation of the Company contained in the Investment
Agreement or any related documents, or (c) any cause of action, suit or claim,
derivative or otherwise, by any stockholder of the Company based on a breach by
the
30
<PAGE> 35
Company or any of its officers or directors of their fiduciary or other
obligations to the stockholders of the Company.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for the
Company by Mays & Valentine L.L.P., McLean (Tysons Corner), Virginia.
EXPERTS
The consolidated financial statements of the Company as of June 30, 1999
and June 30, 1998 and for each of the years in the two year period ended June
30, 1999 included in this Prospectus and Registration Statement have been so
included in reliance on the report, which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 1 to the consolidated financial statements, of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Commission a registration statement on Form SB-2
under the Securities Act with respect to the Common stock offered hereby. This
prospectus does not contain all of the information set forth in the rules and
regulations of the Commission. For further information with respect to the
Company and this offering, reference is made to the registration statement and
exhibits filed as a part of it. The registration statement, including the
exhibits thereto, may be inspected, without charge, at the Public Reference
Section of the Commission at 450 Fifth Street N.W., Washington, D.C., and at the
regional offices of the Commission located at 7 World Trade Center, 13th Floor,
New York, New York. Copies of all or any portion of the registration statement
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the prescribed fees. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. Descriptions contained in this
prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement are not necessarily complete and each such
description is qualified by reference to such contract or document.
We intend to make available to our stockholders annual reports containing
financial statements audited by an independent certified public accounting firm.
We may also make available to our stockholders, from time to time, other reports
about material corporate developments.
31
<PAGE> 36
PLANET AMERICA, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-4
Consolidated Balance Sheets as of June 30, 1999 and 1998.... F-5
Consolidated Statements of Stockholder's Equity for the
years ended June 30, 1999 and 1998........................ F-6
Consolidated Statements of Operations for the years ended
June 30, 1999 and 1998.................................... F-7
Consolidated Statement of Comprehensive Income for the years
ended June 30, 1999 and 1998.............................. F-8
Consolidated Statements of Cash Flows for the years ended
June 30, 1999 and 1998.................................... F-9
Notes to Consolidated Financial Statements for the years
ended June 30 1999 and 1998............................... F-10
Consolidated Balance Sheets as at December 31, 1999 and June
30, 1999.................................................. F-20
Consolidated Statement of Stockholders' Equity for the six
months ended December 31, 1999............................ F-21
Consolidated Statements of Operations for the six months
Ended December 31, 1999 and 1998.......................... F-22
Consolidated Statements of Comprehensive Income for the six
months ended December 31, 1999 and 1998................... F-23
Consolidated Statements of Cash Flows for the six months
ended December 31, 1999 and 1998.......................... F-24
Notes to Consolidated Financial Statements for the six
months ended December 31, 1999............................ F-25
</TABLE>
F-1
<PAGE> 37
[PRICEWATERHOUSECOOPERS LOGO]
PLANET AMERICA INC.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(expressed in U.S. dollars)
F-2
<PAGE> 38
August 24, 1999
REPORT OF MANAGEMENT
TO OUR STOCKHOLDERS
The management of PLANET AMERICA INC. is responsible for the integrity and
objectivity of the consolidated financial statements. These statements were
prepared in conformity with generally accepted accounting principles in the
United States and include amounts that are based on the best estimates and
judgments of management, which it believes are reasonable under the
circumstances.
The company maintains a system of internal accounting policies, procedures
and controls designed to provide management with reasonable assurance that
assets are safeguarded against loss from unauthorized use or disposition, and
that transactions are executed in accordance with management's authorization and
recorded properly.
PricewaterhouseCoopers LLP has audited the company's consolidated financial
statements in accordance with United States generally accepted auditing
standards and provides an objective, independent review of the company's
internal control and the fairness of its reported financial condition and
results of operations.
F-3
<PAGE> 39
[PRICEWATERHOUSECOOPERS LETTERHEAD]
August 24, 1999
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
PLANET AMERICA INC.
We have audited the consolidated balance sheets of PLANET AMERICA INC. as
at June 30, 1999 and 1998 and the consolidated statements of stockholders'
equity, operations, comprehensive income and cash flows for the years then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at June 30, 1999
and 1998 and the results of its operations and cash flows for the years then
ended in accordance with United States generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in note 1 to the
financial statements, the company has sustained losses from operations since its
inception and has a net capital deficiency that raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers LLP
CHARTERED ACCOUNTANTS
Toronto, Ontario
F-4
<PAGE> 40
PLANET AMERICA INC.
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 1999 AND 1998
(expressed in U.S. dollars)
ASSETS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
$ $
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................... 3,244 7,348
Accounts receivable (net of provisions of $4,605;
1998 -- $nil)............................................. 29,525 56,772
Due from related parties (note 4)........................... 4,415 34,643
Other assets................................................ -- 26,610
---------- ----------
37,184 125,373
Property, plant and equipment (note 3)...................... 4,307 10,868
Deferred financing costs (note 6)........................... 928,310 316,000
---------- ----------
969,801 452,241
---------- ----------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................... 88,507 43,249
Due to related parties (note 4)............................. 75,956 617,412
---------- ----------
164,463 660,661
Advance proceeds from sale of future revenue(note 8)........ 53,733 --
Non-controlling interest (note 2(a))........................ -- --
---------- ----------
218,196 660,661
---------- ----------
Commitments (note 10)
SHAREHOLDERS' EQUITY
Capital stock (note 6)
Par value $0.001, 50,000,000 common shares authorized,
5,776,001 common shares issued and outstanding at June 30,
1999 (June 30, 1998 -- 5,579,501 common shares)........... 5,767 5,580
Additional paid-in capital.................................. 6,240,868 4,944,098
Stock purchase warrants (notes 6 and 7)..................... 928,310 --
Subscriptions for common shares receivable (note 4)......... (208,109) (28,120)
Accumulated deficit......................................... (6,098,165) (5,021,907)
Other accumulated comprehensive losses...................... (117,066) (108,071)
---------- ----------
751,605 (208,420)
---------- ----------
969,801 452,241
========== ==========
Nature of operations (note 1)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
APPROVED BY THE BOARD OF DIRECTORS
/S/ JAMES G. STEVENS
- ---------------------------------- DIRECTOR
JAMES G. STEVENS
/S/ PETER PALIJENKO
- ---------------------------------- DIRECTOR
PETER PALIJENKO
F-5
<PAGE> 41
PLANET AMERICA INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
CAPITAL STOCK
---------------------------------------- OTHER
NUMBER OF ACCUMULATED
COMMON ADDITIONAL ACCUMULATED COMPREHENSIVE
SHARES PAR AMOUNT PAID-IN CAPITAL DEFICIT LOSSES
--------- ---------- --------------- ----------- -------------
$ $ $ $
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1997......... 5,579,501 5,580 4,834,571 (4,735,888) (89,160)
Net loss......................... -- -- -- (286,019) --
Other comprehensive losses....... -- -- -- -- (18,911)
Research and development
conducted by parent company
(note 4)....................... -- -- 109,527 -- --
--------- ----- --------- ---------- --------
BALANCE AT JUNE 30, 1998......... 5,579,501 5,580 4,944,098 (5,021,907) (108,071)
Net loss......................... -- -- -- (1,076,258) --
Other comprehensive losses....... -- -- -- -- (8,995)
Exercise of stock purchase
warrants (note 7).............. 186,500 187 372,813 -- --
Debt forgiveness (note 4)........ -- -- 667,360 -- --
Research and development
conducted by parent company
(note 4)....................... -- -- 153,510 -- --
Contribution of use of software
by parent company (note 4)..... -- -- 103,087 -- --
--------- ----- --------- ---------- --------
BALANCE AT JUNE 30, 1999......... 5,766,001 5,767 6,240,868 (6,098,165) (117,066)
========= ===== ========= ========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 42
PLANET AMERICA INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
1999 1998
---------- ---------
$ $
<S> <C> <C>
REVENUES
Advertising revenues -- external customers.................. 139,467 124,766
Licence fee revenues -- external customers.................. 7,901 9,252
---------- ---------
147,368 134,018
---------- ---------
OPERATING EXPENSES
Cost of revenues............................................ 251,741 96,848
Product and content development costs (note 4).............. 278,364 153,439
General and administrative.................................. 316,363 150,485
Advertising................................................. 54,597 6,364
Depreciation................................................ 6,561 12,901
---------- ---------
907,626 420,037
---------- ---------
Loss before the undernoted.................................. (760,258) (286,019)
Deferred stock issue costs written off (note 6)............. 316,000 --
---------- ---------
Loss for the year........................................... (1,076,258) (286,019)
========== =========
Basic and fully diluted loss per share (note 2(k)).......... (0.19) (0.05)
========== =========
Shares used in computing loss per share..................... 5,726,059 5,579,501
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 43
PLANET AMERICA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
1999 1998
---------- --------
$ $
<S> <C> <C>
Loss for the year........................................... (1,076,258) (286,019)
Other comprehensive income (losses)
Foreign exchange translation differences (note 2(l))........ (8,995) (18,911)
---------- --------
Total comprehensive loss for the year....................... (1,085,253) (304,930)
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 44
PLANET AMERICA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
1999 1998
---------- --------
$ $
<S> <C> <C>
CASH PROVIDED BY (USED IN)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... (1,076,258) (286,019)
Adjustments to reconcile loss to net cash used in operating
activities
Depreciation.............................................. 6,561 12,901
Deferred stock issue costs written off.................... 316,000 --
Contribution of use of software by parent company (note
4)..................................................... 103,087 --
Research and development conducted by parent company (note
4)..................................................... 153,510 109,527
Foreign currency translation differences.................. (8,995) (18,030)
Changes in operating assets and liabilities
Accounts receivable.................................... 27,073 65,975
Accounts payable and accrued liabilities............... 45,430 (12,175)
Other assets........................................... 26,610 --
Advances to related parties............................... 30,229 712
Advances from related parties............................. 125,902 148,771
---------- --------
NET CASH USED IN OPERATING ACTIVITIES....................... (250,851) 21,662
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.................. -- (15,818)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock.................. 193,014 --
Advance proceeds from sale of future revenue................ 53,733 --
---------- --------
246,747 --
---------- --------
NET CASH INFLOW (OUTFLOW) DURING THE YEAR................... (4,104) 5,844
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR.............. 7,348 1,504
---------- --------
CASH AND CASH EQUIVALENTS -- END OF YEAR.................... 3,244 7,348
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE> 45
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(expressed in U.S. dollars)
1 NATURE OF OPERATIONS
The company is engaged in the marketing, sale and development in North
America of shared electronic platform technology (e-Property Technology) which
is used to establish private community-based or geographically-based local area
Internet websites called Local Area Webs (LAWs). In addition, a subsidiary
company, Planet Newspapers Inc., is engaged in the marketing, selling and
development of a monthly community-based magazine in Canada called "The Month
Ahead -- Your Community Internet Guide." The company's principal sources of past
and future revenues include: advertising, service revenues, retailing revenues,
subscription revenues, branding revenues, sponsorships and e-business
transaction fee revenues.
The company has sustained losses and negative cash flows from operations
since its inception and expects these conditions to continue for the immediate
future. As of June 30, 1999, the company had an accumulated deficit of
$6,098,165. The implementation of the company's business plan is dependent on
obtaining additional financing through public or private sources, strategic
relationships and other arrangements. The company's current cash resources and
anticipated cash flows from operating activities are not expected to be
sufficient to meet its anticipated need for working capital, and accordingly
substantial doubt exists over the company's ability to continue as a going
concern. The company has entered into various agreements with Swartz Private
Equity LLC to secure equity financing which are described in note 6, and is
currently receiving support from its majority stockholder to provide additional
funds, as needed, to cover its working capital needs until the equity financing
can be completed.
Since the majority of the company's future products and services relate to
providing Internet-related information, and facilitating e-commerce and
e-business services to community-based associations and organizations and
businesses located in those communities, its success is dependent on the
continued growth of the Internet, e-commerce and e-business, and the successful
implementation of its business plan.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of consolidation
The consolidated financial statements include the accounts of the company
and its subsidiaries. Controlling interests in limited partnerships are treated
as subsidiaries and consolidated. Intercompany balances and transactions are
eliminated on consolidation. No amounts have been recorded in the financial
statements for non-controlling interests in the limited partnerships because, as
of June 30, 1999 and 1998, the partnerships' net worth were $nil.
b) Revenue recognition
The company has generated its revenues from two primary sources: the sale
of advertising on its Local Area Web sites and in its local newspaper, The Month
Ahead; and e-business agreements.
i) ADVERTISING REVENUES
Advertising revenue is recognized rateably over the period the
advertising is displayed, provided that no significant company obligations
remain and collection of the resulting receivable is reasonably assured.
F-10
<PAGE> 46
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ii) E-BUSINESS (INCLUDING E-COMMERCE) REVENUES
E-business agreements provide for revenue sharing in the form of
transaction fees from sales made by business partners which are recognized
as revenue in the period that the underlying sales are made by the business
partners. No significant e-business revenues have been generated to date.
c) Product and content development costs
Product and content development costs consist principally of payroll and
related expenses for LAW site development, editorial and systems operations
personnel and consultants, systems infrastructure and costs of acquired content.
All costs associated with the development of products and content on the
company's LAW sites are expensed as incurred.
d) Advertising costs
Advertising costs are recorded as expenses the first time an advertisement
appears. All other advertising costs are expensed as incurred. The company does
not incur any direct-response advertising costs.
e) Foreign currency translation
The functional currency of the company's operations is the Canadian dollar.
Translation gains and losses arising from transactions denominated in a currency
other than the functional currency of the entity involved, which to date have
been insignificant, are included in the consolidated statements of operations.
Assets and liabilities of the operations are translated into the reporting
currency, the U.S. dollar, at year-end exchange rates, and revenues and expenses
are translated at average rates prevailing during the year. Translation
adjustments are included in other comprehensive income, a separate component of
stockholders' equity. To date, the company has not entered into foreign currency
exchange contracts or other such derivative instruments.
f) Income taxes
The company records income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and the tax effect of net operating loss carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
g) Cash and cash equivalents
The company considers all highly liquid investments purchased with original
or remaining maturities of three months or less to be cash equivalents.
h) Financial instruments
The recorded amounts of financial instruments such as cash and cash
equivalents, accounts and notes receivable, accounts payable and accrued
liabilities and notes payable approximate their fair values due to their short
maturities.
F-11
<PAGE> 47
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
i) Property, plant and equipment
Depreciation of computer equipment and software is provided for by the
straight-line method over their estimated useful lives of three years.
Depreciation of furniture, fixtures and equipment is provided for by the
declining balance method at a rate of 20% per annum. Maintenance and repair
expenditures are charged to appropriate expense accounts in the period incurred;
replacements, renewals and betterments are capitalized. Upon the sale or other
disposition of property, the cost and accumulated depreciation of such
properties are eliminated from the consolidated financial statements and the
gains or losses thereon are reflected in the results of operations.
j) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
k) Per share amounts
The company calculates per share amounts in accordance with the provisions
of Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings
per Share." SFAS 128 requires the presentation of basic loss per share and
diluted loss per share for all periods presented. As the company has been in a
net loss position for the years ended July 31, 1999 and 1998, common stock
equivalents were excluded from the diluted loss per share calculation as they
would be antidilutive.
l) Comprehensive income (loss)
As of July 1, 1998, the company adopted SFAS No. 130, Reporting
Comprehensive Income, which establishes standards for the reporting and display
of comprehensive income (loss) and its components in the financial statements.
The only items of comprehensive income (loss) that the company currently reports
are unrealized gains (losses) on foreign currency translation adjustments, which
have been presented gross without recognition of any future tax effects.
m) Deferred financing costs
Deferred financing costs are amortized on a straight-line basis over the
term of the related source of financing.
n) Recently issued accounting pronouncements
In March 1998, the Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) 98-1, "Accounting for the Costs for Computer
Software Developed or Obtained for Internal Use". This SOP provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. SOP 98-1 identifies the characteristics of internal-use software and
provides examples to assist in determining when computer software is for
internal use and whether it should be expensed or capitalized. The SOP is
effective for financial statements for fiscal years beginning after December 15,
1998. Management believes that the company currently complies with the
provisions of this standard and, therefore, believes that the adoption of this
standard will not have a significant impact on the company's business, financial
condition and results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement
No.133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities", which requires that all derivative
F-12
<PAGE> 48
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. For fair-
value hedge transactions in which the company is hedging changes in an asset's,
liability's or firm commitment's fair value, changes in the fair value of the
derivative instrument will generally offset in the income statement by changes
in the hedged item's fair value. For cash flow hedge transactions, changes in
the fair value of the derivative instrument will be reported in comprehensive
income. The gains and losses on the derivative instrument that are reported in
other comprehensive income will be reclassified as earnings in the periods in
which earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognized in current period
earnings. The company currently expects to adopt SFAS 133 for the year ending
June 30, 2000. Management has determined there will be no impact on its results
of operations or financial position resulting from the adoption of SFAS 133
because the company currently does not hold derivative instruments.
3 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
1999 1998
------ ------
$ $
<S> <C> <C>
Furniture, fixtures and computer equipment.................. 23,769 23,769
Less: Accumulated depreciation.............................. 19,462 12,901
------ ------
4,307 10,868
====== ======
</TABLE>
4 RELATED PARTY TRANSACTIONS
The company has entered into an agreement for the sale of future revenue
from one of its LAW sites as described in note 8 to the financial statements.
The company purchased the rights to the Niagara LAW site in 1998 from its
parent company for $30,113 in exchange for debt. The amount payable is included
in amounts due to related parties. The amounts recorded on acquisition
represented the carrying amounts in the financial statements of its parent.
Accordingly, no asset was established on the balance sheet of the company and
the purchase price was charged directly to the accumulated deficit at the date
of acquisition.
Amounts due to and from related parties are unsecured, non-interest bearing
and have no specific terms of repayment. The related companies have certain
shareholders, officers, or directors in common with the company.
During fiscal 1999, a company controlled by the majority shareholder of the
company's ultimate parent, Georgian Bancorp Inc., forgave a portion of a debt
payable by Planet Newspapers Inc. The amount forgiven was CAN$332,420 and has
been included in additional paid-in capital.
During fiscal 1999, the company's parent, Planet Today Inc., forgave a
portion of debt payable by the company. The amount forgiven was CAN$650,000 and
has been included in additional paid-in capital.
Included in notes receivable at June 30, 1999 are amounts totalling
CAN$200,000 that are due from a number of the directors and officers of the
company. The notes arose from the agreement described in note 8 to these
financial statements.
Included in common share subscription receivables are $205,000
(1998 -- $25,000) that are due from a company that is controlled by the majority
shareholder of the company's ultimate parent company,
F-13
<PAGE> 49
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Georgian Bancorp Inc. Share subscription receivables amounting to $2,000 are
guaranteed by a company with directors in common with the company.
The company received certain legal and other services from a law firm, a
partner of which is the Chairman of the company, for a cash consideration of
approximately $nil (1998 -- $12,000).
The company acquired an equity interest in an entity from a related party
as disclosed in note 5 to the financial statements.
The company's parent, Planet Today Inc., contributed the use of certain
proprietary software for use in the development of the LAW sites. Amortization
on the software recorded by Planet Today Inc. for the year ended June 30, 1999
has been included in cost of revenues and additional paid-in capital.
The company's parent, Planet Today Inc., has conducted research and
development activities in connection with the LAW sites on behalf of the
company. The related costs of these activities amounted to $153,510 and $109,527
in fiscal 1999 and 1998 respectively, and have been included in product and
content development costs and additional paid-in capital.
5 ACQUISITIONS
Planet Newspapers Inc.
On July 2, 1998, the company acquired two common shares of Planet
Newspapers Inc. from the majority shareholder of its ultimate parent company,
Georgian Bancorp Inc. for cash consideration of $2, representing a 100%
interest. Planet Newspapers Inc. is engaged in the production and distribution
of a local community newspaper entitled "The Month Ahead" and generates its
revenue from advertisements placed in the newspaper. In accordance with
Accounting Interpretation No. 39 of APB Opinion No. 16 and Emerging Issues
Taskforce Abstract No. 90-5, the acquisition has been accounted for in a manner
similar to a pooling of interests, since it represents a rearrangement of the
legal ownership of equity interests between two entities under common control.
Separate results of the separate entities for the current fiscal year in the
pre-combination period have not been presented as the amounts were insignificant
due to the timing of the combination. No adjustments were required to conform to
the accounting policies of the separate entities.
The assets, liabilities and stockholders' equity of Planet Newspapers Inc.
have been combined with the company's recorded values. The consolidated
financial statements reflect the restatement of all periods presented to include
the financial statements of the merged entities accounted for under the pooling
of interests method of accounting. The historical results of the pooled entities
reflect each of their actual operating cost structures and, as a result, do not
necessarily reflect the cost structure of the newly combined entity. The
historical results do not purport to be indicative of future results. There has
been no change in the basis of presentation of assets and liabilities acquired,
and the results of operations acquired have been combined with the company's own
results for all periods presented.
6 CAPITAL STOCK
Stock issued to promoters
On May 29, 1997, the company issued 400,000 common shares in exchange for
consulting services and assistance in taking the company public as set out in a
consulting services agreement. In accordance with the provisions of SFAS 123,
Accounting for Stock Based Compensation, a value of $0.79 was ascribed to the
common shares issued based on the fair value of the shares issued. The amount
was initially recorded as a prepaid charge, to be matched with the proceeds of a
future public offering. On termination of the agreement, a charge of $316,000
was reflected in the income statement for the year ended June 30, 1999.
F-14
<PAGE> 50
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Private equity line
On May 24, 1999, the company entered into agreements to secure a private
equity line with an investment bank. The company has secured an irrevocable
subscription agreement under which the investment bank must purchase common
stock up to a value of $25 million, expandable to $35 million by mutual
agreement of the company and the investment bank.
Subject to the company securing an effective registration statement, and
for a 36-month term from the initial subscription date, the company has the
right, subject to certain limitations described below, to put common stock to
the investment bank, which in turn will sell the common stock under a qualified
prospectus.
The limitations associated with the put options are:
- the investment bank will buy stock at a price equivalent to 91% of the
low trade price of Planet America Inc.'s stock over the six trading days
prior to the purchase date, subject to a floor price set by the company;
- the dollar value of each put may not exceed the lower of $2 million and
15% of the dollar value of trading volume in the company's stock over the
20 business days prior to the purchase date;
- for each put, the investment bank is entitled to receive share purchase
warrants equivalent to 10% of the number of shares issued in the put,
exercisable at a price equivalent to 110% of weighted average of the
company's stock price over the five trading days prior to the put date,
and with a five-year term;
- the company's stock must be trading on the New York Stock Exchange,
American Stock Exchange or on NASDAQ, and 30 days must have elapsed since
the exercise of the last put option;
- on an annual basis, the company is required to pay a non-usage fee on the
private equity line equal to 10% of the equity value issued below $2
million.
On execution of the private equity line agreements, the investment bank was
granted 490,000 stock purchase warrants (the "commitment warrants") on terms
described in note 7 to these consolidated financial statements. In accordance
with the provisions of SFAS 123, Accounting for Stock Based Compensation, a
value of $1.778 was ascribed to each of the commitment warrants based on their
fair values as determined using the Black Scholes Model. The principal
assumptions used were: a five-year expected term, 90% volatility, a risk-free
interest rate of 5.44% and an expected dividend yield of 0%. This commitment fee
will be amortized on a straight-line basis over the term of the private equity
line.
In the event that the investment bank introduces a strategic partner to the
company, it is entitled to be paid the equivalent to 7% of the dollar amount or
consideration value placed by the partner into the company, plus stock purchase
warrants equivalent to 7% of that dollar amount or consideration value, divided
by the market value of the company's stock based upon a formula. The fee may be
paid in cash or in common stock at the company's discretion.
F-15
<PAGE> 51
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7 STOCK PURCHASE WARRANTS
<TABLE>
<CAPTION>
SERIES A SERIES B COMMITMENT
WARRANTS WARRANTS WARRANTS
-------- -------- ----------
NUMBER NUMBER NUMBER
-------- -------- ----------
<S> <C> <C> <C>
BALANCE AT JULY 1, 1997..................................... 179,500 179,500 --
Exercised................................................... (102,500) (84,000) --
-------- ------- -------
BALANCE AT JUNE 30, 1998.................................... 77,000 95,500 --
Granted..................................................... -- -- 490,000
Expired..................................................... (77,000) (95,500) --
-------- ------- -------
BALANCE AT JUNE 30, 1999.................................... -- -- 490,000
======== ======= =======
</TABLE>
The commitment warrants expire on May 29, 2004, and each is exercisable
into one common share of the company at a price of $2.76 per warrant.
8 SALE OF FUTURE REVENUE
During the year, the company entered into an agreement with a limited
partnership, a majority of whose partners are directors and officers of the
company, under which it has granted the partnership the exclusive rights to use
its e.community software to develop and exploit a LAW site in the Newmarket
geographic area in Ontario, Canada. The agreement has an initial term of 10
years, and the limited partnership has the right to extend for two additional
five-year terms for no additional consideration. Consideration received totalled
CAN$337,500, and comprised cash of CAN$70,000 and the balance in notes payable
by the partners of the limited partnership.
The notes accrue interest at a non-compounded rate of 6.5% per annum and
are repayable out of net revenues earned by the partnership at a rate of 80% of
net revenues in each future accounting period, and in any event by December 31,
2003. The partnership also has the ability to acquire similar rights in three
additional geographic areas for the same consideration.
The company's immediate parent entered into a management services agreement
dated December 2, 1998. Under the agreement, Planet Today Inc. has agreed to
take on the role of manager of the LAW site, with the following
responsibilities:
- provision of product development and operational support as required;
- provision of office facilities and administrative support;
- provision of financial reports, budgets and other information as
required, including an analysis of variances between actual and budgeted
results on an annual basis; and
- make available Planet Today Inc. personnel as required, with
reimbursement for their related payroll costs based on time spent.
Planet Today Inc. is entitled to a management fee of $5,000 per month, as
well as ongoing fees on an annual basis equal to 20% of net revenues earned by
the partnership over the period to June 30, 2004, and 50% of net revenues
thereafter.
The cash received by the company has been accounted for in accordance with
the provisions of Emerging Issues Task Force Abstract No. 88-18 "Sales of Future
Revenue". Accordingly, the cash received has been recorded as debt and no
amounts have been recorded for the outstanding notes receivable.
F-16
<PAGE> 52
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9 INCOME TAXES
The company did not record any provision for federal or state income taxes
through June 30, 1999. The actual tax expense for 1999 and 1998 differs from
"expected" tax expense (computed by applying the statutory U.S. federal
corporate tax rate of 34% to earnings before income taxes) as follows:
<TABLE>
<CAPTION>
1999 1998
-------- -------
$ $
<S> <C> <C>
Computed "expected" tax benefit............................. 365,928 97,246
Non-deductible expenses..................................... (138,481) (1,441)
Tax effect of debt forgiveness in subsidiary company (note
4)........................................................ (77,118) --
Impact of tax rates on foreign jurisdictions................ (23,817) (2,066)
Other....................................................... (1,253) (8,020)
Change in valuation allowance for deferred taxes allocated
to income tax expense..................................... (125,259) (85,719)
-------- -------
-- --
======== =======
</TABLE>
At June 30, 1999 and 1998 deferred income tax assets result from temporary
differences in the recognition of income and expenses for tax and financial
reporting purposes. The sources and tax effects of these temporary differences
are presented below:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
$ $
<S> <C> <C>
Deferred tax assets
United States
Tax basis of developed technology...................... 117,231 398,587
Net operating losses................................... 1,149,827 717,885
Other.................................................. 73,466 (1,276)
---------- ----------
1,340,524 1,115,196
Canadian
Net operating losses................................... 77,226 177,295
---------- ----------
Total gross deferred tax assets............................. 1,417,750 1,292,491
Less valuation allowance.................................... (1,417,750) (1,292,491)
---------- ----------
Net deferred income tax assets.............................. -- --
========== ==========
</TABLE>
In assessing the realizability of deferred tax assets, the company has
considered whether it is more likely than not that some or all of the deferred
tax asset will not be realized. The company believes that sufficient uncertainty
exists regarding the realizability of the deferred tax assets such that
valuation allowances of $1,417,750 and $1,292,491 for June 30, 1999 and 1998
respectively, have been established for deferred tax assets.
At June 30, 1999, the company had approximately $3,554,918 of United States
federal and Canadian net operating loss carry-forwards which will begin to
expire in 2012 for United States federal purposes and 2001 for Canadian
purposes.
10 COMMITMENTS
The company is obligated to pay to Smart 1994 a royalty based on a
percentage of subscription and service revenues less certain direct expenses
generated from sales involving the Smart Community software, calculated using a
participation rate of 8%.
F-17
<PAGE> 53
PLANET AMERICA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The company leases its facilities and certain other equipment under
operating lease agreements expiring through 2003. Future non-cancellable minimum
payments as of June 30, 1999 under these leases for each fiscal year-end are as
follows:
<TABLE>
<CAPTION>
$
------
<S> <C>
2000........................................................ 26,519
2001........................................................ 25,058
2002........................................................ 17,755
2003........................................................ 10,357
</TABLE>
Rent expense for the year under non-cancellable operating leases was
$37,575 (1998 -- $15,196).
11 SEGMENT INFORMATION
The company has adopted statement of Financial Accounting Standard No. 131,
disclosures about segments of an enterprise and related information, for its
1999 financial statements. The Company's operations are currently managed on an
industry basis, and its reportable segments comprise the LAW Internet business
and the Month Ahead newspaper. The company's Internet business is currently in
the development stage and the revenues generated to date relate primarily to
advertising on its LAW sites. Revenues generated from the Month Ahead newspaper
relate to advertisements placed in the newspaper. The measure of profit/loss
reviewed by the chief operating decision maker is income before income taxes,
and accordingly the segment financial information is presented below on this
basis. To date, all of the company revenues have arisen in Canada, and all of
its long lived assets are located in Canada.
<TABLE>
<CAPTION>
1999 1998
---------- --------
$ $
<S> <C> <C>
Revenues
LAW sites................................................. 7,901 9,252
The Month Ahead........................................... 139,467 124,766
---------- --------
147,368 134,018
---------- --------
Depreciation
LAW sites................................................. 6,561 12,901
---------- --------
Unusual items
LAW sites................................................. 316,000 -
---------- --------
Segment income (loss)
LAW sites................................................. (1,069,851) (282,481)
The Month Ahead........................................... (6,407) (3,538)
---------- --------
Enterprise loss before taxes................................ (1,076,258) (286,019)
---------- --------
Identifiable assets
LAW sites................................................. 943,187 401,160
The Month Ahead........................................... 26,614 51,081
---------- --------
Enterprise identifiable assets.............................. 969,801 452,241
---------- --------
Capital expenditures
LAW sites................................................. -- 15,818
---------- --------
</TABLE>
F-18
<PAGE> 54
PLANET AMERICA INC.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(expressed in U.S. dollars)
(unaudited)
F-19
<PAGE> 55
PLANET AMERICA INC.
CONSOLIDATED BALANCE SHEETS
(expressed in U.S. dollars)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
AS AT
--------------------------
DECEMBER 31, JUNE 30,
1999 1999
------------ -----------
$ $
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................... 1,613 3,244
Accounts receivable (net of provisions of $3,129;
1998-$nil)................................................ 62,350 29,525
Due from parent company..................................... 188,985 4,415
----------- -----------
252,948 37,184
Deferred website development costs.......................... 41,601 --
Property, plant and equipment............................... 3,954 4,307
Deferred financing costs.................................... 852,206 928,310
----------- -----------
1,150,709 969,801
=========== ===========
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................... 94,603 88,507
Due to parent company....................................... 116,897 75,956
----------- -----------
211,500 164,463
Advances convertible into common shares..................... 49,427 --
Advance proceeds from sale of future revenue................ 54,808 53,733
Non-controlling interest.................................... -- --
----------- -----------
315,735 218,196
----------- -----------
SHAREHOLDERS' EQUITY
Capital stock
Par value $0.001, 50,000,000 common shares authorized,
5,866,001 common shares issued and outstanding at December
31, 1999.................................................. 5,867 5,767
Additional paid-in capital.................................. 6,510,464 6,240,868
Stock purchase warrants..................................... 928,310 928,310
Subscription for common shares receivable................... (28,657) (208,109)
Accumulated deficit......................................... (6,477,827) (6,098,165)
Other accumulated comprehensive losses...................... (103,183) (117,066)
----------- -----------
834,974 751,605
----------- -----------
1,150,709 969,801
=========== ===========
Nature of Operations (note 1)
</TABLE>
The accompanying notes form an integral part of these unaudited interim
financial statements
F-20
<PAGE> 56
PLANET AMERICA INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(expressed in U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
CAPITAL STOCK
---------------------------------------- OTHER
NUMBER OF ACCUMULATED
COMMON ADDITIONAL ACCUMULATED COMPREHENSIVE
SHARES PAR AMOUNT PAID-IN CAPITAL DEFICIT LOSSES
--------- ---------- --------------- ----------- -------------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1999......... 5,766,001 5,767 6,240,868 (6,098,165) (117,066)
Net loss......................... -- -- -- (379,662) --
Issuance of capital stock........ 100,000 100 199,900 -- --
Other comprehensive gains........ -- -- -- -- 13,883
Contribution of use of software
by parent company.............. -- -- 69,696 -- --
--------- ----- --------- ---------- --------
BALANCE AT DECEMBER 31, 1999..... 5,866,001 5,867 6,510,464 (6,477,827) (103,183)
========= ===== ========= ========== ========
</TABLE>
The accompanying notes form an integral part of these unaudited interim
financial statements.
F-21
<PAGE> 57
PLANET AMERICA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(expressed in U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
$ $
<S> <C> <C>
REVENUE
Advertising revenue -- external customers................... 107,898 81,548
License revenue -- external customers....................... -- 5,000
-------- --------
107,898 86,548
-------- --------
OPERATING EXPENSES
Cost of revenues............................................ 155,900 115,330
Content development costs................................... 140,147 138,320
General and administrative.................................. 81,209 36,793
Advertising................................................. 17,495 25,632
Amortization of deferred financing costs.................... 92,380 --
Depreciation................................................ 429 3,280
-------- --------
487,560 319,355
-------- --------
Loss for the period before the undernoted................... (379,662) (232,807)
Deferred stock issue costs written off...................... -- 316,000
-------- --------
Loss for the period......................................... (379,662) (548,807)
======== ========
Basic and fully diluted loss per share...................... (0.07) (0.10)
======== ========
Shares used in computing loss per share..................... 5,772,558 5,664,244
======== ========
</TABLE>
The accompanying notes form an integral part of these unaudited interim
financial statements.
F-22
<PAGE> 58
PLANET AMERICA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(expressed in U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
$ $
<S> <C> <C>
Loss for the period......................................... (379,662) (548,807)
Other comprehensive income
Foreign exchange translation differences.................. 13,883 5,322
-------- --------
Total comprehensive loss for the period..................... (365,779) (554,129)
======== ========
</TABLE>
The accompanying notes form an integral part of these unaudited interim
financial statements.
F-23
<PAGE> 59
PLANET AMERICA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(expressed in U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
$ $
<S> <C> <C>
CASH PROVIDED BY (USED IN)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period..................................... (379,662) (548,807)
Adjustment to reconcile loss to net cash used in operating
activities
Depreciation of property, plant and equipment............. 429 3,280
Foreign currency translation differences.................. (1,394) 5,322
Deferred stock issue costs write off...................... -- 316,000
Advances from parent companies............................ 40,941 30,229
Accounts receivable....................................... (32,825) (13,174)
Accounts payable and accrued liabilities.................. 6,096 548
Amortization of deferred financing costs.................. 92,380 --
Advances from parent companies............................ (184,570) (230,678)
Contribution of use of software by parent................. 69,696 51,544
Other assets.............................................. -- 20,385
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES......... (388,909) (365,351)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment............................... -- --
Deferred website development costs.......................... (41,601) --
-------- --------
(41,601) --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock.................. 200,000 372,813
Advances convertible into common shares..................... 49,427 --
Collection of common share subscriptions receivable......... 179,452 --
-------- --------
428,879 372,813
-------- --------
NET CASH (OUTFLOWS) INFLOWS DURING THE PERIOD............... (1,631) 7,462
CASH -- BEGINNING OF PERIOD................................. 3,244 7,348
-------- --------
CASH -- END OF PERIOD....................................... 1,613 14,810
======== ========
</TABLE>
The accompanying notes form an integral part of these unaudited interim
financial statements.
F-24
<PAGE> 60
PLANET AMERICA INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(expressed in U.S. dollars)
(unaudited)
1 NATURE OF OPERATIONS
The company is engaged in the marketing sale and development in North
America of shared electronic platform technology (e-Property Technology) which
is used to establish private community-based or geographically-based local area
Internet websites called Local Area Webs (LAWs). In addition, a subsidiary
company, Planet Newspapers Inc., is engaged in the marketing, selling and
development of a monthly community-based magazine in Canada called "The Month
Ahead -- Your Community Internet Guide." The company's principal source of past
and future revenues included: advertising, service revenue, retailing revenues,
subscription revenues, branding revenues, sponsorships and e-business
transaction fee revenues.
The company has sustained losses and negative cash flows from operations
since its inception and expects these conditions to continue for the immediate
future. As of December 31, 1999, the company has an accumulated deficit of
$6,477,827. The implementation of the company's business plan is dependent on
obtaining additional financing through public or private sources, strategic
relationships and other arrangements. The company's current cash resources and
anticipated cash flows from operating activities are not expected to be
sufficient to meet its anticipated need for working capital, and accordingly
substantial doubt exists over the company's ability to continue as a going
concern. The company has entered into various agreements with Swartz Private
Equity LLC to secure equity financing which are described in note 6 to the
consolidated financial statements for the fiscal year ended June 30, 1999, and
is currently receiving support from its majority stockholder to provided
additional funds, as needed, to cover its working capital needs until the equity
financing can be completed.
Since the majority of the company's future products and services relate to
providing Internet-related information, and facilitating e-commerce and
e-business services to community-based associations and organizations and
businesses located in those communities, its success is dependent on the
continued growth of the Internet, e-commerce and e-business, and successful
implementation of its business plan.
2 BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements,
which include the accounts of Planet America Inc. (the "Company"), its wholly
owned subsidiary, and controlling interests in limited partnerships, have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q-SB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting only of normal recurring accruals
considered necessary for fair presentation, have been included in the
accompanying unaudited financial statements. All intercompany transactions and
balances are eliminated on consideration.
Operating results for the six months ended December 31, 1999 are not
necessarily indicative of the results that may be expected for the full year
ending June 30, 2000. For further information, refer to the consolidated
financial statements and notes thereto, for the fiscal year ended June 30, 1999.
The Company has adopted Statement of Position ("SOP") 98-1, Accounting for
the Costs of Computer Software Development or obtained for Internal Use, for its
2000 fiscal year. In accordance with the provisions of the SOP, all costs
incurred in developing the Company's LAW sites are capitalized and amortized
over their estimated useful economic lives of 5 years. Costs associated with the
maintenance of content on the LAW sites continue to be expensed as incurred. In
accordance with the SOP, website
F-25
<PAGE> 61
PLANET AMERICA INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
development costs which were previously expensed as incurred have not been
adjusted to the amounts that would have been capitalized had this SOP been in
effect when those costs were incurred.
3. SEGMENT INFORMATION
Information in respect of the Company's reportable business segments, which
is presented on the same basis as the annual financial statements for the year
ended June 30, 1999, is set out below. To date, all of the Company's revenues
have arisen in Canada, and all of its identifiable assets are located in Canada.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31 DECEMBER 31
1999 1998
----------- -----------
$ $
<S> <C> <C>
Revenues
LAW sites................................................. -- 5,000
The Month Ahead........................................... 107,898 81,548
---------- ---------
107,898 86,548
---------- ---------
Depreciation
LAW sites................................................. 429 3,280
---------- ---------
Segment (loss) income
LAW sites................................................. (362,107) (557,475)
The Month Ahead........................................... (17,555) 8,668
---------- ---------
Enterprise loss for the period.............................. (379,662) (548,807)
---------- ---------
Capital expenditures
LAW sites................................................. 41,601 --
---------- ---------
</TABLE>
<TABLE>
<CAPTION>
AS AT AS AT
DECEMBER 31 JUNE 30
1999 1999
----------- -------
<S> <C> <C>
Identifiable assets
LAW sites................................................. 1,094,180 888,054
The Month Ahead........................................... 56,529 81,747
--------- -------
Enterprise identifiable assets.............................. 1,150,709 969,801
--------- -------
</TABLE>
F-26
<PAGE> 62
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
---------------------
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation, or an amendment thereto validly
approved by stockholders, to eliminate or limit personal liability of members of
its Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been a
breach of the duty of loyalty, failure to act in good faith, intentional
misconduct or a knowing violation of a law, the payment of a dividend or
approval of a stock repurchase which is deemed illegal or an improper personal
benefit is obtained. Articles Tenth and Eleventh of the Company's Restated
Certificate of Incorporation include the following language limiting the
liability of, and providing indemnification for, directors:
A director of the Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
any improper personal benefit.
The Corporation shall, to the fullest extent permitted by the provisions of
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all
expenses, liabilities or other matters referred to in or covered by said
section, and rights to which those indemnified may be entitled under any By-Law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent, and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Additionally, the Company's By-Laws provide that the Company will indemnify
each of its directors and officers, whether or not then in office, with respect
to expenses actually and reasonably incurred by such person in any threatened,
pending or completed actions or proceedings and appeals, whether civil,
criminal, administrative or investigative, in accordance with and to the fullest
extent permitted by the General Corporation Law of the State of Delaware or
other applicable law, as such law now exists or may hereafter be adopted or
amended.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby (items
marked with an asterisk (*) represent estimated expenses):
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ [ ]
Legal Fees and Expenses..................................... [ ]*
Blue Sky Fees (including counsel fees)...................... [ ]*
Accounting Fees and Expenses................................ [ ]*
Transfer Agent and Registrar Fees........................... [ ]*
Printing and Engraving Expenses............................. [ ]*
Miscellaneous............................................... [ ]*
---------
Total............................................. [ ]*
=========
</TABLE>
- ---------------
* Estimated amounts.
II-1
<PAGE> 63
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below in chronological order is information regarding the number
of shares of common stock sold by the Company since inception, the consideration
received by the Company for such shares, and information relating to the section
of the Securities Act, or rule of the Commission under which exemption from
registration was claimed. None of these securities was registered under the
Securities Act. No sales of securities involved the use of an underwriter and no
commissions were paid in connection with the sale of any securities.
In April and May 1997, 179,500 shares valued at $1.00 per share, were
issued without registration to two individuals for consulting services, in
reliance upon the exemplar afforded by Rule 504 and/or Section 4(2) of the Act.
On May 29, 1997, 400,000 shares valued at $0.79 per share, were issued
without registration to an the aggregate without registration to an institution
and an individual for consulting services valued at $0.79 per share, in reliance
upon the exemption afforded by Rule 504 and/or Section 4(2) of the Act. The
institution and the individual are Selling Security Holders.
In August and September 1998, 186,500 shares were issued without
registration for $2.00 per share to eighteen foreign investors, in reliance upon
the exemption afforded by rule 903 of Regulation S and/or Section 4(2) of the
Act. The eighteen investors are Selling Security Holders.
On December 30, 1999, 124,714 shares were issued without registration to
five individuals (including two sets of spouses) for $2.00 per share, in
reliance upon the exemption afforded by Rule 903 of Regulation S and/or Section
4(2) of the Act. The five investors are Selling Security Holders.
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
3.1 -- Restated Certificate of Incorporation of the Company
3.2 -- By-Laws of the Company
**5.1 -- Opinion of Mays & Valentine, L.L.P.
10.1 -- Investment Agreement by and between the Company and
Swartz, dated June 25, 1999.
10.2 -- Partnership Agreement
10.3 -- Management Services Agreement
10.4 -- Technology Access License and Support Services Agreement
*10.5 -- Agreement made January 25, 2000 between Telemedia Radio,
Inc. and Planet Today, Inc.
*10.6 -- 1stUp.com Corporation Co-Branding Services Agreement
**23.1 -- Consent of Mays & Valentine, L.L.P. (included in Exhibit
5.1)
23.2 -- Consent of PricewaterhouseCoopers LLP, Chartered
Accountants
24.1 -- Power of Attorney (included under Signatures)
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Confidential Treatment Requested, in part.
** To be filed by amendment.
II-2
<PAGE> 64
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) to include any additional or changed material information on
the plan of distribution.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be treated as a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or paid
by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 65
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the Province of
Ontario on March 17, 2000.
PLANET AMERICA, INC.
By: /s/ JAMES G. STEVENS
----------------------------------
James G. Stevens
President
II-4
<PAGE> 66
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James G. Stevens or Peter Palijenko, or either of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, for him and in his name, place, and stead, in
any and all capacities, to sign (i) any and all pre- or post-effective
amendments to this Registration Statement, and to file the same with all
exhibits thereto, relating to the offering covered hereby filed pursuant to Rule
462(b) under the Securities Act, with the Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ SINCLAIR M. STEVENS Chairman March 17, 2000
- -----------------------------------------------------
Sinclair M. Stevens
/s/ JAMES G. STEVENS President, Chief Executive March 17, 2000
- ----------------------------------------------------- Officer, Chief Financial
James G. Stevens Officer, And Treasurer
/s/ EMMANUEL CASALINO Vice President of Marketing March 17, 2000
- -----------------------------------------------------
Emmanuel Casalino
/s/ PETER PALIJENKO Vice President Business March 17, 2000
- ----------------------------------------------------- Strategy & Development and
Peter Palijenko Director (Principal
Financial and Accounting
Officer)
/s/ EDWARD E. LOYST Director March 17, 2000
- -----------------------------------------------------
Edward E. Loyst
/s/ THOMAS MORYTO Director March 17, 2000
- -----------------------------------------------------
Thomas Moryto
/s/ NOREEN M. STEVENS Secretary March 17, 2000
- -----------------------------------------------------
Noreen M. Stevens
</TABLE>
II-5
<PAGE> 1
EXHIBIT 3.1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"PLANET AMERICA, INC.", FILED IN THIS OFFICE ON THE FOURTH DAY OF FEBRUARY, A.D.
1997, AT 1:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
EXHIBIT 3.1
[SEAL] /s/ EDWARD J. FREEL
------------------------------------
EDWARD J. FREEL, Secretary of State
2532218 8100 AUTHENTICATION: 8316468
971037690 DATE: 02-05-97
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
PLANET AMERICA, INC.
The original Certificate of Incorporation of Planet America, Inc.
was filed with the Secretary of State of the State of Delaware on August 9,
1995 under the name of The Planet Today Corporation. This Restated Certificate
of Incorporation restates and integrates and further amends the Certificate of
Incorporation in its entirety.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Planet America, Inc.
SECOND: The address, including street, number, city, and
county, of the registered office of the corporation in the State of Delaware is
1013 Centre Road, Wilmington, Delaware 19805, County of New Castle; and the
name of the registered agent of the corporation in the State of Delaware is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is fifty million (50,000,000) shares.
The par value of each of such shares is $.001. All such shares are of one class
and are shares of Common Stock.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized to make,
alter or repeal the By-Laws of the Corporation.
SEVENTH: Elections of directors need not be by written
ballot unless the By-Laws of the Corporation shall so provide.
EIGHTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the statutes)
outside the State of
<PAGE> 3
Delaware at such place or places as may be designated from time to time by the
board of directors or in the By-Laws of the Corporation.
NINTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Restated Certificate of
Amendment, in the manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this reservation.
TENTH: A director of the Corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
General Corporation Law of the State of Delaware, or (iv) for any transaction
from which the director derived any improper personal benefit.
ELEVENTH: The Corporation shall, to the fullest extent
permitted by the provisions of Section 145 of the General Corporation Law of
the State of Delaware, as the same may be amended and supplemented, indemnify
any and all persons whom it shall have power to indemnify under said section
from and against any and all expenses, liabilities or other matters referred to
in or covered by said section, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent, and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
IN WITNESS WHEREOF, the undersigned do execute, file and record this
Restated Certificate of Amendment, and do certify that the facts stated herein
are true.
Dated: , 1997.
----------
PLANET AMERICA, INC.
By: /s/ SINCLAIR M. STEVENS
-------------------------------
Sinclair M. Stevens, President
ATTEST:
By: /s/ BYRON STEVENS
-------------------------------
Byron Stevens, Secretary
2
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
THE PLANET TODAY CORPORATION,
a
Delaware Corporation
<PAGE> 2
Index to By-Laws
Page
----
ARTICLE I - Offices .................................................. 1
Section 1. Registered Office ........................................ 1
Section 2. Other Offices ............................................ 1
ARTICLE II - Meetings of Stockholders ................................. 1
Section 1. Annual Meeting ........................................... 1
Section 2. Special Meetings ......................................... 1
Section 3. Notice and Purpose of Meetings ........................... 1
Section 4. Procedure ................................................ 2
Section 5. List of Stockholders ..................................... 2
Section 6. Quorum ................................................... 2
Section 7. Adjournments ............................................. 2
Section 8. Voting; Proxies .......................................... 3
Section 9- Consent of Stockholders in Lieu of Meeting ............... 3
Section 10. Waiver of Notice ......................................... 3
ARTICLE III - Directors ................................................ 4
Section 1. General Powers ........................................... 4
Section 2. Number and Qualifications ................................ 4
Section 3. Election and Term of Office .............................. 4
Section 4. Resignation .............................................. 4
Section 5. Removal of Directors ..................................... 4
Section 6. Vacancies ................................................ 4
Section 7. First Meeting of Newly Elected Directors ................. 4
Section 8. Regular Meetings of Directors ............................ 5
Section 9. Special Meetings of Directors ............................ 5
Section 10. Notice of Special Meetings ............................... 5
Section 11. Quorum and Action by the Board ........................... 5
Section 12. Procedure ................................................ 6
Section 13. Committees of Directors .................................. 6
Section 14. Compensation of Directors ................................ 6
Section 15. Action Without a Meeting ................................. 6
Section 16. Presence at Meeting by Telephone ......................... 7
Section 17. Waiver of Notice ......................................... 7
<PAGE> 3
Index to By-Laws (continued)
Page
----
ARTICLE IV - Officers .................................................. 7
Section 1. Officers .................................................. 7
Section 2. Term of Office ............................................ 7
Section 3. Removal ................................................... 7
Section 4. Resignation ............................................... 8
Section 5. Vacancies ................................................. 8
Section 6. The Chairman .............................................. 8
Section 7. The Vice Chairmen ......................................... 8
Section 8. The Secretary and Assistant Secretaries ................... 8
Section 9. The Treasurer and Assistant Treasurers .................... 8
Section 10. Officers Holding Two or More Offices ...................... 9
Section 11. Duties of Officers May be Delegated ....................... 9
Section 12. Compensation .............................................. 9
Section 13. Security .................................................. 9
ARTICLE V - Indemnification of Officers and Directors ................. 9
Section 1. Right of Indemnification .................................. 9
Section 2. Indemnification in Partial Liability Situations ........... 9
Section 3. Authorization ............................................. 9
Section 4. Advancement of Expenses ................................... 10
Section 5. Other Rights .............................................. 10
Section 6. Insurance ................................................. 10
ARTICLE VI - Shares and Their Transfer ................................. 11
Section 1. Certificates .............................................. 11
Section 2. Issuance of Certificates .................................. 11
Section 3. More Than One Class of Stock .............................. 11
Section 4. Stock Ledger .............................................. 11
Section 5. Transfer of Shares ........................................ 11
Section 6. Registered Stockholders ................................... 12
Section 7. Regulations ............................................... 12
Section 8. Lost, Stolen and Destroyed Certificates ................... 12
Section 9. Fixing of Record Date ..................................... 12
ii
<PAGE> 4
Index to By-Laws (continued)
Page
----
ARTICLE VII - Finances ................................................. 14
Section 1. Corporate Funds ........................................ 14
Section 2. Fiscal Year ............................................ 14
Section 3. Dividends; Reserves .................................... 14
Section 4. Loans to Employees and Officers ........................ 14
ARTICLE VIII - Corporate Seal ......................................... 15
Section 1. Form of Seal ........................................... 15
Section 2. Use of Seal ............................................ 15
ARTICLE IX - Amendment .............................................. 15
Section 1. Procedure for Amending By-Laws ......................... 15
iii
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BY-LAWS
of
THE PLANET TODAY CORPORATION
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the
corporation shall be in the City of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. The annual meeting of stockholders of the
corporation for the election of directors and for the transaction of other
business shall be held at such time and such place within or without the State
of Delaware as shall be determined by the Board of Directors or the Chairman
and stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Special Meetings. A special meeting of stockholders may be
called by the Board of Directors or the Chairman, and shall be called by the
Chairman, the Secretary or an Assistant Secretary at the request in writing of
a majority of the Board of Directors, or at the request in writing of the
holders of record of a majority of the outstanding shares of the stock of the
corporation entitled to vote at the meeting. Each special meeting of
stockholders shall be held at such time and place within or without the State
of Delaware as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof. Business transacted at any special meeting
of stockholders shall be limited to the purpose or purposes stated in the
notice of the meeting.
Section 3. Notice and Purpose of Meetings. Written notice of each
meeting of stockholders stating the place, date and hour of the meeting and, in
the case of a special
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meeting, the purpose or purposes for which the meeting is called, shall be
given not less than ten (10) nor more than sixty (60) days before the meeting
to each stockholder of record entitled to vote at the meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
first-class postage prepaid, directed to each stockholder at his address as it
appears on the records of the corporation.
Section 4. Procedure. At each meeting of stockholders the order of
business and all other matters of procedure may be determined by the person
presiding at the meeting.
Section 5. List of Stockholders. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares of the stock of the
corporation registered in the name of each stockholder. Such list shall be open
to examination by any stockholder for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. Except as otherwise required by law or the
certificate of incorporation, a quorum at all meetings of stockholders shall
consist of the holders of record of not less than a majority of the outstanding
shares of the stock of the corporation entitled to vote at the meeting, present
in person or represented by proxy, except when the stockholders are required to
vote by class, in which event the holders of record of not less than a majority
of the outstanding shares of the appropriate class shall be present in person
or represented by proxy.
Section 7. Adjournments. The stockholders entitled to vote who are
present in person or represented by proxy at any meeting of stockholders,
whether or nor a quorum shall be present at the meeting, shall have the power
by a majority of the votes cast to adjourn the meeting from time to time
without notice other than announcement at the meeting of the time and place to
which the meeting is adjourned. At any adjourned meeting held without notice at
which a quorum shall be present any business may be transacted that might have
been transacted on the original date of the meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the adjourned meeting.
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Section 8. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder of record shall be entitled at
every meeting of stockholders to one vote for each share of the stock of the
corporation standing in his or her name on the record of stockholders on the
record date fixed for the meeting or, if no record date for the meeting was
fixed, on the date of the meeting. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may act in person or may authorize another person or
persons to act for him or her by proxy, but no proxy shall be voted or acted
upon after three (3) years from its date unless it provides for a longer
period.
Directors elected at any meeting of stockholders shall, except as
otherwise required by law, be elected by a plurality of the votes cast. All
other corporate action to be taken by vote of stockholders shall, except as
otherwise required by law or the certificate of incorporation, be authorized by
a majority of the outstanding shares of the stock of the corporation entitled
to vote thereon. Unless otherwise provided in the certificate of incorporation,
the vote for directors shall be by ballot, but the vote upon any other question
before a meeting of stockholders shall not be by ballot unless required by law
or unless the person presiding at such meeting shall so direct or unless any
stockholder present in person or by proxy and entitled to vote thereon shall so
demand.
Section 9. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the certificate of incorporation, any action required to
be taken at any annual or special meeting of stockholders, or any action
(including, without limitation, adoption, amendment or repeal of by-laws) which
may be taken at any annual or special meeting of stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock of the corporation having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 10. Waiver of Notice. Whenever notice is required by law or
these by-laws to be given to any stockholder, a written waiver thereof, signed
by such stockholder in person or by proxy, whether before or after the time
stated therein, shall be deemed equivalent to notice. The attendance of any
stockholder at a meeting in person or by proxy shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
annual or special meeting of the stockholders need be specified in any written
waiver of notice.
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ARTICLE III
Directors
Section 1. General Powers. The business and affairs of the
corporation shall be managed by or under the direction of its Board of
Directors.
Section 2. Number and Qualifications. The Board of Directors shall
consist of one or more members. The exact number of directors shall be fixed
from time to time by action of the stockholders or by vote of a majority of the
entire Board of Directors.
Section 3. Election and Term of Office. Except as otherwise required
by law or these by-laws, each director shall be elected at the annual meeting
of stockholders of the corporation and shall hold office until the next annual
meeting of stockholders and until his or her successor has been elected and
qualified, or until his or her earlier death, resignation or removal.
Section 4. Resignation. Any director may resign at any time by giving
written notice to the corporation. Such resignation shall take effect at the
time specified therein; unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. Removal of Directors. Except as otherwise provided by law,
any director or the entire Board of Directors may be removed, with or without
cause, by the holders of a majority of the shares of the stock of the
corporation then entitled to vote at an election of directors.
Section 6. Vacancies. Newly created directorships and vacancies in
the Board of Directors, including vacancies resulting from the resignation of
directors effective immediately or at a future date or from the removal of
directors, with or without cause, may be filled by vote of the stockholders, by
vote of a majority of the directors then in office (including directors whose
resignations are effective at a future date), although less than a quorum, or
by the sole remaining director. Each director so chosen shall hold office until
the next annual meeting of stockholders or until his or her successor has been
elected and qualified or until his or her earlier resignation or removal. A
vote to fill a vacancy or vacancies created by the resignation or resignations
of a director or directors effective at a future date shall take effect when
the resignation or resignations become effective.
Section 7. First Meeting of Newly Elected Directors. The first
meeting of the newly elected Board of Directors may be held immediately after
the annual meeting of stockholders and at the same place as the annual meeting
of stockholders, provided a
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quorum is present, and no notice of the meeting shall be necessary. In the
event the first meeting of the newly elected Board of Directors is not held at
said time and place, it shall be held as provided in Section 8 or 9 of this
Article.
Section 8. Regular Meetings of Directors. Regular meetings of the
Board of Directors may be held without notice at such time and such place
within or without the State of Delaware as may be fixed from time to time by
resolution of the Board of Directors. If any day fixed for a regular meeting
shall be a legal holiday at a place where the meeting is to be held, then the
meeting which would otherwise be held on that day shall be held at the same
hour on the next succeeding business day.
Section 9. Special Meetings of Directors. A special meeting of the
Board of Directors may be called by the Chairman, or, in the absence or
disability of the Chairman, any Vice Chairman, or by a majority of the
directors, or if there is only one director by that one director. Each special
meeting of the Board of Directors may be held at such time and place within or
without the State of Delaware as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 10. Notice of Special Meetings. Notice of each special
meeting of the Board of Directors, stating the time and place thereof, shall be
given by the Chairman, any Vice Chairman, the Secretary, any Assistant
Secretary or any member of the Board of Directors, to each member of the Board
of Directors (a) not less than three (3) days before the meeting by depositing
the notice in the United States mail, with first-class postage thereon prepaid,
directed to each member of the Board of Directors at the address designated by
him or her for such purpose (or, if none is designated, at his or her last
known address), or (b) not less than twenty-four (24) hours before the meeting
by either (i) delivering the same to each member of the Board of Directors
personally, (ii) sending the same by telephone, telegraph, cable or wireless to
the address designated by him or her for such purposes (or, if none is
designated, to his or her last known address), or (iii) delivering the notice
to the address designated by him or her for such purpose (or, if none is
designated, to his or her last known address). The notice of any meeting of the
Board of Directors need not specify the purpose or purposes for which the
meeting is called, except as otherwise required by law or these by-laws.
Section 11. Quorum and Action by the Board. At all meetings of the
Board of Directors, except as otherwise required by law or these by-laws, a
quorum shall be required for the transaction of business and shall consist of
not less than a majority of the entire Board of Directors. All actions taken by
the Board of Directors shall be approved by a vote of a majority of the entire
Board of Directors. A majority of the directors present, whether or not a
quorum is present, may adjourn any meeting to another time and place without
notice other than announcement at the meeting of the time and place to which
the meeting is adjourned.
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Section 12. Procedure. The order of business and all other matters of
procedure at every meeting of the Board of Directors may be determined by the
person presiding at the meeting.
Section 13. Committees of Directors. The Board of Directors may, by
resolution adopted by vote of a majority of the entire Board of Directors,
designate one or more committees, each committee to consist of one or more of
the directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member or alternate member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he, she or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member or alternate member. Any such committee,
to the extent provided in the resolution of the Board of Directors, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority of the Board of
Directors in reference to amending the certificate of incorporation, adopting
any agreement or merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, declaring a dividend or
authorizing the issuance of stock. Each such committee shall keep regular
minutes of its proceedings and report the same to the Board of Directors when
required. A majority vote of all the members of any such committee may fix its
rules or procedure, determine its actions and fix the time and place within or
without the State of Delaware for its meetings and specify the number of
members required to constitute a quorum and what notice thereof, if any, shall
be given, unless the Board of Directors shall otherwise provide. The Board of
Directors may at any time fill vacancies in, change the membership of or
discharge any such committee.
Section 14. Compensation of Directors. The Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of committees of the Board of
Directors may be allowed like compensation for attending committee meetings.
Section 15. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors or any committee thereof may be
taken without a
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meeting if all members of the Board of Directors or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consents thereto by the members of the Board of Directors or
committee shall be filed with the minutes of the proceedings of the Board of
Directors or committee.
Section 16. Presence at Meeting by Telephone. Members of the Board of
Directors or any committee thereof may participate in a meeting of the Board of
Directors or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting by such means shall
constitute presence in person at the meeting.
Section 17. Waiver of Notice. Whenever notice is required by law or
these by-laws to be given to any director, a written waiver thereof, signed by
such director, whether before or after the time stated therein, shall be deemed
equivalent to notice.
ARTICLE IV
Officers
Section 1. Officers. The Board of Directors may annually, and at the
first meeting of the Board of Directors, after the annual meeting of
stockholders, elect or appoint a Chairman, one or more Vice Chairmen, a
Secretary, and a Treasurer. The Board of Directors may from time to time elect
or appoint such additional officers as it may determine. Such additional
officers shall have such authority and perform such duties as the Board of
Directors may from time to time prescribe.
Section 2. Term of Office. The Chairman, the Secretary and any other
officers appointed by the Board of Directors shall each, unless otherwise
determined by the Board of Directors, hold office until the first meeting of
the Board of Directors following the next annual meeting of stockholders and
until his or her successor has been elected and qualified, or until his or her
earlier death, resignation or removal. Each additional officer appointed or
elected by the Board of Directors shall hold office for such term as shall be
determined from time to time by the Board of Directors and until his or her
successor has been elected or appointed and qualified, or until his or her
earlier death, resignation or removal.
Section 3. Removal. Any officer may be removed or have his or her
authority suspended by the Board of Directors at any time, with or without
cause.
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Section 4. Resignation. Any officer may resign at any time by giving
written notice to the corporation. Such resignation shall take effect at the
time specified therein; unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office arising for any reason
may be filled by the Board of Directors.
Section 6. The Chairman. The Chairman shall be the chief executive
officer of the corporation. He or she shall preside at all meetings of
stockholders and of the Board of Directors. He or she shall have the powers and
duties of immediate supervision and management of the corporation which usually
pertain to his or her office, and shall perform all such other duties as are
properly required of him or her by the Board of Directors.
Section 7. The Vice Chairmen. The Vice Chairmen may be designated by
such title or titles as the Board of Directors may determine, and each Vice
Chairman in such order of seniority as may be determined by the Board of
Directors shall, in the absence or disability of the Chairman, or at his or her
request, perform the duties and exercise the powers of the Chairman. Each of
the Vice Chairmen also shall have such powers as usually pertain to his or her
office and shall perform such duties as usually pertain to his or her office or
as are properly required of him or her by the Board of Directors.
Section 8. The Secretary and Assistant Secretaries. The Secretary
shall issue notices of all meetings of stockholders and of the Board of
Directors where notices of such meetings are required by law or these by-laws.
He or she shall attend meetings of stockholders and of the Board of Directors
and keep the minutes thereof in a book or books to be provided for that
purpose. He or she shall affix the corporate seal to and sign such Instruments
as require the seal and his or her signature and shall perform such other
duties as usually pertain to his or her office or as are properly required of
him or her by the Board of Directors.
The Assistant Secretaries may, in the absence or disability of the
Secretary, or at his or her request or the request of the Chairman, perform the
duties and exercise the powers of the Secretary, and shall perform such other
duties as the Board of Directors shall prescribe.
Section 9. The Treasurer and Assistant Treasurers. The Treasurer
shall have the care and custody of all the monies and securities of the
corporation. He or she shall cause to be entered in books of the corporation to
be kept for that purpose full and accurate accounts of all monies received by
him or her and paid by him or her on account
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of the corporation. He or she shall make and sign such reports, statements and
instruments as may be required of him or her by the Board of Directors or by
the laws of the United States or of any state, country or other jurisdiction in
which the corporation transacts business, and shall perform such other duties
as usually pertain to his or her office or as are properly required of him or
her by the Board of Directors.
The Assistant Treasurers may, in the absence or disability of the
Treasurer, or at his or her request or the request of the Chairman, perform the
duties and exercise the powers of the Treasurer, and shall perform such other
duties as the Board of Directors shall prescribe.
Section 10. Officers Holding Two or More Offices. Any two or more
offices may be held by the same person.
Section 11. Duties of Officers May be Delegated. In case of the
absence or disability of any officer of the corporation, or in case of a
vacancy in any office or for any other reason that the Board of Directors may
deem sufficient, the Board of Directors, except as otherwise provided by law,
may temporarily delegate the powers or duties of any officer to any other
officer or to any director.
Section 12. Compensation. The compensation of all officers shall be
determined by the Board of Directors. The compensation of all other employees
shall be fixed by the Chairman within such limits as may be prescribed by the
Board of Directors.
Section 13. Security. The corporation may secure the fidelity of any
or all of its officers or agents by bond or otherwise, as may be required from
time to time by the Board of Directors.
ARTICLE V
Indemnification of Officers and Directors
Section 1. Right of Indemnification. Each director and officer of the
corporation, whether or not then in office, shall be indemnified by the
corporation against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her for
the defense of, or in connection with, any threatened, pending or completed
actions or proceedings and appeals therein, whether civil, criminal,
administrative or investigative, in accordance with and to the fullest extent
permitted by the General Corporation Law of the State of Delaware or other
applicable law, as such law now exists or may hereafter be adopted or amended.
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Section 2. Indemnification in Partial Liability Situations. To the
extent that a director or officer of the corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
Section 1 of this Article, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
Section 3. Authorization. Any indemnification under Section 1 of this
Article (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because he or she has
met the applicable standard of conduct provided by the General Corporation Law
of the State of Delaware. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 4. Advancement of Expenses. Expenses (including attorney's
fees) incurred in defending a civil, criminal, administrative or investigative
action, suit or proceeding, or threat thereof, may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding, as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized in this Article or by the General
Corporation Law of Delaware.
Section 5. Other Rights. The indemnification of expenses provided by
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors, statute, court decision or otherwise,
now or hereafter in effect, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 6. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, against any liability asserted against and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such
person against such liability under the provisions of this Article or of the
General Corporation Law of Delaware.
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ARTICLE VI
Shares and Their Transfer
Section 1. Certificates. Every stockholder of the corporation shall
be entitled to a certificate or certificates, to be in such form as the Board
of Directors shall prescribe, certifying the number of shares of the stock of
the corporation owned by him or her.
Section 2. Issuance of Certificates. Certificates representing shares
of stock of the corporation shall be numbered in the order in which they are
issued and shall be signed by the Chairman or any Vice Chairman and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the corporation. Any or all of the Signatures on the certificate may be a
facsimile.
Section 3. More Than One Class of Stock. If the corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences rights
shall be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock,
provided that, except for restrictions on transfer of stock (as provided in
Section 202 of the General Corporation Law of Delaware), in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 4. Stock Ledger. A record shall be kept by the Secretary or
by any other officer designated by the Board of Directors, of the name of the
individual, firm or corporation holding the shares of the stock of the
corporation represented by each certificate, the number of shares represented
by such certificate, the date of issue thereof and, in case of cancellation,
the date of cancellation thereof.
Section 5. Transfer of Shares. Upon surrender to the corporation of a
certificate representing shares of the stock of the corporation duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, to cancel the old certificate and to record the
transaction upon its books. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, it shall be so
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expressed in the entry of the transfer if, when the certificates are presented
to the corporation for transfer, both the transferor and transferee request the
corporation to do so.
Section 6. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of the stock of the corporation to receive dividends, and to
vote as such owner, and to hold liable for call and assessment a person
registered on its books as the owner of such shares, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
Section 7. Regulations. The Board of Directors may make such rules
and regulations as it may deem expedient, not inconsistent with law, the
certificate of incorporation or these by-laws, concerning the issue, transfer
and registration of certificates representing shares of stock of the
corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents or one or more
registrars, and may require all such certificates to bear the signature or
signatures of any of them.
Section 8. Lost, Stolen, and Destroyed Certificates. The Board of
Directors may in its discretion cause a new certificate representing shares of
the stock of the corporation to be issued in place of any certificate
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon satisfactory proof of that fact by the person claiming the
certificate to have been lost, stolen or destroyed; but the Board of Directors
may in its discretion refuse to issue a new certificate except upon the order
of a court having jurisdiction in such matters. When authorizing such issue of
a new certificate, the Board of Directors may, in its discretion, and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
Section 9. Fixing of Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before
the date of such meeting. If no record date is fixed by the Board of Directors,
then the record date shall be at the close of business on the day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held, and
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In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken
is delivered to the corporation by delivery to its registered office in this
State, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required, the record
date shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Only such stockholders as shall be stockholders of record on the date
so fixed shall be entitled to notice of and to vote at such meeting of
stockholders and any adjournment thereof, or to receive payment of such
dividend or such other distribution or such allotment of rights, or to exercise
such rights in respect of any such change, conversion or exchange of shares of
the stock of the corporation, or to participate in such other action, or to
give such consent, as the case may be, notwithstanding any transfer of any
shares of the stock of the corporation on the books of the corporation after
any such record date so fixed. A determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
13
<PAGE> 18
ARTICLE VII
FINANCES
Section 1. Corporate Funds. The funds of the corporation shall be
deposited in its name with such banks, trust companies or other depositories as
the Board of Directors may from time to time designate. All checks, notes,
drafts and other negotiable instruments of the corporation shall be signed by
such officer or officers, employee or employees, agent or agents as the Board
of Directors may from time to time designate. No officers, employees or agents
of the corporation, alone or with others, shall have power to make any checks,
notes, drafts or other negotiable instruments in the name of the corporation or
to bind the corporation thereby, except as provided in this Section 1.
Section 2. Fiscal Year. The fiscal year of the corporation shall be
the calendar year unless otherwise provided by the Board of Directors.
Section 3. Dividends; Reserves. Dividends upon the stock of the
corporation, payable out of funds legally available therefor, may be declared
by the Board of Directors at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the stock of the corporation. Before
declaring any dividend, the Board of Directors may set aside out of any funds
of the corporation legally available for dividends such sum or sums as the
Board of Directors from time to time in its discretion shall deem proper as a
reserve for working capital, for contingencies, for equalizing dividends or for
such other purpose or purposes as the Board of Directors shall deem conducive
to the interests of the corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
Section 4. Loans to Employees and Officers. The corporation may lend
money to, or guarantee any obligation of, or otherwise assist any officer or
other employee of the corporation, including any officer or employee who is
also a director of the corporation, whenever in the judgment of the Board of
Directors such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the Board
of Directors shall approve, including, without limitation, a pledge of shares
of stock of the corporation.
14
<PAGE> 19
ARTICLE VIII
Corporate Seal
Section 1. Form of Seal. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its incorporation and the words
"Corporate Seal" and "Delaware", and shall otherwise be in such form as shall be
prescribed from time to time by the Board of Directors.
Section 2. Use of Seal. The corporate seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced in any manner.
ARTICLE IX
Amendments
Section 1. Procedure for Amending By-Laws. By-laws of the corporation
may be adopted, amended or repealed (a) at any meeting of stockholders, notice
of which shall have referred to the proposed action, by the holders of a
majority of the shares of the corporation then entitled to vote at an election
of directors, and (b) if the power to adopt, amend or repeal by-laws shall have
been conferred upon the directors in the certificate of incorporation, at any
meeting of the Board of Directors, notice of which shall have referred to the
proposed action, by the vote of a majority of the entire Board of Directors.
15
<PAGE> 1
EXHIBIT 10.1
PLANET AMERICA, INC.
AMENDED AND RESTATED INVESTMENT AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES AUTHORITIES. THEY
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL
AND STATE SECURITIES LAWS.
THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE SUCH AUTHORITIES
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE
INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF
THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED
DISCLOSURE DOCUMENTS AS EXHIBIT J.
SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.
THIS AMENDED AND RESTATED INVESTMENT AGREEMENT (this "Agreement" or
"Investment Agreement") is dated as of the 25th day of June, 1999, by and
between Planet America, Inc., a corporation duly organized and existing under
the laws of the State of Delaware (the "Company"), and the undersigned Investor
executing this Agreement ("Investor"), and amends and restates that certain
Investment Agreement between the Company and the Investor dated June 25, 1999.
RECITALS:
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Investor, and the
Investor shall purchase from the Company, from time to time as provided herein,
shares of the Company's Common Stock , as part of an offering of Common Stock by
the Company to Investor, for a maximum aggregate offering amount of Twenty Five
Million Dollars ($25,000,000) (the "Maximum Offering Amount"); and
WHEREAS, the solicitation of this Investment Agreement and, if accepted by
the Company, the offer and sale of the Common Stock are being made in reliance
upon the provisions of Regulation D ("Regulation D") promulgated under the Act,
Section 4(2) of the Act, and/or upon such other exemption from the registration
requirements of the Act as may be available with respect to any or all of the
purchases of Common Stock to be made hereunder.
Planet America (Final Amended and Restated) Inv. Agreement
<PAGE> 2
TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the recitals
above), the following terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):
"20% Approval" shall have the meaning set forth in Section 5.26.
"Accredited Investor" shall have the meaning set forth in Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Advance Put Notice" shall have the meaning set forth in Section 2.3.1(a),
the form of which is attached hereto as Exhibit E.
"Advance Put Notice Confirmation" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth in Section
2.3.1(a).
"Affiliate" shall have the meaning as set forth Section 6.5.
"Aggregate Issued Shares" equals the aggregate number of shares of Common
Stock issued to Investor pursuant to the terms of this Agreement or the
Registration Rights Agreement as of a given date, including Put Shares and
Warrant Shares.
"Agreed Upon Procedures Report" shall have the meaning set forth in Section
2.6.3(b).
"Agreement" shall mean this Investment Agreement.
"Annual Non-Usage Fee" shall have the meaning set forth in Section 2.7.
"Automatic Termination" shall have the meaning set forth in Section 2.3.2.
"Bring Down Cold Comfort Letters" shall have the meaning set forth in
Section 2.3.6(b).
"Business Day" shall mean any day during which the Principal Market is open
for trading.
"Calendar Month" shall mean the period of time beginning on the numeric day
in question in a calendar month and for Calendar Months thereafter, beginning on
the earlier of (i) the same numeric day of the next calendar month or (ii) the
last day of the next calendar month. Each Calendar Month shall end on the day
immediately preceding the beginning of the next succeeding Calendar Month.
"Cap Amount" shall have the meaning set forth in Section 2.3.11.
"Capital Raising Limitations" shall have the meaning set forth in Section
6.6.1.
"Capitalization Schedule" shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit K.
Planet America (Final Amended and Restated) Inv. Agreement 2
<PAGE> 3
"Closing" shall mean one of (i) the Investment Commitment Closing and (ii)
each closing of a purchase and sale of Common Stock pursuant to Section 2.
"Closing Bid Price" means, for any security as of any date, the last
closing bid price for such security on the O.T.C. Bulletin Board, or, if the
O.T.C. Bulletin Board is not the principal securities exchange or trading market
for such security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by such principal securities exchange or trading market, or if the
foregoing do not apply, the last closing bid price of such security in the
over-the-counter market on the electronic bulletin board for such security, or,
if no closing bid price is reported for such security, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as mutually determined by the Company and the Investor in this Offering. If the
Company and the Investor in this Offering are unable to agree upon the fair
market value of the Common Stock, then such dispute shall be resolved by an
investment banking firm mutually acceptable to the Company and the Investor in
this offering and any fees and costs associated therewith shall be paid by the
Company.
"Commitment Evaluation Period" shall have the meaning set forth in Section
2.7.
"Commitment Warrants" shall have the meaning set forth in Section 2.7.
"Commitment Warrant Exercise Price" shall have the meaning set forth in
Section 2.7.
"Common Shares" shall mean the shares of Common Stock of the Company.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean Planet America, Inc., a corporation duly organized and
existing under the laws of the State of Delaware.
"Company Designated Maximum Put Dollar Amount" shall have the meaning set
forth in Section 2.3.1(a).
- "Company Designated Minimum Put Share Price" shall have the meaning set
forth in Section 2.3.l(a).
"Company Termination" shall have the meaning set forth in Section 2.3.14.
"Conditions to Investor's Obligations" shall have the meaning as set forth
in Section 2.2.4.
"Delisting Event" shall mean any time during the term of this Investment
Agreement, that the Company's Common Stock is not listed for and actively
trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq
National Market, the American Stock Exchange, or the New York Stock Exchange or
is suspended or delisted with respect to the trading of the shares of Common
Stock on such market or exchange.
"Disclosure Documents" shall have the meaning as set forth in Section
3.2.4.
"Due Diligence Review" shall have the meaning as set forth in Section 2.6
"Effective Date" shall have the meaning set forth in Section 2.3.1.
Planet America (Final Amended and Restated) Inv. Agreement 3
<PAGE> 4
"Evaluation Day" shall have the meaning set forth in Section 2.3.7(b).
"Equity Securities" shall have the meaning set forth in Section 6.6.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Extended Put Period" shall mean the period of time between the Advanced
Put Notice Date until the Pricing Period End Date.
"Impermissible Put Cancellation" shall have the meaning set forth in
Section 2.3.1(e).
"Indemnified Liabilities" shall have the meaning set forth in Section 9.
"Indemnities" shall have the meaning set forth in Section 9.
"Indemnitor" shall have the meaning set forth in Section 9.
"Individual Put Limit" shall have the meaning set forth in Section 2.3.1
(b).
"Ineffective Period" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (each as defined in the
Registration Rights Agreement) becomes ineffective or unavailable for use for
the sale or resale, as applicable, of any or all of the Registrable Securities
(as defined in the Registration Rights Agreement) for any reason (or in the
event the prospectus under either of the above is not current and deliverable)
during any time period required under the Registration Rights Agreement.
"Intended Put Share Amount" shall have the meaning set forth in Section
2.3.1(a).
"Investment Commitment Closing" shall have the meaning set forth in
Section 2.2.3.
"Investment Agreement" shall mean this Investment Agreement.
"Investment Commitment Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as Exhibit B,
or such other form as agreed upon by the parties, as to the Investment
Commitment Closing.
"Investment Date" shall mean the date of the Investment Commitment
Closing.
"Investor" shall have the meaning set forth in the preamble hereto.
"Key Employee" shall have the meaning set forth in Section 5.18, as set
forth in Exhibit N.
"Late Payment Amount" shall have the meaning set forth in Section 2.3.8.
"Legend" shall have the meaning set forth in Section 4.7.
"Major Transaction" shall mean and shall be deemed to have occurred at
such time upon any of the following events:
(i) a consolidation, merger or other business combination or event
or transaction following which the holders of Common Stock of the Company
immediately preceding such consolidation, merger, combination or event either
(i) no longer hold a majority of the shares of Common Stock of the Company or
(ii) no longer have the ability to elect the board of directors
Planet America (Final Amended and Restated) Inv. Agreement 4
<PAGE> 5
of the Company (a "Change of Control"); provided, however, that if the other
entity involved in such consolidation, merger, combination or event is a
publicly traded company with "Substantially Similar Trading Characteristics"
(as defined below) as the Company and the holders of Common Stock are to
receive solely Common Stock or no consideration (if the Company is the
surviving entity) or solely common stock of such other entity (if such other
entity is the surviving entity), such transaction shall not be deemed to be a
Major Transaction (provided the surviving entity, if other than the Company,
shall have agreed to assume all obligations of the Company under this Agreement
and the Registration Rights Agreement). For purposes hereof, an entity shall
have Substantially Similar Trading Characteristics as the Company if the
average daily dollar trading volume of the common stock of such entity is equal
to or in excess of $200,000 for the 90th through the 31st day prior to the
public announcement of such transaction;
(ii) the sale or transfer of all or substantially all of the
Company's assets; or
(iii) a purchase, tender or exchange offer made to the holders of
outstanding shares of Common Stock, such that following such purchase, tender or
exchange offer a Change of Control shall have occurred.
"Market Price" shall equal the lowest Closing Bid Price for the Common
Stock on the Principal Market during the Pricing Period for the applicable Put.
"Material Facts" shall have the meaning set forth in Section 2.3.6(a).
"Maximum Put Dollar Amount" shall mean the lesser of (i) the Company
Designated Maximum Put Dollar Amount, if any, specified by the Company in a Put
Notice, and (ii) $2 million.
"Maximum Offering Amount" shall mean Twenty Five Million Dollars
($25,000,000).
"Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.11.
"NASD" shall have the meaning set forth in Section 6.10.
"NYSE" shall have the meaning set forth in Section 6.10.
"Numeric Day" shall mean the numerical day of the month of the Investment
Date or the last day of the calendar month in question, whichever is less.
"Offering" shall mean the Company's offering of common stock and warrants
issued under this Investment Agreement.
"Officer's Certificate" shall mean a certificate, signed by an officer of
the Company, to the effect that the representations and warranties of the
Company in this Agreement required to be true for the applicable Closing are
true and correct in all material respects and all of the conditions and
limitations set forth in this Agreement for the applicable Closing are
satisfied.
"Opinion of Counsel" shall mean, as applicable, the Investment Commitment
Opinion of Counsel, the Put Opinion of Counsel, the Registration Opinion and the
Purchase Warrant Opinion of Counsel.
"Payment Due Date" shall have the meaning set forth in Section 2.3.8.
"Pricing Period" shall have the meaning set forth in Section 2.3.7(b).
Planet America (Final Amended and Restated) Inv. Agreement 5
<PAGE> 6
"Pricing Period End Date" shall mean the last Business Day of any Pricing
Period.
"Principal Market" shall mean the O.T.C. Bulletin Board, the Nasdaq Small
Cap Market, the Nasdaq National Market, the American Stock Exchange or the New
York Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.
"Proceeding" shall have the meaning as set forth Section 5.1.
"Purchase" shall have the meaning set forth in Section 2.3.7(a).
"Purchase Warrants" shall have the meaning set forth in Section 2.4.2.
"Purchase Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.2.
"Purchase Warrant Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as Exhibit O,
or such other form as agreed upon by the parties, as to the issuance of Purchase
Warrants to the Investor.
"Put" shall have the meaning set forth in Section 2.3.1(d).
"Put Cancellation" shall have the meaning set forth in Section 2.3.13(a).
"Put Cancellation Notice Confirmation" shall have the meaning set forth
in Section 2.3.13(c), the form of which is attached hereto as Exhibit S.
"Put Cancellation Date" shall have the meaning set forth in Section
2.3.13(a).
"Put Cancellation Notice" shall have the meaning set forth in Section
2.3.13(a), the form of which is attached hereto as Exhibit Q.
"Put Closing" shall have the meaning set forth in Section 2.3.8.
"Put Closing Date" shall have the meaning set forth in Section 2.3.8.
"Put Date" shall mean the date that is specified by the Company in any
Put Notice for which the Company intends to exercise a Put under Section 2.3.1,
unless the Put Date is postponed pursuant to the terms hereof, in which case
the "Put Date" is such postponed date.
"Put Dollar Amount" shall be determined by multiplying the Put Share
Amount by the Put Share Price with respect to such Put Date, subject to the
limitations herein.
"Put Notice" shall have the meaning set forth in Section 2.3.1(d), the
form of which is attached hereto as Exhibit G.
"Put Notice Confirmation" shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.
"Put Opinion of Counsel" shall mean an opinion from Company's independent
counsel, in the form attached as Exhibit I, or such other form as agreed upon
by the parties, as to any Put Closing.
"Put Share Amount" shall have the meaning as set forth Section 2.3.1(b).
Planet America (Final Amended and Restated) Inv. Agreement 6
<PAGE> 7
"Put Share Price" shall have the meaning set forth in Section 2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are purchased by the
Investor pursuant to a Put.
"Registrable Securities" shall have the meaning as set forth in the
Registration Rights Agreement.
"Registration Opinion" shall have the meaning set forth in Section
2.3.6(a).
"Registration Opinion Deadline" shall have the meaning set forth in
Section 2.3.6(a).
"Registration Rights Agreement" shall mean that certain registration
rights agreement entered into by the Company and Investor on even date herewith,
in the form attached hereto as Exhibit A, or such other form as agreed upon by
the parties.
"Registration Statement" shall have the meaning as set forth in the
Registration Rights Agreement.
"Regulation D" shall mean Regulation D promulgated under the Act.
"Reporting Issuer" shall have the meaning set forth in Section 6.2.
"Required Put Documents" shall have the meaning set forth in Section
2.3.5.
"Risk Factors" shall have the meaning set forth in Section 3.2.4,
attached hereto as Exhibit J.
"Schedule of Exceptions" shall have the meaning set forth in Section 5,
and is attached hereto as Exhibit C.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Investment Agreement, together with the
Common Stock of the Company, the Warrants and the Warrant Shares issuable
pursuant to this Investment Agreement.
"Share Authorization Increase Approval" shall have the meaning set forth
in Section 5.26.
"Six Month Anniversary" shall mean the date that is the same Numeric Day
of the sixth (6th) calendar month after the Investment Date, and the date that
is the same Numeric Day of each sixth (6th) calendar month thereafter, provided
that if such date is not a Business Day, the next Business Day thereafter.
"Stockholder 20% Approval" shall have the meaning set forth in Section
6.12.
"Supplemental Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Term" shall mean the term of this Agreement, which shall be a period of
time beginning on the date of this Agreement and ending on the Termination Date.
Planet America (Final Amended and Restated) Inv. Agreement 7
<PAGE> 8
"Termination Date" shall mean the earlier of (i) the date that is three
(3) years after the date of this Agreement, or (ii) the date that is thirty (30)
Business Days after the later of (a) the Put Closing Date on which the sum of
the aggregate Put Share Price for all Put Shares equal the Maximum Offering
Amount, (b) the date that the Company has delivered a Termination Notice to the
Investor, (c) the date of an Automatic Termination, and (d) the date that all of
the Warrants have been exercised.
"Termination Fee" shall have the meaning as set forth in Section 2.7.
"Termination Notice" shall have the meaning as set forth in Section
2.3.14.
"Third Party Report" shall have the meaning set forth in Section 3.2.4.
"Transfer Agent Instructions" shall mean the Company's instructions to
its transfer agent, substantially in the form attached as Exhibit T, or such
other form as agreed upon by the parties.
"Transaction Documents" shall have the meaning set forth in Section 9.
"Trigger Price" shall have the meaning set forth in Section 2.3.7(b).
"Truncated Pricing Period" shall have the meaning set forth in Section
2.3.7(b).
"Truncated Put Share Amount" shall have the meaning set forth in Section
2.3.13(b).
"Unlegended Share Certificates" shall mean a certificate or certificates
(or electronically delivered shares, as appropriate) (in denominations as
instructed by Investor) representing the shares of Common Stock to which the
Investor is then entitled to receive, registered in the name of Investor or its
nominee (as instructed by Investor) and not containing a restrictive legend or
stop transfer order, including but not limited to the Put Shares for the
applicable Put and Warrant Shares.
"Use of Proceeds Schedule" shall have the meaning as set forth in Section
3.2.4, attached hereto as Exhibit L.
"Warrant Shares" shall mean the Common Stock issuable upon exercise of
the Warrants.
"Warrants" shall mean Purchase Warrants and Commitment Warrants.
2. Purchase and Sale of Common Stock
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the satisfaction
of the conditions to closing set forth in Sections 2.2 and 2.3 below, Investor
hereby agrees to purchase such amounts of Common Stock and accompanying Warrants
as the Company may, in its sole and absolute discretion, from time to time
elect to issue and sell to Investor according to one or more Puts pursuant to
Section 2.3 below.
2.2 Investment Commitment.
2.2.1 [Intentionally Left Blank].
Planet America (Final Amended and Restated) Inv. Agreement 8
<PAGE> 9
2.2.2 [Intentionally Left Blank].
2.2.3 Investment Commitment Closing. The closing of this
Agreement (the "Investment Commitment Closing") shall be deemed to occur when
this Agreement and the Registration Rights Agreement have been executed by both
Investor and the Company, the Transfer Agent Instructions have been executed by
both the Company and the Transfer Agent, and the other Conditions to Investor's
Obligations set forth in Section 2.2.4 below have been met.
2.2.4 Conditions to Investor's Obligations. As a
prerequisite to the Investment Commitment Closing and the Investor's obligations
hereunder, all of the following (the "Conditions to Investor's Obligations")
shall have been satisfied prior to or concurrently with the Company's execution
and delivery of this Agreement:
(a) the following documents shall have been delivered to the
Investor: (i) the Registration Rights Agreement (executed
by the Company and Investor), (ii) the Investment
Commitment Opinion of Counsel (signed by the Company's
counsel), (iii) the Transfer Agent Instructions (executed
by the Company and the Transfer Agent), and (iv) a
Secretary's Certificate as to (A) the resolutions of the
Company's board of directors authorizing this transaction,
(B) the Company's Certificate of Incorporation, and (C) the
Company's Bylaws;
(b) this Investment Agreement, accepted by the Company, shall
have been received by the Investor;
(c) [Intentionally Left Blank];
(d) the Company's Common Stock shall be listed for trading and
actually trading on the O.T.C. Bulletin Board, the Nasdaq
Small Cap Market, the Nasdaq National Market, the American
Stock Exchange or the New York Stock Exchange;
(e) other than continuing losses described in the Risk Factors
set forth in the Disclosure Documents (provided for in
Section 3.2.4), as of the Closing there have been no
material adverse changes in the Company's business
prospects or financial condition since the date of the last
balance sheet included in the Disclosure Documents,
including but not limited to incurring material
liabilities; and
(f) the representations and warranties of the Company in this
Agreement shall be true and correct in all material
respects and the conditions to Investor's obligations set
forth in this Section 2.2.4 shall have been satisfied as of
such Closing; and the Company shall deliver an Officer's
Certificate, signed by an officer of the Company, to such
effect to the Investor.
2.3 Puts of Common Shares to the Investor.
2.3.1 Procedure to Exercise a Put. Subject to the
Individual Put Limit, the Maximum Offering Amount and the Cap Amount (if
applicable), and the other conditions and limitations set forth in this
Agreement, at any time beginning on the date on which the Registration Statement
is declared effective by the SEC (the "Effective Date"), the Company may, in its
sole and absolute discretion, elect to exercise one or more Puts according to
the
Planet America (Final Amended and Restated) Inv. Agreement 9
<PAGE> 10
following procedure, provided that each subsequent Put Date after the first Put
Date shall be no sooner than twenty (20) Business Days following the preceding
Put Date:
(a) Delivery of Advance Put Notice. At least five (5)
Business Days but not more than twenty (20) Business Days prior to any intended
Put Date (unless otherwise agreed in writing by the Investor), the Company shall
deliver advance written notice (the "Advance Put Notice," the form of which is
attached hereto as Exhibit E, the date of such Advance Put Notice being the
"Advance Put Notice Date") to Investor stating the Put Date for which the
Company shall, subject to the limitations and restrictions contained herein,
exercise a Put and stating the number of shares of Common Stock (subject to the
Individual Put Limit and the Maximum Put Dollar Amount) which the Company
intends to sell to the Investor for the Put (the "Intended Put Share Amount").
The Company may, at its option, also designate in any Advance Put Notice
(i) a maximum dollar amount of Common Stock, not to exceed $2,000,000, which it
shall sell to Investor during the Put (the "Company Designated Maximum Put
Dollar Amount") and/or (ii) a minimum purchase price per Put Share at which the
Investor may purchase Shares pursuant to such Put Notice (a "Company Designated
Minimum Put Share Price"). The Company Designated Minimum Put Share Price, if
applicable, shall be no greater than 80% of the Closing Bid Price of the
Company's common stock on the Advance Put Notice Date.
Notwithstanding the above, if, at the time of delivery of an Advance Put
Notice, more than two (2) Calendar Months have passed since the previous Put
Date, such Advance Put Notice shall provide at least ten (10) Business Days
notice of the intended Put Date, unless waived in writing by the Investor. In
order to effect delivery of the Advance Put Notice, the Company shall (i) send
the Advance Put Notice by facsimile on such date so that such notice is received
by the Investor by 6:00 p.m., New York, NY time, and (ii) surrender such notice
on such date to a courier for overnight delivery to the Investor (or two (2) day
delivery in the case of an Investor residing outside of the U.S.). Upon receipt
by the Investor of a facsimile copy of the Advance Put Notice, the Investor
shall, within two (2) Business Days, send, via facsimile, a confirmation of
receipt (the "Advance Put Notice Confirmation," the form of which is attached
hereto as Exhibit F) of the Advance Put Notice to the Company specifying that
the Advance Put Notice has been received and affirming the intended Put Date and
the Intended Put Share Amount.
(b) Put Share Amount. The "Put Share Amount" is the number
of shares of Common Stock that the Investor shall be obligated to purchase in a
given Put, and shall equal the lesser of (i) the Intended Put Share Amount, and
(ii) the Individual Put Limit. The "Individual Put Limit" shall equal the lesser
of (i) 15% of the sum of the aggregate daily reported trading volumes in the
outstanding Common Stock on the Company's Principal Market, excluding any block
trades of 30,000 or more shares of Common Stock, for all Evaluation Days (as
defined in Section 2.3.7(b) below) in the Pricing Period, (ii) the number of Put
Shares which, when multiplied by their respective Put Share Prices, equals the
Maximum Put Dollar Amount, and (iii) 9.9% of the total amount of the Company's
Common Stock that would be outstanding upon completion of the Put, but shall in
no event exceed 15% of the sum of the aggregate daily reported trading volumes
in the outstanding Common Stock on the Company's Principal Market, excluding any
block trades of 30,000 or more shares of Common Stock, for the twenty (20)
Trading Days immediately preceding the Put Date (this limitation, together with
the limitation in (i) immediately above, are collectively referred to herein as
the "Volume Limitations").
(c) Put Share Price. The purchase price for the Put Shares
(the "Put Share Price") shall equal the lesser of (i) the Market Price for such
Put, minus $.10, or (ii) 91% of the Market Price for such Put.
Planet America (Final Amended and Restated) Inv. Agreement 10
<PAGE> 11
(d) Delivery of Put Notice. After delivery of an Advance
Put Notice, on the Put Date specified in the Advance Put Notice the Company
shall deliver written notice (the "Put Notice," the form of which is attached
hereto as Exhibit G) to Investor stating (i) the Put Date, (ii) the Intended
Put Share Amount as specified in the Advance Put Notice (such exercise a
"Put"), (iii) the Company Designated Maximum Put Dollar Amount (if applicable),
and (iv) the Company Designated Minimum Put Share Price (if applicable). In
order to effect delivery of the Put Notice, the Company shall (i) send the Put
Notice by facsimile on the Put Date so that such notice is received by the
Investor by 6:00 p.m., New York, NY time, and (ii) surrender such notice on the
Put Date to a courier for overnight delivery to the Investor (or two (2) day
delivery in the case of an Investor residing outside of the U.S.). Upon receipt
by the Investor of a facsimile copy of the Put Notice, the Investor shall,
within two (2) Business Days, send, via facsimile, a confirmation of receipt
(the "Put Notice Confirmation," the form of which is attached hereto as Exhibit
H) of the Put Notice to Company specifying that the Put Notice has been
received and affirming the Put Date and the Intended Put Share Amount.
(e) Delivery of Required Put Documents. On or before the
Put Date for such Put, the Company shall deliver the Required Put Documents (as
defined in Section 2.3.5 below) to the Investor (or to an agent of Investor, if
Investor so directs). Unless otherwise specified by the Investor, the Put Shares
of Common Stock shall be transmitted electronically pursuant to such electronic
delivery system as the Investor shall request; otherwise delivery shall be by
physical certificates. If the Company has not delivered all of the Required Put
Documents to the Investor on or before the Put Date, the Put shall be
automatically cancelled, unless the Investor agrees to delay the Put Date by up
to three (3) Business Days, in which case the Pricing Period begins on the
Business Day following such new Put Date. If the Company has not delivered all
of the Required Put Documents to the Investor on or before the Put Date (or new
Put Date, if applicable), and the Investor has not agreed in writing to delay
the Put Date, the Put is automatically canceled (an "Impermissible Put
Cancellation") and, unless the Put was otherwise canceled in accordance with the
terms of Section 2.3.13, the Company shall pay the Investor $5,000 for its
reasonable due diligence expenses incurred in preparation for the canceled Put
and the Company may deliver an Advance Put Notice for the subsequent Put no
sooner than ten (10) Business Days after the date that such Put was canceled,
unless otherwise agreed by the Investor.
2.3.2 Termination of Right to Put. The Company's right to require
the Investor to purchase any subsequent Put Shares shall terminate permanently
(each, an "Automatic Termination"), upon the occurrence of any of the following:
(a) the Company shall not exercise a Put or any Put
thereafter if, at any time, either the Company or any director or executive
officer of the Company has engaged in a transaction or conduct related to the
Company that gives rise to (i) a Securities and Exchange Commission enforcement
action, or (ii) a civil judgment or criminal conviction for fraud or
misrepresentation, or for any other offense that, if prosecuted criminally,
would constitute a felony under applicable law;
(b) the Company shall not exercise a Put or any Put
thereafter, on any date after a cumulative time period or series of time
periods, including both Ineffective Periods and Delisting Events, that lasts for
an aggregate of four (4) months;
(c) the Company shall not exercise a Put or any Put
thereafter if at any time the Company has filed for and/or is subject to any
bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors instituted by or against the Company or any subsidiary of the Company;
Planet America (Final Amended and Restated) Inv. Agreement 11
<PAGE> 12
(d) the Company shall not exercise a Put after the sooner
of (i) the date that is three (3) years after the date of this Agreement, or
(ii) the Put Closing Date on which the aggregate of the Put Dollar Amounts for
all Puts equal the Maximum Offering Amount; and
(e) the Company shall not exercise a Put after the Company
has breached any covenant in Section 2.7, Section 6, or Section 9 hereof.
2.3.3 Put Limitations. The Company's right to exercise a Put shall
be limited as follows:
(a) [Intentionally Left Blank].
(b) notwithstanding the amount of any Put, the Investor
shall not be obligated to purchase any additional Put Shares once the aggregate
Put Dollar Amount paid by Investor equals the Maximum Offering Amount;
(c) the Investor shall not be obligated to acquire and pay
for the Put Shares with respect to any Put for which the Company has announced a
subdivision or combination, including a reverse split, of its Common Stock or
has subdivided or combined its Common Stock during the Extended Put Period;
(d) the Investor shall not be obligated to acquire and pay
for the Put Shares with respect to any Put for which the Company has paid a
dividend of its Common Stock or has made any other distribution of its Common
Stock during the Extended Put Period;
(e) the Investor shall not be obligated to acquire and pay
for the Put Shares with respect to any Put for which the Company has made,
during the Extended Put Period, a distribution of all or any portion of its
assets or evidences of indebtedness to the holders of its Common Stock;
(f) the Investor shall not be obligated to acquire and pay
for the Put Shares with respect to any Put for which a Major Transaction has
occurred during the Extended Put Period;
2.3.4 Conditions Precedent to the Right of the Company to Deliver
an Advance Put Notice or a Put Notice and the Obligation of the Investor to
Purchase Put Shares. The right of the Company to deliver an Advance Put Notice
or a Put Notice and the obligation of the Investor hereunder to acquire and pay
for the Put Shares incident to a Closing is subject to the satisfaction, on (i)
the date of delivery of such Advance Put Notice or Put Notice and (ii) the
applicable Put Closing Date, of each of the following conditions:
(a) the Company's Common Stock shall be listed for and actively
trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market,
the Nasdaq National Market or the New York Stock Exchange and the
Put Shares shall be so listed, and to the Company's knowledge
there is no notice of any suspension or delisting with respect to
the trading of the shares of Common Stock on such market or
exchange;
(b) the Company shall have satisfied any and all obligations pursuant
to the Registration Rights Agreement, including, but not limited
to, the filing of the Registration Statement with the SEC with
respect to the resale of all
Planet America (Final Amended and Restated) Inv. Agreement 12
<PAGE> 13
Registrable Securities and the requirement that the
Registration Statement shall have been declared effective
by the SEC for the resale of all Registrable Securities and
the Company shall have satisfied and shall be in compliance
with any and all obligations pursuant to this Agreement and
the Warrants;
(c) [Intentionally Left Blank].
(d) the representations and warranties of the Company are true
and correct in all material respects as if made on such
date and the conditions to Investor's obligations set forth
in this Section 2.3.4 are satisfied as of such Closing, and
the Company shall deliver a certificate, signed by an
officer of the Company, to such effect to the Investor;
(e) the Company shall have reserved for issuance a sufficient
number of Common Shares for the purpose of enabling the
Company to satisfy any obligation to issue Common Shares
pursuant to any Put and to effect exercise of the Warrants;
(f) the Registration Statement is not subject to an Ineffective
Period as defined in the Registration Rights Agreement, the
prospectus included therein is current and deliverable, and
to the Company's knowledge there is no notice of any
investigation or inquiry concerning any stop order with
respect to the Registration Statement; and
(g) if the Aggregate Issued Shares after the Closing of the Put
would exceed the Cap Amount, the Company shall have
obtained the Stockholder 20% Approval as specified in
Section 6.12.
2.3.5 Documents Required to be Delivered on the Put Date
as Conditions to Closing of any Put. The Closing of any Put and Investor's
obligations hereunder shall additionally be conditioned upon the delivery to the
Investor of each of the following (the "Required Put Documents") on or before
the applicable Put Date:
(a) a number of Unlegended Share Certificates (or
freely tradeable electronically delivered shares, as appropriate) equal to the
Intended Put Share Amount, in denominations of not more than 50,000 shares per
certificate;
(b) the following documents: Put Opinion of Counsel,
Officer's Certificate, Put Notice, any required Registration Opinion, and any
report or disclosure required under Section 2.3.6 or Section 2.6;
(c) current Risk Factors; and
(d) all documents, instruments and other writings
required to be delivered on or before the Put Date pursuant to any provision of
this Agreement in order to implement and effect the transactions contemplated
herein.
2.3.6 Accountant's Letter and Registration Opinion.
(a) The Company shall have caused to be delivered to
the Investor, (i) whenever required by Section 2.3.6(b) or by Section 2.6.3, and
(ii) on the date that is three (3) Business Days prior to each Put Date (the
"Registration Opinion Deadline"), an opinion of the
Planet America (Final Amended and Restated) Inv. Argreement 13
<PAGE> 14
Company's independent counsel, in substantially the form of Exhibit R (the
"Registration Opinion"), addressed to the Investor stating, inter alia, that no
facts ("Material Facts") have come to such counsel's attention that have caused
it to believe that the Registration Statement is subject to an Ineffective
Period or to believe that the Registration Statement, any Supplemental
Registration Statement (as each may be amended, if applicable), and any related
prospectuses, contain an untrue statement of material fact or omits a material
fact required to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. If a Registration
Opinion cannot be delivered by the Company's independent counsel to the Investor
on the Registration Opinion Deadline due to the existence of Material Facts or
an Ineffective Period, the Company shall promptly notify the Investor and as
promptly as possible amend each of the Registration Statement and any
Supplemental Registration Statements, as applicable, and any related prospectus
or cause such Ineffective Period to terminate, as the case may be, and deliver
such Registration Opinion and updated prospectus as soon as possible thereafter.
If at any time after a Put Notice shall have been delivered to Investor but
before the related Pricing Period End Date, the Company acquires knowledge of
such Material Facts or any Ineffective Period occurs, the Company shall promptly
notify the Investor and shall deliver a Put Cancellation Notice to the Investor
pursuant to Section 2.3.13 by facsimile and overnight courier by the end of that
Business Day.
(b) (i) the Company shall engage its independent
auditors to perform the procedures in accordance with the provisions of
Statement on Auditing Standards No. 71, as amended, as agreed to by the parties
hereto, and reports thereon (the "Bring Down Cold Comfort Letters") as shall
have been reasonably requested by the Investor with respect to certain financial
information contained in the Registration Statement and shall have delivered to
the Investor such a report addressed to the Investor, on the date that is three
(3) Business Days prior to each Put Date.
(ii) in the event that the Investor shall
have requested delivery of an "Agreed Upon Procedures Report" pursuant to
Section 2.6.3, the Company shall engage its independent auditors to perform
certain agreed upon procedures and report thereon as shall have been reasonably
requested by the Investor with respect to certain financial information of the
Company and the Company shall deliver to the Investor a copy of such report
addressed to the Investor. In the event that the report required by this Section
2.3.6(b) cannot be delivered by the Company's independent auditors, the Company
shall, if necessary, promptly revise the Registration Statement and the Company
shall not deliver a Put Notice until such report is delivered.
2.3.7 Mechanics of Purchase of Put Shares.
(a) Investor's Obligation and Right to Purchase
Shares. Subject to the conditions set forth in this Agreement, following the
Investor's receipt of a validly delivered Put Notice, the Investor shall be
required to purchase (each a "Purchase") from the Company a number of Put Shares
equal to the Put Share Amount, in the manner described below.
(b) Pricing Period. For purposes hereof, the
"Pricing Period" shall mean, unless otherwise shortened under the terms of this
Agreement, the period beginning on the Business Day immediately following the
Put Date and ending on and including the date which is 20 Business Days after
such Put Date; provided that, if a Put Cancellation Notice has been delivered to
the Investor after the Put Date, the Pricing Period for such Put shall end at
the close of trading on the last full trading day on the Principal Market that
ends prior to the moment of initial delivery of the Put Cancellation Notice (a
"Truncated Pricing Period").
Planet America (Final Amended and Restated) Inv. Agreement 14
<PAGE> 15
For purposes of this Agreement:
"Trigger Price" for any Pricing Period shall mean the greater of
(i) the Company Designated Minimum Put Share Price, plus $.10, or (ii) the
Company Designated Minimum Put Share Price divided by .91.
An "Evaluation Day" shall mean each Business Day during a Pricing
Period where the lowest intra-day trading price of the Common Stock is greater
than or equal to the Trigger Price.
2.3.8 Mechanics of Put Closing. Each of the Company and
the Investor shall deliver all documents, instruments and writings required to
be delivered by either of them pursuant to this Agreement at or prior to each
Closing. Subject to such delivery and the satisfaction of the conditions set
forth in Sections 2.3.4 and 2.3.5, the closing of the purchase by the Investor
of Shares shall occur by 5:00 PM, New York City Time, on the date which is five
(5) Business Days following the applicable Pricing Period End Date (or such
other time or later date as is mutually agreed to by the Company and the
Investor) (the "Payment Due Date") at the offices of Investor. On each or before
each Payment Due Date, the Investor shall deliver to the Company, in the manner
specified in Section 8 below, the Put Dollar Amount to be paid for such Put
Shares, determined as aforesaid. The closing (each a "Put Closing") for each Put
shall occur or the date that both (i) the Company has delivered to the Investor
all Required Put Documents, and (ii) the Investor has delivered to the Company
such Put Dollar Amount and any Late Payment Amount, if applicable (each a "Put
Closing Date").
If the Investor does not deliver to the Company the Put Dollar Amount
for such Put Closing on or before the Payment Due Date, then the Investor shall
pay to the Company, in addition to the Put Dollar Amount an amount (the "Late
Payment Amount") at a rate of X% per month, accruing daily, multiplied by such
Put Dollar Amount, where "X" equals one percent (1%) for the first month
following the date in question, and increases by an additional one percent (1%)
for each month that passes after the date in question, up to a maximum of five
percent (5%) per month; provided, however, that in no event shall the amount of
interest that shall become due and payable hereunder exceed the maximum amount
permissible under applicable law.
2.3.9 [Intentionally Left Blank].
2.3.10 Limitation on Short Sales. The Investor and its
Affiliates shall not engage in short sales of the Company's Common Stock;
provided, however, that the Investor may enter into any short sale or other
hedging or similar arrangement it deems appropriate with respect to Put Shares
after it receives a Put Notice with respect to such Put Shares so long as such
sales or arrangements do not involve more than the number of such Put Shares
specified in the Put Notice.
2.3.11 Cap Amount. If the Company becomes listed on the
Nasdaq Small Cap Market or the Nasdaq National Market, then, unless the Company
has obtained Stockholder 20% Approval as set forth in Section 6.12 or unless
otherwise permitted by Nasdaq, in no event shall the Aggregate Issued Shares
exceed the maximum number of shares of Common Stock (the "Cap Amount") that
the Company can, without stockholder approval, so issue pursuant to Nasdaq Rule
4460(i)(l)(d)(ii) (or any other applicable Nasdaq Rules or any successor rule)
(the "Nasdaq 20% Rule").
2.3.12 [Intentionally Left Blank]
Planet America (Final Amended and Restated) Inv. Agreement 15
<PAGE> 16
2.3.13 Put Cancellation
(a) Mechanics of Put Cancellation. If at any time
during a Pricing Period the Company discovers the existence of Material
Facts or any Ineffective Period or Delisting Event occurs, the Company shall
cancel the Put (a "Put Cancellation"), by delivering written notice to the
Investor (the "Put Cancellation Notice"), attached as Exhibit Q, by facsimile
and overnight courier. The "Put Cancellation Date" shall be the date that the
Put Cancellation Notice is first received by the Investor, if such notice is
received by the Investor by 6:00 p.m., New York, NY time, and shall be the
following date, if such notice is received by the Investor after 6:00 p.m.,
New York, NY time.
(b) Effect of Put Cancellation. Anytime a Put
Cancellation Notice is delivered to Investor after the Put Date, the Put shall
remain effective with respect to a number of Put Shares (the "Truncated Put
Share Amount") equal to the Put Share Amount for the Truncated Pricing Period.
(c) Put Cancellation Notice Confirmation. Upon receipt
by the Investor of a facsimile copy of the Put Cancellation Notice, the
Investor shall promptly send, via facsimile, a confirmation of receipt (the
"Put Cancellation Notice Confirmation," a form of which is attached
as Exhibit S) of the Put Cancellation Notice to the Company specifying that the
Put Cancellation Notice has been received and affirming the Put Cancellation
Date.
2.3.14 Investment Agreement Cancellation. The Company may terminate
(a "Company Termination") its right to initiate future Puts by providing
written notice ("Termination Notice") to the Investor, by facsimile and
overnight courier, at any time other than during an Extended Put Period,
provided that such termination shall have no effect on the parties' (other
rights and obligations under this Agreement, the Registration Rights
Agreement or the Warrants. Notwithstanding the above, any cancellation
occurring during an Extended Put Period is governed by Section 2.3.13.
2.3.15 Return of Excess Common Shares. In the event that the
number of Shares purchased by the Investor pursuant to its obligations
hereunder is less than the Intended Put Share Amount, the Investor shall
promptly return to the Company any shares of Common Stock in the Investor's
possession that are not being purchased by the Investor.
2.4 Warrants.
2.4.1 [Intentionally Omitted].
2.4.2 Purchase Warrants. Within five (5) Business Days of
the end of each Pricing Period, the Company shall issue and deliver to the
Investor a warrant ("Purchase Warrant"), in the form attached hereto as Exhibit
D, or such other form as agreed upon by the parties, to purchase a number of
shares of Common Stock equal to 10% of the number of Put Shares issued to
Investor in that Put. Each Purchase Warrant shall be exercisable at a price
(the "Purchase Warrant Exercise Price") which shall initially equal 110% of the
weighted average price for the 5 Business Days immediately preceding the Put
Date, and shall have semi-annual reset provisions. Each Purchase Warrant shall
be immediately exercisable at the Purchase Warrant Exercise Price, and shall
have a term beginning on the date of issuance and ending on the date that is
five (5) years thereafter. The Warrant Shares shall be registered for resale
pursuant to the Registration Rights Agreement. Concurrently with the issuance
and delivery of the Purchase Warrant to the Investor, the Company shall deliver
to the Investor a Purchase Warrant Opinion of Counsel (signed by the Company's
independent counsel).
2.5 [Intentionally Left Blank].
Planet America (Final Amended and Restated) Inv. Agreement 16
<PAGE> 17
2.6 Due Diligence Review. The Company shall make available
for inspection and review by the Investor (the "Due Diligence Review"),
advisors to and representatives of the Investor (who may or may not be
affiliated with the Investor and who are reasonably acceptable to the Company),
underwriter participating in any disposition of Common Stock on behalf of the
any Investor pursuant to the Registration Statement, any Supplemental
Registration Statement, or amendments or supplements thereto or any blue sky,
NASD or other filing, all financial and other records, all SEC Documents and
other filings with the SEC, and all other corporate documents and properties of
the Company as may be reasonably necessary for the purpose of such review,
and cause the Company's officers, directors and employees to supply all
such information reasonably requested by the Investor or any such
representative, advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all questions and other
inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement
for the sole purpose of enabling the Investor and such representatives,
advisors and underwriters and their respective accountants and attorneys to
conduct initial and ongoing due diligence with respect to the Company and the
accuracy of the Registration Statement.
2.6.1 Treatment of Nonpublic Information. The Company shall
not disclose nonpublic information to the Investor or to its advisors or
representatives unless prior to disclosure of such information the Company
identifies such information as being nonpublic information and provides the
Investor and such advisors and representatives with the opportunity to accept
or refuse to accept such nonpublic information for review. The Company may, as
as a condition to disclosing any nonpublic information hereunder,
require the Investor and its advisors and representatives to enter into
a confidentiality agreement (including an agreement with such advisors
and representatives prohibiting them from trading in Common Stock during such
period of time as they are in possession of nonpublic information) in form
reasonably satisfactory to the Company and the Investor.
Nothing herein shall require the Company to disclose nonpublic
information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate nonpublic information to any
investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investor and, if
any, underwriters, of any event or the existence of any circumstance (without
any obligation to disclose the specific event or circumstance) of which it
becomes aware, constituting nonpublic information (whether or not requested of
the Company specifically or generally during the course of due diligence by and
such persons or entities), which, if not disclosed in the Prospectus included
in the Registration Statement, would cause such Prospectus to include a
material misstatement or to omit a material fact required to be stated therein
in order to make the statements therein, in light of the circumstances in which
they were made, not misleading. Nothing contained in this Section 2.6 shall be
construed to mean that such persons or entities other than the Investor
(without the written consent of the Investor prior to disclosure of such
information) may not obtain nonpublic information in the course of conducting
due diligence in accordance with the terms of this Agreement; provided,
however, that in no event shall the Investor's advisors or representatives
disclose to the Investor the nature of the specific event or circumstances
constituting any nonpublic information discovered by such advisors or
representatives in the course of their due diligence without the written
consent of the Investor prior to disclosure of such information.
2.6.2 Disclosure of Misstatements and Omissions. The
Investor's advisors or representatives shall make complete disclosure to the
Investor's counsel of all events or circumstances constituting nonpublic
information discovered by such advisors or representatives in the course of
their due diligence upon which such advisors or representatives form the
opinion
Planet America (Final Amended and Restated) Inv. Agreement 17
<PAGE> 18
that the Registration Statement contains an untrue statement of a material
fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in the light
of the circumstances in which they were made, not misleading. Upon receipt of
such disclosure, the Investor's counsel shall consult with the Company's
independent counsel in order to address the concern raised as to the
existence of a material misstatement or omission and to discuss appropriate
disclosure with respect thereto; provided, however, that such consultation
shall not constitute the advice of the Company's independent counsel to the
Investor as to the accuracy of the Registration Statement and related
Prospectus.
2.6.3 Procedure if Material Facts are Reasonably Believed to be
Untrue or are Omitted. In the event after such consultation the Investor
or the Investor's counsel reasonably believes that the Registration
Statement contains an untrue statement or a material fact or omits a
material fact required to be stated in the Registration Statement or
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading,
(a) the Company shall file with the SEC an
amendment to the Registration Statement responsive to such alleged untrue
statement or omission and provide the Investor, as promptly as practicable,
with copies of the Registration Statement and related Prospectus, as so
amended, or
(b) if the Company disputes the existence
of any such material misstatement or omission, (i) the Company's independent
counsel shall provide the Investor's counsel with a Registration Opinion and
(ii) in the event the dispute relates to the adequacy of financial
disclosure and the Investor shall reasonably request, the Company's
independent auditors shall provide to the Company a letter ("Agreed Upon
Procedures Report") outlining the performance of such "agreed upon
procedures" as shall be reasonably requested by the Investor and the Company
shall provide the Investor with a copy of such letter.
2.7 Commitment Payments. In partial consideration hereof,
following the execution of the Letter of Agreement dated on or about May 24,
1999 between the Company and the Investor, the Company issued and delivered
to Subscriber or its designated assignees, warrants (the "Commitment
Warrants") in the form attached hereto as Exhibit U, or such other form as
agreed upon by the parties, to purchase 490,000 shares of Common Stock. The
Commitment Warrants shall be exercisable at a price (the "Commitment
Warrant Exercise Price") which shall initially equal the weighted average
price for the five (5) trading days immediately preceding May 24, 1999
("Initial Exercise Price"), and shall have reset provisions. Each
Commitment Warrant shall be immediately exercisable at the Commitment
Warrant Exercise Price, and shall have a term beginning on the date of issuance
and ending on date that is five (5) years thereafter. The Warrant Shares
shall be registered for resale pursuant to the Registration Rights
Agreement. Concurrently with the issuance and delivery of the Commitment
Warrant to the Subscriber, the Company shall deliver to the Subscriber a
Commitment Warrant Opinion of Counsel (signed by the Company's independent
counsel).
On the last Business Day of each Twelve (12) Calendar Month period
following the date of this Agreement (each such period a "Commitment
Evaluation Period"), if the Company has not Put at least $2,000,000 in
aggregate Put Dollar Amount during that Commitment Evaluation Period, the
Company, in consideration of Investor's commitment costs, including, but not
limited to, due diligence expenses, shall pay to the Investor an amount (the
"Annual Non-Usage Fee ") equal to the difference of (i) $200,000, minus (ii)
10% of the aggregate Put Dollar Amount of the Put Shares put to Investor during
that Commitment Evaluation Period. In the event that the Company delivers
a Termination Notice to the Investor or an Automatic Termination occurs, the
Company shall pay to the Investor (the "Termination Fee") the greater of (i)
the Annual Non-Usage Fee for the applicable Commitment Evaluation Period, or
(ii) the difference of (x)
Planet America (Final Amended and Restated) Inv. Agreement 18
<PAGE> 19
$200,000, minus (y) 10% of the aggregate Put Dollar Amount of the Put Shares put
to Investor during all Puts to date, and the Company shall not be required to
pay the Annual Non-Usage Fee thereafter.
Each Annual Non-Usage Fee or Termination Fee is payable within five (5)
business days of the date it accrued, in cash or in registered, unlegended,
freely tradable Common Stock of the Company. Where such payment is made in
shares of Common Stock, each share of Common Stock shall be valued at the lesser
of (i) the weighted average price of the Common Stock for the five (5) Business
Days preceding the date that such Annual Non-Usage Fee is due, or (ii) the
weighted average price of the Common Stock for the five (5) Business Days
preceding the date that such shares are delivered to Investor. The Company shall
not be required to deliver any payments to Investor under this subsection until
Investor has paid all Put Dollar Amounts that are then due.
3. Representations, Warranties and Covenants of Investor. Investor
hereby represents and warrants to and agrees with the Company as follows:
3.1 Accredited Investor. Investor is an accredited investor
("Accredited Investor"), as defined in Rule 501 of Regulation D, and has checked
the applicable box set forth in Section 10 of this Agreement.
3.2 Investment Experience; Access to Information; Independent
Investigation.
3.2.1 Access to Information. Investor or Investor's
professional advisor has been granted the opportunity to ask questions of and
receive answers from representatives of the Company, its officers, directors,
employees and agents concerning the terms and conditions of this Offering, the
Company and its business and prospects, and to obtain any additional information
which Investor or Investor's professional advisor deems necessary to verify the
accuracy and completeness of the information received.
3.2.2 Reliance on Own Advisors. Investor has relied
completely on the advice of, or has consulted with, Investor's own personal tax,
investment, legal or other advisors and has not relied on the Company or any of
its affiliates, officers, directors, attorneys, accountants or any affiliates of
any thereof and each other person, if any, who controls any of the foregoing,
within the meaning of Section 15 of the Act for any tax or legal advice (other
than reliance on information in the Disclosure Documents as defined in Section
3.2.4 below and on the Opinion of Counsel). The foregoing, however, does not
limit or modify Investor's right to rely upon covenants, representations and
warranties of the Company in this Agreement.
3.2.3 Capability to Evaluate. Investor has such knowledge
and experience in financial and business matters so as to enable such Investor
to utilize the information made available to it in connection with the Offering
in order to evaluate the merits and risks of the prospective investment, which
are substantial, including without limitation those set forth in the Disclosure
Documents (as defined in Section 3.2.4 below).
3.2.4 Disclosure Documents. Investor, in making Investor's
investment decision to subscribe for the Investment Agreement hereunder,
represents that (a) Investor has received and had an opportunity to review (i)
the Risk Factors, attached as Exhibit J, (the "Risk Factors") (ii) the
Capitalization Schedule, attached as Exhibit K, (the "Capitalization Schedule")
and (iii) the Use of Proceeds Schedule, attached as Exhibit L, (the "Use of
Proceeds Schedule"); (b) Investor has read, reviewed, and relied solely on the
documents described in (a) above, the Company's representations and warranties
and other information in this Agreement, including the exhibits, documents
prepared by the Company which have been specifically provided to Investor in
connection with this Offering (the documents described in this Section 3.2.4 (a)
and
Planet America (Final Amended and Restated) Inv. Agreement 19
<PAGE> 20
(b) are collectively referred to as the "Disclosure Documents"), and an
independent investigation made by Investor and Investor's representatives, if
any; (c) Investor has, prior to the date of this Agreement, been given an
opportunity to review material contracts and documents of the Company which have
been filed as exhibits to the Company's filings under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and has had an opportunity
to ask questions of and receive answers from the Company's officers and
directors; and (d) is not relying on any oral representation of the Company or
any other person, nor any written representation or assurance from the Company
other than those contained in the Disclosure Documents or incorporated herein or
therein. The foregoing, however, does not limit or modify Investor's right to
rely upon covenants, representations and warranties of the Company in Sections 5
and 6 of this Agreement. Investor acknowledges and agrees that the Company has
no responsibility for, does not ratify, and is under no responsibility
whatsoever to comment upon or correct any reports, analyses or other comments
made about the Company by any third parties, including, but not limited to,
analysts' research reports or comments (collectively, "Third Party Reports"),
and Investor has not relied upon any Third Party Reports in making the decision
to invest.
3.2.5 Investment Experience; Fend for Self. Investor has
substantial experience in investing in securities and it has made investments
in securities other than those of the Company. Investor acknowledges that
Investor is able to fend for Investor's self in the transaction contemplated by
this Agreement, that Investor has the ability to bear the economic risk of
Investor's investment pursuant to this Agreement and that Investor is an
"Accredited Investor" by virtue of the fact that Investor meets the investor
qualification standards set forth in Section 3.1 above. Investor has not been
organized for the purpose of investing in securities of the Company, although
such investment is consistent with Investor's purposes.
3.3 Exempt Offering Under Regulation D.
3.3.1 [Intentionally Left Blank].
3.3.2 No General Solicitation. The Investment Agreement was
not offered to Investor through, and Investor is not aware of, any form of
general solicitation or general advertising, including, without limitation, (i)
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
3.3.3 Restricted Securities. Investor understands that the
Investment Agreement is, the Common Stock and Warrants issued at each Put
Closing will be, and the Warrant Shares will be, characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction exempt from the registration
requirements of the federal securities laws and that under such laws and
applicable regulations such securities may not be transferred or resold without
registration under the Act or pursuant to an exemption therefrom. In this
connection, Investor represents that Investor is familiar with Rule 144 under
the Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
3.3.4 Disposition. Without in any way limiting the
representations set forth above, Investor agrees that until the Securities are
sold pursuant to an effective Registration Statement or an exemption from
registration, they will remain in the name of Investor and will not be
transferred to or assigned to any dealer or depositary, provided that the
Investor may direct the Company to deliver any shares that the Investor is
entitled to receive into street name at a brokerage account specified by the
Investor. Investor further agrees not to sell, transfer, assign, or pledge: the
Securities (except for any bona fide pledge arrangement to the extent that such
Planet America (Final Amended and Restated) Inv. Agreement 20
<PAGE> 21
pledge does not require registration under the Act or unless an exemption from
such registration is available and provided further that if such pledge is
realized upon, any transfer to the pledgee shall comply with the requirements
set forth herein), or to otherwise dispose of all or any portion of the
Securities unless and until:
(a) There is then in effect a registration
statement under the Act and any applicable state securities laws covering such
proposed disposition and such disposition is made in accordance with such
registration statement and in compliance with applicable prospectus delivery
requirements; or
(b) (i) Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition to the
extent relevant for determination of the availability of an exemption from
registration, and (ii) if reasonably requested by the Company, Investor shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of the
Securities under the Act or state securities laws. It is agreed that the Company
will not require the Investor to provide opinions of counsel for transactions
made pursuant to Rule 144 provided that Investor and Investor's broker, if
necessary, provide the Company with the necessary representations for counsel to
the Company to issue an opinion with respect to such transaction.
The Investor is entering into this Agreement for its own account
and the Investor has no present arrangement (whether or not legally binding) at
any time to sell the Common Stock to or through any person or entity; provided,
however, that by making the representations herein, the Investor does not agree
to hold the Common Stock for any minimum or other specific term and reserves the
right to dispose of the Common Stock at any time in accordance with federal and
state securities laws applicable to such disposition.
3.4 Due Authorization.
3.4.1 Authority. The person executing this Investment
Agreement if executing this Agreement in a representative or fiduciary capacity,
has full power and authority to execute and deliver this Agreement and each
other document included herein for which a signature is required in such
capacity and on behalf of the subscribing individual, partnership, trust,
estate, corporation or other entity for whom or which Investor is executing this
Agreement. Investor has reached the age of majority (if an individual) according
to the laws of the state in which he or she resides.
3.4.2 Due Authorization. If Investor is a corporation,
Investor is duly and validly organized, validly existing and in good tax and
corporate standing as a corporation under the laws of the jurisdiction of its
incorporation with full power and authority to purchase the Securities to be
purchased by Investor and to execute and deliver this Agreement.
3.4.3 Partnerships. If Investor is a partnership, the
representations, warranties, agreements and understandings set forth above are
true with respect to all partners of Investor (and if any such partner is itself
a partnership, all persons holding an interest in such partnership, directly or
indirectly, including through one or more partnerships), and the person
executing this Agreement has made due inquiry to determine the truthfulness of
the representations and warranties made hereby.
3.4.4 Representatives. If Investor is purchasing in a
representative or fiduciary capacity, the representations and warranties shall
be deemed to have been made on behalf of the person or persons for whom Investor
is so purchasing.
Planet America (Final Amended and Restated) Inv. Agreement 21
<PAGE> 22
4. Acknowledgments Investor is aware that:
4.1 Risks of Investment. Investor recognizes that an investment in
the Company involves substantial risks, including the potential loss of
Investor's entire investment herein. Investor recognizes that the Disclosure
Documents, this Agreement and the exhibits hereto do not purport to contain all
the information, which would be contained in a registration statement under the
Act;
4.2 No Government Approval. No federal or state agency has passed
upon the Securities, recommended or endorsed the Offering, or made any finding
or determination as to the fairness of this transaction;
4.3 No Registration, Restrictions on Transfer. As of the date of
this Agreement, the Securities and any component thereof have not been
registered under the Act or any applicable state securities laws by reason of
exemptions from the registration requirements of the Act and such laws, and may
not be sold, pledged (except for any limited pledge in connection with a margin
account of Investor to the extent that such pledge does not require registration
under the Act or unless an exemption from such registration is available and
provided further that if such pledge is realized upon, any transfer to the
pledgee shall comply with the requirements set forth herein), assigned or
otherwise disposed of in the absence of an effective registration of the
Securities and any component thereof under the Act or unless an exemption from
such registration is available;
4.4 Restrictions on Transfer. Investor may not attempt to sell,
transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities or any component thereof in the absence of either an effective
registration statement or an exemption from the registration requirements of the
Act and applicable state securities laws;
4.5 No Assurances of Registration. There can be no assurance that
any registration statement will become effective at the scheduled time, or ever,
or remain effective when required, and Investor acknowledges that it may be
required to bear the economic risk of Investor's investment for an indefinite
period of time;
4.6 Exempt Transaction. Investor understands that the Securities
are being offered and sold in reliance on specific exemptions from the
registration requirements of federal and state law and that the representations,
warranties, agreements, acknowledgments and understandings set forth herein are
being relied upon by the Company in determining the applicability of such
exemptions and the suitability of Investor to acquire such Securities.
4.7 Legends. The certificates representing the Put Shares shall
not bear a Restrictive Legend. The certificates representing the Warrant Shares
shall not bear a Restrictive Legend unless they are issued at a time when the
Registration Statement is not effective for resale. It is understood that the
certificates evidencing any Warrant Shares issued at a time when the
Registration Statement is not effective for resale, subject to legend removal
under the terms of Section 6.9 below, shall bear the following legend (the
"Legend"):
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or applicable state securities laws,
nor the securities laws of any other jurisdiction. They may not be sold
or transferred in the absence of an effective statement under those
securities laws or pursuant to an exemption therefrom."
5. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to Investor (which shall be
true at the signing of this
Planet America (Final Amended and Restated) Inv. Agreement 22
<PAGE> 23
Agreement, and as of any such later date as contemplated hereunder) and agrees
with Investor that, except as set forth in the Schedule of Exceptions attached
hereto as Exhibit C:
5.1 Organization, Good Standing, and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, USA and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole. The Company is not the subject of any pending,
threatened or, to its knowledge, contemplated investigation or administrative or
legal proceeding (a "Proceeding") by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the Securities and Exchange
Commission, The National Association of Securities Dealer, Inc., The Nasdaq
Stock Market, Inc. or any state securities commission, or any other governmental
entity, which have not been disclosed in the Disclosure Documents. None of the
disclosed Proceedings, if any, will have a material adverse effect upon the
Company or the market for the Common Stock. The Company has the following
subsidiaries:
5.2 Corporate Condition. The Company's condition is, in all
material respects, as described in the Disclosure Documents (as further set
forth in any subsequently filed Disclosure Documents, if applicable), except
for changes in the ordinary course of business and normal year-end adjustments
that are not, in the aggregate, materially adverse to the Company. Except for
continuing losses, there have been no material adverse changes to the Company's
business, financial condition, or prospects since the dates of such Disclosure
Documents. The financial statements as contained in the Company's Form 10 and
other SEC filings will be prepared in accordance with generally accepted
accounting principles, consistently applied (except as otherwise permitted by
Regulation S-X of the Exchange Act), subject, in the case of unaudited interim
financial statements, to customary year end adjustments and the absence of
certain footnotes, and fairly present the financial condition of the Company as
of the dates of the balance sheets included therein and the consolidated results
of its operations and cash flows for the periods then ended,. Without limiting
the foregoing, there are no material liabilities, contingent or actual, that are
not disclosed in the Disclosure Documents (other than liabilities incurred by
the Company in the ordinary course of its business, consistent with its past
practice, after the period covered by the Disclosure Documents). The Company has
paid all material taxes that are due, except for taxes that it reasonably
disputes. There is no material claim, litigation, or administrative proceeding
pending or, to the best of the Company's knowledge, threatened against the
Company, except as disclosed in the Disclosure Documents. This Agreement and the
Disclosure Documents do not contain any untrue statement of a material fact and
do not omit to state any material fact required to be stated therein or herein
necessary to make the statements contained therein or herein not misleading in
the light of the circumstances under which they were made. No event or
circumstance exists relating to the Company which, under applicable law,
requires public disclosure but which has not been so publicly announced or
disclosed.
5.3 Authorization. All corporate action on the part of the Company
by its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the Common
Stock being sold hereunder and the issuance (and/or the reservation for
issuance) of the Warrants and the Warrant Shares have been taken, and this
Agreement and the Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their terms,
except insofar as the enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws affecting creditors' rights
generally or by principles governing the availability of equitable remedies. The
Company has obtained all consents and approvals required for it to execute,
deliver and perform each agreement referenced in the previous sentence.
Planet America (Final Amended and Restated) Inv. Agreement 23
<PAGE> 24
5.4 Valid Issuance of Common Stock. The Common Stock and the
Warrants, when issued, sold and delivered in accordance with the terms hereof,
for the consideration expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the represenations of Investor in this
Agreement, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Warrant Shares, when issued in accordance with the
terms of the Warrants, shall be duly and validly issued and outstanding, fully
paid and nonassessable, and based in part on the representations and warranties
of Investor, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Put Shares, the Warrants and the Warrant Shares will
be issued free of any preemptive rights.
5.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, each as amended and in effect on and as of the date of the Agreement,
or of any material provision of any material instrument or material contract
to which it is a party or by which it is bound or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company, which would have a material adverse effect
on the Company's business or prospects, or on the performance of its obligations
under this Agreement or the Registration Rights Agreement. The execution,
delivery and performance of this Agreement and the other agreements entered into
in conjunction with the Offering and the consummation of the transactions
contemplated hereby and thereby will not (a) result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument or contract or
an event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations
under this Agreement, the Registration Rights Agreement, (b) violate the
Company's Certificate of Incorporation or By-Laws or (c) violate any statute,
rule or governmental regulation applicable to the Company which violation
would have a material adverse effect on the Company's business or prospects.
5.6 Reporting Company. The Company will use its best efforts to
become subject to the reporting requirements of the Exchange Act, and to have a
class of securities registered under Section 12 of the Exchange Act not later
than six (6) months from the date hereof, and shall file all reports required by
the Exchange Act following the date the Company first becomes subject to such
reporting obligations. The Company undertakes to furnish Investor with copies of
such reports as may be reasonably requested by Investor prior to consummation of
this Offering and thereafter, to make such reports available, for the full term
of this Agreement, including any extensions thereof, and for as long as
Investor holds the Securities. The Common Stock is duly listed on the O.T.C.
Bulletin Board. The Company is not in violation of the listing requirements of
the O.T.C. Bulletin Board and does not reasonably anticipate that the Common
Stock will be delisted by the O.T.C. Bulletin Board for the foreseeable future.
The Company has filed all reports required under the Exchange Act. The Company
has not furnished to the Investor any material nonpublic information concerning
the Company.
5.7 Capitalization. The capitalization of the Company as of
June , 1999, is, and the capitalization as of the Closing, subject to exercise
of any outstanding warrants and/or exercise of any outstanding stock options,
after taking into account the offering of the Securities contemplated by this
Agreement and all other share issuances occurring prior to this Offering, will
be, as set forth in the Capitalization Schedule as set forth in Exhibit K.
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. Except as
disclosed in the Capitalization Schedule, as of the date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its
Planet America (Final Amended and Restated) Inv. Agreement 24
<PAGE> 25
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, and (ii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of its or their securities under the Act (except the Registration
Rights Agreement).
5.8 Intellectual Property. The Company has valid, unrestricted and
exclusive ownership of or rights to use the patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business. Exhibit M lists
all patents, trademarks, trademark registrations, trade names and copyrights of
the Company. The Company has granted such licenses or has assigned or otherwise
transferred a portion of (or all of) such valid, unrestricted and exclusive
patents, trademarks, trademark registrations, trade names, copyrights, know-how,
technology and other intellectual property necessary to the conduct of its
business as set forth in Exhibit M. The Company has been granted licenses,
know-how, technology and/or other intellectual property necessary to the conduct
of its business as set forth in Exhibit M. To the best of the Company's
knowledge after due inquiry, the Company is not infringing on the intellectual
property rights of any third party, nor is any third party infringing on the
Company's intellectual property rights. There are no restrictions in any
agreements, licenses, franchises, or other instruments that preclude the Company
from engaging in its business as presently conducted.
5.9 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from this Offering (less fees and expenses) for the purposes
and in the approximate amounts set forth on the Use of Proceeds Schedule set
forth as Exhibit L hereto. These purposes and amounts are estimates and are
subject to change without notice to any Investor.
5.10 No Rights of Participation. No person or entity, including,
but not limited to, current or former stockholders of the Company, underwriters,
brokers, agents or other third parties, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the financing contemplated by this Agreement which has not been waived.
5.11 Company Acknowledgment. The Company hereby acknowledges that
Investor may elect to hold the Securities for various periods of time, as
permitted by the terms of this Agreement, the Warrants, and other agreements
contemplated hereby, and the Company further acknowledges that Investor has made
no representations or warranties, either written or oral, as to how long the
Securities will be held by Investor or regarding Investor's trading history or
investment strategies.
5.12 No Advance Regulatory Approval. The Company acknowledges that
this Investment Agreement, the transaction contemplated hereby and the
Registration Statement contemplated hereby have not been approved by the SEC, or
any other regulatory body and there is no guarantee that this Investment
Agreement, the transaction contemplated hereby and the Registration Statement
contemplated hereby will ever be approved by the SEC or any other regulatory
body. The Company is relying on its own analysis and is not relying on any
representation by Investor that either this Investment Agreement, the
transaction contemplated hereby or the Registration Statement contemplated
hereby has been or will be approved by the SEC or other appropriate regulatory
body.
5.13 Underwriter's Fees and Rights of First Refusal. The Company is
not obligated to pay any compensation or other fees, costs or related
expenditures in cash or securities to any underwriter, broker, agent or other
representative other than the Investor in connection with this Offering.
Planet America (Final Amended And Restated) Inv. Agreement 25
<PAGE> 26
5.14 Availability of Suitable Form for Registration. The Company is
currently eligible and agrees to maintain its eligibility to register the resale
of its Common Stock on a registration statement on a suitable form under the
Act.
5.15 No Intergrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any of the Company's securities or
solicited any offers to buy any security under circumstances that would prevent
the parties hereto from consummating the transactions contemplated hereby
pursuant to an exemption from registration under Regulation D of the Act or
would require the issuance of any other securities to be integrated with this
Offering under the Rules of Nasdaq. The Company has not engaged in any form of
general solicitation or advertising in connection with the offering of the
Common Stock or the Warrants.
5.16 [Intentionally Left Blank].
5.17 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent employee or other person acting
on behalf of the Company or any subsidiary has, in the course of its actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
5.18 Key Employees. Each "Key Employee" (as defined in Exhibit N)
is currently serving the Company in the capacity disclosed in Exhibit N. No Key
Employee, to the best knowledge of the Company and its subsidiaries, is, or is
now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of the Company and
its subsidiaries, any intention to terminate his employment with, or services
to, the Company or any of its subsidiaries.
5.19 Representations Correct. The foregoing representations,
warranties and agreements are true, correct and complete in all material
respects, and shall survive any Put Closing and the issuance of the shares of
Common Stock thereby.
5.20 Tax Status. The Company has made or filed all federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and as set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
5.21 Transactions With Affiliates. Except as set forth in the
Disclosure Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services
Planet America (Final Amended And Restated) Inv. Agreement 26
<PAGE> 27
to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such employee
or, to the knowledge of the Company, any corporation, partnership, trust or
other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
5.22 Application of Takeover Protections. The Company and its board
of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under Delaware law which is or could become
applicable to the Investor as a result of the transactions contemplated by this
Agreement, including, without limitation, the issuance of the Common Stock, any
exercise of the Warrants and ownership of the Common Shares and Warrant Shares.
The Company has not adopted and will not adopt any "poison pill" provision that
will be applicable to Investor as a result of transactions contemplated by this
Agreement.
5.23 Other Agreements. The Company has not, directly or indirectly,
made any agreements with the Investor under a subscription in the form of this
Agreement for the purchase of Common Stock, relating to the terms or conditions
of the transactions contemplated hereby or thereby except as expressly set forth
herein, respectively, or in exhibits hereto or thereto.
5.24 Major Transactions. There are no other Major Transactions
currently pending or contemplated by the Company.
5.25 Financings. There are no other financings currently pending or
contemplated by the Company.
5.26 Shareholder Authorization. The Company shall, at its next
annual shareholder meeting following its listing on either the Nasdaq Small Cap
Market or the Nasdaq National Market, or at a special meeting to be held as soon
as practicable thereafter, use its best efforts to obtain approval of its
shareholders to (i) authorize the issuance of the full number of shares of
Common Stock which would be issuable under this Agreement and eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or any of its securities with respect to the
Company's ability to issue shares of Common Stock in excess of the Cap Amount
(such approvals being the "20% Approval") and (ii) the increase in the number of
authorized shares of Common Stock of the Company (the "Share Authorization
Increase Approval") such that at least 15,000,000 shares can be reserved for
this Offering. In connection with such shareholder vote, the Company shall use
its best efforts to cause all officers and directors of the Company to promptly
enter into irrevocable agreements to vote all of their shares in favor of
eliminating such prohibitions. As soon as practicable after the 20% Approval and
the Share Authorization Increase Approval, the Company agrees to use its best
efforts to reserve 15,000,000 shares of Common Stock for issuance under this
Agreement.
5.27 Acknowledgment of Limitations on Put Amounts. The Company
understands and acknowledges that the amounts available under this Investment
Agreement are limited, among other things, based upon the liquidity of the
Company's Common Stock traded on its Principal Market.
6. Covenants of the Company
6.1 Independent Auditors. The Company shall, until at least the
Termination Date, maintain as its independent auditors an accounting firm
authorized to practice before the SEC.
Planet America (Final Amended And Restated) Inv. Agreement 27
<PAGE> 28
6.2 Corporate Existence and Taxes. The Company shall, until at
least the Termination Date, maintain its corporate existence in good standing
and, once it becomes a "Reporting Issuer" (defined as a Company which files
periodic reports under the Exchange Act), remain a Reporting Issuer (provided,
however, that the foregoing covenant shall not prevent the Company from entering
into any merger or corporate reorganization as long as the surviving entity in
such transaction, if not the Company, assumes the Company's obligations with
respect to the Common Stock and has Common Stock listed for trading on a stock
exchange or on Nasdaq and is a Reporting Issuer) and shall pay all its taxes
when due except for taxes which the Company disputes.
6.3 Registration Rights. The Company will enter into a
registration rights agreement covering the resale of the Common Shares and the
Warrant Shares substantially in the form of the Registration Rights Agreement
attached as Exhibit A.
6.4 [Intentionally Omitted].
6.5 Asset Transfers. The Company shall not (i) transfer, sell,
convey or otherwise dispose of any of its material assets to any Subsidiary
except for a cash or cash equivalent consideration and for a proper business
purpose or (ii) transfer, sell, convey or otherwise dispose of any of its
material assets to any Affiliate, as defined below, during the Term of this
Agreement. For purposes hereof, "Affiliate" shall mean any officer of the
Company, director of the Company or owner of twenty percent (20%) or more of the
Common Stock or other securities of the Company.
6.6 Rights of First Refusal.
6.6.1 Capital Raising Limitations. During the period from
the date of this Agreement until the date that is one year after the Termination
Date, the Company shall not issue or sell, or agree to issue or sell Equity
Securities (as defined below), for cash in private capital raising transactions
without obtaining the prior written approval of the Investor of the Offering
(the limitations referred to in this subsection 6.6.1 are collectively referred
to as the "Capital Raising Limitations"). For purposes hereof, the following
shall be collectively referred to herein as, the "Equity Securities": (i) Common
Stock or any other equity securities, (ii) any debt or equity securities which
are convertible into, exercisable or exchangeable for, or carry the right to
receive additional shares of Common Stock or other equity securities, or (iii)
any securities of the Company pursuant to an equity line structure or format
similar in nature to this Offering.
6.6.2 Investor's Right of First Refusal. For any private
capital raising transactions of Equity Securities which close after the date
hereof and on or prior to the date that is one (1) year after the Termination
Date of this Agreement, not including any warrants issued in conjunction with
this Investment Agreement, the Company agrees to deliver to Investor, at least
ten (10) days prior to the closing of such transaction, written notice
describing the proposed transaction, including the terms and conditions thereof,
and providing the Investor and its affiliates an option during the ten (10) day
period following delivery of such notice to purchase the securities being
offered in such transaction on the same terms as contemplated by such
transaction.
6.6.3 Exceptions to Rights of First Refusal.
Notwithstanding the above, the Rights of First Refusal shall not apply to any
transaction involving issuances of securities in connection with a merger,
consolidation, acquisition or sale of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company or exercise of options by employees,
consultants or directors.
Planet America (Final Amended and Restated) Inv. Agreement 28
<PAGE> 29
6.7 Financial 10-KSB Statements, Etc. and Current Reports on Form
8-K. Once the Company becomes a "reporting company" within the meaning of the
Exchange Act, the Company shall deliver to the Investor copies of its annual
reports on Form 10-KSB, and quarterly reports on Form l0-QSB and shall deliver
to the Investor current reports on Form 8-K within two (2) days of filing for
the Term of this Agreement.
6.8 Opinion of Counsel. Investor shall, concurrent with the
purchase of the Common Stock and accompanying Warrants pursuant to this
Agreement, receive an opinion letter from the Company's legal counsel, in the
form attached as Exhibit B or in such form as agreed upon by the parties, as to
the Investment Commitment Closing and in the form attached as Exhibit I or in
such form as agreed upon by the parties, as to any Put Closing.
6.9 Removal of Legend. If the certificates representing any
Securities are issued with a restrictive Legend in accordance with the terms of
this Agreement, the Legend shall be removed and the Company shall issue a
certificate without such Legend to the holder of any Security upon which it is
stamped, and a certificate for a security shall be originally issued without the
Legend, if (a) the sale of such Security is registered under the Act, or (b)
such holder provides the Company with an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions (the
reasonable cost of which shall be borne by the Investor), to the effect that a
public sale or transfer of such Security may be made without registration under
the Act, or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144. Each Investor agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which wore originally issued without the Legend,
pursuant to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Act.
6.10 Listing. Subject to the remainder of this Section 6.10, the
Company shall ensure that its shares of Common Stock (including all Warrant
Shares) are listed and available for trading on the O.T.C. Bulletin Board.
Thereafter, the Company shall (i) use its best efforts to continue the listing
and trading of its Common Stock on the O.T.C. Bulletin Board or to become
eligible for and listed and available for trading on the Nasdaq Small Cap
Market, the NMS, or the New York Stock Exchange ("NYSE"); and (ii) comply in
all material respects with the Company's reporting, filing and other
obligations under the By-Laws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable.
6.11 The Company's Instructions to Transfer Agent. The Company
will instruct the Transfer Agent of the Common Stock, by delivering instructions
in the form of Exhibit T hereto, to issue certificates, registered in the name
of each Investor or its nominee, for the Put Shares and Warrant Shares in such
amounts as specified from time to time by the Company upon any exercise by the
Company of a Put and/or exercise of the Warrants by the holder thereof. Such
certificates shall not bear a Legend unless issuance with a Legend is permitted
by the terms of this Agreement and Legend removal is not permitted by Section
6.9 hereof and the Company shall cause the Transfer Agent to issue such
certificates without a Legend. Nothing in this Section shall affect in any way
Investor's obligations and agreement set forth in Sections 3.3.3 or 3.3.4 hereof
to resell the Securities pursuant to an effective registration statement and to
deliver a prospectus in connection with such sale or in compliance with an
exemption from the registration requirements of applicable securities laws. If
(a) an Investor provides the Company with an opinion of counsel, which opinion
of counsel shall be in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from
registration or (b) an Investor transfers Securities, pursuant to Rule 144, to
an affiliate which is an accredited investor, the Company shall permit the
transfer, and, in the case of Put Shares aid Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates
Planet America (Final Amended and Restated) Inv. Agreement 29
<PAGE> 30
in such name and in such determination as specified by such Investor. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to an Investor by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 6.11 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 6.11, that an Investor shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6.12 Stockholder 20% Approval. Prior to the closing of any Put
that would cause the Aggregate Issued Shares to exceed the Cap Amount, the
Company shall obtain approval of its stockholders to authorize (i) the issuance
of the full number of shares of Common Stock which would be issuable pursuant to
this Agreement but for the Cap Amount and eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Company or any of its securities with respect to the Company's ability to
issue shares of Common Stock in excess of the Cap Amount (such approvals being
the "Stockholder 20% Approval").
6.13 Press Release. The Company agrees that the Investor shall
have the right to review and comment upon any press release issued by the
Company in connection with the Offering which approval shall not be unreasonably
withheld by Investor.
6.14 Change in Law or Policy. In the event of a change in law, or
policy of the SEC, as evidenced by a No-Action letter or other written
statements of the SEC or the NASD which causes the Investor to be unable to
perform its obligations hereunder, this Agreement shall be automatically
terminated and no further Commitment Fees shall be due.
7. Investor Covenant/Miscellaneous.
7.1 Representations and Warranties Survive the Closing;
Severability. Investor's and the Company's representations and warranties shall
survive the Investment Date and any Put Closing contemplated by this Agreement
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, or is altered by a term required by the Securities
Exchange Commission to be included in the Registration Statement, this Agreement
shall continue in full force and effect without said provision; provided that if
the removal of such provision materially changes the economic benefit of this
Agreement to the Investor, this Agreement shall terminate.
7.2 Successors and Assigns. This Agreement shall not be assignable
without the Company's written consent, If assigned, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Investor may assign Investor's rights hereunder, in
connection with any private sale of the Common Stock of such Investor, so long
as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement in a form acceptable to the Company and provides an original copy of
such acknowledgement to the Company.
Planet America (Final Amended and Restated) Inv. Agreement 30
<PAGE> 31
7.3 Execution in Counterparts Permitted. This Agreement may be executed in
any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one (1) instrument.
7.4 Ties and Subtitles; Gender. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The use in this Agreement of a
masculine, feminine or neither pronoun shall be deemed to include a reference to
the others.
7.5 Written Notices, Etc. Any notice, demand or request required or
permitted to be given by the Company or Investor pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally, or by facsimile or upon receipt if by overnight or two (2) day
courier, addressed to the parties at the addresses and/or facsimile telephone
number of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing; provided,
however, that in order for any notice to be effective as to the Investor such
notice shall be delivered and sent, as specified herein, to all the addresses
and facsimile telephone numbers of the Investor set forth at the end of this
Agreement or such other address and/or facsimile telephone number as Investor
may request in writing.
7.6 Expenses. Except as set forth in the Registration Rights Agreement,
each of the Company and Investor shall pay all costs and expenses that it
respectively incurs, with respect to the negotiation, execution, delivery and
performance of this Agreement.
7.7 Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Common Stock certificates, the
Warrants, the Registration Rights Agreement, and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof, and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants, whether oral, written, or otherwise
except as specifically set forth herein or therein. Except as expressly
provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
7.8 Actions at Law or Equity; Jurisdiction and Venue. The parties
acknowledge that any and all actions, whether at law or at equity, and whether
or not said actions are based upon this Agreement between the parties hereto,
shall be filed in any state or federal court sitting in Atlanta, Georgia.
Delaware law shall govern both the proceeding as well as the interpretation and
construction of the Transaction Documents and the transaction as a whole. In any
litigation between the parties hereto, the prevailing party, as found by the
court, shall be entitled to an award of all attorney's fees and costs of court.
Should the court refuse to find a prevailing party, each party shall bear its
own legal fees and costs.
8. Subscription and Wiring Instructions; Irrevocability.
8.1 Subscription
(a) Wire transfer of Subscription Funds. Investor shall deliver Put
Dollar Amounts (as payment towards any Put Share Price) by wire
transfer, to the Company pursuant to a wire instruction letter to be
provided by the Company, and signed by the Company.
Planet America (Final Amended and Restated) Inv. Agreement 31
<PAGE> 32
(b) Irrevocable Subscription. Investor hereby acknowledges and agrees,
subject to the provisions of any applicable laws providing for the
refund of subscription amounts submitted by Investor, that this
Agreement is irrevocable and that Investor is not entitled to
cancel, terminate or revoke this Agreement or any other agreements
executed by such Investor and delivered pursuant hereto, and that
this Agreement and such other agreements shall survive the death or
disability of such Investor and shall be binding upon and inure to
the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and assigns. If
the Securities subscribed for are to be owned by more than one
person, the obligations of all such owners under this Agreement
shall be joint and several, and the agreements, representations,
warranties and acknowledgments herein contained shall be deemed to
be made by and be binding upon each such person and his heirs,
executors, administrators, successors, legal representatives and
assigns.
8.2 Acceptance of Subscription. Ownership of the number of securities
purchased hereby will pass to Investor upon the Warrant Closing or any Put
Closing.
9. Indemnification.
In consideration of the Investor's execution and delivery of the Investment
Agreement, the Registration Rights Agreement and the Warrants (the "Transaction
Documents") and acquiring the Securities thereunder and in addition to all of
the Company's other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless Investor and all of its
stockholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents, members, partners or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorney's fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
documents contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim, derivative or otherwise, by any
stockholder of the Company based on a breach or alleged breach by the Company or
any of its officers or directors of their fiduciary or other obligations to the
stockholders of the Company.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which it
would be required to make if such foregoing undertaking was enforceable which is
permissible under applicable law.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified Party will, if a claim in respect thereof is to be made against the
other party (hereinafter "Indemnitor") under this Section 9, deliver to the
Indemnitor a written notice of the commencement thereof and the Indemnitor shall
have the right to participate in and to assume the defense thereof with counsel
reasonably selected by the Indemnitor, provided, however, that an Indemnified
Party shall have
Planet America (Final Amended and Restated) Inv. Agreement 32
<PAGE> 33
the right to retain its own counsel, with the reasonably incurred fees and
expenses of such counsel to be paid by the Indemnitor, if representation of such
Indemnified Party by the counsel retained by the Indemnitor would be
inappropriate due to actual or potential conflicts of interest between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the Indemnitor within a
reasonable time of the commencement of any such action, if prejudicial to the
Indemnitor's ability to defend such action, shall relieve the Indemnitor of any
liability to the Indemnified Party under this Section 9, but the omission to so
deliver written notice to the Indemnitor will not relieve it of any liability
that it may have to any Indemnified Party other than under this Section 9 to the
extent it is prejudicial.
[INTENTIONALLY LEFT BLANK]
Planet America (Final Amended and Restated) Inv. Agreement 33
<PAGE> 34
10. Accredited Investor. Investor is an "accredited investor"
because (check all applicable boxes):
(a) [ ] it is an organization described in Section 50l(c)(3)
of the Internal Revenue Code, or a corporation,
limited duration company, limited liability company,
business trust, or partnership not formed for the
specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
(b) [ ] any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is
directed by a sophisticated person who has such
knowledge and experience in financial and business
matters that he is capable of evaluating the merits
and risks of the prospective investment.
(c) [ ] a natural person, who
[ ] is a director, executive officer or general partner
of the issuer of the securities being offered or
sold or a director, executive officer or general
partner of a general partner of that issuer.
[ ] has an individual net worth, or joint net worth with
that person's spouse, at the time of his purchase
exceeding $1,000,000.
[ ] had an individual income in excess of $200,000 in
each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation
of reaching the same income level in the current
year.
(d) [ ] an entity each equity owner of which is a entity
described in a - b above or is an individual who
could check one (1) of the last three (3) boxes
under subparagraph (c) above.
(e) [ ] other [specify] .
----------------------------------
Planet America (Final Amended and Restated) Inv. Agreement 34
<PAGE> 35
The undersigned hereby subscribes the Maximum Offering Amount and
acknowledges that this Agreement and the subscription represented hereby shall
not be effective unless accepted by the Company as indicated below.
IN WITNESS WHEREOF, the undersigned Investor does represent and certify
under penalty of perjury that the foregoing statements are true and correct and
that Investor by the following signature(s) executed this Agreement.
Dated this 25th day of June, 1999.
- ---------------------------------- -----------------------------------------
Your Signature PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
SECURITY DELIVERY INSTRUCTIONS:
- ---------------------------------- -------------------------------
Name: Please Print Please type or print address where your
security is to be delivered
ATTN:
- ---------------------------------- ------------------------------------
Title/Representative Capacity
(if applicable)
- ---------------------------------- -----------------------------------------
Name of Company You Represent Street Address
(if applicable)
- ---------------------------------- -----------------------------------------
Place of Execution of this City, State or Province, Country, Offshore
Agreement Postal Code
NOTICE DELIVERY INSTRUCTIONS: WITH A COPY DELIVERED TO:
- ----------------------------- -------------------------
Please print address where any Please print address where Copy is
Notice is to be delivered to be delivered
ATTN: ATTN:
--------------------------------- -------------------------------
- -------------------------------------- ------------------------------------
Street Address Street Address
- --------------------------------------
- ----------------------------------
City, State or Province, Country, City, State or Country,
Offshore Postal Code Offshore Postal Code
Telephone: Telephone:
---------------------------- --------------------------
Facsimile: Facsimile:
---------------------------- --------------------------
Facsimile: Facsimile:
---------------------------- --------------------------
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM OFFERING
AMOUNT ON THE 25TH DAY OF JUNE, 1999.
PLANET AMERICA, INC.
By:
-----------------------------------
Sinclair Stevens, President
Address:
Attn: Sinclair Stevens
PLANET AMERICA, INC.
Suite 1825
The Liberty Building
Buffalo, NY
Telephone (905) 853-0349
Facsimile (905) 853-5145
Planet America (Final Amended and Restated) Inv. Agreement 35
<PAGE> 36
ADVANCE PUT NOTICE
PLANET AMERICA, INC. (the "Company") hereby intends, subject to the
Individual Put Limit (as defined in the Investment Agreement), to elect to
exercise a Put to sell the number of shares of Common Stock of the Company
specified below, to ____________________________, the Investor, as of the
Intended Put Date written below, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company and Swartz
Private Equity, LLC dated on or about June___, 1999.
Date of Advance Put Notice:
--------------------------
Intended Put Date:
------------------------------------
Intended Put Share Amount:
----------------------------
Company Designation Maximum Put Dollar Amount (Optional):
.
---------------------------------------------------
Company Designation Minimum Put Share Price (Optional):
.
---------------------------------------------------
PLANET AMERICA, INC.
By:
----------------------------------------
Sinclair Stevens, President
Address:
PLANET AMERICA, INC.
Suite 1825
The Liberty Building
Buffalo, New York
Telephone (905) 853-0349
Facsimile (905) 853-5145
EXHIBIT E
Planet America (Final Amended and Restated) Inv. Agreement 36
<PAGE> 37
CONFIRMATION OF ADVANCE PUT NOTICE
_______________________________ the Investor, hereby confirms receipt of PLANET
AMERICA, INC.'S (the "Company") Advance Put Notice on the Advance Put Date
written below, and its intention to elect to exercise a Put to sell shares of
common stock ("Intended Put Share Amount") of the Company to the Investor, as of
the intended Put Date written below, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company and Swartz
Private Equity, LLC dated on or about June , 1999.
Date of Confirmation:
--------------------------------------
Date of Advance Put Notice:
--------------------------------
Intended Put Date:
-----------------------------------------
Intended Put Share Amount:
--------------------------------
Company Designation Maximum Put Dollar Amount (Optional):
--------------------------------------------.
Company Designation Minimum Put Share Price (Optional):
--------------------------------------------.
INVESTOR(S)
----------------------------------------------------
Investor's Name
By:
-------------------------------------------------
(Signature)
Address:
----------------------------------------------
---------------------------------------------
---------------------------------------------
Telephone No.:
---------------------------------------------
Facsimile No.:
---------------------------------------------
EXHIBIT F
Planet America (Final Amended and Restated) Inv. Agreement 37
<PAGE> 38
PUT NOTICE
PLANET AMERICA, INC. (the "Company") hereby elects to exercise a Put to sell
shares of common stock ("Common Stock") of the Company to______________________,
the Investor, as of the Put Date, at the Put Share Price and for the number of
Put Shares written below, all pursuant to that certain Investment Agreement (the
"Investment Agreement") by and between the Company and Swartz Private Equity,
LLC dated on or about June___, 1999.
Put Date:______________
Intended Put Share Amount (from Advance Put
Notice):_______________ Common Shares
Company Designation Maximum Put Dollar Amount (Optional):
____________________________________________.
Company Designation Minimum Put Share Price (Optional):
____________________________________________.
Note: Capitalized terms shall have the meanings ascribed to them in this
Investment Agreement.
PLANET AMERICA, INC.
By:_____________________________
Sinclair Stevens, President
Address:
PLANET AMERICA, INC.
Suite 1825
The Liberty Building
Buffalo, New York
Telephone (905) 853-0349
Facsimile (905) 853-5145
EXHIBIT G
Planet America (Final Amended and Restated) Inv. Agreement 38
<PAGE> 39
CONFIRMATION OF PUT NOTICE
______________________________, the Investor, hereby confirms receipt of PLANET
AMERICA, INC. (the "Company")Put Notice and election to exercise a Put to sell
____________________ shares of common stock ("Common Stock") of the Company to
investor, as of the Put Date, all pursuant to that certain Investment Agreement
(the "Investment Agreement") by and between the Company and Swartz Private
Equity, LLC dated on or about June___, 1999.
Date of this Confirmation:_____________
Put Date:_________________
Number of Put Shares of
Common Stock to be Issued:_____________
Volume Evaluation Period:______Business Days
Pricing Period:______Business Days
INVESTOR(S)
----------------------------------------------------
Investor's Name
By:
-------------------------------------------------
(Signature)
Address:
----------------------------------------------
---------------------------------------------
---------------------------------------------
Telephone No.:
---------------------------------------------
Facsimile No.:
---------------------------------------------
EXHIBIT H
Planet America (Final Amended and Restated) Inv. Agreement 39
<PAGE> 40
PUT CANCELLATION NOTICE
PLANET AMERICA, INC. (the "Company") hereby cancels the Put specified below,
pursuant to that certain Investment Agreement (the "Investment Agreement") by
and between the Company and Swartz Private Equity, LLC dated on or about June
, 1999, as of the close of Trading on the date specified below (the
"Cancellation Date," which date must be on or after the date that this notice is
delivered to the Investor), provided that such cancellation shall not apply to
the number of shares of Common Stock equal to the Truncated Put Share Amount (as
defined in the Investment Agreement).
Cancellation Date:
----------------------
Put Date of Put Being Canceled:
--------------
Number of Shares Put on Put Date:
------------
Reason for Cancellation (check one):
[ ] Material Facts, Ineffective Registration
Period.
[ ] Delisting Event
The Company understands that, by canceling this Put, it must give twenty (20)
Business Days advance written notice to the Investor before effecting the next
Put.
PLANET AMERICA, INC.
By:_____________________________
Sinclair Stevens, President
ADDRESS:
PLANET AMERICA, INC.
Suite 1825
The Liberty Building
Buffalo, New York
Telephone (905) 853-0349
Facsimile (905) 853-5145
EXHIBIT Q
Planet America (Final Amended and Restated) Inv. Agreement 40
<PAGE> 41
PUT CANCELLATION NOTICE CONFIRMATION
The undersigned Investor to that certain Investment Agreement (the "Investment
Agreement") by and between the Company, and Swartz Private Equity, LLC dated on
or about June___,1999, hereby confirms receipt of Planet America Inc.'s (the
"Company") Put Cancellation Notice, and confirms the following:
Date of this Confirmation:
---------------------------------
Put Cancellation Date:
-------------------------------------
INVESTOR(S)
----------------------------------------------------
Investor's Name
By:
-------------------------------------------------
(Signature)
Address:
----------------------------------------------
---------------------------------------------
---------------------------------------------
Telephone No.:
---------------------------------------------
Facsimile No.:
---------------------------------------------
EXHIBIT S
Planet America (Final Amended and Restated) Inv. Agreement 41
<PAGE> 1
EXHIBIT 10.2
PARTNERSHIP AGREEMENT
E-PROPERTY SERVICES CORPORATION
- AND -
MR. GRAHAM TURNER
- AND -
LIMITED PARTNERS
- AND -
PLANET TODAY INC.
- --------------------------------------------------------------------------------
YORK REGION E-PROPERTY LIMITED PARTNERSHIP
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
ARTICLE 1.00 - GENERAL
INTERPRETATION ..............................................2
1.01 Definitions ......................................2
1.02 Interpretation ...................................5
ARTICLE 2.00 - THE PARTNERSHIP ..............................6
2.01 Formation and Status of Partnership ..............6
2.02 Name of the Partnership ..........................6
2.03 Maintaining Status of Partnership ................6
2.04 Fiscal Period ....................................6
2.05 Business of the Partnership ......................6
2.06 Head Office and Mailing Address ..................7
2.07 Term .............................................7
2.08 Status of the General Partner ....................7
2.09 Status of each Partner ...........................7
2.10 Compliance with Laws .............................8
2.11 Limitations on the Authority of Partners .........8
ARTICLE 3.00 - MANAGEMENT OF PARTNERSHIP ....................8
3.01 Authority of General Partner .....................8
3.02 Covenants of General Partner .....................9
3.03 Expenses of the General Partner ..................9
3.04 Amendment of Agreement .......................... 9
3.05 Power of Attorney ................................9
3.06 Safekeeping of Assets ...........................11
3.07 Indemnification .................................11
3.08 Liability of Partners ...........................11
3.09 Restrictions Upon the General Partner. ..........11
ARTICLE 4.00 - RESIGNATION OR REMOVAL OF GENERAL PARTNER ...11
4.01 Resignation of General Partner ..................11
4.02 Deemed Resignation of General Partner ...........12
4.03 Removal of General Partner ......................12
4.04 Effect of (Deemed) Resignation or
Removal of General Partner ......................12
4.05 Transfer of Management to New General Partner ...12
ARTICLE 5.00 - THE UNITS ...................................12
5.01 Number of Units .................................12
5.02 Nature of Unit ..................................12
5.03 Unit Certificates ...............................13
5.04 Receipt by Limited Partner ......................13
5.05 Registrar and Transfer Agent ....................13
5.06 Inspection of Records ...........................13
5.07 Transfer of Units ...............................13
5.08 Pledge of Units .................................14
5.09 Parties Not Bound To See to Trust or Equity .....14
5.10 Incapacity, Death, Insolvency or Bankruptcy .....15
5.11 Lost Unit Certificates ..........................15
ARTICLE 6.00 - CONTRIBUTIONS, ALLOCATIONS AND
DISTRIBUTIONS................................15
6.01 Capital Contribution ............................15
6.02 Sale of Units by Private Placement ..............15
6.03 Discretion of the General Partner in
Raising Capital .................................15
6.04 Allocation of Distributable Cash ................16
6.05 Allocation of Taxable Income and Loss ...........16
6.06 Additional Capital Contributions ................16
6.07 Adjustments .....................................16
6.08 Computing Taxable Income and Loss ...............16
6.09 Distribution of Distributable Cash ..............16
6.10 Separate Capital Accounts .......................16
6.11 Separate Current Account ........................17
6.12 No Interest Payable .............................17
ARTICLE 7.00 - ACCOUNTING AND REPORTING ....................17
7.01 Books and Records ...............................17
7.02 Annual Financial Information ....................17
ARTICLE 8.00 - MEETINGS
8.01 Meetings ........................................17
8.02 Place of Meeting ................................17
8.03 Notice of Meetings ..............................18
8.04 Accidental Omissions ............................18
8.05 Information Circulars ...........................18
8.06 Proxies .........................................18
8.07 Validity of Proxies .............................18
8.08 Form of Proxy ...................................18
8.09 Corporations ....................................19
8.10 Attendance of Others ............................19
8.11 Chairman ........................................19
8.12 Quorum ..........................................19
8.13 Voting ..........................................19
8.14 Poll ............................................20
8.15 Resolutions Binding .............................20
8.16 Powers Exercisable by Extraordinary Resolution ..20
8.17 Powers Exercisable by Ordinary Resolution .......20
8.18 Minutes .........................................21
8.19 Additional Rules and Procedures .................21
8.20 Authorized Attendance ...........................21
ARTICLE 9.00 - REPRESENTATIONS, WARRANTIES AND COVENANTS ...21
9.01 Representations, Warranties and
Covenants of the General Partner ................21
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP i
<PAGE> 3
ARTICLE 10.00 - DISSOLUTION AND LIQUIDATION ................21
10.01 Dissolution and Termination .....................21
10.02 Distributions upon Dissolution ..................21
10.03 Events Not Causing Dissolution ..................22
ARTICLE 11 - OPTION TO PURCHASE ............................22
11.01 Option to Purchase Partnership Units ............22
ARTICLE 12.00 - MISCELLANEOUS ..............................25
12.01 Notices .........................................25
12.02 Further Acts ....................................25
12.03 Binding Effect ..................................25
12.04 Severability ....................................25
12.05 Counterparts ....................................25
12.06 Time ............................................25
12.07 Governing Law ...................................25
12.08 Arbitration .....................................25
12.09 Entire Agreement ................................26
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP ii
<PAGE> 4
PARTNERSHIP AGREEMENT
This agreement dated as of September 6, 1996, amended and restated as of
December 15, 1998.
B E T W E E N: E-PROPERTY SERVICES CORPORATION, a
corporation incorporated under the laws of the Province
of Ontario (formerly known as 1195944 Ontario Inc.)
(hereinafter known as the "GENERAL PARTNER")
OF THE FIRST PART
- and -
GRAHAM TURNER, of the City of St. Catherines in the
Regional Municipality of Niagara
(hereinafter known as the "INITIAL LIMITED PARTNER")
OF THE SECOND PART
- and -
Each party who from time to time is accepted as a limited
partner in YORK REGION E-PROPERTY LIMITED PARTNERSHIP, or
who is a successor of any such person and who becomes a
limited partner upon being registered as such under the
applicable laws of the Province of Ontario
(hereinafter individually called a "LIMITED PARTNER" and
collectively called the "LIMITED PARTNERS")
OF THE THIRD PART
- and -
PLANET TODAY INC., a company incorporated under the laws
of Canada
(hereinafter known as "PLANET TODAY")
OF THE FOURTH PART
WHEREAS the Initial Limited Partner formed a limited partnership under the laws
of the Province of Ontario on September 6, 1996 (the "PARTNERSHIP") under the
name GTTS VII Limited Partnership;
AND WHEREAS the name of the Partnership was changed on December 1, 1998 to YORK
REGION E-PROPERTY LIMITED PARTNERSHIP;
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP A-1
<PAGE> 5
AND WHEREAS the General Partner has agreed to sell Units of the Partnership by
way of private placement for the purposes of financing the business and affairs
of the Partnership and shall admit subscribers for Units as Partners in
accordance with the terms hereof;
NOW THEREFORE in consideration of the payment of the sum of $1.00 and other good
and valuable consideration, receipt of which is hereby acknowledged and of the
premises and the mutual covenants herein contained, and for other good and
valuable consideration, the parties agree as follows:
ARTICLE 1.00 - GENERAL INTERPRETATION
1.01 DEFINITIONS
For the purpose of this Agreement, the following terms shall be deemed to have
the following meanings:
"ACCOUNTANTS" means a firm of certified public accountants as may be appointed
by the General Partner on behalf of the Partnership from time to time.
"AFFILIATE" has the meaning ascribed thereto in the Securities Act (Ontario).
"AREA" means any of one of the following areas located within the Regional
Municipality of York, Ontario, Canada:
(a) the area comprising (i) The Town of Newmarket, which, for greater
certainty comprises, among other areas, The Town of East Gwillimbury and
The Town of Georgina and (ii) The Town of Aurora, which, for greater
certainty comprises, among other areas, The Township of King;
(b) the area comprising The Town of Richmond Hill;
(c) the area comprising The Town of Markham and The Town of
Whitchurch-Stouffville; or
(d) the area comprising The City of Vaughan.
"ASSIGNMENT OF PROMISSORY NOTES AGREEMENT" means the agreement between the
Partnership, Planet America and Planet Today wherein, among other things, the
Partnership assigns and transfers on a non-recourse basis to Planet America all
of the First Promissory Notes, the Second Promissory Notes and the Pledge
Agreements to satisfy, in part, the payment of the Licence Fee, in the form set
out in Schedule "G" to the Offering Memorandum.
"ASSOCIATE" has the meaning ascribed thereto in the Securities Act (Ontario) and
also includes any person who does not deal at "arm's length" (as that term has
meaning as set forth in the Tax Act) with such party.
"BUSINESS" means the development, marketing, use, operation and/or licencing of
Internet-based information utilities which have the ability to host a full range
of interactive services to enable individuals, community groups and local
businesses, governments and associations within the Regional Municipality of
York, Ontario, Canada to, among other things, share information and conduct
e-commerce and e-business transactions for the purpose of earning income, and
all activities incidental thereto.
"CLOSING DATE" means the day of closing of the Offering, which is expected to
occur on or before December 29, 1998 subject to the right of the Partnership, at
its discretion, to close the Offering prior to such date and/or extend the
Offering to such date as determined by the Partnership.
"DISTRIBUTABLE CASH" for any fiscal period of the Partnership means the amount
by which the aggregate of Gross Receipts and any Sales Proceeds exceeds
Operating Expenses, less applicable withholding taxes.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 2
<PAGE> 6
"e-PROPERTY TECHNOLOGY" means the computer-based software system and facility
developed and owned by Planet America called "e-PROPERTY(TM)" which creates a
shared electronic platform capable of hosting a full range of interactive
services, including collaborative information and file-sharing, e-commerce and
e-business transactions, relationship-building and permission marketing and
messaging between individuals, groups, businesses, governments, associations and
other organizations, all as more particularly described in the Technology
Licence and Services Agreement.
"EXTRAORDINARY RESOLUTION" means:
(i) a resolution passed by Limited Partners holding, in the aggregate, not
less than 60% of the outstanding Units held by those Limited Partners
who, being entitled to do so, vote in person or by proxy at a duly
convened meeting of Limited Partners or any adjournment thereof; or
(ii) a written resolution in one or more counterparts consented to in writing
by Limited Partners holding, in the aggregate, not less than 60% of all
of the outstanding Units held by those Limited Partners who are entitled
to vote on the resolution.
"GROSS RECEIPTS" means the aggregate, without duplication, of all revenues
received from the operation of the Partnership's Business during the fiscal
period in question, and all investment income earned on the funds of the
Partnership but excluding any monies, deposits or other prepayments unless and
until earned, insurance proceeds (other than business interruption insurance
proceeds), expropriation proceeds, Refinancing Proceeds and Sales Proceeds.
"FIRST PROMISSORY NOTE" means the promissory note in the principal amount of
$500 per Unit bearing interest at the rate equal to 6.5% per annum payable on
March 31, 1999, in the form set out in Schedule "B" to the Offering Memorandum.
"LAW SITE" means a community-based or geographically-based local area Internet
website created and supported by the e-Property Technology.
"MANAGEMENT SERVICES AGREEMENT" means the agreement between the Partnership and
Planet Today described under the heading entitled "The Partnership - Management
Services Agreement" in the Offering Memorandum.
"NET INCOME" and "NET LOSS" mean, respectively, the net income or net loss of
the Partnership as determined under Section 6.08 hereof.
"OFFERING" means the offering(s) of Units pursuant to and under the terms of the
Offering Memorandum.
"OFFERING MEMORANDUM" means the offering memorandum of the Partnership that will
offer Units of the Partnership, as the same may be amended from time to time.
"OPERATING EXPENSES" means the aggregate, without duplication, of all outlays
made by the Partnership during the fiscal period in question in connection with
the operation of the Business and without limitation, includes: professional
fees reasonably attributable thereto; all business taxes, wages, salaries and
benefits; all debt servicing expenditures of the Partnership whether on account
of principal or interest; reporting costs; and such reserves as may reasonably
be designated by the General Partner, but excluding capital cost allowance or
depreciation and amortization with respect to any assets held by the
Partnership.
"OPTION TO PURCHASE" means the option of Planet Today to acquire all of the
issued and outstanding Units, as provided in Article 11 hereof.
"OPTION EXERCISE DATE" means any date after December 31, 2003 upon which Planet
Today provides written notice to the Partnership that it will exercise the
Option to Purchase.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 3
<PAGE> 7
"OPTION EXERCISE PRICE" means the price at which Planet Today can acquire all of
the issued and outstanding Units, as provided in Article 11 hereof.
"OPTION EXPIRY DATE" means December 30, 2005, being the date of expiry of the
Option to Purchase.
"ORDINARY RESOLUTION" means:
(i) a resolution passed by Limited Partners holding, in the aggregate, not
less than 50% of the outstanding Units held by those Limited Partners
who, being entitled to do so, vote in person or by proxy at a duly
convened meeting of Limited Partners or any adjournment thereof; or
(ii) a written resolution in one or more counterparts consented to in writing
by Limited Partners holding, in the aggregate, not less than 50% of all
of the outstanding Units held by those Limited Partners who are entitled
to vote on the resolution.
"PARTNER" means the General Partner or any Limited Partner and "PARTNERS" means
all Partners together with the General Partner.
"PLANET AMERICA" means Planet America Inc., a corporation incorporated under the
laws of the State of Delaware, and an Affiliate of Planet Today.
"PLEDGE AGREEMENT" means the pledge agreement to be entered into between the
Partnership and each of the Limited Partners, in the form set out in Schedule
"D" to the Offering Memorandum.
"PROMISSORY NOTES" means, collectively, the First Promissory Note and the Second
Promissory Note.
"PROPORTIONATE SHARE" and words of like import with respect to a holder of Units
means the proportion that the number of Units owned by such Limited Partner is
of the aggregate number of Units outstanding at the particular time.
"REFINANCING PROCEEDS" means the net proceeds resulting from any borrowings by
the Partnership for any purpose other than operating purposes, which is secured
by a mortgage, charge or security interest of the Partnership's interest in all
or any part of its assets or other collateral security.
"REGISTRAR AND TRANSFER AGENT" means the General Partner or an agent appointed
thereby to keep a register of Partners and a register of the transfer of Units.
"SALE" means the disposition of all or any part of the assets of the
Partnership, whether by way of sale or expropriation or otherwise.
"SALES PROCEEDS" means:
(i) the proceeds resulting from a Sale, after deducting the amounts required
to discharge or partially discharge any security relating to, and/or
repay or partially repay loans incurred in respect of the acquisition of
any asset of the Partnership and all costs incurred as a result of such
Sale; and
(ii) the proceeds of any insurance to the extent not applied to repair or
rebuild some or all of the assets held by the Partnership.
"SECOND PROMISSORY NOTE" means the promissory note in the principal amount of
$2,000 per Unit bearing interest at the rate equal to 6.5% per annum payable on
December 31, 2003, in the form set out in Schedule "C" to the Offering
Memorandum.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 4
<PAGE> 8
"SUBSCRIPTION AGREEMENT" means the completed subscription and power of attorney
agreement in the form set out in Schedule "F" to the Offering Memorandum, or in
such other form as the General Partner may accept.
"SUBSCRIPTION PRICE" means $3,000.00 per Unit payable as set forth in the
Offering Memorandum.
"TAX ACT" means the Income Tax Act (Canada) as amended from time to time.
"TECHNOLOGY LICENCE AND SERVICES AGREEMENT" Means the agreement between the
Partnership, Planet Today and Planet America described under the heading
entitled "The Partnership - Technology Licence and Services Agreement" in the
Offering Memorandum.
"UNIT" means an undivided interest in the Partnership and includes the Units
offered hereby and units authorized to be issued in accordance with the terms of
this Agreement.
"UNIT CERTIFICATE" means the form of certificate issued by the General Partner,
following the Date of Closing, evidencing the number of Units owned by a Limited
Partner or certificates issued in replacement thereof.
1.02 INTERPRETATION
For all purposes of this Agreement except as otherwise expressly provided or
unless the context otherwise requires:
(a) "this Agreement" means this partnership agreement as it may from time to
time be supplemented or amended;
(b) headings are for convenience of reference only and do not form a part of
this Agreement, nor are they intended to interpret, define or limit the
scope, extent or intent of this Agreement or any provision hereof;
(c) all accounting terms not otherwise defined herein shall have the meanings
assigned to them by, and all computations made pursuant to this Agreement
except as expressly provided otherwise shall be made in accordance with,
Canadian generally accepted accounting principles applied on a consistent
basis;
(d) all references to currency herein are references to Canadian currency;
(e) any reference to a statute shall include and shall be deemed to be a
reference to such statute and the regulations made pursuant thereto, with
any amendments made thereto and in force from time to time, and to any
statute or regulation that may be passed which has the effect of
supplementing or superseding the statute so referred to or the
regulations made pursuant thereto;
(f) any reference to any entity shall include and shall be deemed to be a
reference to any entity that is a successor to such entity;
(g) all capitalized terms not otherwise defined herein shall have the
meanings as defined in the Offering Memorandum; words importing the
masculine gender include the feminine or neuter gender and words
importing the singular include the plural and vice versa; and
(h) for the purpose of determining those limited partners who are entitled to
receive notice of, or to vote or act at, a meeting of Partners or any
adjournment of any meeting, or who are entitled to participate in any
distribution or for any other proper action, the General Partner may fix
in advance a date not more than fifty (50) days, and not less than
twenty-one (21) days, prior to the date on which the particular action
requiring such determination is to be taken (or in the case of
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 5
<PAGE> 9
any allocation, the date as of which such allocation is to be made and, in
case of any distribution, the date on which persons entitled to such
distribution are to be determined). Where no record date is fixed, the
date on which such notice is given or on which such meeting is held or on
which such allocation and distribution is made or on which such other
action is taken, as the case may be, is the record date for the
determination. Any determination of Partners entitled to vote at a meeting
of Partners applies to any adjournment of such meeting.
ARTICLE 2.00 - THE PARTNERSHIP
2.01 FORMATION AND STATUS OF PARTNERSHIP
The General Partner and the Initial Limited Partner acknowledge that the
Partnership was initially formed as a limited partnership on September 6, 1996
as GTTS VII Limited Partnership and changed its name on December 1, 1998 to YORK
REGION E-PROPERTY LIMITED PARTNERSHIP.
2.02 NAME OF THE PARTNERSHIP
The Partnership shall carry on business under the name "YORK REGION E-PROPERTY
LIMITED PARTNERSHIP" (or such other name or names as the General Partner may
from time to time adopt with prior notice to the Partners, if required, to
comply with laws of the jurisdiction in which the Partnership may conduct
business), as more particularly set out in the Offering Memorandum.
2.03 MAINTAINING STATUS OF PARTNERSHIP
The General Partner shall be the sole general partner and the managing partner
of the Partnership, shall do all things and shall cause to be executed and filed
such certificates, declarations, instruments and documents as may be required
under the laws of the Province of Ontario and any other laws having jurisdiction
to reflect the constitution of the Partnership. The General Partner and each
affected Partner shall execute and deliver as promptly as possible any documents
that may be necessary or desirable to accomplish the purposes of this Agreement
or to give effect to the formation of the Partnership under any and all
applicable laws. The General Partner shall take all necessary action on the
basis of information available to it in order to maintain the status of the
Partnership as a partnership under the laws of the Province of Ontario.
2.04 FISCAL PERIOD
The fiscal period of the Partnership ends on the 31st day of December in each
and every year or such other date as the Partners determine by Extraordinary
Resolution.
2.05 BUSINESS OF THE PARTNERSHIP
The business objectives of the Partnership are to commercially develop, market,
use, operate and/or licence Internet-based information utilities which have the
ability to host a full range of interactive services to enable individuals,
community groups and local businesses, governments and associations within the
Regional Municipality of York, Ontario, Canada to, among other things, share
information and conduct e-commerce and e-business transactions.
The Partnership has entered into the Technology Licence and Services Agreement
pursuant to which, among other things, the Partnership has acquired from Planet
America the non-exclusive and restricted licence to use and apply the e-Property
Technology to enable the Partnership to develop, market and operate LAW Sites
within one or more Areas.
The Partnership shall be entitled to contract with anyone in connection
with the Business, including without limitation, Planet Today or Planet
America.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 6
<PAGE> 10
2.06 HEAD OFFICE AND MAILING ADDRESS
The registered office and mailing address of the Partnership and the registered
office and mailing address of the General Partner shall be 1091 Gorham Street,
Suite 302, Newmarket, Ontario, L3Y 7V1. The General Partner may change the
registered office or mailing address of the Partnership and the registered
office or mailing address of the General Partner from time to time by giving
notice to that effect to all Partners pursuant to the notice provision
contained in this Agreement and after having filed an amendment to the
Declaration of Partnership.
2.07 TERM
The Partnership shall pursue its permitted activities until December 31, 2042.
unless terminated or dissolved on an earlier date:
(a) as required by operation of law;
(b) by approval of such termination or dissolution by the General Partner and
authorization thereof by Extraordinary Resolution;
(c) which is 180 days after the bankruptcy, insolvency, dissolution,
liquidation or winding-up of the General Partner unless within such 180
day period a new General Partner is appointed; or
(d) if the General Partner resigned after giving 120 days' written notice to
the Partnership and the Limited Partners have not appointed a new General
Partner prior to the effective date of such resignation.
In the event of a vote to dissolve the Partnership by way of Extraordinary
Resolution, the liquidator, who may be the General Partner shall be authorized
and directed to commence an orderly disposition of the properties and assets of
the Partnership as it deems fit and shall not be permitted to acquire any new
assets or make any new investments, but may arrange or re-arrange any existing
investment with a view to enabling such orderly disposition.
2.08 STATUS OF THE GENERAL PARTNER
The General Partner represents and warrants to, and covenants with, each
Partner that it:
(a) is and shall continue to be a corporation incorporated and in good
standing under the laws of the Province of Ontario;
(b) has and shall continue to have the requisite capacity and corporate
authority to act as General Partner and to perform its obligations under
this Agreement, and such obligations do not and shall not conflict with
or breach its articles of incorporation by-laws or any agreement by which
it is bound; and
(c) is and shall continue to be a resident of Canada for purposes of the Tax
Act.
2.09 STATUS OF EACH PARTNER
Each Limited Partner represents and warrants to each other Limited Partner and
to the General Partner that he, she or it, as the case may be:
(a) is not a "non-resident" of Canada within the meaning of the Tax Act;
(b) is not a "non-Canadian" within the meaning of the Investment Canada Act
(Canada);
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 7
<PAGE> 11
(c) if an individual has the capacity and competence to enter into and be
bound by this Agreement and all other agreements contemplated hereby;
(d) if a corporation, partnership, unincorporated association or other
entity, is legally competent to execute this Agreement and all other
agreements contemplated hereby and to take all actions required pursuant
hereto, and further certifies that all necessary approvals of directors,
shareholders, partners, members or otherwise have been given; and
(e) shall promptly provide such evidence of its, his or her, as the case may
be, status as the General Partner may reasonably request.
Each Limited Partner covenants and agrees that it, he or she, as the case may
be, will not transfer or purport to transfer its, his or her Units to any
person, firm, corporation, partnership, unincorporated association or other
entity which would be unable to make the representations and warranties in
subparagraphs (a), (b), (c), and (d) above.
2.10 COMPLIANCE WITH LAWS
Each Limited Partner and the Initial Limited Partner shall, on request by the
General Partner, immediately execute all certificates, declarations,
instruments and documents necessary to comply with any applicable law or
regulation in regard to the formation, continuance, operation or dissolution of
the Partnership.
2.11 LIMITATIONS ON THE AUTHORITY OF PARTNERS
No Partner other than the General Partner shall or shall be entitled to:
(a) execute any document which binds or purports to bind the Partnership, or
any Partner as such;
(b) purport to have the power or authority to bind the Partnership or any
other Partner as such;
(c) have any authority to undertake any obligation or responsibility on
behalf of the Partnership;
(d) take part in the control or management of the Business; or
(e) bring any action for partition or sale in connection with any assets of
the Partnership, or register or permit any lien or charge in respect of
the Units of such Partner to be filed or registered or remain
undischarged against any assets of the Partnership in respect of such
Partner's interest in the Partnership.
ARTICLE 3.00 - MANAGEMENT OF PARTNERSHIP
3.01 AUTHORITY OF GENERAL PARTNER
The General Partner shall have the power and authority to do such acts and
things and to execute and deliver such documents as it considers necessary or
desirable in connection with the offering for sale of the Units and for the
formation and operation of the Partnership for the purposes stated herein.
Subject to the provisions of this Agreement, the General Partner shall carry on
the business of the Partnership with full power and authority for and on behalf
of and in the name of the Partnership to administer, manage, control and
operate such business and to do any act, take any proceeding, make any decision
and execute and deliver any instrument, deed, agreement or document necessary
for, or incidental to, the business of the Partnership for and on behalf of and
in the name of the Partnership.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 8
<PAGE> 12
3.02 COVENANTS OF GENERAL PARTNER
The General Partner covenants with each Limited Partner that the General
Partner shall:
(a) exercise its powers and discharge its duties honestly, in good faith and
in the best interest of the Partnership and will exercise the care,
diligence and skill of a prudent and qualified manager of a business
similar to that of the Partnership, including, without limitation, the
enforcement of the contracts listed under the heading entitled "Material
Contracts" in the Offering Memorandum; and
(b) devote such time and attention to the conduct of the business of the
Partnership as is reasonably required for the prudent management of the
business and affairs of the Partnership.
3.03 EXPENSES OF THE GENERAL PARTNER
The General Partner is entitled to reimbursement by the Partnership for all
reasonable third party costs and expenses incurred by the General Partner on
behalf of the Partnership in the ordinary course of business, including costs
of accounting, legal, reporting or other costs and expenses incidental to
acting as General Partner to the Partnership, provided the General Partner is
not in default of its duties hereunder in connection with such costs and
expenses.
3.04 AMENDMENT OF AGREEMENT
Unless otherwise provided for herein, this Agreement may be amended in writing
with the consent of the Limited Partners given by Extraordinary Resolution
provided, however, that this Article 3.00 and Articles 6.00 and 8.00 may not be
amended except with the unanimous consent of all Limited Partners entitled to
vote and further provided that no amendment that adversely affects the rights
of the General Partner or reduces the fee or other compensation payable to the
General Partner may be made without the approval of the General Partner. No
amendment can be made to this Agreement, however, which would have the effect
of reducing the interest in the Partnership of the Limited Partners, allowing
any Limited Partner to exercise control over the business of the Partnership,
changing the right of a Limited Partner to vote at any meeting, or allowing the
Partnership to engage in any unauthorized activity. The General Partner may,
without prior notice to or consent from any Limited Partner, amend any
provision of this Agreement from time to time:
(a) for the purpose of adding to or deleting from this Agreement any
covenants, restrictions or provisions if such additions or deletions are
necessary for the protection of the Limited Partners;
(b) to cure an ambiguity or to correct or supplement any provisions contained
herein which may be defective or inconsistent with any other provision
contained herein; or
(c) to make such other provision in regard to matters or question arising
under this Agreement which in the opinion of counsel to the Partnership
does not and will not materially adversely affect the rights or interests
of any Limited Partner.
Limited Partners will be notified in writing by the General Partner of such
amendments to this Agreement within ten (10) days of the effective date of the
amendment.
3.05 POWER OF ATTORNEY
In consideration of the sum of $1.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, each Limited
Partner hereby irrevocably nominates, constitutes and appoints the General
Partner with full power of substitution, as his true and lawful attorney and
agent with full power and authority in his name, place and stead and for his
use and benefit to do the following, namely:
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 9
<PAGE> 13
(a) make, execute, swear to, sign, acknowledge, amend, supplement, renew,
restate, modify, deliver and file, including without limitation filing
for recording at the appropriate public offices, as and where required
any and all of the following:
(i) this Agreement and all registers, declarations, and other
instruments necessary to form, qualify or continue and keep in
good standing the Partnership as a partnership under the laws of
the Province of Ontario;
(ii) all instruments, declarations and certificates necessary to
reflect any amendment to this Agreement or to the constitution of
the Partnership;
(iii) the First Promissory Note, the Second Promissory Note and the
Pledge Agreement and the other documents referenced under the
heading entitled "Material Contracts" in the Offering Memorandum;
and
(iv) all conveyances, agreements and other instruments necessary or
desirable to reflect the dissolution and termination of the
Partnership including cancellation of any certificates or
declarations and the execution of any elections under subsection
98(3) of the Tax Act, as may be amended or re-enacted from time to
time, and any analogous provincial legislation;
(b) execute and file with any governmental body or instrumentality thereof of
the Government of Canada or a province or any other governmental
authority having jurisdiction, any documents necessary to be filed in
connection with the business, property, assets and undertaking of the
Partnership;
(c) execute and deliver all such other documents or instruments on behalf of
and in the name of the Partnership and for the Limited Partners as may be
deemed necessary or desirable by the General Partner in connection with
the Business, including without limitation, any agreement or instrument
with, to or in favour of, Planet Today or Planet America, or to carry out
fully the provisions of this Agreement and the other documents referenced
under the heading entitled "Material Contracts" in the Offering
Memorandum in accordance with their respective terms and conditions; and
(d) prepare, execute and file all income tax, sales tax and other tax forms,
returns and elections which the Partnership is required to file or which
are deemed desirable by the General Partner.
To evidence the foregoing, each Limited Partner, in executing a Subscription
Agreement or in executing the form of transfer of a Unit, will have executed a
power of attorney containing substantially the same powers set forth above. The
power of attorney granted herein is irrevocable, is a power coupled with an
interest, will survive the death, disability, insolvency or other legal
incapacity of a Limited Partner and will survive the assignment (to the extent
of the Limited Partner's obligations hereunder) by the Limited Partner of the
whole or any part of the interest of the Limited Partner in the Partnership and
extends to the heirs, executors, administrators, successors and assigns of the
Limited Partner and may be exercised by the General Partner executing on behalf
of each Limited Partner any instrument by listing all of the Limited Partners to
be bound by such instrument with a single signature as attorney and agent for
all of them.
This power of attorney shall not be affected by the removal, resignation or
deemed resignation of the General Partner as general partner of the Partnership
and upon substitution therefor of a replacement General Partner, may be
exercised by such General Partner as if it were an original party to this
Agreement.
Each Limited Partner agrees to be bound by any representations and actions made
or taken in good faith by the General Partner pursuant to such power of attorney
in accordance with the terms hereof and hereby waives any and all defences which
may be available to contest, negate or disaffirm the action of the General
Partner taken in good faith under such power of attorney.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 10
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The General Partner has determined that it is contrary to the interests of the
Partnership to file an election with the U.S. Department of Treasury ("IRS"), as
well as any state with taxing jurisdiction relating to the Partnership, so as to
permit the Partnership to be treated as a corporation for U.S. tax purposes.
Accordingly. each Partner, by signing this Agreement, hereby represents that he
shall not take any position on their U.S. tax returns inconsistent with said
election.
3.06 SAFEKEEPING OF ASSETS
The General Partner is responsible for the safekeeping and use of all funds and
assets of the Partnership, whether or not in its immediate possession or
control.
3.07 INDEMNIFICATION
The Partnership will indemnify and hold harmless the General Partner and its
Affiliates, Associates, officers, directors, shareholders, employees or agents,
from and against any losses, costs, expenses, liabilities and damages (including
reasonable legal fees) incurred or suffered by them on behalf of the Partnership
or in furtherance of the interests of the Partnership, but only if the acts,
omissions or the alleged acts or omissions in respect of which any actual or
threatened action, proceeding or claim are based, were performed honestly and in
good faith and were not performed or omitted to be performed fraudulently or in
bad faith or as a result of the gross negligence or wilful misconduct of the
General Partner, its Affiliates, Associates, officers, directors, shareholders,
employees or agents.
3.08 LIABILITY OF PARTNERS
The General Partner is not liable for losses or damages to the Partnership other
than those attributable to a failure to act honestly and in good faith or
attributable to an act of gross negligence or willful misconduct. In making the
foregoing determination, the applicable standard shall be the standard of care
expected of a prudent and qualified manager of a business similar to the
Business of the Partnership. In no event shall the General Partner be liable for
any loss or depreciation of the value of any investment or reinvestment made by
the General Partner in accordance with the provisions of this Agreement.
The liability of each Limited Partner for the liabilities and obligations of the
Partnership is limited to the amount standing to credit of the Limited Partner
in the capital account maintained pursuant to Section 6.10.
3.09 RESTRICTIONS UPON THE GENERAL PARTNER
The General Partner will not:
(a) cause the Partnership to guarantee the obligations or liabilities of, or
make loans to the General Partner, or any Affiliate or Associate of the
General Partner;
(b) commingle the funds of the Partnership with the funds of the General
Partner or any Affiliate or Associate of the General Partner; or
(c) permit the Partnership to contract with anyone other than for the
purposes of the carrying out of the Partnership's Business.
ARTICLE 4.00 - RESIGNATION OR REMOVAL OF GENERAL PARTNER
4.01 Resignation of General Partner
The General Partner shall only be entitled to withdraw from the Partnership or
to sell, transfer or assign its interest upon providing 120 days written notice
to the Partnership and the Limited Partners.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 11
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4.02 DEEMED RESIGNATION OF GENERAL PARTNER
The General Partner shall be deemed to have resigned as the General Partner of
the Partnership in the event of the bankruptcy or the dissolution, liquidation
or winding-up of the General Partner (or the commencement of any act or
proceeding in connection therewith which is not contested in good faith by the
General Partner) or by the appointment of a trustee, receiver or receiver and
manager of the affairs of all or substantially all of the properties of the
General Partner. The General Partner shall forthwith advise the Limited Partners
by written notice of the occurrence of any event referred to in this Section
4.02. In such circumstances, the Limited Partners shall have the right by
Ordinary Resolution to designate a successor General Partner.
4.03 REMOVAL OF GENERAL PARTNER
In the event the General Partner is in default of any obligation or duty
hereunder and such default is not rectified within thirty (30) days after the
giving of notice thereof to the General Partner by the Limited Partners, the
General Partner may be removed and a successor named as the General Partner of
the Partnership by Extraordinary Resolution. The appointment of the new General
Partner and the removal of the General Partner shall be effective upon the date
specified in such Extraordinary Resolution.
4.04 EFFECT OF (DEEMED) RESIGNATION OR REMOVAL OF GENERAL PARTNER
In the event of the resignation, deemed resignation or the removal of the
General Partner, the General Partner shall cease to be entitled to any
allocation of Distributable Cash provided for herein upon the effective date of
such resignation, deemed resignation or removal but shall be entitled to a pro
rata share of any allocation of Distributable Cash up to such date. The
withdrawing General Partner shall be, and shall remain, liable for all
obligations and liabilities incurred by the Partnership for which the General
Partner was liable before such withdrawal became effective.
4.05 TRANSFER OF MANAGEMENT TO NEW GENERAL PARTNER
Upon any appointment of a new General Partner, the former General Partner agrees
to do all things and to take all steps to immediately and effectively transfer
the management, control, administration and operation of the Partnership to the
new General Partner. The new General Partner shall execute a counterpart hereof
and shall from that time forward, for all purposes and in all ways, assume the
powers, duties and obligations of the General Partner under this Agreement and
shall be bound by and subject to the terms of this Agreement. The new General
Partner shall file an amendment to the declaration constituting the Partnership
and any other instruments necessary to record the substitution of the new
General Partner as a general partner of the Partnership or to continue the
Partnership as a limited partnership in the jurisdiction in which the
Partnership carries on business.
ARTICLE 5.00 - THE UNITS
5.01 NUMBER OF UNITS
Subject to this Agreement, the Partnership shall be divided into a maximum of
540 Units. No additional Units shall be issued subsequent to the Offering unless
the General Partner is authorized to do so by an Extraordinary Resolution.
5.02 NATURE OF UNIT
Except as otherwise provided herein, each issued and outstanding Unit shall be
equal to each other Unit with respect to voting rights, the right to receive
distributions from the Partnership and otherwise. No Unit shall have any
preference or right in any circumstances over any other Unit. Each Unit carries
the right to one (1) vote in respect of all matters to be decided by the Limited
Partners. The General Partner shall not, as such, be entitled to vote at any
meetings of Partners. Units have no preference, exchange, pre-emptive or
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 12
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redemption rights. Only registered holders of Units will be entitled to vote or
receive distributions or otherwise to exercise or enjoy the rights of Limited
Partners.
5.03 UNIT CERTIFICATES
Unit Certificates shall be in such form as is from time to time approved by the
General Partner and shall be signed by the General Partner for and on behalf of
the Partnership.
5.04 RECEIPT BY LIMITED PARTNER
The receipt of any money, securities or other property from the Partnership by a
person in whose name any Units are recorded, or if such Units are recorded in
the names of more than one person, the receipt thereof by any one of such
persons, or by the fully authorized agent of any such person in that regard,
shall be a sufficient and proper discharge for that amount of money, securities
and other property payable, issuable or deliverable in respect of such Units.
5.05 REGISTRAR AND TRANSFER AGENT
(a) The General Partner, or such other person as may be appointed from time
to time by the General Partner, shall act as Registrar and Transfer Agent
of the Partnership and shall maintain such books as are necessary to
record the names and addresses of the Limited Partners, the number of
Units held by each Limited Partner and particulars of transfer of Units.
The General Partner shall cause the Registrar and Transfer Agent to
perform all other duties usually performed by a registrar and transfer
agent of certificates of shares in a corporation except as the same may
be modified by reason of the nature of the Units.
(b) For so long as the General Partner shall be Registrar and Transfer Agent,
the register of Limited Partners will be kept by the General Partner at
its principal office, currently located at the offices of e-Property
Services Corporation, Newmarket Corporate Centre, 1091 Gorham Street,
Suite 302, Newmarket, Ontario, L3Y 7V1.
5.06 INSPECTION OF RECORDS
The General Partner shall cause the Registrar and Transfer Agent to make the
records relating to the Limited Partners available for inspection by any Limited
Partner, or his agent duly authorized in writing, at the expense of such Limited
Partner. A copy of the register of the Partners shall be provided to any Limited
Partner on forty-eight (48) hours notice in writing to the Registrar and
Transfer Agent, at the expense of the Limited Partner requesting same.
5.07 TRANSFER OF UNITS
A Unit may be assigned and transferred by a Limited Partner or his agent duly
authorized in writing if the following conditions are satisfied:
(a) the transferee has delivered to the Registrar and Transfer Agent a
transfer form in the form set out in Schedule "E" to the Offering
Memorandum, which form has been duly completed and executed by the
registered holder of the Unit and by the transferee;
(b) the transferee has agreed in writing to be bound by the provisions of
this Agreement and the Subscription Agreement and assumes the obligations
of the Limited Partners under this Agreement and the Subscription
Agreement in respect of the Unit being transferred to him and enters into
a Pledge Agreement, if applicable;
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 13
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(c) the transferee delivers or causes to be delivered to the Registrar and
Transfer Agent the Unit Certificate issued pursuant to this Agreement
representing the Unit transferred, duly endorsed for transfer by the
transferee;
(d) the transferee pays such costs, expenses and disbursements that are
reasonably incurred by the Partnership by reason of such transfer;
(e) such other requirements as may reasonably be established by the Registrar
and Transfer Agent are satisfied, provided that a transferee will not
become a Limited Partner in respect of that Unit until all filings and
recordings required by law to validly effect a transfer have been duly
made. A transfer of Units will not be recognized where, in the reasonable
opinion of the General Partner, such transfer might result in the
termination of the Partnership or in the creation of a lien or charge on
the property of the Partnership.
The Registrar and Transfer Agent has the right to rescind a transfer of Units to
a "non-Canadian" within the meaning of the Investment Canada Act. When a
transferee is entitled to become a Limited Partner pursuant to the provisions
hereof, the General Partner shall be authorized to admit such person to the
Partnership as a Limited Partner and the Limited Partners hereby consent to the
admission of, and will admit, the transferee to the Partnership as a Limited
Partner, without any further act of the Limited Partners. The General Partner or
the Registrar and Transfer Agent will:
(a) record at the registered office of the Partnership any change in
ownership of the Unit;
(b) amend the declaration showing the name of the transferee as the new
Limited Partner;
(c) make such filings and cause to be made such recordings as may from time
to time be necessary;
(d) forward a notice of the transfer to the transferee; and
(e) forward a Unit Certificate to the transferee in respect of the
transferred Unit.
Any transfer shall comply with the appropriate provincial securities and other
relevant legislation at the time. No assignment of a fraction of a Unit may be
made or will be recognized or entered in the register of the Partnership.
5.08 PLEDGE OF UNITS
If a Limited Partner pledges a Unit held by such Limited Partner as security for
a loan to such Limited Partner other than as per the Pledge Agreement, the
General Partner will, upon written request by such Limited Partner, deliver an
acknowledgement to the person making such loan acknowledging such pledge and
confirming that all distributions by the Partnership in respect of such Unit
will be paid to such person upon receipt by the General Partner of a written
order from such person, until such person delivers a release of such
acknowledgement to the Partnership.
5.09 PARTIES NOT BOUND TO SEE TO TRUST OR EQUITY
Except where specific provision has been made therefor in this Agreement, the
Registrar and Transfer Agent shall not, nor shall the General Partner or the
Limited Partners, be bound to see to the execution of any trust, express,
implied or constructive, or any charge, pledge or equity to which any Unit or
any interest therein is subject, or to ascertain or inquire whether any sale or
transfer of any such Unit or interest therein by a Limited Partner or his
personal representative is authorized by such trust, charge, pledge or equity,
or to recognize any person having any interest therein except for the person or
persons recorded as such Limited Partner.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 14
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5.10 INCAPACITY, DEATH, INSOLVENCY OR BANKRUPTCY
Where a person becomes entitled to a Unit on the incapacity, death, insolvency
or bankruptcy of a Limited Partner, or otherwise by operation of law, in
addition to the requirements of Section 5.07 hereof, that person will not be
recorded as or become a Limited Partner until:
(a) that person produces evidence satisfactory to the General Partner of such
entitlement; and
(b) that person has delivered such other evidence, approvals and consents in
respect of such entitlement as the General Partner may reasonably require
or as may be required by law or by this Agreement.
5.11 LOST UNIT CERTIFICATES
Where a Limited Partner claims that the Unit Certificate for his Units has been
defaced, lost, apparently destroyed or wrongly taken, the Registrar and
Transfer Agent shall cause a new Unit Certificate to be issued, provided that
the Limited Partner files with the Registrar and Transfer Agent an indemnity
bound in the form and in an amount satisfactory to the General Partner to
protect the Registrar and Transfer Agent and the Partnership from any loss,
cost or damage that they may incur or suffer by complying with the request to
issue a new Unit Certificate and provided further that the Limited Partner
satisfies all other reasonable requirements imposed by the Registrar and
Transfer Agent, including delivery of a form of proof of loss and payment of
reasonable expenses associated with the replacement of such Unit Certificates.
ARTICLE 6.00 - CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
6.01 CAPITAL CONTRIBUTION
The capital of the Partnership shall be the aggregate amount of the capital
contribution of all the Limited Partners from time to time, and the
contributions of the Initial Limited Partner in the amount of $1.00. The
Initial Limited Partner hereby agrees to sell to the Partnership and the
Partnership hereby agrees to purchase from such Initial Limited Partner, all of
the interest of the Initial Limited Partner in the Partnership for
consideration of $1.00, such purchase and sale transaction to be completed
contemporaneously with the closing of the Offering. The Initial Limited
Partner shall not sell, transfer or assign his interest in the Partnership
except in accordance with this Section.
6.02 SALE OF UNITS BY PRIVATE PLACEMENT
The General Partner is hereby authorized to raise capital required to enter
into the Technology Licence and Services Agreement and for the operation of the
Business by offering and selling to investors a minimum of 135 Units and a
maximum of 540 Units pursuant to the one or more offerings and will admit
subscribers of Units as Limited Partners in the Partnership. Each Unit shall
represent a contribution to the capital of the Partnership in the amount of the
Subscription Price.
It is hereby acknowledged and agreed that as of the date hereof the General
Partner has made a capital contribution of $1.00. This contribution entitles
the General Partner to an interest in the Distributable Cash of the Partnership
as described in Section 6.04 and no more.
6.03 DISCRETION OF THE GENERAL PARTNER IN RAISING CAPITAL
Subject to Section 6.02, the General Partner has complete discretion in
determining the terms and conditions of the offering and sale of Units and the
General Partner may do all things which it deems necessary, convenient,
appropriate or advisable in connection therewith. All things done or to be done
by the General Partner in this regard are hereby ratified and confirmed.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 15
<PAGE> 19
6.04 ALLOCATION OF DISTRIBUTABLE CASH
Distributable Cash will be allocated among the Partners as follows:
(a) 2% to the General Partner; and
(b) the balance to the Limited Partners pro rata according to their
respective Unit proportions.
6.05 ALLOCATION OF TAXABLE INCOME AND LOSS
The Net Income of the Partnership for the purposes of the Tax Act for each
fiscal year (including net income from any sale of property interests) shall be
allocated among the Partners based on the same formula as the allocation of
Distributable Cash set forth in Section 6.04. The Net Loss of the Partnership
for the purposes of the Tax Act for each fiscal year (including loss from any
sale of property interests) shall be allocated entirely to the Limited
Partners.
6.06 ADDITIONAL CAPITAL CONTRIBUTIONS
No Partner shall be required to make any additional capital contributions in
excess of its, his or her initial capital contributions and the aggregate cash
distributions made to it, him or her.
6.07 ADJUSTMENTS
If the Accountants of the Partnership determine that the Proportionate Share of
a Limited Partner in the distribution or allocation of Distributable Cash
differs from its, his or her share as determined by the General Partner, then
the determination of the Accountants shall be deemed to be correct and binding
upon the Partnership, General Partner and the Limited Partners. The General
Partner will cause the necessary adjustments to be made by payment or
reallocation to or from the Limited Partner, as the case may be.
6.08 COMPUTING TAXABLE INCOME AND LOSS
With respect to any fiscal period, Net Income and Net Loss of the Partnership
will be determined by the General Partner in accordance with generally accepted
accounting principles subject to the provisions of the Tax Act. For the
purposes of determining Net Income or Net Loss, the General Partner will
maximize discretionary deductions and allowances permitted by the Tax Act.
6.09 DISTRIBUTION OF DISTRIBUTABLE CASH
Distributable Cash will be estimated and paid to the Limited Partners and the
General Partner forthwith and adjusted annually following delivery of the
annual financial statements of the Partnership for the fiscal period in
question within 90 days of the fiscal year end. Any adjustments will be made by
increasing or decreasing, as appropriate, the next ensuing distribution to be
made.
Each Limited Partner hereby acknowledges that its, his or her entitlement to
Distributable Cash will be reduced to reflect any monetary default under any
one of its, his or her Promissory Notes.
The amount of cash distributed to a Limited Partner during any fiscal period
may be different from the amount of Net Income, Net Loss or income or loss for
tax purposes allocated to a Limited Partner for the period. The Managing
Partner shall have the right to withhold that portion of Distributable Cash
otherwise payable, in order to give effect to the provisions of Section 6.09
hereof.
6.10 SEPARATE CAPITAL ACCOUNTS
A separate capital account shall be established and maintained on the books of
the Partnership for each Limited Partner.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 16
<PAGE> 20
6.11 SEPARATE CURRENT ACCOUNT
A separate current account shall be established and maintained on the books of
the Partnership for the General Partner and each of the Limited Partners to
which any operating loss and all distributions (other than distributions of
capital) will be charged.
6.12 NO INTEREST PAYABLE
No Partner shall be entitled to receive interest on the amount of his capital
account or any balance in its, his or her current account from the Partnership
and no Partner shall be liable to pay interest to the Partnership on any
negative balance in its, his or her capital account or on any negative balance
in its, his or her current account. No Partner shall be entitled to withdraw
any funds from the capital or current accounts maintained for such Partner
except in compliance with this Agreement.
ARTICLE 7.00 - ACCOUNTING AND REPORTING
7.01 BOOKS AND RECORDS
The General Partner will keep or cause to be kept on behalf of the Partnership
adequate books and records reflecting the assets, liabilities, income and
expenditures of the Partnership and a register listing all Partners and the
Units held by them. Such books, records and register will be kept available for
inspection by any Partner or his duly authorized representative (at the expense
of such Partner) during business hours at the offices of the General Partner or
in the case of the register, at the office of the Registrar and Transfer Agent.
7.02 ANNUAL FINANCIAL INFORMATION
The General Partner, or its agent on its behalf, shall be responsible for the
preparation of annual audited financial statements of the Partnership as at the
end of each fiscal year of the Partnership. The General Partner, or its agent
in that behalf, shall distribute a copy of such annual audited financial
statements together with a report on the affairs of the Partnership to each
Partner on or before March 31 in each year and shall provide each Partner with
all income tax information regarding the Partnership and its operations during
the preceding fiscal year by March 31 of the following year. The cost of
preparing all such reports shall be a Partnership expense. Each Partner shall
be solely responsible for filing his income tax returns and reporting his share
of the Partnership income or loss.
ARTICLE 8.00 - MEETINGS
8.01 MEETINGS
Where Limited Partners holding not less than 25% of the outstanding Units in
number (the "REQUISITIONING PARTNERS") give to the General Partner notice
signed by each of them requesting a meeting of the Partnership, the General
Partner will, within 30 days of receipt of such notice, convene a meeting, and
if it fails to do so, the Requisitioning Partners may convene such meeting by
giving notice to the Limited Partners in accordance with this Agreement, signed
by such person as the Requisitioning Partners specify. Every meeting, however
convened, will be conducted in accordance with this Agreement.
8.02 PLACE OF MEETING
Every meeting will be held within the Regional Municipality of York or at a
place not more than thirty (30) kilometres from the boundaries of the Regional
Municipality of York, or at such other place in Canada as may be approved by
Ordinary Resolution.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 17
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8.03 NOTICE OF MEETINGS
Notice of any meeting will be given to each Limited Partner by prepaid
ordinary mail or by personal delivery not less than twenty-one (21) days prior
to such meeting, and will state:
(a) the time, date and place of such meeting; and
(b) in general terms, the nature of the business to be transacted at the
meeting
8.04 ACCIDENTAL OMISSIONS
Accidental omissions to give notice of a meeting to, or the non-receipt of
notice of a meeting by, any Limited Partner will not invalidate proceedings at
that meeting.
8.05 INFORMATION CIRCULARS
If proxies are solicited from Limited Partners, the persons soliciting such
proxies will prepare an information circular, and if such information circular
is delivered to the General Partner at least twenty-one (21) days before any
such meeting, the General Partner will cause the information circular to be
sent to Limited Partners whose proxies are solicited at least fourteen (14)
days prior to the meeting. An information circular will contain to the extent
that it is relevant and applicable, the information prescribed for information
circulars by the Securities Act (Ontario) and the regulations made thereunder.
No information circular shall be required for proxies solicited by the General
Partner.
8.06 PROXIES
Any Limited Partner entitled to vote at a meeting may vote by proxy if a proxy
has been received by the General Partner or the chairman of the meeting for
verification prior to the meeting. A person appointed as a proxy holder need
not be a Limited Partner.
8.07 VALIDITY OF PROXIES
A proxy purporting to be executed by or on behalf of a Limited Partner will be
considered to be valid unless challenged at the time of or prior to its
exercise, and the person challenging will have the burden of providing to the
satisfaction of the chairman of the meeting that the proxy is invalid and any
decision of the chairman concerning the validity of the proxy will be final.
8.08 FORM OF PROXY
Every proxy will be substantially in the following form or such other form as
may be approved by the General Partner or as may be satisfactory to the
chairman of the meeting at which it is sought to be exercised:
I _____________,of ____________________ in the Province of
____________,being a limited partner of YORK REGION E-PROPERTY LIMITED
PARTNERSHIP hereby appoint ______________ of the Province of __________
as my proxy, with full power of substitution to vote for me and on my
behalf at the meeting of limited partners to be held on the _________ day
of __________, 19_____ and every adjournment thereof and every poll that
may take place in consequence thereof.
As witness my hand this __ day of____,19___.
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---------------------------- -------------------------------
Signature Name of Limited Partner
8.09 CORPORATIONS
A Limited Partner which is a corporation may appoint under seal an officer,
director or other authorized person as its representative to attend, vote and
act on its behalf at a meeting of Limited Partners.
8.10 ATTENDANCE OF OTHERS
Any officer or director of the General Partner and representatives of the
Accountants will be entitled to attend and receive notice of any meeting of
Limited Partners.
8.11 CHAIRMAN
The General Partner may nominate an individual (including an officer, director
or shareholder of the General Partner and who need not be a Limited Partner) to
be chairman of a meeting of Limited Partners and the person nominated by the
General Partner will be chairman of such meeting unless the Limited Partners
elect a chairman by Ordinary Resolution.
8.12 QUORUM
Subject to this Agreement, a quorum at any meeting of Limited Partners will
consist of two or more Limited Partners present in person or represented by
proxy. If within half an hour after the time fixed for the holding of such
meeting, a quorum for the meeting is not present, the meeting:
(a) if called by or on the requisition of the Limited Partners will be
terminated; and
(b) if called by the General Partner will be held at the same time and, if
available, the same place, not less than 10 days or more than 21 days
later (or if that date is not a business day, the first business day
after that date), and the General Partner who called the meeting will
give at least 7 days notice to all Limited Partners of the date of the
reconvening of the adjourned meeting. Such notice need not set forth the
matters to be considered unless they are different from those for which
the original meeting was called. At such reconvened meeting the quorum
for the meeting and the quorum for any specific resolution to be passed
at such meeting will consist of the Limited Partners then present in
person or represented by proxy at such reconvened meeting.
8.13 VOTING
Each question submitted to a meeting:
(a) which requires an Extraordinary Resolution under this Agreement will be
decided by a poll; and
(b) which does not require an Extraordinary Resolution will, other than as
otherwise provided in this Agreement, be decided by Ordinary Resolution on
a show of hands unless a poll is demanded by a Limited Partner, in which
case a poll will be taken; and in the case of an equality of votes, the
chairman will not have a casting vote and the resolution will be deemed to
be defeated. The chairman will be entitled to vote in respect of any Units
held by him or pursuant to which he may be a proxyholder. On any vote at a
meeting of Limited Partners, a declaration of the chairman concerning the
result of the vote will be conclusive.
Subject as hereinafter provided, each person present at the meeting will have
one vote for each Unit of which he is registered as the Unit holder and for
each Unit in respect of which he is the proxyholder. Units owned by a Limited
Partner who is party to a contract or proposed contract or who has a material
interest in a contract, proposed contract or transaction (either directly or
indirectly, including through an Associate or
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 19
<PAGE> 23
Affiliate) which is the subject matter of a resolution shall not be entitled to
a vote on such resolution: provided however, that a Limited Partner shall be
deemed not to have a material interest in a contract, proposed contract or
transaction if the interest arises merely from the ownership of Units where the
Limited Partner will have or receive no extra or special benefit or advantage
not shared on a pro rata basis by all other Limited Partners.
8.14 POLL
A poll requested or required concerning the election of a chairman or an
adjournment will be taken immediately on request and any other matter will be
taken at the meeting or an adjournment of the meeting in such manner as the
chairman directs.
8.15 RESOLUTIONS BINDING
Any resolution passed in accordance with this Agreement will be binding on all
the Limited Partners and their respective heirs, executors, administrators,
successors and assigns, whether or not any such Limited Partner was present in
person or voted against any resolution so passed.
8.16 POWERS EXERCISABLE BY EXTRAORDINARY RESOLUTION
The following powers shall only be exercisable by Extraordinary Resolution
passed by the Limited Partners:
(a) selling all or substantially all of the assets of the Partnership;
(b) consenting to the amendment of this Agreement, except as expressly
provided herein;
(c) continuing the Partnership in the event that the Partnership is
terminated by operation of the law;
(d) agreeing to any compromise or arrangement by the Partnership with any
creditor, or class or classes of creditors;
(e) changing the fiscal year end of the Partnership;
(f) amending, modifying, altering or repealing any Extraordinary Resolution
previously passed by the Limited Partners;
(g) borrowing money other than as contemplated hereunder;
(h) dissolving or terminating the Partnership;
(i) subject to and in accordance with Article 4.00, removing the General
Partner and appointing a new General Partner;
(j) changing the business of the Partnership;
(k) except as contemplated in Sections 6.02 and 6.03, conducting a public
offering of the Partnership's securities; and
(l) approving a settlement of an action against the General Partner as a
result of a breach of its duties.
8.17 POWERS EXERCISABLE BY ORDINARY RESOLUTION
Any other matters to be determined by the Partnership other than as otherwise
expressly provided for in this Agreement shall be determined by Ordinary
Resolution.
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YORK REGION E-PROPERTY LIMITED PARTNERSHIP 20
<PAGE> 24
8.18 MINUTES
The General Partner will cause minutes to be kept of all proceedings and
resolutions passed at every meeting, with copies of any resolutions of the
Partnership to be made and entered in books to be kept for that purpose, and
any minutes, if signed by the chairman of the meeting will be deemed to have
been duly convened and held and all resolutions and proceedings shown in them
will be deemed to have been duly passed and taken.
8.19 ADDITIONAL RULES AND PROCEDURES
To the extent that the rules and procedures for the conduct of a meeting of the
Limited Partners are not prescribed in this Agreement, the rules and procedures
will be determined by the chairman of the meeting.
8.20 AUTHORIZED ATTENDANCE
The General Partner has the right to authorize the presence of any person at a
meeting regardless of whether the person is a Limited Partner. With the approval
of the General Partner, that person is entitled to address the meeting.
ARTICLE 9.00 - REPRESENTATIONS, WARRANTIES AND COVENANTS
9.01 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GENERAL PARTNER
The General Partner hereby represents and warrants to the Partnership and each
Limited Partner that:
(a) the Partnership is a valid limited partnership, duly formed under the
laws of the Province of Ontario; and
(b) this Agreement has been duly and validly authorized, executed and
delivered by the General Partner and constitutes a valid, binding and
enforceable agreement of the General Partner, except as enforcement may be
limited by bankruptcy, insolvency and other similar laws affecting
enforcement of creditors' rights, by general principles of equity that may
apply in any proceeding and to the extent that equitable remedies are in
the discretion of the applicable court.
and the General Partner covenants to execute and deliver all such other
documents or instruments on behalf of and in the name of the Partnership and
for the Limited Partners as may be deemed necessary or desirable by the General
Partner to carry out fully the provisions of this Agreement in accordance with
its terms.
ARTICLE 10.00 - DISSOLUTION AND LIQUIDATION
10.01 DISSOLUTION AND TERMINATION
The Partnership shall be automatically dissolved on December 31, 2042 unless
sooner terminated or dissolved in accordance with Section 2.07.
10.02 DISTRIBUTIONS UPON DISSOLUTION
Upon dissolution of the Partnership, the assets of the Partnership shall be
liquidated and the proceeds distributed as follows:
(a) the liquidator, who shall be the General Partner unless determined
otherwise by the Limited Partners pursuant to an Extraordinary
Resolution, shall file all certificates and notices of dissolution of the
Partnership required by law. The liquidator shall proceed without any
unnecessary delay to sell and otherwise liquidate the Partnership's
property and assets; provided however, that if the liquidator shall
determine that an immediate sale of part or all of the
- --------------------------------------------------------------------------------
YORK REGION E-PROPERTY LIMITED PARTNERSHIP 21
<PAGE> 25
Partnership property would cause undue loss to the Limited Partners, in
order to avoid such loss, the liquidator may, except to the extent
prohibited by the laws of the Province of Ontario, defer the liquidation
of the Partnership property for a reasonable time, except for such
liquidation as may be necessary to satisfy the debts and liabilities of
the Partnership to persons other than the Limited Partners. Upon the
complete liquidation and distribution of the Partnership assets, the
Limited Partners shall cease to be Limited Partners of the Partnership and
the liquidator will execute, acknowledge and cause to be filed all
certificates and notices required by law to terminate the Partnership; and
(b) upon the dissolution of the Partnership pursuant to Section 10.01, the
Accountants of the Partnership shall promptly prepare, and the liquidator
shall furnish to each Limited Partner, a statement setting forth the
assets and liabilities of the Partnership upon its dissolution. Promptly
following the complete liquidation and distribution of the Partnership's
property and assets, the Accountants shall prepare, and the liquidator
shall furnish to each Limited Partner, a statement showing the manner in
which the Partnership assets were liquidated and distributed.
10.03 EVENTS NOT CAUSING DISSOLUTION
Notwithstanding any rule of law or equity to the contrary, the Partnership
shall not be dissolved or terminated by admission of any new General Partner or
Limited Partner or the removal, actual or deemed, resignation, death,
incompetence, bankruptcy, insolvency, other disability or incapacity,
dissolution, liquidation winding-up or receivership, or the admission,
resignation or withdrawal of the General Partner, the Initial Limited Partner
or any Limited Partner, except in accordance with this Agreement.
ARTICLE 11 - OPTION TO PURCHASE
11.01 OPTION TO PURCHASE PARTNERSHIP UNITS
(a) Notwithstanding any other provision of this Agreement, Planet Today shall
have the right to purchase ("Option to Purchase"), by notice at any time
after December 31, 2003 and prior to the expiry thereof, all, but not
less than all, of the issued and outstanding Units for a price equal to
$3,300 per Unit less the amount of any liabilities of the Partnership,
contingent or non-contingent, calculated on a per Unit basis (the "Option
Exercise Price").
(b) Subject to obtaining any necessary regulatory approvals and compliance
with all applicable legal and regulatory requirements, the Option
Exercise Price will be payable to each Limited Partner and satisfied as
follows:
(I) on behalf of each Limited Partner, the amount in cash, if
applicable, required to repay and satisfy in full all payments of
principal and interest due under the Second Promissory Note made
or assumed by the subject Limited Partner; and
(II) the balance:
(i) in cash; or
(ii) if Planet Today or any successor company thereto is a
public company whose common shares are listed or quoted on
a stock exchange or other recognized public market:
(A) by issuing and delivering that number of such common
shares of Planet Today obtained by dividing the
balance of the Option Exercise Price by 95% of the
weighted average trading price of such common shares
on such stock exchange(s) or other recognized public
market(s) for 20
- --------------------------------------------------------------------------------
YORK REGION E-PROPERTY LIMITED PARTNERSHIP 22
<PAGE> 26
consecutive trading days ending not more than 10
days prior to the exercise of the Option to
Purchase; or
(B) by issuing and delivering a combination of cash
and that number of such common shares of Planet
Today obtained by dividing the balance of the
Option Exercise Price not paid in cash by 95% of
the weighted average trading price of such common
shares on such stock exchange(s) or other
recognized public market(s) for 20 consecutive
trading days ending not more than 10 days prior to
the exercise of the Option to Purchase.
(c) The Partnership and each Limited Partner agree to deposit the
certificates representing the Units, duly endorsed in blank for
transfer, with the General Partner, which will deposit the
Units with Planet America in accordance with this provision (and
in accordance with the Assignment of Promissory Notes Agreement
and the Pledge Agreement) and agree not to withdraw the
certificates from deposit while the Option to Purchase is
outstanding. The deposited certificates shall be held by
Planet America, subject to the terms and conditions hereof
and in accordance with the terms of the Assignment of Promissory
Notes Agreement and the Pledge Agreement.
(d) The Partnership and the General Partner will represent, as of the
closing of the Option to Purchase that:
(a) there are no agreements, options or rights outstanding
to subscribe for Units and the Partnership has not agreed
to allot, set aside, reserve or issue any of its
Units and no person, firm or corporation has any right or
privilege (pre-emptive or contractual) to subscribe for or
purchase any issued or unissued Units; and
(b) the financial statements of the Partnership as at the
Option Exercise Date will present fairly the assets,
liabilities and the financial condition of the
Partnership as at that date and the results of operation
of the Partnership for the period covered thereby and,
if the Option to Purchase is exercised, then, at the time
when the purchase of the Units is completed, the
Partnership will be the owner of all assets shown in the
financial statements with good and marketable title
thereto, free and clear of all mortgages, liens, charges,
security interest and encumbrances (except those shown or
reflected in the financial statements) and will have no
liabilities, except liabilities shown or reflected in the
financial statements.
(e) The Limited Partners each represent and warrant that the
Units held by them at the date of closing of the Option to
Purchase will be beneficially owned by such Limited Partners,
free and clear of all mortgages, liens, charges, pledges,
security interest, adverse claims or encumbrances, and the
Limited Partners are severally entitled to sell and transfer the
same.
(f) The Partnership agrees that:
(a) during the currency of the Option to Purchase, it will
cause to be made available to Planet Today or its agents,
at all reasonable times, all books and records of the
Partnership, and will permit Planet Today, through its
officers or agents to inspect any property or assets
owned by the Partnership and all deeds, documents, records
and accounts in the possession of the Partnership and with
relation to the Partnership business and affairs; and
(b) if the Option to Purchase is exercised, no distributions
will be authorized, paid or made to the Limited Partners
from the date of the notice of exercise.
- -----------------------------------------------------------------------------
YORK REGION E-PROPERTY LIMITED PARTNERSHIP 23
<PAGE> 27
(g) The Option to Purchase may be exercised by a notice in
writing addressed to the Partnership and delivered to the
office of the General Partner at or before 5:00 p.m.(EST)
on the Option Expiry Date. Upon the Option to Purchase
being exercised, the sale and purchase of the Units shall
be closed on or before the 20th, business day following the
exercise of the same, at which time, upon compliance with
the terms hereof, all necessary and proper corporate
proceedings as approved by counsel for the Partnership and
Planet Today shall be taken for the transfer of all the
outstanding Units to Planet Today, or its nominee(s), for
the resignation of the General Partner and the appointment
of Planet Today or a nominee of Planet Today as the General
Partner and for the delivery to Planet Today of the
releases and agreements hereinafter provided for. Upon
all such proceedings being taken and such releases and
agreements being delivered, Planet Today shall pay to the
new general partner the aggregate Option Exercise Price
for distribution to the Limited Partners. Having made
such payment, the General Partner shall thereupon
make arrangements for the delivery of the deposited
certificates representing all the outstanding Units of
the Partnership to Planet Today or its nominee(s), and the
new general partner shall deliver to the Limited
Partners the respective Option Exercise Price, after
deducting therefrom any taxes required to be withheld.
From and after the date of delivery to a Limited Partner
of the respective Option Exercise Price, after deducting
therefrom any taxes required to be withheld, to the
address of the Limited Partner appearing on the register
maintained by the Registrar and Transfer Agent, or to
such other address as the Limited Partner may in writing
direct, the purchase of the Units by Planet Today shall
be deemed to have been fully completed and all right,
title, benefit and interest, both at law and in equity,
of the Limited Partner, or of any transferee, assignee
or any other person having any interest, legal or
equitable, therein or thereto shall cease and determine.
(h) If the Option to Purchase is exercised, on payment of the
Option Exercise Price:
(a) the Limited Partners and the General Partner each
release the Partnership and Planet Today from all
claims and demands, including any demands by the
General Partner for fees for any services beyond
the closing of the Option to Purchase, and the
Limited Partners and the General Partner agree to
indemnify Planet Today against all liabilities or
claims whatsoever against Planet Today existing at
the time of closing and not disclosed on the
financial statements of the Partnership; and
(b) the Limited Partners and the General Partner agree
to deliver such releases, duly executed by each of
them as Planet Today may specify, for all their
respective claims and demands against the
Partnership and Planet Today, and an agreement to
jointly and severally indemnify the Partnership and
Planet Today against all liabilities or claims
whatsoever existing at the time the Option to
Purchase is exercised and not disclosed in the
financial statements of the Partnership.
(i) The above releases and agreements shall be binding upon the
heirs, executors, administrators and other legal
representatives of the persons executing the same and
shall enure to the benefit of the successors and
assigns of the Partnership and Planet Today.
(j) The Unit certificates shall be legended to notify Limited
Partners of the Option to Purchase.
(k) Notwithstanding anything herein to the contrary, if the
Option to Purchase is properly exercised in
accordance with all of the terms of this Article 11 and a
Unit holder does not tender all of his Units in
accordance herewith, then the Units not so tendered shall
be cancelled and cease to be outstanding for all purposes
of this Agreement and the holder thereof shall not be
entitled to any assets of the Partnership or interest
therein, except to the extent of the Option Exercise Price.
(l) In the event that the Option to Purchase is exercised,
there shall be no allocation of income to the Limited
Partners in the fiscal period that the acquisition of all
of the Units is completed.
- -----------------------------------------------------------------------------
YORK REGION E-PROPERTY LIMITED PARTNERSHIP 24
<PAGE> 28
ARTICLE 12.00 - MISCELLANEOUS
12.01 NOTICES
Any notice or other written communication which must be given or sent under
this Agreement shall be deemed to have been validly given and received on
the seventh day following its sending by first class ordinary mail to the
address of the General Partner and the Limited Partners as follows: in the
case of the General Partner at 1091 Gorham Street, Suite 302, Newmarket,
Ontario, L3Y 7V 1, or any new address as the General Partner may give notice
of: and in the case of the Limited Partners, to the address appearing on the
register maintained by the Registrar and Transfer Agent. Notices may be
delivered by facsimile or other electronic communication and shall be deemed
to be received on the day transmitted as evidenced by the transmission report.
12.02 FURTHER ACTS
The parties hereto agree to execute and deliver such further and other
documents and perform and cause to be performed such further and other acts
and things as may be necessary or desirable to give full effect to this
Agreement and every part thereof.
12.03 BINDING EFFECT
Subject to the restrictions on assignment and transfer herein contained,
this Agreement shall enure to the benefit of and be binding upon the parties
thereto and their respective heirs, executors, administrators and other
legal representative, successors and assigns.
12.04 SEVERABILITY
Each provision of this Agreement is intended to be severable. If any provision
hereof is illegal or invalid, such illegality or invalidity shall not effect
the validity of the remainder hereof.
12.05 COUNTERPARTS
This Agreement may be executed in any number of counterparts with the
same effect as if all parties had signed the same document. This Agreement
may also be adopted in any subscription and assignment forms or similar
instruments signed by a Limited Partner, with the same effect as if such
Limited Partner had executed a counterpart of this Agreement. All
counterparts and adopting instruments shall be construed together and shall
constitute one and the same agreement.
12.06 TIME
Time shall be of the essence.
12.07 GOVERNING LAW
This Agreement shall be government by and construed in accordance with the laws
of the Province of Ontario and the laws of Canada applicable therein.
12.08 ARBITRATION
Any dispute arising out of or in connection with the interpretation of this
Agreement shall be finally settled by arbitration pursuant to the
Arbitration Act (Ontario) and the rules and regulations thereunder save
that the arbitrator(s) shall be entitled to be paid his, her or their
customary professional fees without limitation to those referred to in the
Arbitration Act (Ontario). The decision of the arbitrator(s) shall be final
and binding upon the parties and shall be reducible to judgement in the
appropriate court of competent
- -----------------------------------------------------------------------------
YORK REGION E-PROPERTY LIMITED PARTNERSHIP 25
<PAGE> 29
jurisdiction. The party or parties to bear the fees and costs of the
arbitrator(s) and the costs of arbitration shall be in the discretion of the
arbitrator(s).
12.09 ENTIRE AGREEMENT
This Agreement sets forth all (and is intended by all parties to be an
integration of all)of the representations, promises, agreements and
understandings among the parties hereto with respect to the Partnership, the
Partnership's Business, and the property of the Partnership, and there
are no representations, promises, agreements or understandings, oral or
written, express or implied, among them other than as set forth, referred to,
or incorporated herein.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first
above written.
E-PROPERTY SERVICES CORPORATION
By:/s/NOREEN M. STEVENS
----------------------------------
Name: Noreen M. Stevens
Title: President and Director
SIGNED, SEALED AND DELIVERED )
in the presence of )
[SIG] ) /s/ GRAHAM TURNER
- ---------------------------------------- ) ------------------------------------
Witness ) GRAHAM TURNER
)
YORK REGION E-PROPERTY LIMITED
PARTNERSHIP PARTNERS, by its agent and
attorney E-PROPERTY SERVICES
CORPORATION
By: /s/ NOREEN M. STEVENS
------------------------------
Name: Noreen M. Stevens
Title: President and Director
PLANET TODAY INC.
By: /s/ NOREEN M. STEVENS
------------------------------
Name: Noreen M. Stevens
Title: Secretary
- -------------------------------------------------------------------------------
YORK REGION E-PROPERTY LIMITED PARTNERSHIP 26
<PAGE> 1
EXHIBIT 10.3
DATED AS OF THE 2ND DAY OF DECEMBER, 1998
BETWEEN:
YORK REGION e-PROPERTY LIMITED PARTNERSHIP
- AND -
PLANET TODAY INC.
----------------------------------------------------
MANAGEMENT SERVICES AGREEMENT
----------------------------------------------------
FRASER MILNER
BARRISTERS & SOLICITORS
1 FIRST CANADIAN PLACE
100 KING STREET WEST
TORONTO, ONTARIO
M5X 1B2
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1
INTERPRETATION
<S> <C> <C>
SECTION 1.1 - Definitions .......................................................................1
SECTION 1.2 - Interpretation Not Affected by Headings, etc. .....................................5
SECTION 1.3 - Severability ......................................................................5
SECTION 1.4 - Governing Law .....................................................................5
ARTICLE 2
APPOINTMENT OF THE MANAGER
SECTION 2.1 - Representation ....................................................................6
SECTION 2.2 - Appointment of Manager ............................................................6
ARTICLE 3
DUTIES AND AUTHORITY OF THE MANAGER
SECTION 3.1 - Management Services ...............................................................6
SECTION 3.2 - Approvals .........................................................................7
SECTION 3.3 - Employees and Consultants .........................................................7
SECTION 3.4 - Failure to Comply .................................................................7
SECTION 3.5 - Authority .........................................................................7
SECTION 3.6 - Co-operation of Manager Being Replaced ............................................7
SECTION 3.7 - General ...........................................................................8
ARTICLE 4
RECORDS, BUDGETS, ACCOUNTS
SECTION 4.1 - Records and Rights of Examination .................................................8
SECTION 4.2 - Furnish Information to Accountants ................................................8
SECTION 4.3 - Budgets and Reports ...............................................................8
SECTION 4.4 - Accounting ........................................................................9
SECTION 4.5 - Billings ..........................................................................9
SECTION 4.6 - Banking ...........................................................................9
SECTION 4.7 - Reporting and Communication .......................................................9
ARTICLE 5
COLLECTION AND DISBURSEMENT OF GROSS REVENUE
SECTION 5.1 - Gross Revenue ....................................................................10
SECTION 5.2 - Disbursement of Gross Revenue ....................................................10
SECTION 5.3 - Report to the Owner ..............................................................10
SECTION 5.4 - Revenue Deficiencies .............................................................11
</TABLE>
<PAGE> 3
ii.
<TABLE>
<CAPTION>
ARTICLE 6
FEES AND EXPENSES
<S> <C> <C>
SECTION 6.1 - Management Fee ...................................................................11
SECTION 6.2 - Expenses .........................................................................11
SECTION 6.3 - Overhead .........................................................................12
SECTION 6.4 - No Duplication ...................................................................12
ARTICLE 7
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 7.1 - Representations and Warranties of Owner and General Partner ......................12
SECTION 7.2 - Representations and Warranties of the Manager ....................................12
SECTION 7.3 - Manager an Independent Contractor ................................................13
SECTION 7.4 - Indemnity by the Owner ...........................................................13
SECTION 7.5 - Indemnity by Manager .............................................................13
SECTION 7.6 - Standard, Unavoidable Delay ......................................................13
SECTION 7.7 - Confidentiality ..................................................................14
ARTICLE 8
OWNER'S CONTROL
SECTION 8.1 - General Control of the Owner .....................................................14
SECTION 8.2 - Specific Approvals ...............................................................14
ARTICLE 9
TERM AND TERMINATION
SECTION 9.1 - Initial Term .....................................................................15
SECTION 9.2 - Renewal ..........................................................................15
SECTION 9.3 - Termination by the Owner .........................................................15
SECTION 9.4 - Termination by Manager For Default by the Owner ..................................15
SECTION 9.5 - Delivery of Records ..............................................................16
SECTION 9.6 - Effect of Continued Performance ..................................................16
SECTION 9.7 - Duties Flowing From Termination ..................................................16
SECTION 9.8 - Rights on Termination ............................................................16
ARTICLE 10
RESOLUTION OF DISPUTES
SECTION 10.1 - Arbitration ......................................................................17
SECTION 10.2 - Specific Performance .............................................................17
ARTICLE 11
GENERAL
SECTION 11.1 - Notices ..........................................................................17
SECTION 11.2 - Waiver ...........................................................................18
</TABLE>
<PAGE> 4
iii.
<TABLE>
<S> <C> <C>
SECTION 11.3 - Amendments .......................................................................18
SECTION 11.4 - Further Assurances ...............................................................19
SECTION 11.5 - Entire Agreement .................................................................19
SECTION 11.6 - No Assignments ...................................................................19
SECTION 11.7 - Successors and Assigns ...........................................................19
ARTICLE 12
EXECUTION
SECTION 12.1 - Execution ........................................................................20
</TABLE>
<PAGE> 5
MANAGEMENT AGREEMENT
THIS AGREEMENT dated as of the 2nd day of December, 1998
B E T W E E N:
YORK REGION e-PROPERTY LIMITED PARTNERSHIP, a limited
partnership formed under the laws of the Province of
Ontario by its general partner, York Region e-Property
Services Corporation, a corporation incorporated under the
laws of the Province of Ontario, (hereinafter referred to
as the "Owner")
OF THE FIRST PART
- and -
PLANET TODAY INC., a corporation incorporated under the
laws of the Province of Ontario,
(hereinafter referred to as the "Manager")
OF THE SECOND PART
WITNESSETH THAT:
WHEREAS the Owner has acquired or will acquire pursuant to a
Technology Access Licence and Support Services Agreement dated December 31,
1998 between the Owner and Planet America Inc. (the "Licence Agreement") the
non-exclusive licence to use and apply the e-Property Technology within the
Territory; such that the Owner will conduct thereafter a business (hereinafter
called the "Business") of developing, operating and marketing those Initial
Technologies;
AND WHEREAS the Owner and the Manager also desire to enter into
certain arrangements for the Manager to provide certain administrative services
to the Business as hereinafter set out for and in consideration of the fees
payable by the Owner to the Manager.
NOW THEREFORE in consideration of the premises, covenants and
agreements set forth herein and of the sum of FIVE ($5.00) DOLLARS now paid by
each party to the other and of other good and valuable consideration, the
receipt and sufficiency of which each party hereby acknowledges, the parties
hereby covenant and agree as follows:
ARTICLE 1
INTERPRETATION
SECTION 1.1 - DEFINITIONS
In this Agreement, unless there is something in the subject matter
or context inconsistent therewith:
<PAGE> 6
2.
"ACCOUNTANTS" means such certified public accountants or independent chartered
accountants as may be appointed annually by the Owner;
"ACCOUNTING PERIOD" means the period of twelve months ending on the last day of
December in each calendar year, except that the first Accounting Period under
this Agreement shall be the period from the date of commencement of the Initial
Term to the next ensuing December 31;
"AFFILIATE" has the meaning ascribed thereto in the Securities Act (Ontario);
"AGREEMENT", "this Agreement", "the Agreement", "hereto", "hereof", "herein",
"hereby", "hereunder" and similar expressions mean to refer to this Agreement
as amended from time to time and any agreement or instrument supplemental or
ancillary hereto or in implementation hereof and the expressions "Article",
"Section", "Subsection", "Paragraph" and "Subparagraph" followed by a number or
letter without further qualification mean and refer to the specified Article,
Section, Subsection, Paragraph or Subparagraph of this Agreement;
"APPLICABLE LAW" means, with respect to any Person, property, transaction,
event or other matter, any law, rule, statute, regulation, order, judgment,
decree, treaty or other requirement having the force of law (collectively the
"Law") relating or applicable to such Person, property, transaction, event or
other matter. Applicable Law also includes, where appropriate, any
interpretation of the Law (or any part thereof) by any Person having
jurisdiction over it, or charged with its administration or interpretation;
"APPROVED BUDGET" means a budget Approved by the Owner pursuant to Section 4.3;
"APPROVED BY THE OWNER" means the approval in writing given by the General
Partner of the Owner to the Manager in connection with the subject request or
item to be approved;
"BUSINESS" means the development, marketing, use, operation and/or licencing of
Internet-based information utilities which have the ability to host a full
range of interactive services to enable individuals, community groups and local
businesses, governments and associations within the Regional Municipality of
York, Canada to, among other things, share information and conduct e-commerce
and e-business transactions for the purpose of earning income, and all
activities incidental thereto.
"BUSINESS DAY" means a day which is neither a Saturday, Sunday nor a day
observed as a holiday under the laws of the Province of Ontario or the federal
laws of Canada; and "Business Days" means more than one Business Day;
"CAPITAL EXPENDITURES" means expenditures of a capital nature relating to the
Business according to generally accepted accounting principles, consistently
applied;
"DISTRIBUTABLE CASH" shall have the meaning attributed thereto in the Limited
Partnership Agreement;
"e-PROPERTY TECHNOLOGY" means the computer-based software system and facility
developed and owned by Planet America called "e-Property (TM)" which creates a
shared electronic platform that is capable of hosting a full range of
interactive services, including collaborative information and file-sharing,
e-commerce and e-business transactions, relationship-building and permission
marketing and messaging between individuals, groups, businesses, governments,
associations and other organizations, all as more particularly described in the
Licence Agreement;
<PAGE> 7
3.
"EVENT OF DEFAULT" means, in the case of the Manager:
(i) a material breach by the Manager to a material tern if this
Agreement, including without limitation, the failure of the
Manager to perform or the improper performance by the Manager in
any material respect of any one or more of its duties or its
obligations under this Agreement; or
(ii) a breach by the Manager of any trust or fiduciary duty created by
this Agreement for funds received by it or the Manager's refusal
to account for such funds,
and means, in the case of the Owner, the failure of the Owner to perform its
duties and discharge its obligations in any material respect under this
Agreement;
"EVENT OF INSOLVENCY" means, with respect to the Manager, the occurrence of any
one of the following events:
(i) if the Manager, other than in connection with a bona fide
corporate reorganization, is wound up, dissolved, liquidated, or
becomes subject to the provisions of the Winding Up Act (Canada)
as amended or re-enacted from time to time, or has its existence
terminated unless such existence is immediately reinstated or has
any resolution passed therefor or makes a general assignment for
the benefit of its creditors or a proposal under the Bankruptcy
and Insolvency Act (Canada) as amended or re-enacted from time to
time, or is adjudged bankrupt or insolvent; or if it proposes a
compromise or arrangement under the Companies' Creditors
Arrangement Act (Canada) as amended or re-enacted from time to
time, or files any petition or answer seeking any reorganization,
arrangement, composition, re-adjustment, liquidation, or similar
relief for itself under any present or future law relating to
bankruptcy, insolvency, or other relief for or against debtors
generally; or
(ii) if a court of competent jurisdiction enters an order, judgment or
decree approving a petition filed with respect to the Manager
seeking any reorganization, arrangement, composition,
re-adjustment, liquidation, dissolution, winding up, termination
of existence, declaration of bankruptcy or insolvency or similar
relief under any present or future law relating to bankruptcy,
insolvency or other relief for or against debtors generally, and
such order, judgment or decree remains unvacated and unstayed for
an aggregate of thirty (30) days (whether or not consecutive) from
the day of entry thereof; or if any trustee in bankruptcy,
receiver, receiver and manager, liquidator or any other officer
with similar powers is appointed, whether privately or judicially,
with the consent or acquiescence of the Manager or such
appointment remains unvacated and unstayed for an aggregate of
thirty (30) days (whether or not consecutive); or
(iii) if the Manager shall be or become insolvent;
"FIRST PROMISSORY NOTE" shall have the meaning attributed thereto in the
Offering Memorandum;
"GENERAL PARTNER" means York Region e-Property Inc.;
"GROSS REVENUE" shall mean the aggregate of all revenues from all sources from
the operation of the Business before deducting any cost or expense, as
determined on an accrual basis in accordance with generally accepted accounting
principles, consistently applied, including, without restriction, interest on
<PAGE> 8
4.
deposits and any funds received from the disposition of any assets forming part
of the Business or any other receipt of a capital nature in accordance with
generally accepted accounting principles;
"INITIAL TERM" means the initial term of this Agreement as defined in Section
9.1;
"LAW SITE" means a community-based or geographically-based local area Internet
website created and supported by the e-Property Technology;
"LICENCE AGREEMENT" means the Technology Licence and Services Agreement dated as
of December 31, 1998 between the Owner, the Manager and Planet America Inc.
"LIMITED PARTNERS" means the limited partners of the Owner;
"LIMITED PARTNERSHIP AGREEMENT" means the Amended and Restated Limited
Partnership Agreement dated December 1, 1998, respecting the Owner;
"MANAGEMENT FEE" shall mean the fee payable by the Owner to the Manager as
provided in Section 6.1;
"MANAGEMENT SERVICES" means the provision of administrative assistance to the
Owner by the Manager in connection with the Business, as provided at Article 3
hereof;
"MANAGER" means Planet Today Inc. or an Affiliate or permitted assign thereof;
"MORTGAGE" means present or future charges, mortgages, liens or other
encumbrances, if any, in or on the Property or any part thereof as may be
Approved by the Owner;
"NET REVENUE" shall have the meaning attributed thereto in the Limited
Partnership Agreement;
"NOTICE OF COMPLAINT" means a notice of complaint given in accordance with the
provisions of either of Sections 9.3 or 9.4;
"NOTICE OF TERMINATION" means a notice of termination given in accordance with
the provisions of either of Sections 9.3 or 9.4;
"OFFERING" means the offering of limited partnership units of the Owner on
December 2, 1998, pursuant to the Offering Memorandum;
"OFFERING MEMORANDUM" means the Confidential Offering Memorandum of the Owner
dated December 2, 1998 as such may be amended from time to time;
"OPERATING EXPENSES" shall have the meaning attributed thereto in the Limited
Partnership Agreement;
"OTHER CONTRACTS" means all contracts entered into or assumed by the Owner, or
the Manager on behalf of the Owner, in respect of the Business pursuant to an
Approved Budget or as otherwise Approved by the Owner;
"OWNER" means York Region e-Property Limited Partnership, a limited partnership
formed under the laws of the Province of Ontario, as the owner of the Business,
and any successors in title thereto;
"PERSON" means an individual, a partnership, a corporation, a government or any
department or agency thereof, a trustee, any unincorporated organization and the
heirs, executors, administrators or legal representatives of an individual;
<PAGE> 9
5.
"PROPERTY" means all undertaking, property and assets of any form or of any
nature whatsoever, now or hereafter owned by the Owner and used in connection
with, in respect of or relating to, in any way or in any manner whatsoever, the
Business;
"RENEWAL TERMS" means any renewal of the Initial Term of this Agreement or of
subsequent renewal terms as provided at Section 9.2 hereof;
"SECOND PROMISSORY NOTES" shall have the meaning attributed thereto in the
Offering Memorandum;
"TERM" means the Initial Term hereof together with any Renewal Terms;
"UNAVOIDABLE DELAY" means any condition or cause beyond the reasonable control
of the Manager, in its capacity as Manager under this Agreement, if the Manager
is acting in good faith and in a reasonable manner with respect to such
condition or cause but shall not include any inability to perform because of any
financial condition of the Manager or any lack of funds other than a lack of
funds caused by a failure of the Owner to pay the Manager an amount properly
due, or because of a failure of the Owner to respond to a request for any
approval required under this Agreement; and
"UNITS" means the limited partnership units of the Owner which are owned by the
Limited Partners.
SECTION 1.2 - INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
Grammatical variations of any terms defined herein have similar
meanings; words importing the singular number shall include the plural and vice
versa; words importing the masculine gender shall include the feminine and
neuter genders. The division of this Agreement into separate Articles, Sections,
Subsections, Paragraphs and Subparagraphs, the provision of a table of contents,
and the insertion of headings and marginal notes and references are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
SECTION 1.3 - SEVERABILITY
If any covenant, obligation or agreement of this Agreement, or the
application thereof to any Person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such covenant, obligation or agreement to Persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each covenant, obligation and agreement of this Agreement shall be
separately valid and enforceable to the fullest extent permitted by law.
SECTION 1.4 - GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of Ontario and the laws of Canada applicable therein and shall be
treated in all respects as an Ontario contract.
<PAGE> 10
6.
ARTICLE 2
APPOINTMENT OF THE MANAGER
SECTION 2.1 - REPRESENTATION
The Manager represents to and covenants with the Owner that it has
and that it will continue to have the facilities, personnel and expertise to
provide to the Owner the functions and services herein set forth in a competent
and efficient manner, in keeping with the then current industry standards
applicable to the Business.
SECTION 2.2 - APPOINTMENT OF MANAGER
Relying on the foregoing representation and covenant, the Owner
hereby appoints and retains the Manager to carry out those certain services as
provided in Article 3 hereof related to the Business and as the Owner may
otherwise direct, from time to time, on the terms and conditions and for the
remuneration provided in this Agreement. The Manager accepts such appointment
and covenants and agrees with the Owner that, subject to the terms and
conditions hereof, it shall manage the Business, and shall, without limitation,
perform the services set forth in Article 3 for the Term, subject to earlier
termination pursuant to the provisions of this Agreement.
ARTICLE 3
DUTIES AND AUTHORITY OF THE MANAGER
SECTION 3.1 - MANAGEMENT SERVICES
The Manager, subject to and in accordance with the provisions of
this Agreement, shall, from and after the date hereof, perform the following
services for the benefit of the Owner:
(a) make and carry out all administrative decisions as required in
connection with the operation of the Business and as requested by the Owner from
time to time, in accordance with the instructions, written policies and
procedures approved by the Owner from time to time;
(b) provide such additional product development and operational
support respecting the e-Property Technology as may be required, in addition to
the product development and operational support provided in the Licence
Agreement;
(c) provide office facilities, as required;
(d) provide the use of its personnel, as required, and such
personnel-related services as may be required to ensure the adequate
supervision, training, certification, equipping, and insurance coverage of such
personnel, understanding that the Manager shall and does hereby assume
responsibility and holds the Owner harmless for the acts or omissions and safety
of such persons and their workplace;
(e) prepare and furnish to the Owner such reports, budgets and
information relating to the operation of the Business as may be requested; keep
at all times proper books, records and accounts of the operation of the
Business; permit the Owner upon reasonable notice during normal business hours
to inspect all such books, records and accounts of the operation of the Business
held or retained by the Manager and take extracts or copies therefrom and
thereof and audit the same solely at the expense of the Owner, as the case may
be; and provide such particulars of accounting entries relating to the operation
of the Business as may be reasonably requested by the Owner;
<PAGE> 11
7.
(f) prepare and furnish, or cause to be prepared and furnished, to the
Owner financial statements of the operation of the Business in accordance with
Section 4,3 and 4.4;
(g) take such action as is necessary or advisable to ensure that the
Business remains in compliance with the Applicable Law; and
(h) generally do all such acts, matters and things which it is obliged
to do pursuant to the provisions of this Agreement.
SECTION 3.2 - APPROVALS
The Manager agrees that in connection with the performance of its
duties under this Agreement, it shall not enter into any contract or incur or
pay any expense not provided for in an Approved Budget or otherwise Approved by
the Owner; notwithstanding the foregoing, the Manager may incur or pay in each
Accounting Period, within such Approved Budget, increased expenditures in
respect of any category of expenditures of up to twenty percent (20%) for such
category, provided always that such increased expenditures shall not increase
the total expenditures provided for in the Approved Budget or otherwise Approved
by the Owner by a margin of more than 5% thereof. Any expenditures incurred or
paid by the Manager purportedly on behalf of the Owner which have not been
included in an Approved Budget or otherwise Approved by the Owner shall be
reported to the Owner and shall be for the account of the Manager unless and
until otherwise Approved by the Owner.
SECTION 3.3 - EMPLOYEES AND CONSULTANTS
The Manager will perform, or cause to be performed, for the Owner
all things necessary in connection with the operation of the Business so that it
is not necessary for the Owner to have any employees or any other consultants or
advisory or management services. The Owner will reimburse the Manager for
reasonable salaries and benefits paid to the Manager's personnel employed
exclusively with respect to the Business and other reasonable expenses of
personnel to the extent that such have been provided for in an Approved Budget
or otherwise Approved by the Owner.
SECTION 3.4 - FAILURE TO COMPLY
The Manager shall notify the Owner in writing promptly upon
discovery of any failure to substantially comply with Sections 3.1, 3.3 and 3.7.
SECTION 3.5 - AUTHORITY
Except as otherwise provided herein, the Manager shall have the
authority, in its own name as the Owner's agent or in the name of the Owner, and
at the Owner's expense or for the account of the Owner, to do or cause to be
done all things necessary or convenient to fulfill its obligations under
Sections 3.1, 3.3 and 3.7. The Owner shall provide to third parties any
assurances or undertakings as any such third parties may require from time to
time regarding the Manager's management of the Business. Except as expressly
provided in this Agreement, no party shall act in any agency or representative
capacity for the other party.
SECTION 3.6 - CO-OPERATION OF MANAGER BEING REPLACED
Upon termination of this Agreement, the Manager shall fully
co-operate with the Owner or the Owner's nominee who is assuming the rights,
duties and status of the Manager. The Manager, at the Owner's expense, shall
make all necessary information available to the incoming manager and shall,
<PAGE> 12
8.
upon request, give the incoming manager the originals or photocopies of any
books, records, plans, documents or other information pertaining to the Business
that have been reduced to writing and that are in the Manager's possession. The
Manager shall assign all contracts and instruments necessary for the incoming
manager to exercise the rights of the Manager under this Agreement against third
parties.
SECTION 3.7 - GENERAL
The Manager shall generally do and perform and contract for all
things it considers, acting in good faith, necessary for the proper and
efficient management, operation and maintenance of the Business.
ARTICLE 4
RECORDS, BUDGETS, ACCOUNTS
SECTION 4.1 - RECORDS AND RIGHTS OF EXAMINATION
The Manager shall maintain in the York Region records relevant to
all aspects of the Business, and notify the Owner from time to time of the
location of such records. The Manager, at any and all times during normal
business hours and upon reasonable notice, upon a written request of the Owner,
will permit the Owner or its agents and attorneys, to examine all books of
account, records, reports and other papers of the Manager relating to the
services performed by the Manager under this Agreement and to make copies
thereof and to take extracts therefrom, solely at the expense of the Owner.
SECTION 4.2 - FURNISH INFORMATION TO ACCOUNTANTS
The Manager covenants and agrees with the Owner to, at reasonable
times and after reasonable notice from the Owner, make available to the auditors
of the Owner and the Accountants such information and material as may be
required by such auditors or Accountants for the purpose of their audits or
review and otherwise give such co-operation as may be necessary for such
auditors or Accountants to carry out their duties on behalf of the Owner, solely
at the expense of the Owner.
SECTION 4.3 - BUDGETS AND REPORTS
(a) The Manager covenants and agrees to prepare and submit to the
General Partner on or before the commencement of each Accounting Period (save
and except for the first Accounting Period, for which an Approved Budget is
attached hereto as Schedule "A") a proposed operating budget setting forth
anticipated maximum Operating Expenses for such Accounting Period.
(b) Upon Approval of the Owner being communicated in writing to the
Manager by the General Partner, any such budget shall be an Approved Budget.
(c) If the General Partner board of directors fails to approve any
budget, the Manager shall call a meeting with the General Partner board of
directors to attempt to resolve the points of disagreement. So long as no
approved budget is in effect, the Manager shall have the right and obligation,
on behalf of the Owner, to implement, at the Manager's discretion, any actions
to keep the Business in operation and in good standing. In all other cases
involving the General Partner failure to approve any budget, the Manager shall
take no steps to implement any activities without the General Partner's board of
director's approval.
<PAGE> 13
9.
(d) Any budget prepared by or for the Manager as the case may be, is
intended to be a reasonable estimate that takes into account all of the various
material factors known to the Manager, at the time of preparation. Although the
Manager shall use its best efforts in preparing any budget, the Manager will not
be understood to be making any warranty in connection with any budget.
(e) The Manager shall keep the budget under constant review and shall
use its best efforts to ensure that the work for which it is responsible is
carried out within the time and in accordance with the approved budget, provided
that if the Manager considers it necessary to materially revise any budget, the
Manager shall notify the General Partner in writing indicating the reasons for
such revisions and including in such notice the proposed revisions to the
budget, for the approval of the General Partner's board of directors. Such
approval shall be deemed to be given unless written objection is made by the
General Partner's board of directors to the Manager within 60 days after such
submission by the Manager to the General Partner. At any time, the Owner may
request that a budget be revised and the Manager shall consider such request.
(f) In circumstances where the amount of any item in a budget exceeds
or is about to exceed $60,000, the Manager shall obtain the approval of the
General Partner's board of directors for any proposed expenditures in excess of
such amount.
(g) In addition, the Manager shall provide such other reports,
explanations and information as the Owner may reasonably request from time to
time.
SECTION 4.4 - ACCOUNTING
During the Term, the Manager shall provide to the Owner unaudited
statements and reports within thirty (30) calendar days after the last date of
each month, which shall include a statement of expense showing the actual
expenses of the Manager which are or have been to the account of the Owner
relating to the operations from the Business for such month and for the elapsed
portion of the current Accounting Period; and annually, within one hundred and
twenty (120) calendar days after the end of such Accounting Period, an unaudited
statement of expenses and an unaudited statement of account with a narrative
explanation of any variations from the Approved Budget relating to that
Accounting Period which are material.
SECTION 4.5 - BILLINGS
The Manager shall, in connection with the operation of the
Business, establish and maintain suitable records and systems to handle, and
shall handle, any billings to customers or clients of the Business as the Owner
may direct.
SECTION 4.6 - BANKING
If requested to do so by the Owner, the Manager shall establish for
the benefit of the Owner a separate bank account in the name of the Manager in
relation to the operation of the Business and make all deposits thereto and
disbursements therefrom and shall handle all banking necessary for the due
performance of the Manager's accounting and administrative functions under the
provisions of this Agreement and for the receipt and disbursement of all moneys
of the Owner pertaining to the operation of the Business required to be attended
to by the Manager under the provisions of this Agreement.
SECTION 4.7 - REPORTING AND COMMUNICATION
<PAGE> 14
10.
All budgets, financial statements and other documents to be
provided by the Manager to the Owner shall be provided at the address for the
Owner set out in Section 11.1. The communication of the Approval of the Owner to
any matter shall be given by, and the Manager shall only be entitled to act on
such Approval of the Owner if communicated in writing by, the general or
managing partner of the Owner.
ARTICLE 5
COLLECTION AND DISBURSEMENT OF GROSS REVENUE
SECTION 5.1 - GROSS REVENUE
If requested to do so by the Owner, the Manager shall be
responsible for the management of cash balances held by the Owner in connection
with the operation of the Business from time to time during the course of each
month, and shall deposit in the separate account or accounts, to be maintained
by the Manager, in the name of the Manager for and on behalf of the Owner,
pursuant to Section 4.6, all cash, cheques and other negotiable instruments
which come into the Manager's hands pursuant to the provisions of this
Agreement, and the Manager shall deal with such cash, cheques and other
negotiable instruments in accordance with sound management practices so that the
Owner is adequately protected, all such cash, cheques or other negotiable
instruments being held in trust for the Owner. All revenues from the Business
received and collected by the Manager on behalf of and in trust for the Owner
until deposited as herein provided shall be held in the account referred to in
Section 4.6.
SECTION 5.2 - DISBURSEMENT OF GROSS REVENUE
No funds shall be disbursed from the account referred to in
Section 4.6 except in accordance with the following provisions:
(a) the Manager shall be entitled to reimbursement for all
Operating Expenses to third parties properly chargeable to the Owner hereunder
on behalf of the Owner, provided that such Operating Expenses are set forth in
an Approved Budget or are otherwise Approved by the Owner or where there is no
Approved Budget or other approval by the Owner, such Operating Expenses are not
greater than those set forth in the then most recent Approved Budget. The
payment of any Operating Expenses in excess thereof shall be subject to the
Approval of the Owner; and
(b) if an Event of Default has not occurred in respect of the
Manager, or if an Event of Default shall have occurred in respect of the Manager
which has been cured or, if an Event of Default in respect of the Manager has
occurred but has not been cured and is immaterial and the Manager has commenced
and is diligently and in good faith proceeding to cure such Event of Default,
then the Manager shall be entitled on the last day of each month during the
Accounting Period, to withdraw the Management Fee and any Operating Expenses and
out-of-pocket expenses of the Manager for which the Owner is responsible for
such month as herein mentioned; in the event that an Event of Default has
occurred and the payment of the Management Fee has been suspended pursuant to
this Subsection 5.2(b), the Management Fee shall accrue and be payable without
interest (and may be withdrawn by the Manager) upon the curing of such Event of
Default pursuant to the terms of this Agreement.
SECTION 5.3 - REPORT TO THE OWNER
Monthly, on or before the fifteenth (15th) day of each month, the
Manager shall provide to the General Partner a statement showing all banking
transactions with respect to the bank account referred to in Section 4.6.
<PAGE> 15
11.
SECTION 5.4 - REVENUE DEFICIENCIES
In the event that the Manager determines, at any time during the
Term, that the direct expenses incurred or, within a reasonable time, to be
incurred in the operation of the Business exceed or shall exceed, as the case
may be, the aggregate of all revenues from all sources of the Business, no
Management Fee shall be payable by the Owner to the Manager in respect of such
time period that such deficiency occurred.
ARTICLE 6
FEES AND EXPENSES
SECTION 6.1 - MANAGEMENT FEE
(a) Subject to Section 5.4, the Owner has agreed to pay to the
Manager:
A. an annual administration fee of $60,000 per annum, payable
on the first day of each month, in advance, in the amount
of $5,000 per month, plus
B. an annual fee equal to 20% of Net Revenue for the
applicable fiscal year of the Partnership until the later
of (i) the fiscal year 2004 and (ii) the date that all
First Promissory Notes and Second Promissory Notes have
been repaid in full, and thereafter, the annual fee payable
by the Owner to the Manager will be 50% of Net Revenue for
the applicable fiscal year of the Partnership. The fee
payable to the Manager shall be calculated annually for
each fiscal year of the Partnership, no later than 90 days
after the end of each fiscal year of the Partnership, and
such fee shall be payable within 90 days from the end of
each fiscal year of the Partnership.
(b) In addition to the fees payable pursuant to Section 6.1(a) above,
the Owner shall be responsible for and shall reimburse the Manager in respect of
all Taxes properly payable upon any of the fees payable to the Manager
hereunder.
SECTION 6.2 - EXPENSES
The Manager shall, on behalf of the Owner, from the account
referred to in Section 4.6 hereof, be reimbursed for all direct, out-of-pocket,
expenses properly and reasonably incurred by the Manager in the operation of the
Business (including, without limiting the generality of the foregoing,
reasonable travelling expenses of employees of the Manager for travelling beyond
the City of Toronto on matters related to the Business, all legal fees, costs of
brochures, market research, advertising and other promotion expenses, but
excluding travel and entertainment expenses incurred by employees of the Manager
not specifically allocated to the management of the Business, provided such
out-of-pocket expenses are incurred in accordance with an Approved Budget or are
otherwise Approved by the Owner. Notwithstanding the foregoing, the Manager
shall in no event be required to pay any of its funds for the implementation of
its duties and responsibilities under this Agreement nor shall the Manager be
obligated to incur any liability in connection with such implementation unless
the Owner furnishes the Manager with funds necessary for such implementation or
such liability.
<PAGE> 16
12.
SECTION 6.3 - OVERHEAD
No charge other than fees reserved herein shall be made by the
Manager nor shall there be any reimbursement to the Manager for any
administrative, overhead and indirect costs of the Manager pertaining to its own
business and business operations not relating to the Business.
SECTION 6.4 - NO DUPLICATION
Notwithstanding anything contained herein to the contrary, the
Manager shall not be entitled to any fees, costs or expenses which are or have
been paid or are payable to the Manager under any other agreement for the same
services, costs or expenses set out herein.
ARTICLE 7
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 7.1 - REPRESENTATIONS AND WARRANTIES OF OWNER AND GENERAL PARTNER
(a) The Owner represents and warrants to the Manager that:
(i) it is a subsisting limited partnership under the
laws of Ontario; and
(ii) the General Partner has all the necessary authority
and capacity to execute, deliver and perform this
Agreement on behalf of the Owner.
(b) The General Partner represents and warrants to the Manager
that:
(i) it is a subsisting corporate under the laws of the
Province of Ontario; and
(ii) the execution and delivery of this Agreement has
been duly authorized by all necessary corporate
action on the part of the General Partner on behalf
of the Owner and will constitute a valid and binding
obligation of the Owner enforceable in accordance
with its terms.
All representations and warranties of each of the Owner and the General Partner
made herein with respect to this Agreement shall survive the execution and
delivery of this Agreement.
SECTION 7.2 - REPRESENTATIONS AND WARRANTIES OF THE MANAGER
The Manager represents and warrants to each of the Owner and the
General Partner that;
(a) it is a subsisting corporation under the laws of the
Province of Ontario;
(b) it has all the necessary authority and capacity to execute,
delivery and perform this Agreement; and
(c) the execution and delivery of this Agreement has been duly
authorized by all necessary corporate action on the part of
the Manager and will constitute a valid and binding
obligation of the Manager enforceable in accordance with
its terms
All representations and warranties of the Manager made herein with
respect to this Agreement shall survive the execution and delivery of this
Agreement.
<PAGE> 17
13.
SECTION 7.3 - MANAGER AN INDEPENDENT CONTRACTOR
Nothing in this Agreement should be construed so as to or shall
constitute a partnership or joint venture between the Owner and the Manager in
respect of the management of the Business as contemplated in this Agreement. The
duties to be performed and the obligations assumed by the Manager, as manager of
the Business, under this Agreement shall be performed and assumed by it as an
independent contractor and not as agent or in any other way as representative of
the Owner, except to the extent that the Manager is authorized by this Agreement
to incur obligations on behalf of the Owner. However, the Manager may require
that the terms and conditions of all contracts entered into by the Manager on
behalf of the Owner, pursuant to its duties under this Agreement and pursuant to
its authority hereunder, shall acknowledge that such contracts create a
contractual relationship between the other party thereto and the Owner and that
the Manager is in a representative capacity and, where any such contracts do not
specifically provide, the Owner acknowledges, nevertheless, that the Manager,
although it may be personally liable to a third party, is in a representative
capacity acting on behalf of the Owner and shall be indemnified by it.
SECTION 7.4 - INDEMNITY BY THE OWNER
Both during and after the termination of this Agreement, the Owner
shall protect, indemnify and save the Manager harmless from any action, cause of
action, suit, debt, cost, expense, claim or demand whatsoever, at law or in
equity, in connection with the performance by the Manager of any and all of its
obligations under and in accordance with this Agreement including, without
limitation, any damage or injury whatsoever to any employee or other Person or
property arising out of the use, administration, control or operation of the
Business of the Property, but the indemnity provided under this Section 7.5
shall not extend to any wrongful act or neglect of the Manager or of its
employees, servants, agents or Persons for whom it is responsible in law, and
shall not extend to any action taken by the Manager outside the provisions of
this Agreement.
SECTION 7.5 - INDEMNITY BY MANAGER
Both during and after the termination of this Agreement, the
Manager shall protect, indemnify and save the Owner harmless in respect of any
action, cause of action, suit, debt, cost, expense, claim or demand whatsoever,
at law or in equity, arising by way of any breach during the Term by the
Manager, its employees, servants, agents or Persons for whom it is responsible,
of any of the provisions of this Agreement or by reason or any negligence or
wrongful act of the Manager, its employees, servants, agents or Persons for whom
it is responsible, but the indemnity provided under this Section 7.6 shall not
extend to any wrongful act or neglect of the Owner or any of them, or of their
respective employees, servants, agents or Persons for whom they are responsible
in law, and shall not extend to any action by the Owner outside the provisions
of this Agreement.
SECTION 7.6 - STANDARD, UNAVOIDABLE DELAY
The Manager hereby accepts its appointment in accordance with the
terms hereof and covenants and agrees to perform the services and functions to
be performed by it hereunder, as manager of the Business, in a competent and
efficient manner, in keeping with the then current industry standards applicable
to the Business. It is understood and agreed, however, that in carrying out its
duties and obligations hereunder, the Manager will not be responsible for
matters beyond its reasonable control or for matters involving the expenditure
of funds which are not made available by the Owner (after due and proper notice
from the Manager) and it is understood that the responsibility of the Manager in
performing the services and functions mentioned shall be limited in each case to
exercising in such performance the same degree of care and skill and supervision
as would be exercised by any reasonable and prudent owner
<PAGE> 18
experienced in performing like services and functions and that, as manager, the
Manager shall not be held responsible for the defaults of contractors or other
parties so long as it has exercised due care in selecting respectable and
competent contractors and third parties retained in connection with the
operation of the Business and has taken reasonable measures within its power to
avoid such defaults. In the event that the Manager is prevented from performance
on a given date by an item of Unavoidable Delay, the date for performance shall
be delayed by a period of time equal to the period of Unavoidable Delay. The
Manager will notify the Owner as soon as practicable after becoming aware of an
event of Unavoidable Delay and will, from time to time, notify the Owner of the
expected duration of the period of Unavoidable Delay.
SECTION 7.7 - CONFIDENTIALITY
All information received by the Manager pursuant to this Agreement
shall be used only in the course of performing its duties hereunder and may not
be disclosed by the Manager to any other Person except with the consent of the
Owner or unless required to be disclosed in legal proceedings, including
proceedings among the parties hereto. Data, trade secrets, drawings, records,
reports and any other information (collectively referred to as the
"Information"), whether patented or unpatentable, and existing or developed in
the course of the Manager's duties hereunder, or obtained by the Manager while
acting as Manager, shall be owned exclusively by the Owner. The Manager shall
maintain as confidential and not disclose information to third parties without
the Owner's written consent before five years after termination of this
Agreement, subject to the following exceptions:
(a) Information which is in or becomes part of the public
domain;
(b) Information which is required to be disclosed by law or
regulation or by any court of competent jurisdiction;
(c) Information lawfully received by the Manager in its
capacity as the manager under this Agreement from any third
parties;
(d) Information which is required to be disclosed in connection
with obtaining advice or opinions from consultants relating
to the Project, provided such consultants agree to keep
such Information confidential.
ARTICLE 8
OWNER'S CONTROL
SECTION 8.1 - GENERAL CONTROL OF THE OWNER
The Owner may establish and provide to the Manager, from time to
time, at the Manager's request or otherwise, written policies, limitations,
instructions and procedures governing the management and operation of the
Business and, in carrying out its obligations and duties under Article 3 of this
Agreement, the Manager shall at all times act in accordance with them.
SECTION 8.2 - SPECIFIC APPROVALS
The Manager covenants and agrees that in connection with the
performance of its duties under this Agreement, the Manager shall submit to the
Owner for the Approval of the Owner (and, subject as hereinafter provided in
this Section 8.2, the Manager shall not proceed without the Approval of the
Owner):
<PAGE> 19
15.
(a) any matter or act which according to the specific
provisions of this Agreement requires the Approval of the
Owner or that it be Approved by the Owner; and
(b) the acquisition or disposal of any property or the
incurring of any non-capital obligation involving a sum in
excess of $50,000.00 for any transaction or group of
similar or related transactions except for expenditures
made and obligations incurred pursuant to an Approved
Budget or otherwise in accordance with Section 4.4.
ARTICLE 9
TERM AND TERMINATION
SECTION 9.1 - INITIAL TERM
This Agreement shall commence as of the date of this Agreement
and, unless otherwise terminated in accordance with the provisions hereinafter
contained, shall continue in full force and effect for an initial term (the
"Initial Term") ending on the twentieth (20th) anniversary of the date hereof,
unless sooner terminated in accordance with the provisions herein.
SECTION 9.2 - RENEWAL
This Agreement may be renewed, at the option of the Owner, for no
more than two (2) additional terms of five- (5) year periods, at no additional
cost or expense to the Manager or on such other term as the parties hereto may
otherwise agree.
SECTION 9.3 - TERMINATION BY THE OWNER
If, in the case of the Manager, an Event of Default occurs, the
Owner may provide a notice (herein referred to as a "Notice of Complaint") to
the Manager specifying in reasonable detail the Event of Default. If within 30
days of receipt of any Notice of Complaint, the Manager fails to cure or remedy
the Event of Default in a reasonable manner, or if more than 30 days are
required to cure or remedy the Event of Default, the Manager fails to proceed
and continue diligently to cure or remedy or give reasonable assurances to the
Owner that such Event of Default will be cured or remedied within a reasonable
period of time, the Owner may terminate this Agreement by written notice (herein
referred to as a "Notice of Termination") to the Manager stating that this
Agreement is terminated and the reason for termination. Such termination shall
be effective as and from the last day of the month in which the Notice of
Termination is received by the Manager.
In the event an Event of Insolvency occurs, the Owner may
terminate this Agreement by one (1) year's written notice (herein referred to as
a "Notice of Termination") to the Manager stating that this Agreement is
terminated and the reason for termination. Such termination shall be effective
as and from the date set out in the Notice of Termination.
SECTION 9.4 - TERMINATION BY MANAGER FOR DEFAULT BY THE OWNER
If, in the case of the Owner, an Event of Default occurs as a
result of any acts or omissions of the Owner (other than those caused, directly
or indirectly, by the Manager), the Manager may provide a notice (herein
referred to as a "Notice of Complaint") to the Owner specifying in reasonable
detail the Event of Default. If within 30 days of receipt of any Notice of
Complaint, the Owner
<PAGE> 20
16.
fails to cure or remedy the Event of Default in a reasonable manner, or if
more than 30 days are required to cure or remedy the Event of Default, the
Owner fails to proceed and continue diligently to cure or remedy or give
reasonable assurances to the Manager that such Event of Default will be cured
or remedied within a reasonable period of time, the Manager may terminate
this Agreement by notice (herein referred to as a "Notice of Termination")
to the Owner stating that this Agreement is terminated and the reason for
termination. Such termination shall be effective as and from the last day of
the month in which the Notice of Termination is received by the Owner.
SECTION 9.5 - DELIVERY OF RECORDS
If this Agreement is terminated, notwithstanding such
termination, the Manager shall forthwith upon termination and from time to time
thereafter deliver to the Owner all records and documents, including without
limitation, all contracts and all other operating records, books of account and
ancillary documents maintained with respect to the Business which are then in
the possession or control of the Manager which the Owner reasonably requires and
which relate directly or indirectly to the Business; provided however, that the
Manager may elect to retain copies of such records, books of account and
documents and, notwithstanding such termination, the Owner shall thereafter and
from time to time for a reasonable period of time produce at its offices the
originals of such records, books of account and documents whenever the Manager
reasonably requires them for its purposes in connection with its prior
management of the Business. The Manager shall keep all such information
confidential.
SECTION 9.6 - EFFECT OF CONTINUED PERFORMANCE
Subject to the provisions in Section 10.7, if this Agreement is
terminated, the Owner shall be under no obligation to pay to the Manager any
amount whatsoever for services performed by the Manager after the effective date
of termination of this Agreement unless such performance has been expressly
Approved by the Owner and in that event the Manager shall be entitled to be paid
on a quantum meruit basis in accordance with the fees set out herein.
SECTION 9.7 - DUTIES FLOWING FROM TERMINATION
Upon termination of this Agreement, the Owner shall:
(a) assume the contracts entered into by the Manager on
behalf of the Owner if such contracts have been entered
into in accordance with the terms and provisions of
this Agreement and indemnify the Manager against any
liability by reason of anything done or required to be
done under any such contracts and relating to the period
after the effective date of termination of this Agreement;
and
(b) pay for and indemnify and save the Manager harmless
against the cost of all services and supplies ordered by
the Manager from third parties in accordance with the
terms and provisions of this Agreement but which may not
have been charged to and paid by the Owner at the time of
termination.
SECTION 9.8 - RIGHTS ON TERMINATION
Any termination of this Agreement shall terminate all rights and
obligations under this Agreement except rights and obligations with respect to
amounts owing or to remedies, if either the Manager or the Owner shall be
entitled to an accounting as to the fees or other moneys payable to the Manager
or by the Manager or the Owner. Notwithstanding the foregoing, the
indemnification provisions
<PAGE> 21
17.
of Sections 7.3 and 7.4 and the provisions of Section 9.4, 9.5 and 9.6 shall
survive any termination of this Agreement and shall remain in full force
and effect thereafter.
ARTICLE 10
RESOLUTION OF DISPUTES
SECTION 10.1 - ARBITRATION
The parties agree that, should any dispute or question be
raised by any party or parties hereto concerning the interpretation of any
provision(s) of this Agreement which cannot be resolved by agreement amongst
the parties, then such dispute or question shall be submitted to arbitration as
herein provided by the party or parties who raised the dispute or question (the
"Initiator(s)") to the other party or parties hereto (the "Respondent(s)"). The
arbitration shall be heard by a single arbitrator who is mutually acceptable to
each of the Initiator(s) and the Respondents or, failing which mutual agreement
on the single arbitrator within thirty (30) days following the second fifteen
(15) day period referred to above, by a single arbitrator appointed, on
application of any interested party to the dispute, to the courts of Ontario
under the Arbitrations Act, 1991 (Ontario). The determination and award of the
arbitrators, as applicable, shall be in writing and shall be final and binding
upon the parties thereto and hereto and on their respective successors and
assigns. The parties hereto shall co-operate in completing any arbitration as
expeditiously as practicable. The cost of the arbitration shall be borne
equally by the parties. Submission to arbitration pursuant to the provisions of
this Subsection 10.1 shall be a condition precedent to the bringing of any
action with respect to this Agreement.
SECTION 10.2 - SPECIFIC PERFORMANCE
The parties agree that irreparable damage would result if this
Agreement is not specifically enforced. Therefore, the parties agree that
the rights and obligations hereunder shall be enforceable in any court of
equity by a decree of specific performance and appropriate injunctive relief
may be applied for and granted in connection therewith. Such remedy will,
however, be cumulative and not exclusive and will be in addition to any other
remedies which any party may have under this Agreement or at law.
ARTICLE 11
GENERAL
SECTION 11.1 - NOTICES
Any notice, demand, request, consent, agreement or approval
which may or is required to be given pursuant to this Agreement shall be in
writing and shall be sufficiently given if given by personal delivery upon
the party for whom it is intended, or (except in the case of an actual or
impending disruption of postal service) mailed by registered mail or sent
by facsimile transmission, and in the case of:
<PAGE> 22
18.
(a) in the case of notice to the General Partners or to the Owner:
c/o York Region e-Property Services Corporation
Newmarket Corporate Centre
Suite 302, 1091 Gorham Street
Newmarket, Ontario
L3Y 7V1
Attn: the President
Telecopier: (905) 853-7214
(b) in the case of notice to the Manager:
c/o Planet Today Inc.
Newmarket Corporate Centre
Suite 302, 1091 Gorham Street
Newmarket, Ontario
L3Y 7V1
Attn: the President
Telecopier: (905) 853-7214
Any such notice or other document shall be deemed to have been given or
received, if delivered or sent by telecopier on the Business Day next following
the day it was received, and if mailed, on the fifth Business Day following the
day it was mailed. No party shall mail any notice or other documents hereunder
during any period in which Canadian postal workers are on strike or if any such
strike is imminent and may be anticipated to affect normal delivery thereof. A
party may change its address for receipt of notices or other documents at any
time by giving notice thereof as aforesaid to all other parties.
SECTION 11.2 - WAIVER
No consent to or waiver of any breach or default by a party in the
performance of its obligations hereunder shall be valid unless made in writing
and no such consent to or waiver of any breach or default shall be deemed or
construed to be a consent to or waiver of any other breach or default in the
performance by such party of the same or any other obligations of such party
hereunder. Failure on the part of any party to complain of any act or failure to
act of any other party or to declare any other party in default, irrespective of
how long such failure continues, shall not constitute a waiver by such party of
its rights hereunder.
SECTION 11.3 - AMENDMENTS
This Agreement may not be modified or amended except with the
written consent of the parties hereto.
<PAGE> 23
19.
SECTION 11.4 - FURTHER ASSURANCES
The parties hereto agree that they will, from time to time, at the
reasonable request of any of them, execute and deliver such assignments,
instruments and conveyances and take such further action as may be required to
accomplish the purposes of this Agreement.
SECTION 11.5 - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the
parties, pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein.
SECTION 11.6 - NO ASSIGNMENTS
Neither this Agreement nor any of the rights, entitlements,
duties and obligations arising from it shall be assignable in whole or in part
by the Manager, except with the prior written consent of the Owner (which
consent may be unreasonably withheld) except where the Manager elects to assign
this Agreement to an Affidavit of the Manager.
SECTION 11.7 - SUCCESSORS AND ASSIGNS
This Agreement shall enure to the benefit of and be binding upon
the successors and permitted assigns of the parties hereto.
<PAGE> 24
Schedule "A"
Initial Approval Budget
YORK REGION e-PROPERTY LIMITED PARTNERSHIP*
FIRST ACCOUNTING PERIOD
January -- December, 1999
POPULATION: HOUSEHOLDS:
169,800 62,198
<TABLE>
<S> <C>
OPERATING EXPENSES:
Occupancy $2,970
Tel/Fax 2,160
Insurance 108
General & office 2,268
Accounting 1,944
Professional & consulting 1,080
Sub total $10,530
SALES AND MARKETING:
Advertising/promotion $17,753
Salaries 12,960
Sub total $30,713
INTEREST ON FINANCING $18,954
-------
Total operating expenses $60.197
-------
</TABLE>
*The area comprising of the Town of Newmarket, The Town of East Gwillimbury, The
Town of Georgina, The Town of Aurora and The Township of King
<PAGE> 25
20.
ARTICLE 12
EXECUTION
SECTION 12.1 - EXECUTION
IN WITNESS WHEREOF the parties hereto have caused their corporate
seals to be affixed under the hands of their proper officers duly authorized in
that behalf.
PLANET TODAY INC.
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: SECRETARY
-----------------------------------------
YORK REGION e-PROPERTY LIMITED
PARTNERSHIP, BY ITS GENERAL PARTNER YORK REGION
e-PROPERTY SERVICES CORPORATION
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: PRESIDENT
-----------------------------------------
YORK REGION e-PROPERTY SERVICES CORPORATION
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: PRESIDENT
-----------------------------------------
<PAGE> 26
20.
ARTICLE 12
EXECUTION
SECTION 12.1 - EXECUTION
IN WITNESS WHEREOF the parties hereto have caused their corporate
seals to be affixed under the hands of their proper officers duly authorized in
that behalf.
PLANET TODAY INC.
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: SECRETARY
-----------------------------------------
YORK REGION e-PROPERTY LIMITED
PARTNERSHIP, BY ITS GENERAL PARTNER YORK REGION
e-PROPERTY SERVICES CORPORATION
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: PRESIDENT
-----------------------------------------
YORK REGION e-PROPERTY SERVICES CORPORATION
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: PRESIDENT
-----------------------------------------
<PAGE> 27
20.
ARTICLE 12
EXECUTION
SECTION 12.1 - EXECUTION
IN WITNESS WHEREOF the parties hereto have caused their corporate
seals to be affixed under the hands of their proper officers duly authorized in
that behalf.
PLANET TODAY INC.
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: SECRETARY
-----------------------------------------
YORK REGION e-PROPERTY LIMITED
PARTNERSHIP, BY ITS GENERAL PARTNER YORK REGION
e-PROPERTY SERVICES CORPORATION
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: PRESIDENT
-----------------------------------------
YORK REGION e-PROPERTY SERVICES CORPORATION
By: /s/ NOREEN STEVENS
--------------------------------------------
Name: NOREEN STEVENS
------------------------------------------
Title: PRESIDENT
-----------------------------------------
<PAGE> 1
EXHIBIT 10.4
TECHNOLOGY ACCESS LICENSE AND SUPPORT SERVICES
AGREEMENT
THIS AGREEMENT is made as of the 31st day of December, 1998
BETWEEN:
YORK REGION E-PROPERTY LIMITED PARTNERSHIP, a limited partnership registered
under the laws of the Province of Ontario (hereinafter called the
"Partnership");
AND:
PLANET TODAY INC., a company incorporated under the laws of Canada (hereinafter
called "Licensor");
WHEREAS:
A. Licensor is in the business of providing access licenses to certain
computer software known as the e-Property Technology; and
B. the Partnership has agreed to acquire from Licensor a technology access
license and support services to the e-Property Technology on the terms and
conditions set out herein.
NOW THEREFORE THIS AGREEMENT WITNESSETH in consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
I. INTERPRETATION
1.1. DEFINITIONS
In this Agreement, the following terms shall have the following respective
meanings, unless otherwise provided, and the singular or plural of such terms
shall have corresponding meanings:
"ACCESS RIGHTS" means the access rights that the Partnership obtains to the
e-Property Technology as set out in Schedule B;
"AREA" shall have the meaning set out in the Access Rights.
"CONFIGURATION" means third party software, computers, other equipment,
communications and other services and their set up, layout, interconnection,
operating environment and operating procedures;
"E-PROPERTY TECHNOLOGY" means the computer-based software system and facility
owned or licenced by the Licensor called "e-Property(TM)", the functional
specifications for which are described in Schedule A;
"INTELLECTUAL PROPERTY RIGHTS" means patents, trade marks, service marks,
registered designs, applications for any of the foregoing, copyright, know-how,
trade secrets, confidential information, trade or business names and any other
similar protected right in any country;
"LICENSE" means a restricted, non-exclusive, non-transferable license to the
Access Rights, without the right to sublicense;
"SUPPORT SERVICES" means the support services to be provided by Licensor
pursuant to Schedule D;
<PAGE> 2
"SYSTEM SPECIFICATIONS" are as set out in Schedule A;
"TRADE-MARKS" means the trade-marks that Licensor will license to the
Partnership in connection with the Licence as set out in Schedule E; and
"TRADE-MARKS LICENSE" shall have the meaning set out in Section 6.l.
1.2. SCHEDULES
The following schedules are incorporated into this Agreement and the contents
thereof form part of this Agreement:
SCHEDULE A e-Property Technology Specifications
SCHEDULE B Access Rights
SCHEDULE C License and Support Services Fees
SCHEDULE D Support Services
SCHEDULE E Trade-marks
2. LICENSE GRANT
2.1. LICENSE
In consideration of the payment of the license fee set out in Schedule C hereto,
Licensor hereby grants to the Partnership a License on the terms and conditions
contained in this Agreement.
2.2. TERM
The initial term of the Licence is for ten years, subject to the Partnership's
right to extend the term thereof for two additional terms of five years each
for no additional license fee.
2.3. DELIVERY
Licensor shall use its best efforts to provide the Access Rights to the
Partnership within thirty days of the execution of this Agreement so long as the
Partnership is not in default of any payment due to Licensor in accordance with
this Agreement.
3. PAYMENT TERMS
3.1. PAYMENTS AND OTHER CHARGES
The Partnership shall pay to Licensor the fees described in Schedule C. All
invoices are payable net 30 days. Prices and fees outlined in this Agreement do
not include goods and services tax or other taxes, levies, duties or charges
imposed by local, provincial, federal or other government authorities.
3.2. SALES AND OTHER TAXES
The Partnership shall pay any and all applicable federal, provincial or local
sales, use, property and/or value added taxes, excluding any taxes payable on
Licensor's income, required by law immediately upon receipt of an invoice from
Licensor or any earlier demand by any taxing authority therefore.
<PAGE> 3
3.3. LATE PAYMENT CHARGE
The Partnership is obliged to pay to Licensor the invoiced amount within thirty
(30) days of receipt of an invoice from Licensor. The Partnership will be levied
a late payment charge of up to 1.5% per month (18% per annum) on amounts overdue
by more than thirty (30) days of the date of receipt of an invoice from
Licensor.
4. SUPPORT SERVICES
4.1 SUPPORT SERVICES
Licensor shall provide Support Services to the Partnership in consideration of
the Support Services fee set out in Schedule C.
4.2 SUBCONTRACTING OF SUPPORT SERVICES
The Partnership acknowledges that Licensor hereby reserves the right to
subcontract the Support Services to third parties.
5. WARRANTIES
5.1. LICENSOR WARRANTIES
Licensor hereby warrants to the Partnership as follows:
(a) Licensor has full right and authority to grant the License;
(b) in the course of carrying out any provision of this Agreement, neither
Licensor nor any person for whom Licensor is responsible has taken or
shall take any action that results or would result in an infringement of
any copyrights, patents, trade-marks, trade secrets or other rights or
interests of any other person or result in a violation of any instrument
or agreement to which Licensor or any such person is bound; and
(c) the provision of the License hereunder shall be in compliance with all
laws and regulations applicable to Licensor.
5.2. LICENSOR WARRANTIES
Licensor hereby warrants to the Partnership as follows:
(a) the provision of the Support Services hereunder shall be in compliance
with all laws and regulations applicable to Licensor; and
(b) Licensor has full right and authority to grant the Trade-marks License.
5.3. NO OTHER WARRANTIES
LICENSOR DISCLAIMS ALL OTHER WARRANTIES OR CONDITIONS, EITHER EXPRESSED OR
IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OR CONDITIONS OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
LICENSE, THE TRADE-MARKS LICENSE AND SUPPORT SERVICES. LICENSOR DOES NOT WARRANT
THAT THE LICENSE OR THE TRADE-MARKS LICENSE OR THE SUPPORT SERVICES WILL SATISFY
THE PARTNERSHIP'S REQUIREMENTS OR THAT EACH OF THE LICENSE, TRADE-MARKS LICENSE
AND SUPPORT SERVICES IS WITHOUT DEFECT OR ERROR OR THAT THE PARTNERSHIP'S USE OF
THE LICENSE OR SUPPORT SERVICES WILL
<PAGE> 4
BE UNINTERRUPTED. LICENSOR DOES NOT REPRESENT OR WARRANT THAT THE LICENSE OR
SUPPORT SERVICES IS YEAR 2000 COMPLIANT.
6. INTELLECTUAL PROPERTY RIGHTS
6.1. USE OF TRADE-MARKS
Licensor hereby grants the Partnership a non-exclusive right to use the
Trade-marks in the Area for the purpose of marketing the Partnership's services
("Trade-marks License"). The Partnership agrees to use the style and format
specified by Licensor, as amended from time to time, and in accordance with
Licensor's specifications and guidelines for the use of the Trade-marks. The
Partnership shall not alter, obscure, remove, interfere with or add to any
of the Trade-marks, markings, trade names, copyright or other notices without
the prior written approval of Licensor, which approval shall be in Licensor's
sole discretion.
6.2. IDENTIFIERS
Partnership shall not alter, obscure, remove, interfere with or add to any of
the trade-marks, markings, trade names, copyright or other notices that are
accessible pursuant to the License without the prior written approval of
Licensor, which approval shall be at the Licensor's sole discretion.
6.3. INTELLECTUAL PROPERTY RIGHTS
All Intellectual Property Rights in or relating to: (a) the License are and
shall remain the property of Licensor, its affiliates, and third party
licensors; (b) the Trade-marks License are and shall remain the property of
Licensor and its affiliates. The Partnership acknowledges and agrees that the
License grants access to copyrighted material, trade secrets and other
proprietary material of Licensor, its affiliates and third party licensors. The
Partnership shall immediately notify Licensor if the Partnership becomes aware
of any illegal or unauthorized use of: (a) the License or any of the
Intellectual Property Rights therein or relating thereto; and (b) the
Trade-marks License or any of the Intellectual Property Rights therein or
relating thereto. The provisions of this section shall survive the termination
of this Agreement.
Partnership acknowledges that the e-Property Technology is unique and has
particular value as proprietary information, the unauthorized use or disclosure
of which cannot be reasonably or adequately compensated in damages alone. In
addition to any and all remedies available at law, the Partnership agrees that
Licensor and/or Licensor shall also be entitled to equitable relief, including
injunction and specific performance in the event of any breach of this
Agreement.
6.4. LICENSOR'S COPYRIGHT INDEMNITY
Licensor will defend or settle at its own expense any action brought against the
Partnership to the extent that it is based on a claim that the e-Property
Technology supplied by Licensor infringes any third party's copyright and will
pay any costs and damages finally awarded against the Partnership in any such
action which are attributable to any such claim or incurred by the Partnership
through settlement of such claim. However, such defence and payments are subject
to the conditions that:
(a) Licensor will be notified promptly in writing by the Partnership of
any such claim;
(b) Licensor will have sole control of the defence and all negotiations
for any settlement or compromise;
(c) the Partnership will reasonably assist Licensor in the defence of
any such claim; and
(d) should the e-Property Technology become (or in Licensor's opinion be
likely to become) the subject of any such claim, the Partnership
will permit Licensor, at Licensor's option and expense, to: (i)
procure for the Partnership the right to continue having the Access
<PAGE> 5
Rights: or (ii) replace or modify the e-Property Technology so
that it becomes noninfringing while providing functionally
equivalent performance; or (iii) grant the Partnership a refund of
the price paid for the Licence as depreciated. Such depreciation
will be an equal amount per month over a five year period for the
e-Property Technology based on Canadian generally accepted
accounting practice.
Licensor will have no liability to the Partnership under any provision of
this Agreement with respect to any claim of copyright infringement which
is based: (a) upon the combination of the e-Property Technology with any
other product, data or program not furnished or approved by Licensors; or
(b) upon the misuse of the Access Rights by the Partnership or any third
parties.
6.5.CONFIDENTIALITY
(a) None of the parties shall disclose, divulge or communicate
to any person:
(i) any confidential information concerning the
e-Property Technology; or
(ii) any of the terms of this Agreement;
other than: (a) those whose position requires the same,
including persons requiring such information in the course
of its business: (b) as permitted or contemplated by this
Agreement; (c) with the written authority of the other
party: or (d) as may be required by law.
(b) Each party shall use its best efforts to prevent the
unauthorized publication or disclosure of any such
information or documents.
(c) Each party shall ensure that its employees are and any
person to whom such information or documents are disclosed
is aware of and comply with the confidentiality and
non-disclosure provisions contained in this Agreement.
(d) If either party becomes aware of any breach of confidence by
any of its employees it shall promptly notify the other
party and give the other party all reasonable assistance in
connection with any proceedings which the other party may
institute against any such employees and any persons to whom
disclosure has been made.
(e) The provisions hereof shall survive the termination of this
Agreement.
(f) The restrictions contained in subsection (a) (i) shall cease
to apply to any information which comes into the public
domain other than through unauthorized disclosure by the
receiving party or its employees.
7. TERM AND TERMINATION
7.1. TERM
This Agreement, the License and Trade-marks License granted
hereunder shall continue in full force and effect until terminated
in accordance with the terms and conditions of this Agreement.
7.2. TERMINATION
This Agreement, the License and the Trade-marks License granted
hereunder may be terminated upon the happening of any of the
following events:
(a) if the Partnership fails to fulfill any of its payment
obligations and the Partnership fails to cure such payment
default within seven (7) days of receiving written notice of
its default:
<PAGE> 6
(b) if the Partnership breaches any of the terms and conditions
of this Agreement and the Partnership fails to cure such
material breach within five (5) days of receiving written
notice of its default; and
(c) upon the occurrence of any of the following events of
default and the Partnership fails to cure such event of
default within thirty (30) days:
(i) if the Partnership, other than in connection with a
bona fide reorganization, is wound up, dissolved,
liquidated or becomes subject to the provisions of
the Winding Up Act (Canada) or has its existence
terminated unless such existence is immediately
reinstated or has any resolution passed therefor or
makes a general assignment for the benefit of its
creditors or a proposal under the Bankruptcy and
Insolvency Act (Canada) or is adjudged bankrupt or
insolvent; or if it proposes a compromise or
arrangement under the Companies' Creditors
Arrangement Act (Canada) or files any petition or
answer seeking any reorganization, arrangement,
composition, re-adjustment, liquidation, or similar
relief for itself under any present or future law
relating to bankruptcy, insolvency, or other relief
for or against debtors generally; or
(ii) if a court of competent jurisdiction enters an order,
judgment or decree approving a petition filed with
respect to the Partnership seeking any
reorganization, arrangement, composition,
re-adjustment, liquidation, dissolution, winding up,
termination of existence, declaration of bankruptcy
or insolvency or similar relief under any present or
future law relating to bankruptcy, insolvency or
other relief for or against debtors generally, or if
any trustee in bankruptcy, receiver, liquidator, or
any other officer with similar powers is appointed,
whether privately or judicially, with the consent or
acquiescence of the Partnership: or
(iii) if the Partnership shall be or become insolvent.
7.4. EFFECT OF TERMINATION
Upon termination of the Agreement, all the rights and obligations
of the parties under this Agreement with respect to the License and
the Trade-marks License shall automatically terminate, except for:
(a) payments owing by the Partnership to Licensor pursuant to
this Agreement; or
(b) such rights of action as shall have accrued prior to such
termination and any obligations which expressly or by
implication are intended to come into or continue in force.
Partnership shall at its own expense forthwith return to Licensor,
or otherwise dispose of as Licensor may instruct all technical and
promotional materials and other documents and papers whatsoever in
the possession or control of the Partnership and relating to the
License or the business of Licensor (other than correspondence
between the parties) and all property of Licensor in the
Partnership's possession or under its control.
8. LIMITATION OF LIABILITY
LICENSOR SHALL NOT BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER LEGAL AUTHORITY INCLUDING, BUT NOT LIMITED TO, LOSSES OR
LIABILITIES FOR THE FAILURE OF THE LICENSE, LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION OR
OTHER PECUNIARY LOSS, ARISING OUT OF THE USE OF OR INABILITY TO
USE THE LICENSE, THE TRADE-MARKS LICENSE OR THE SUPPORT SERVICES,
WHETHER OR NOT LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF ANY
SUCH DAMAGES. LICENSOR'S ENTIRE LIABILITY AND PARTNERSHIP'S SOLE
REMEDY FOR ALL DAMAGES WITH RESPECT TO THE LICENSE AND THE
TRADE-MARKS LICENSE ACQUIRED BY PARTNERSHIP OR
<PAGE> 7
THE PROVISION OF SUPPORT SERVICES SHALL BE LIMITED TO DIRECT DAMAGES SUFFERED BY
PARTNERSHIP WHICH SHALL NOT, IN ANY EVENT, EXCEED THE TOTAL OF ALL AMOUNTS PAID
BY PARTNERSHIP IN THE PREVIOUS 12 MONTHS FOR THE LICENSE OR SUPPORT SERVICES, AS
APPLICABLE.
9. GENERAL
9.1. FURTHER ASSURANCES
The parties shall execute such further documents and do such further things as
may be necessary to implement and carry out the intent of this Agreement.
9.2. ENTIRE AGREEMENT
This Agreement and documents contemplated hereby to be attached to this
Agreement constitute the entire agreement between the parties and supersede and
replace all previous expectations, understandings, communications,
representations and agreements whether verbal or written between the parties
with respect to the subject matter hereof.
9.3 SEVERABILITY
If any part of this Agreement is unenforceable or invalid for any reason
whatsoever, such part shall be severable from the remainder of this Agreement
and its unenforceability or invalidity shall not affect the enforceability or
validity of the remaining parts of this Agreement.
9.4. AMENDMENTS
This Agreement may only be modified or amended in writing duly executed by both
parties.
9.5. NOTICES
Every notice and every document or copy of a document required or permitted to
be given or delivered hereunder shall be given in writing and delivered by
facsimile transmission followed immediately by: a) registered mail: or b) sent
by courier, addressed to the respective party or parties as identified in the
form following, or to such other address as one party may advise the other in
writing from time to time, and shall be delivered to such address. Any such
notice shall be deemed to have been given at the time of delivery.
PARTNERSHIP: YORK REGION E-PROPERTY LIMITED
PARTNERSHIP
Attn: e-Property Services Corporation
Suite 302
1091 Gorham Street
Newmarket, Ontario
L3Y 7V1
Attention: President
Fax No: (905) 853-7214
<PAGE> 8
LICENSOR: PLANET TODAY INC
Suite 302
1091 Gorham Street
Newmarket, Ontario
L3Y 7V1
Attention: President
Fax No.: (905) 853-7214
9.6. TIME OF ESSENCE
Time shall be of the essence hereof.
9.7. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws in
effect in the Province of Ontario.
9.8. HEADINGS
The headings in this Agreement and the division of this Agreement into sections
are for convenience of reference only and form no part of this Agreement.
9.9. ENUREMENT AND ASSIGNMENT
Partnership may not assign this Agreement or assign or sub-license any rights
hereunder without the prior written consent of Licensor, which consent may be
withheld, in its sole and absolute discretion. Licensor may assign this
Agreement to an affiliate and/or may assign the payment obligation to a third
party. This Agreement shall enure to the benefit of and shall be binding upon
the parties and their respective permitted assigns and successors.
9.10. ARBITRATION
In the event of any difference or dispute arising under this Agreement, the
disputing party shall give written notice of such dispute (the "Dispute Notice")
to the other party, setting out reasonable details of the dispute. Failing
settlement of the dispute by Licensor and the Partnership within 30 days after
the giving of the Dispute Notice, the dispute shall be determined by a single
arbitrator in accordance with the Arbitrations Act, 1991 (Ontario) as amended
from time to time. All awards pronounced by an arbitrator appointed in respect
of any dispute shall be reasoned awards in writing and shall immediately be
delivered to Licensor and the Partnership. All such awards shall be binding on
Licensor and the Partnership and no appeal from any award shall be allowed or
permitted unless the party appealing shall commence appeal proceedings in a
court of competent jurisdiction within 30 days after the award appealed from is
pronounced. The costs of any arbitration and court proceedings shall be in the
discretion of the arbitrator and, if the arbitration award is appealed, the
court.
9.11. WAIVERS
The waiver by a party of any of its rights hereunder or of the performance by
the other party of any of its obligations hereunder shall be without prejudice
to all other rights of the party and shall not be considered a waiver of any
other right or, in any other instance, of the rights so waived or a waiver of
performance by the other party of any of its obligations hereunder or of the
performance, in any other instance, of the obligations as waived. No waiver on
behalf of a party shall be effective or binding upon it unless made in writing.
<PAGE> 9
9.12. FORCE MAJEURE
Neither party shall be liable for any delay in performing any of its obligations
hereunder (other than financial obligations) if such delay is caused by
circumstances beyond the reasonable control of the party so delaying and such
party shall be entitled to a reasonable extension of time for the performance of
its obligations.
9.13 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this Agreement are
in Canadian funds.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date set
forth above.
YORK REGION E-PROPERTY LIMITED PARTNERSHIP BY ITS
GENERAL PARTNER, E-PROPERTY SERVICES CORPORATION
By: [SIG]
-------------------------
Name: NOREEN M. STEVENS
Title: Pres
PLANET TODAY INC.
By: [SIG]
-------------------------
Name: NOREEN STEVENS
Title: Secretary
<PAGE> 10
SCHEDULE "A"
e-PROPERTY TECHNOLOGY SPECIFICATIONS
The e-Property Technology can be described generally as a shared electronic
platform that is capable of hosting a full range of interactive services,
including collaborative information and file sharing, e-commerce and e-business
transactions, relationship-building, permission marketing and messaging between
individuals, groups, business, governments and associations. It is based on
commercial intranet/extranet models used by corporations to enhance business
activities at local levels by servicing e-commerce, e-business, and information
technology needs of local or regional businesses, governments and organizations.
The e-Property Technology provides a simple and low-cost method for publishing,
sharing, co-editing, integrating, transacting, collecting and messaging
information. This information can include content distributed from a central
location downward, or data collected locally and channeled into a central
database. In terms of an information utility, the flow information is inherently
bi-directional.
The e-Property Technology consists of a custom designed Lotus Notes(TM)/
Domino(TM)(being registered trademarks of IBM) software application and has
embedded within it IBM's Community Point(TM)(being a registered trademark of
IBM), a Lotus Notes(TM)/Domino(TM) based system designed for use by
municipalities in Europe, pursuant to a licensing agreement between Licensor and
IBM. The e-Property Technology also consists, in general terms, of methodologies
and practices related to the generation of revenues through the delivery of
interactive services. The hardware component of the e-Property Technology
consists of a remote Internet server (owned by Planet Today and hosted by IBM)
and several local IBM "production terminals" configured with internet
connections and IBM's Lotus(TM) client software. To interface with the
e-Property Technology, end-users require only a personal computer with web
browser software capable of connecting to the Internet.
<PAGE> 11
SCHEDULE "B"
ACCESS RIGHTS
Access Rights consist of the right of the Partnership to use the licence rights
to the e-Property Technology, the Trade Marks and other Applications granted
herein within the following area:
The area comprising (i) The Town of Newmarket, which, for greater certainty
comprises, among other areas. The Town of East Gwillimbury and The Town of
Georgina, and (ii) The Town of Aurora, which, for greater certainty comprises,
among other areas, The Township of King.
Pursuant to a Supplementary Indenture, the Partnership will be able to acquire
licence rights as granted hereunder upon payment of the appropriate fees for the
following area:
(i) The area comprising The Town of Richmond Hill;
(ii) The area comprising The Town of Markham and The Town of
Whitchurch-Stouffville; or
(iii) The area comprising The City of Vaughan.
<PAGE> 12
SCHEDULE "C"
LICENSE AND SUPPORT SERVICES FEES
LICENCE FEE:
The Partnership shall pay to Licensor a licence fee of $337,500 per Area to
acquire the License for use and application within one or more of the Areas. The
licence fee shall be payable upon the execution and delivery of the Agreement as
follows:
(i) 1.28% of the licence fee shall be payable in cash;
(ii) 98.72% of the licence fee shall be payable by the assignment and
transfer by the Partnership to Licensor on a non-recourse basis
pursuant to the terms of the Assignment of Promissory Notes
Agreement executed between the Partnership, Licensor and
Licensor.
SUPPORT SERVICES FEE:
Partnership to be invoiced support services fee from time to time by Licensor.
<PAGE> 13
SCHEDULE "D"
SUPPORT SERVICES
Support services to be provided by Licensor to Partnership shall be negotiated
and agreed to in writing from time to time.
<PAGE> 14
SCHEDULE "E"
TRADE-MARKS
Please see attached.
<PAGE> 15
SCHEDULE "E"
TRADE-MARKS
1. [e-PROPERTY LOGO]
2.
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YOUR LOCAL AREA WEB
3. LAW(TM) (Local Area Web)
<PAGE> 1
EXHIBIT 10.5
- - THE MATERIAL DENOTED BY THE SYMBOL "**" AS "HAS BEEN OMITTED
PURSUANT TO A "CONFIDENTIAL TREATMENT" REQUEST FILED WITH THE
COMMISSION.
THIS AGREEMENT IS MADE AS OF THIS 25TH DAY OF JANUARY, 2000.
BETWEEN: TELEMEDIA RADIO INC., a corporation duly incorporated under
the laws of Canada and having a place of business at 40 Holly
Street, Toronto, Province of Ontario, M4S 3C3,
(hereinafter referred to as "Telemedia");
AND: PLANET TODAY INC., a corporation a corporation duly
incorporated under the laws of Canada and having a place of
business at 1091 Gorham, Newmarket, Province of Ontario,
L37 7V1,
(hereinafter referred to as "Planet").
WHEREAS Telemedia is the owner of the radio stations CIQM-FM, CJBK-AM and
CJBX-FM in London and CIGM-FM, CJRQ-FM and CJMX-FM in Sudbury, hereinafter
referred collectively to as the "Stations";
WHEREAS Planet implements, operates and distributes on-line information,
communications and transactions services including network of local area
webs (LAWs) to facilitate the needs of consumers living in local
communities;
WHEREAS Planet has agreed to undertake the launch and the operation of LAWs
in the cities of London and Sudbury;
WHEREAS Planet is desirous of producing and executing with Telemedia a
marketing campaign to promote the LAWs on the Stations;
NOW, THEREFORE, this Agreement witnesses that in consideration of the
foregoing and of the covenants and agreements herein contained, the parties
hereto agree as follows:
ARTICLE 1. DEFINITIONS
In this agreement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the
respective meanings ascribed to them as follows:
1.1 "CITIES" means the local communities of London and Sudbury.
1.2 "EXPENSES" means all direct out-of-pocket costs incurred by Planet
for the preparation, production, operation, hosting, and
advertising of the LAWs, as detailed under Schedule "A". For
greater certainty, "Expenses" does not include indirect overhead
costs, rental costs for Planet's premises, the Tax on Goods and
Services applicable thereon and any other similar taxes that are
payable on goods and services.
1.3 "CENTRALIZED CONTENT" means, but is not limited to, Kickstart
Content, on-line affiliate products and services, national
advertising and brander's content, locally relevant content from
national
<PAGE> 2
sources (i.e. news events, chapter of national organizations...)
for display and distribution on the LAWs.
1.4 "KICKSTART CONTENT" means all local content for display and
distribution on the LAWs as referred to under Section 1.6 that is
available on the web as of the date of signature of this Agreement.
1.5 "LAWs" means one community-based intranet with electronic commerce
capabilities in each of the Cities. LAWs reside on IBM's Global
Network and are monitored seven (7) days a week.
1.6 "LOCAL CONTENT" means, but is not limited to, local community
groups and associations (i.e. schedules, statistics,
registrations), local business and advertisement, local
institutions and revues such as schools, theatres, local branch
information services as related to national branders, local events
for display and distribution of the LAWs.
1.7 "REVENUE" means all revenues generated by the LAWs including but
not limited to subscriptions based-fees for access to LAWs,
advertising revenues, sponsorship, branding, affiliate programs,
any revenue received by Planet for the products offered, sold or
licensed through LAWs, buyers clubs, group discount plans, and
other interactive activities. For greater certainty, "Revenue" does
not include GST or PST or any other taxes collected by Planet and
bad debts.
1.8 "NET PROFIT" means the positive difference between the Revenue and
the Expenses.
1.9 "STATIONS" means the radio stations CIQM-FM, CJBK-AM and CJBX-FM in
London and CIGM-FM, CJRQ-FM and CJMX-FM in Sudbury,
1.10 "TERM" means a term of two (2) years commencing on the day
following the Trial Period, unless sooner terminated in accordance
with the provisions of this Agreement.
1.11 "TRIAL PERIOD" means the time commencing on the date first written
above and terminating on January 31st, 2001.
ARTICLE 2. SERVICES DESCRIPTION
The services to be provided by the parties for the pre-launch, launch and
post launch of the LAWs shall include the following services and elements to
be provided by the party (parties) designated prior to the closing dates
indicated below:
2.1 PRE-LAUNCH (FROM DATE FIRST WRITTEN ABOVE TO FEBRUARY 1ST, 2000)
2.1.1 Planet shall meet with the General Manager of each Station
to review the rollout plan.
2.1.2 Telemedia shall provide Planet at no charge to Planet in
each Station with office spaces, telephones, computer
equipment and office supplies for the persons indicated
under 2.2.2.
2.1.3 Planet creative team shall collect material to develop the
Centralized Content.
2.1.4 Planet shall present the Centralized Content and will
meet with Telemedia advertisement creative team to develop
a marketing campaign to promote the LAWs.
<PAGE> 3
Page 3
2.1.5 Planet's community leader shall solicit local associations
and collect material to develop the Local Content.
2.1.6 Telemedia shall develop and produce the creative on the
Stations "coming soon" type advertisement for the LAWs, in
accordance with Article 5.
2.1.7 Telemedia shall broadcast on the Stations "coming soon"
type advertisement for the LAWs, in accordance with
Article 5.
2.2 LAUNCH (FROM FEBRUARY 2ND, 2000, TO MARCH 31ST, 2000)
2.2.1 Planet shall provide space for at least one advertisement
for the Stations on the LAWs in its advertising banner
sections at no charge for Telemedia. The composition and
placement of the advertisement shall be agreed by
Telemedia and the duration shall be for the duration of
the Trial Period and the Term.
2.2.2 Planet shall retain the services in each City of a
regional and community leader and train such persons to
develop the LAWs.
2.2.3 Planet shall place a button for each Station on the LAWs
to link to Telemedia's web sites.
2.2.4 Planet shall officially launch the LAWs.
2.2.5 Telemedia shall develop & produce the creative for launch
advertisement in accordance with Article 5.
2.2.6 Telemedia shall broadcast launch advertisement in
accordance with Article 5.
2.2.7 Planet's community leader shall continue to solicit local
associations and collect material to develop the Local
Content.
2.3 POST-LAUNCH (FROM APRIL 1ST, 2000, TO JANUARY 31ST, 2001)
2.3.1 Telemedia shall develop and produce the creative for
follow-ups awareness of the marketing campaign in
accordance with Article 5.
2.3.2 Telemedia shall broadcast follow-ups awareness of the
marketing campaign in accordance with Article 5.
2.3.3 Planet shall retain the services in each City of business
managers and train such persons for the LAWs.
2.3.4 The business managers shall solicit its businesses for
advertisement space and electronic commerce on the LAWs.
2.3.5 Planet's community leader shall continue to solicit local
associations and collect material to develop the Local
Content.
<PAGE> 4
Page 4
ARTICLE 3. SITE COSTS
3.1 COSTS. Planet hereby covenants and agrees to assume all Expenses
for the development, operating and other costs of the LAWs during
the Trial Period and the Term, save and except for the promotion of
the LAWs on the Stations by Telemedia as provided under Article 5.
Planet shall also be responsible of any loss that may result from
the LAWs in the Cities.
ARTICLE 4. CONTENT LIABILITY
4.1 CONTENT. Planet shall be responsible and control all content on the
LAWs and is solely responsible for licensing and copyright of all
material to ensure internet broadcast rights.
ARTICLE 5. PROMOTION
5.1 COMMERCIAL. Telemedia agrees to provide commercial airtime on the
Stations for a total value equal to the amount of the Expenses.
5.2 PURPOSE. The commercial ads shall be aired to promote the
pre-launch, the launch and the post-launch of the LAWs in the
Cities in accordance with the broadcast plan under Schedule B and
to the Stations' availability. In the event of unavailability,
Telemedia shall have the right to modify the broadcast plan.
5.3 COSTS. All costs incurred for the creative development, production
and broadcasting of the commercial ads shall be assumed by
Telemedia.
5.4 RULES. All scripts, recordings and instructions submitted to
Telemedia by Planet regarding the broadcasting of the commercial
ads shall be in accordance with the Commercial codes governing
broadcasting and any laws or by-laws in force at the time of
broadcasting. The responsibility of Telemedia is limited to the
broadcasting of said commercial ads.
5.5 NO BROADCAST. Telemedia can refuse to broadcast any commercial ads
which is not in accordance with commercial codes governing
broadcasting or any law or by-laws in force at the time of
broadcasting.
5.6 AFFIDAVITS. Telemedia shall provide Planet with affidavits on a
monthly basis confirming the date and the time of broadcast of the
commercial ads to promote the LAWs in the Cities in the previous
month.
ARTICLE 6. TRADE-MARKS
6.1 INTELLECTUAL RIGHTS. Save and except as may be required by the
parties in order to perform their obligations thereunder, neither
party may use in any form whatsoever the trade names or trade-marks
of the other party without the prior consent of the party whose
trade names or trade-marks are to be used.
ARTICLE 7. COMPENSATION
7.1 REVENUES. In consideration of the wares and services provided by
Telemedia under this agreement, Planet shall pay Telemedia fifty
percent (50 %) of all Net Profits.
<PAGE> 5
Page 5
7.2 RATE CARDS. The rate card for all sources of revenues shall be approved
by both parties.
7.3 CALCULATION. To calculate the Net Profits, Planet will prepare and
submit a detailed statement of Revenue and Expenses (the "Financial
Statement") for the term of the Trial Period and shall provide the
same to Telemedia within 30 days following the expiry of the Trial
Period together with a cheque for Telemedia's 50% share of the Net
Profits (if any). Thereafter, Planet shall prepare and submit the
Financial Statements half yearly and forward them to Telemedia within
30 days following the expiry of each half year period together with
payment for Telemedia's 50% share of the Net Profits.
7.4 NO WITHHOLDING OR SET-OFF. Planet shall not withhold any amount that
is due and owing to Telemedia pursuant to this Agreement either on
the basis that it disputes some issue in respect of this Agreement.
7.5 STATEMENTS. The Financial Statement provided for under article 7.3
shall show the Revenue, the bad debts, the outstanding accounts
receivable, the Expenses, and any other information, which may
reasonably be requested by Telemedia. Such information shall be
provided on a half yearly basis and on a cumulative basis. The said
statement shall be submitted to Telemedia within thirty (30) days after
the end of the half year period.
7.6 AUDIT. Planet shall keep at its principal place of business full,
accurate and complete records and books of account relating to this
Agreement for the accurate determination of payments to be made
pursuant to this Agreement. All records necessary for the determination
of payments shall be open at all reasonable times during the Trial
Period and the Term for examination and audit by Telemedia or duly
authorized independent chartered accountants designated by it.
Telemedia and the chartered accountants shall be entitled to examine
and audit all records, books, and statements; to examine and to
investigate generally all business transactions carried on by Planet
relating to this Agreement.
7.7 DEFICIENCY. If, as a result of an examination, audit or inspection of
Planet's records that is conducted or has been conducted by Telemedia
or an independent chartered accountant designated by it, it is
determined that there are unreported amounts payable to Telemedia,
such amounts shall be deemed to have been payable when due and Planet
shall immediately pay to Telemedia such amounts and any interest due
thereon in accordance with the provisions of this Article 7. In
addition, if the unreported payment exceeds five thousand dollars
($5,000.00) or more, Planet shall reimburse Telemedia for its
out-of-pocket expenses in conducting such examination, inspection or
audit, as well as any accounting fees and disbursements incurred by
Telemedia in connection therewith.
7.8 MISTAKES. The receipt or acceptance by Telemedia of any of the
statements furnished or any amounts paid or the cashing of any cheques
pursuant to this Agreement shall not preclude Telemedia from
questioning the correctness, authenticity or veracity thereof at any
time. In the event that any inconsistencies or mistakes are discovered
in such statements or payments, they shall immediately be rectified and
the appropriate payment shall immediately be made to Telemedia
together with the interest due thereon.
<PAGE> 6
Page 6
ARTICLE 8 TRIAL
8.1 TEST. The parties hereto covenant and agree that the initial duration
of this Agreement is limited to the Trial Period. During the Trial
Period, the parties shall meet on a quarterly basis to review progress
of this Agreement.
8.2 RENEWAL. Fifteen (15) days prior to the end of the Trial Period,
Telemedia shall have the right to renew this Agreement for the Term, at
the same terms and conditions, except as provided for under Article 8.
3, by sending a notice to such effect to Planet. Planet shall agree to
such renewal, unless the Financial Statements for the Trial Period show
a loss.
8.3 ONGOING PROMOTION. Should Telemedia exercise its option to renew,
Telemedia shall agree to continue the promotion of the LAWs in the
Cities by providing commercial airtime on the Stations for a total
value equal to the expenses to be incurred by Planet for the LAWs in
the Cities during the Term. The value of such expenses and the
broadcast plan of the commercial airtime shall be mutually agreed by
the parties thirty (30) days prior to the end of the Trial Period.
ARTICLE 9. INSURANCE AND INDEMNIFICATION
9.1 INDEMNITY BY PLANET. Planet shall indemnify and save harmless Telemedia
and its affiliated and related corporations and the officers,
directors, employees and agents thereof (collectively, the "Telemedia
Indemnified parties") against any and all liabilities, costs, expenses,
damages, losses, claims, including reasonable fees and expenses of
legal counsel and expenses and costs of litigation, directly or
indirectly, resulting from, related to or arising out of the use or the
inability to use the LAWs, or that could be instituted against
Telemedia or any of the Stations concerning the broadcasting or the
content of the commercial ads mentioned under Article 7, or arising,
directly or indirectly, from the wares advertised by Planet on the
Stations or on the LAWs, or as a result of the breach of this
Agreement by Planet or Planet's negligence or failure to act including,
without limiting the generality of the foregoing, all claims made by
any person for damages or loss of profits or a violation of
intellectual property rights.
9.2 INSURANCE. Planet shall procure and maintain in full force and effect
throughout the Trial Period and the Term at its sole cost,
comprehensive public and product liability insurance of not less than
one million dollars ($1,000,000) per single occurrence and not less
than two million dollars ($2,000,000) in the annual aggregate for
events which may result in a dispute, claim, legal investigation or
proceeding in respect of the activities of any or all of Telemedia and
Planet relating to the liabilities mentioned in Article 4. Such
insurance policy or polices shall not have a deductible of more than
ten thousand dollars ($10,000). Such insurance policy or policies shall
be written by responsible and recognized insurers qualified to do
business in Canada, shall name Telemedia as an additional named
insured, shall provide that Telemedia receive thirty (30) days written
notice prior to termination, expiration or cancellation of the policy
or policies or any material change thereto.
9.3 CLAIMS. Each party shall report promptly to its insurer and to the
others all disputes, claims, potential claims and legal investigations
and proceedings against any of them with the LAWs.
<PAGE> 7
Page 7
ARTICLE 10. EXCLUSIVITY AND RIGHT OF FIRST REFUSAL
10.1 OPTION. During the Trial Period and the Term, if the Cities show Net
Profits, Planet agrees to permit Telemedia to add two (2) cities to
this Agreement, at the same terms and conditions contained herein save
and except for the value of the expenses for such two cities, which
shall be mutually agreed by the parties.
10.2 EXCLUSIVITY. During the Trial Period and the Term, Planet agrees that
it shall not enter into any other agreements for the LAWs in the Cities
or the optional two (2) cities mentioned hereinabove for the purposes
of sharing revenues as contained herein.
10.3 FIRST REFUSAL. During the Trial Period and the Term, Planet agrees that
it shall offer Telemedia the right to conclude any agreement similar
as to this Agreement for any LAWs that Planet may desires to launch in
any city where Telemedia operates a radio station. The right contained
herein is in addition to the right of Telemedia under Article 10.1.
ARTICLE 11. TERMINATION
11.1 TERMINATION. Either party shall have the right to terminate this
Agreement immediately on giving notice to the other party if any of the
following events occur:
11.1.1 Either party becomes insolvent or makes an assignment for
the benefit of its creditors or makes a proposal to its
creditors or attempts to take advantage of any legislation
for the relief of bankrupt or insolvent debtor or its
declared bankrupt or a petition in bankruptcy is filed
against it, or
11.1.2 Either party fails to fulfil or perform any of its
obligations and such default is not remedied within 30 days
after the receipt of a notice from the other party
requesting that such default be remedied; or
11.2 NOTICE. Either party shall have the right after the expiry of the Trial
Period to terminate this Agreement at any time on giving a thirty-day
(30) prior written notice to the other party.
ARTICLE 12. EFFECT OF TERMINATION
12.1 SURVIVAL. In the event of the termination for any reason whatsoever or
expiration of this Agreement, all future and continuing rights and
obligations under this Agreement shall terminate, save and except for:
12.1.1 the obligation of Planet to pay the amounts to Telemedia in
accordance with the provisions of this Agreement;
12.1.2 the right of Telemedia to examine, investigate and audit
records of Planet in accordance with the provisions of this
Agreement;
12.1.3 the obligations of Planet to indemnify Telemedia and to
insure in accordance with the provisions of this Agreement;
<PAGE> 8
Page 8
12.1.4 the rights of either party to enforce any rights accrued
against the other and seek remedies for breach of this
Agreement,
which shall survive after the termination or expiration of this
Agreement.
ARTICLE 13. FORCE MAJEURE
13.1 No failure or omission in the performance of any obligation hereunder,
except the failure to pay any monies required to be paid hereunder,
will be deemed a breach of this Agreement or create any liability for
damages if such failure arises from any cause beyond the control of
either party, provided, however, that the party unable to perform will
continue to exercise its best efforts to overcome the disability and
find an alternative or substitute for the performance of its
obligations.
ARTICLE 14. NOTICE
14.1 Any notice, request, consent or other communication required or desired
to be given hereunder shall be in writing and shall be given by prepaid
first class mail, by telecopier or other means of electronic
communication or by hand delivery and shall be addressed as follows:
<TABLE>
<S> <C>
If to Telemedia: If to Planet:
Telemedia Radio Inc. Planet Today Inc.
40 Holly Street 1091 Gorham
Toronto, Ontario, Newmarket, Ontario
M4S 3C3 L37 7V1
Facsimile: (416) 486-2600 Facsimile: (905) 836-4926
Telephone: (416) 482-1429 Telephone: (905) 836-1800
Attention: President Attention: Sinclair Stevens
</TABLE>
Any such notice, if mailed by prepaid first class mail at any time
other than during a general discontinuance of postal service due to
strike, lockout or otherwise, shall be deemed to have been received on
the third day after the post marked date thereof, or if sent by
telecopier or other means of electronic communication, shall be deemed
to have been received on the day following the transmission date, or if
delivered by hand, shall be deemed to have been received at the time of
delivery to the address noted above. In the event of a postal strike,
notices or other communications shall be delivered by hand or sent by
telecopier or other means of electronic communication. Any party hereto
may change its address for the purpose of this Agreement by giving
notice of such a change of address to the other party hereto in the
manner provided for herein.
ARTICLE 15. ASSIGNMENT AND SUCCESSION
15.1 ASSIGNMENT BY TELEMEDIA. This Agreement or any interest herein is
assignable by Telemedia to any person capable of performing all of its
obligations pursuant to this Agreement.
<PAGE> 9
Page 9
15.2 ASSIGNMENT BY PLANET. This Agreement or any interest herein is personal
to Planet and cannot be assigned, transferred, mortgaged or otherwise
encumbered by Planet without the prior written consent of Telemedia, such
consent not to be unreasonably withheld.
15.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and enure to
the benefit of the parties hereto and their respective successors and
permitted assigns.
ARTICLE 16. GENERAL
16.1 PREAMBLE. The preamble hereof shall be deemed to form part of this
Agreement for all purposes.
16.2 CURRENCY. All amount payable pursuant to this Agreement shall be paid in
Canadian currency.
16.3 INDEPENDENT CONTRACTORS. The relationship between Telemedia and Planet is
such that, in its performance of this Agreement, each is an independent
contractor. Neither party shall by reason of this Agreement be deemed to
be or become a member of a joint venture or a joint enterprise with the
other party.
16.4 NO REPRESENTATION. Neither party is constituted or appointed the agent,
partner or representative of the other party for any purpose whatsoever.
Nothing contained herein shall be deemed or construed as granting to
either party any right or authority to assume or to create any obligation
or responsibility, express or implied, for or on behalf of the other
party or to bind the other party in any way or manner whatsoever, and
neither party shall hold itself out as agent of the other party or enter
into contracts in the name of the other party or otherwise bind or
purport to bind the other party.
16.5 GOVERNING LAW. This Agreement shall be interpreted and construed in
accordance with the laws of the Province of Ontario and the law of Canada
applicable therein.
16.6 ATTORNMENT TO JURISDICTION. The parties hereto attorn to the jurisdiction
of the courts in the Province of Ontario.
16.7 EXTENDED MEANING. In this Agreement, unless the context otherwise
requires, words importing the singular include the plural and vice versa
and words importing persons shall include firms and corporations and vice
versa.
16.8 SEVERABILITY. It is the intention of the parties hereto not to violate
any public policy, statutory law, regulatory law or common law. If any
provision of this Agreement is invalid, unenforceable, in conflict with,
or in violation of, the law of the governing jurisdiction or any other
relevant jurisdiction, such provision shall be inoperative, the validity
of the remaining provisions shall not be affected, and this Agreement
shall remain binding upon the parties to the fullest extent permitted by
law.
16.9 TIME OF ESSENCE. Time is of the essence of this Agreement.
16.10 WAIVER. The failure on the part of one party to complain of any act or
failure to act of the other party or to declare the other party in
default shall not constitute a waiver by such party of its rights under
this Agreement. No waiver of any rights under this Agreement shall be
effective unless in
<PAGE> 10
Page 10
writing and signed by a duly authorized officer of the party purporting
to give the same. A waiver of any breach of any provision of this
Agreement shall not be construed as a continuing waiver of other breaches
of the same provision or a waiver of any other provisions of this
Agreement.
16.11 NO ELECTION. Resort to any remedy referred to in this Agreement shall not
be construed as an election of remedies or a waiver of any other rights
and remedies to which a party is or may be entitled at law, in equity or
otherwise for violation of any right relating to the Marks or under this
Agreement against the party in breach. The rights of termination shall be
in addition to, and not in substitution for, any and all rights or
remedies available to the non-defaulting party against the defaulting
party.
16.12 COUNTERPARTS. This Agreement may be signed in counterparts and each such
counterpart shall constitute an original document and such counterparts,
taken together, shall constitute one and the same instrument.
16.13 HEADINGS. The insertion of headings is for convenience of reference only
and shall not affect the construction or interpretation hereof.
16.l4 ENTIRE AGREEMENT. This Agreement embodies the entire Agreement between
the parties hereto with regard to the matters dealt with herein. There
are no understandings or agreements, verbal or otherwise, which exist
between the parties except as herein expressly set out. No modification
to this Agreement shall be effective unless embodied in a written
instrument duly executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
<TABLE>
<S> <C>
PLANET TODAY INC. TELEMEDIA RADIO INC.
/s/ PETER PALIJENKO /s/ CLAUDE BEAUDOIN
- -------------------------------------- ------------------------------------
Per: Peter Palijenko Per: Claude Beaudoin
Title: V.P. Business Strategy of Development Title: President
</TABLE>
<PAGE> 11
SCHEDULE "A"
Estimated expenses to be incurred by Planet Today for each of the Cities for
the Trial Period
<TABLE>
<S> <C>
1. Salaries for community leader and business manager, including supervision $ **
2. Hosting of site on IBM Global Network, including 7-day 24-hour monitoring $ **
3. Kickstart Content creation (2 months of work) $ **
4. Creation of Telemedia wed pages for each of the Cities in test market (1 month of work) $ **
5. Affiliate content charges $ **
6. E-commerce development services $ **
-------
Total estimated cost for each Cities for Trial Period $ **
</TABLE>
The parties agree that the Expenses for the Trial Period shall not exceed the
amount of $ ** for each of the Cities.
SCHEDULE "B"
Preliminary Broadcast Plan
Criteria:
1. Schedule for term of 52 weeks
- High Frequency Launch -- First 4--6 weeks
- Ongoing Institutional/Maintenance Plan - Balance of 52-week
commitment.
2. For the stations CIQM, CJBK and CJBX in London - Investment Commitment -
$ **
3. Creative - To be provided by CIQM, London
4 The commercial ads are scheduled on the best times available but subject
to Section 5.2 of this Agreement.
- - THE MATERIAL DENOTED BY THE SYMBOL " ** " HAS BEEN OMITTED PURSUANT TO A
"CONFIDENTIAL TREATMENT" REQUEST FILED WITH THE COMMISSION.
<PAGE> 12
Page 2
PROPOSED SCHEDULES
PART ONE: LAUNCH Weeks 1 to 4
- - 30 spots per week on CIQM, 120 commercials
- - 35 spots per week on CJBX, 140 commercials
- - 35 spots per week on CJBK, 140 commercials
- - CJBK on air interviews with Planet Today (i.e. Peter Palijenko) to talk about
plan.
- - Total number of occasions: 400
PART TWO: HIGH MAINTENANCE: Weeks 5-13
- - 20 spots per week on CIQM, 180 commercials
- - 20 spots per week on CJBX, 180 commercials
- - 25 spots per week on CJBK, 225 commercials
- - Total number of occasions: 585
PART THREE: SITE MAINTENANCE: Weeks 14-52
- - 14 spots per week on CIQM, 546 commercials
- - 16 spots per week on CJBX, 624 commercials
- - 25 spots per week on CJBK, 975 commercials
- - Total number of occasions: 2145 commercials
- - Plus On-Air interviews!
<PAGE> 1
EXHIBIT 10.6
1stUp.com Corporation
CO-BRANDING SERVICES AGREEMENT
- --------------------------------------------------------------------------------
PREAMBLE
- --------------------------------------------------------------------------------
This agreement (Agreement) is made as of the Agreement Date by and between
1stUp.com Corporation("1stUp") and the co-branding associate named below
("Co-Branding Associate"). In consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
ORDER FORM
<S> <C>
Co-Branding Associate Name: PLANET TODAY INC. Agreement Date: Feb. 16, 2000
-----------------
- -------------------------------------------------------------------------------------------
Co-Branding Associate Address Telephone Launch Date: March 6, 2000
Number: -----------------
Suite #105,
1091 Gorham Street, (905) 836-1800 URL of Co-Branding Associate homepage:
Newmarket, Ontario, Extension 140 WWW.PLANETTODAY.COM
L3Y 7x1, Fax Number: -------------------
CANADA. (905) 836-4926
- -------------------------------------------------------------------------------------------
</TABLE>
Co-Branding Description: 1stUp.com is a company that develops, deploys and
operates a free Internet access service to be distributed and marketed under the
1stUp.com and Co-Branding Associate brand name through a persistent "Service
Offering Window" which, while an end-user is connected to the Internet, displays
one 468x60 pixel banner advertisement and eight navigational buttons that allow
access to additional functionalities. Co-Branding Associate desires to offer a
version of such service on which the Service Offering Window shall be branded
with the Co-Branding Associate's trademark or logo (per Exhibit A). Co-Branding
Associate shall promote, market and make available this service to the general
public.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Agreement consists of the Preamble, the Order Form, and the 1stUp Terms and
Conditions of Co-Branding.
<TABLE>
<S> <C>
1stUp.com Corporation Co-Branding Associate
By: [SIG] By: [SIG]
---------------------- ------------------------
Title: [SIG] Title: [SIG]
---------------------- ------------------------
Date: 2/17/00 Date: Feb. 16, 2000
---------------------- ------------------------
</TABLE>
- - THE REMAINING TERMS AND CONDITIONS OF THIS AGREEMENT HAVE BEEN OMITTED
PURSUANT TO A "CONFIDENTIAL TREATMENT" REQUEST FILED WITH THE COMMISSION.
<PAGE> 1
[PRICEWATERHOUSECOOPERS LOGO]
PRICEWATERHOUSECOOPERS LLP
CHARTERED ACCOUNTANTS
145 King Street West
Toronto Ontario
Canada M5H 1V8
Telephone +1 (416) 869 1130
Facsimile +1 (416) 863 0926
Direct phone (416) 814-5809
Direct fax (416) 941-8445
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form SB-2 of
our report dated August 24, 1999 relating to the consolidated financial
statements of Planet America Inc. as of and for the years ended June 30, 1999
and 1998, which appear in such Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Toronto, Canada
March 16, 2000
PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers
LLP and other members of the worldwide PricewaterhouseCoopers organization.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
REGISTRATION STATEMENT ON FORM SB-2 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> OTHER YEAR
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-1999
<PERIOD-END> DEC-31-2000 JUN-30-1999
<CASH> 1,613 3,244
<SECURITIES> 0 0
<RECEIVABLES> 65,479 34,130
<ALLOWANCES> 3,129 4,605
<INVENTORY> 0 0
<CURRENT-ASSETS> 252,948 37,184
<PP&E> 23,769 23,769
<DEPRECIATION> 19,815 19,462
<TOTAL-ASSETS> 1,150,709 969,801
<CURRENT-LIABILITIES> 211,500 164,463
<BONDS> 0 0
0 0
0 0
<COMMON> 5,867 5,767
<OTHER-SE> 829,107 745,838
<TOTAL-LIABILITY-AND-EQUITY> 1,150,709 969,801
<SALES> 0 0
<TOTAL-REVENUES> 107,898 147,368
<CGS> 0 0
<TOTAL-COSTS> 155,900 251,741
<OTHER-EXPENSES> 333,136 967,280
<LOSS-PROVISION> (1,476) 4,605
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 379,662 1,076,258
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 379,662 1,076,258
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 379,662 1,076,258
<EPS-BASIC> 0.07 0.19
<EPS-DILUTED> 0.07 0.19
</TABLE>
