UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
PlayStar Corporation
(Name of Small Business Issuer in Its Charter)
Delaware 51-0378588
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
50 Wellington Street East, Top Floor, Toronto, Ontario, Canada M5E 1C8
(Address of Principal Executive Offices) (Zip Code)
(416) 360-4531
Issuer's Telephone Number
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.0001 Per Share
(Title of Class)
<PAGE>
PART I
Item 1. Description of Business.
Introduction
PlayStar Corporation (the "Company") is a developmental stage company
which, through PlayStar Limited, its operating subsidiary, designs and develops
and intends to operate, promote and commercialize interactive, software-based
games of chance which it offers as an on-line service accessible world-wide on
the Internet. The Company was incorporated in the State of Delaware on October
3, 1996. On October 9, 1996, the Company acquired all of the issued and
outstanding shares of common stock of PlayStar Limited, a Jersey, Channel
Islands corporation incorporated on October 9, 1996. Unless otherwise indicated,
any reference to the Company or PlayStar Corporation shall also be deemed to be
the business of PlayStar Limited. The Company's headquarters are located at 50
Wellington Street East, Top Floor, Toronto, Ontario, Canada M5E 1C8, and its
telephone number is (416) 360-4531.
The information set forth in this report contains certain forward looking
statements within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward looking statements as a result of future uncertainties
and the limited operating history of the Company.
Products and Services
The Company designs and develops and intends to operate, promote and
commercialize an on-line gaming service offering interactive, software-based
games of chance accessible world-wide through the Internet. The service will
allow patrons to play interactive games in real time either in "free" mode or in
"live" mode. In "live" mode, patrons will wager with real money in various
forms, including electronic money or "e-cash," credit cards, wire-transfers,
money-orders and personal account debits. The Company will initially offer a
selection of casino-style games, including, but not limited to, blackjack, draw
poker, roulette and slot machines.
The Company has designed its games to be entertaining and captivating.
Moreover, the games have been adapted to the idiosyncrasies of the Internet. For
example, at times, due to "noise" on telephone lines or other unpredictable
technical glitches, connections between computers may terminate. To respond to
such problems, the Company's software keeps track of the precise status of the
game. If a game is interrupted, the patron needs only to return to the Company's
website and the game will be restored to the moment the disconnection occurred.
The Company does not plan to require patrons to maintain a minimum account
balance or place any restrictions on amounts accumulated through winnings. The
Company does plan, however, to establish a maximum bet limit for new customers.
The Company may, at its discretion, grant custom wagering and account options to
its regular customers based upon their
<PAGE>
established profiles. At the present time, the Company does not intend to extend
credit services to its patrons.
Distribution
The Company intends to attract patrons to its service by providing quality
content through innovative use of animation and graphic design. The Company's
website has been designed with simplicity and effectiveness in mind. Patrons are
able to browse the website and try any game in "free" mode. When a patron
decides to open an account, the relevant financial information will be
processed. Once an account is open, patrons may elect to play any of the
Company's games in "live" mode and wager against their accounts. The Company
will also allow patrons to review their accounts and cash-out at any time.
The Company plans to protect all customer data and information with
high-level security systems and password encryption software. Patrons will be
issued both an account identification number and a PIN number. Any wagering or
patron functions, such as an account review or a cash-out, will require the
correct identification numbers. The Company will not require identification
numbers to browse the Company's website or play games in "free" mode.
The Company intends to work closely with major, international banking
institutions that have experience providing electronic and Internet payment
clearing services. All commercial and financial transactions will be processed
in real time. To protect the privacy of sensitive information, no records will
be kept of transactions once they are processed. Furthermore, the information
that is administered by the Company for purposes of account review will be
encrypted by the patron's own password. These security measures will ensure that
not even Company personnel will be able to examine sensitive information without
the patron's direct permission or instruction.
Customers and Marketing
The Company's target market is individuals located throughout the world
who are current on-line users and at least 18 years of age. According to the
Internet Society, there are currently 35 to 40 million such people world-wide
who regularly access the Internet. Moreover, Internet use is expected to grow by
as much as 80 percent each year. In order to create an awareness of the
Company's existence among individuals in the target market, the Company intends
to focus its marketing efforts primarily on traditional media advertising,
on-line promotions, business development, third-party relationships and social
programs. To ensure the creation of an effective advertising program, the
Company plans to work closely with a marketing communications firm. The Company
intends to direct its initial marketing efforts outside of the United States and
Canada.
<PAGE>
Competition
A significant number of companies, organizations and individuals are
currently offering or purporting to offer casino gambling services on the
Internet similar to those of the Company. The Company's primary competition
includes, but is not limited to, Venturetech Inc., Internet Casinos Ltd.,
Interactive Gaming and Communications Corp. (formerly Sports International -
USA), Wager Net Inc., Casinos of the South Pacific, World Wide Web Casinos and
Virtual Vegas. The Company is aware of several firms currently accepting wagers
on various sporting events with financial transactions being administered from
off-shore accounts. Additionally, several organizations currently offer lottery
tickets for sale on the Internet for international lotteries.
Most Internet markets, including the gambling segment, are relatively
accessible to a wide number of entities and individuals. The Company believes,
however, that there are substantial market barriers that will ultimately
preclude the vast majority of prospective providers from maintaining successful
Internet operations and thereby provide an advantage to the Company.
Patents, Copyrights and Trade Secrets
As of the date hereof, the Company does not own or otherwise control any
patents, copyrights or trademarks. As the Company's research and development
efforts progress, the Company will attempt to protect its own proprietary
technology by relying on trade secret laws and non-disclosure and
confidentiality agreements with its employees who have access to its proprietary
technology. To date, the Company has entered into one such consulting agreement
with Dreamplay Research Corp. of Toronto, Canada ("Dreamplay"). Despite these
anticipated protections, no assurance can be given that others will not
independently develop or obtain access to such technology or that the Company's
competitive position will not be adversely affected thereby.
Regulation
The Company must adhere to the legal requirements of each jurisdiction in
which it operates or offers its services. To the Company's knowledge, no United
States court or federal agency has directly addressed the legality of the
operation of on-line casinos or sport wagering services. The use of the Internet
for sports wagering services, however, may violate the United States federal
wire statute. In the United States, the ownership and operation of land-based
gaming facilities has traditionally been regulated on a state by state basis.
Although the vast majority of states have legalized some forms of gaming
activities, there can be no assurance that the Company's activities will be
sanctioned in any particular jurisdiction. The Company will confront similar
legal obstacles in each jurisdiction in which a user of the Company's services
is located. In the event that it is determined that the Company's activities
violate applicable law, the Company and its directors and officers may be
subject to civil and criminal sanctions. The Company intends to carefully review
all applicable laws prior to offering its services
<PAGE>
in a particular jurisdiction. Moreover, at no time will the Company offer
its services in any jurisdiction where such activities are illegal. There can be
no assurance that the Company will be able to legally offer its services in the
United States or any other country. Furthermore, until such time as new
legislation is passed or current statutes are adequately defined, the Company
will refrain from offering its gaming services in the United States and Canada.
Research and Development
Since the Company's inception in October 1996, the Company has expended
approximately $250,000 on research and development activities. Effective
December 1, 1996, the Company retained Dreamplay as a consultant to perform
software research and develop the Company's Internet-based software games of
chance. Pursuant to this consulting agreement, Dreamplay agreed to assign to the
Company all right, title and interest in the software designed and developed for
the Company. The Company intends to continue its research efforts to enable the
development of additional casino games, including, but not limited to, pai gow,
baccarat, sic bo, craps and two-up. During the implementation of this second
generation of casino games, the Company also intends to design a complete sports
betting system. Additionally, the Company believes that other games, more
interactive in nature, will become highly popular in the gaming community in the
future. Accordingly, once the Company establishes its core business, it will
research and invest in this developing area.
Employees
The Company currently has one full-time employee who serves as the
Company's President, Chief Executive Officer, Chief
Financial Officer and Treasurer.
Item 2. Management's Discussion and Analysis or Plan of Operation.
In connection with its organization, the Company acquired all of the
issued and outstanding shares of common stock of PlayStar Limited. During the
succeeding months, the Company raised an aggregate of $1,000,000 in capital
through three private placements completed pursuant to Rule 504 promulgated
under the Securities Act of 1933. This financing has satisfied the Company's
cash requirements as of the date hereof. However, management estimates that the
total amount of "seed capital" required in order to proceed with current
operations and to bring the Company's own services to market will be between
$12,000,000 and $15,000,000, including approximately $1,000,000 for research and
development, approximately $5,000,000 for advertising, marketing and promotional
efforts, and approximately $6,000,000 for working capital, and anticipates that
the Company may need to raise additional capital during its first twelve months.
It anticipates doing so through additional private placements of unregistered
shares of its Common Stock conducted under an exemption provided by the
Securities Act of 1933 or by the rules of the Securities and Exchange
Commission.
<PAGE>
The Company's initial efforts for its first twelve months will center on
the development of its revenue stream. During the first three months, the
Company intends to finalize its software product with system testing beginning
in April 1997 and continuing until July 1997. The Company will also continue to
negotiate licensing arrangements with certain countries and finalize the
location of the operations base for its on-line casino. Thus far, the Company
has secured the interest of two such countries, both of which are members of the
Organization for Economic Cooperation and Development (OECD).
After the first three months, and prior to the launch of the on-line
casino operations, the Company intends to raise additional capital.
Additionally, the Company plans to obtain casino operator licenses and finalize
its merchant status with local financial institutions which will support the
Company's banking requirements.
The Company plans to distribute its operations throughout the world,
through jurisdictions that can provide the necessary operational infrastructure,
and that are protected by favorable tax and gaming regulations. To implement its
operations, the Company intends to rely on the expertise of industry standard,
leading edge computer and software manufacturers.
Provided that all regulatory and financial requirements have been
satisfied, the Company intends to establish an operating base and begin
operation of its on-line casino in the third quarter of 1997. The launch of the
on-line casino will be a critical factor for the Company's success. Accordingly,
the Company plans to announce the launch of the on-line casino through selected
world media, press conferences and an advertising campaign. The Company intends
to retain the services of a marketing communications firm to oversee its
promotional efforts.
Once the Company's service is fully operational, the Company plans to
employ 5 "Crews", each of which will consist of a Gaming Supervisor, a Computer
Technician and a Customer Assistant. The Gaming Supervisor will be responsible
for overseeing all gaming activity and resolving any concerns patrons may have.
The Computer Technician will maintain and ensure the smooth operation of play.
The Customer Assistant will provide general support and customer service.
Customer Assistants will be responsible for the immediate handling of players'
questions and complaints. The Company anticipates that employee growth will be
greatest in this area. The Company also plans to employ a corporate
Administrative Assistant, a Financial Comptroller, a Manager of Operations
(Systems), a Manager of Business Development and Research and Development staff.
Moreover, the Company may increase the number of its employees as its business
may permit or require.
The Company intends to sign an equipment and service lease to facilitate
its operations computer center. The estimated value of this lease is
approximately $2,500,000.
Finally, since the revenues of the Company depend on casino winnings from
customers, the Company will endeavor to develop a loyal customer base.
Ultimately, the Company foresees that such efforts will establish the Company as
a premier brand in on-line gaming.
<PAGE>
Item 3. Description of Property.
The Company does not presently own or lease any property or real estate.
The Company has no policies regarding investments in real estate, securities, or
other forms of property.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of April 25, 1997 by (i) each
director of the Company, (ii) each executive officer of the Company and each
executive officer named in the Compensation Table below, (iii) all directors and
officers of the Company as a group and (iv) each person known by the Company to
be the beneficial owner of more than five percent of the Common Stock of the
Company:
- ---------------------------------------------------------------------
Beneficial Current Percent
Ownership of of Class
Name and Address Common Stock(1)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Julius Patta - President, Chief 4,330,500 (2) 25.38%
Executive Officer, Chief Financial
Officer, Treasurer and Director
719-20 Vanauley Street
Toronto, Ontario M5T 2H4
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Simon Bramson - Chairman of the 320,000 (3) 1.98%
Board, Secretary and Director
800 Petrolia Rd. Unit 16
Downsview, Ontario M3J 3K4
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Trust f/b/o Allan Bramson, Evan 3,694,500 (4) 22.37%
Bramson and Joanne Bramson
c/o Hemery Trustees Limited
31 Broad Street
St. Helier
Jersey Channel Islands JE4 8XN
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
William Tucker 3,362,500 (5) 20.93%
Powerstock Consultants Limited
Clinch's House
Lord Street
Douglas, Isle of Man 1M99 1BD
- ---------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------
Trust f/b/o Irving Litvack, Michael 3,353,100 (6) 20.88%
Leonard Litvack, Lori Lee Litvack,
Kari Lynn Freesman, Jeffrey Eliot
Litvack, Andrew David Litvack and
Dora Litvack
c/o Powerstock Limited
31 Broad Street
St. Helier
Jersey Channel Islands JE4 8XN
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
All directors and executive 4,650,500 (7) 26.75%
officers as a group
- ---------------------------------------------------------------------
(1)Based upon 15,812,500 issued and outstanding shares of the Company's Common
Stock.
(2)Includes options to purchase 1,250,000 shares of Common Stock exercisable
within 60 days.
(3)Consists of options to purchase 320,000 shares of Common Stock exercisable
within 60 days.
(4)Includes options to purchase 700,000 shares of Common Stock exercisable
within 60 days.
(5)Includes options to purchase 250,000 shares of Common Stock exercisable
within 60 days.
(6)Includes options to purchase 250,000 shares of Common Stock exercisable
within 60 days.
(7)Includes options to purchase 1,570,000 shares of Common Stock exercisable
within 60 days.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The following table sets forth information regarding the directors and
executive officers of the Company.
Name Age Position
Julius Patta.................. 30 President, Chief Executive
Officer, Chief Financial
Officer, Treasurer and
Director
Simon Bramson................. 59 Chairman of the Board,
Secretary and Director
- --------------------
Julius Patta has served as President, Chief Executive Officer and a
Director of the Company since its inception. Since January 1997, Mr. Patta has
also served as Chief Financial Officer and Treasurer of the Company. Mr. Patta
has fourteen years of international business, finance, games software and
telecommunications technology experience. From April 1996 until September 1996,
Mr. Patta was Vice President of Netron Interactive, a division of Netron, Inc.
("Netron"), a Canadian software company. While with Netron Interactive, Mr.
Patta managed corporate sales, third-party relationships, staff, production
development and key projects. From June 1994 until March 1996, Mr. Patta was
Vice President, Research and Development of Netron where he managed product
planning, product development, staff, public relations and strategic customer
sales. From January 1992 until May 1994, Mr. Patta was Vice President,
Consulting Services of Netron where he managed business development and sales,
third-party partnering, contract negotiations and key projects. Prior to joining
Netron, Mr. Patta was the owner and
<PAGE>
principal consultant of CASE Consulting Services, which provided high-end
information systems services.
Simon Bramson has been Chairman of the Board, Secretary and a Director of
the Company since its inception. Until January 1997, Mr. Bramson also served as
Chief Financial Officer and Treasurer of the Company. Since January 1996, Mr.
Bramson also has served as Vice President, Corporate Development and a Director
of W.I.N. Gaming Corporation, an operator of charity casinos in Ontario. From
January 1991 to December 1995, Mr. Bramson was a private investor and an
independent financial consultant.
Item 6. Executive Compensation.
The following table discloses as to the Chief Executive Officer and each
of the Company's four mostly highly compensated executive officers whose salary
plus bonus exceeded $100,000, information concerning compensation payable and/or
paid for services rendered during the fiscal year ending June 30, 1997 and
from inception until December 31, 1996:
Summary Compensation Table
- -------------------------------------------------------------------------
Long-Term
Compensation
Annual Compensation Awards
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Other Securities
Name and Annual Underlying All
Principal Year Salary Bonus Compensation Options Other
Position Compensation
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Julius Patta 1997 NIL NIL NIL 1,250,000 NIL
President, 1996 NIL NIL NIL
Chief Executive
Officer, Chief
Financial
Officer and
Treasurer
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Simon Bramson 1997 NIL NIL NIL 320,000 NIL
Chairman of the 1996 NIL NIL NIL
Board and
Secretary
- -------------------------------------------------------------------------
The following table contains information concerning the grant of stock
options to the Company's executive officers named in the Summary Compensation
Table during the fiscal year ending June 30, 1997:
<PAGE>
----------------------------------------------------------
Number of Percent of
Securities Total
Underlying Options
Options Granted to Exercise or Expiration
Name Granted Employees Base Price Date
in per Share
Fiscal Year
----------------------------------------------------------
----------------------------------------------------------
Julius Patta - 1,250,000 100% $0.05 October
President, 9, 2001
Chief Executive
Officer, Chief
Financial
Officer and
Treasurer
----------------------------------------------------------
----------------------------------------------------------
Simon Bramson - 320,000 0% $0.05 October
Chairman of the 9, 2001
Board and
Secretary
----------------------------------------------------------
----------------------------------------------------------
Total........ 1,570,000 100% $0.05 October
9, 2001
----------------------------------------------------------
No stock options have been exercised to date.
Directors of the Company do not receive any stated salary for their
services as directors or members of committees of the board of directors, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Directors of the Company may also serve the
Company in other capacities as an officer, agent or otherwise, and may receive
compensation for their services in such other capacity.
The Company is not a party to any employment or consulting agreements
between the Company and any executive officer.
Item 7. Certain Relationships and Related Transactions.
On October 9, 1996, the Company issued 12,000,000 unregistered shares of
Common Stock to the shareholders of PlayStar Limited, a Jersey, Channel Islands
corporation, in exchange for all of the issued and outstanding shares of
PlayStar Limited. Certain of the beneficial owners of the Company were
shareholders of PlayStar Limited, and therefore received shares of Common Stock
of the Company in this transaction. These beneficial owners include Julius Patta
who received 3,000,000 shares through his beneficial ownership of Hemery
Nominees Limited, Trust f/b/o Allan Bramson, Evan Bramson and Joanne Bramson
which received 3,000,000 shares through its beneficial ownership of Hemery
Trustees Limited, William Tucker who received 3,000,000 shares through his
beneficial ownership of Powerstock Consultants Limited and Trust f/b/o Irving
Litvack, Michael Leonard Litvack, Lori Lee Litvack, Kari Lynn Freesman, Jeffrey
Eliot Litvack, Andrew David Litvack and Dora Litvack which received 3,000,000
shares through its beneficial ownership of Powerstock Limited in the
transaction.
<PAGE>
Item 8. Description of Securities.
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, par value $0.0001 per share. As of April 25, 1997, there were
issued and outstanding 15,812,500 shares of the Company's Common Stock. On April
17, 1997, there were 71 holders of record of the Company's Common Stock.
Each stockholder of the Company is entitled to one vote for each share of
Common Stock entitled to vote held by such stockholder. All elections for
directors are decided by plurality vote; all other questions are decided by
majority vote except as may otherwise be provided by the Company's Certificate
of Incorporation or by the Delaware General Corporation Law.
The holders of the Company's Common Stock are not entitled to cumulative
voting rights with respect to the election of directors, and as a consequence,
minority stockholders will not be able to elect directors on the basis of their
votes alone. Holders of the Company's Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. See Part II. In the event of a liquidation,
dissolution or winding up of the Company, holders of the Company's Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities. Holders of the Company's Common Stock have no preemptive rights and
no right to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of the Company's Common Stock are fully paid and
non-assessable.
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters.
On March 14, 1997, the Common Stock of the Company was approved for
trading on the NASDAQ-OTC Electronic Bulletin Board. The Common Stock of the
Company began trading on March 19, 1997. From March 19, 1997 through April 25,
1997, the high bid price was $2.25 and the low bid price was $0.25; quarter-end
high and low bids (as reported by NASDAQ) as set forth below, reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
reflect actual transactions:
Quarter Ended High Bid Low Bid
1997 - First $2.25 $0.25
Quarter (Since
March 19)
As of April 17, 1997, there were 71 holders of record of the Company's
Common Stock. The Company has not declared or paid any cash dividends on its
Common Stock since its inception, and its Board of Directors currently intends
to retain all earnings for use in the
<PAGE>
business for the foreseeable future. Any future payment of dividends will
depend upon the Company's results of operations, financial condition, cash
requirements and other factors deemed relevant by the Company's Board of
Directors.
Item 2. Legal Proceedings.
The Company is not party to any legal proceeding.
Item 3. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
On October 9, 1996, the Company issued 12,000,000 unregistered shares of
its Common Stock to the shareholders of PlayStar Limited in exchange for all of
the issued and outstanding shares of PlayStar Limited. These shareholders
include Hemery Nominees Limited, which received 3,000,000 shares beneficially
owned by Julius Patta; Hemery Trustees Limited, which received 3,000,000 shares
beneficially owned by Trust f/b/o Allan Bramson, Evan Bramson and Joanne
Bramson; Powerstock Consultants Limited, which received 3,000,000 shares
beneficially owned by William Tucker; and Powerstock Limited, which received
3,000,000 shares in the transaction beneficially owned by Trust f/b/o Irving
Litvack, Michael Leonard Litvack, Lori Lee Litvack, Kari Lynn Freesman, Jeffrey
Eliot Litvack, Andrew David Litvack and Dora Litvack. The issuance of shares was
exempt from registration under the provisions of Section 4(2) of the Securities
Act of 1933 in that the exchange of the shares did not involve a public
offering.
On October 9, 1996, the Company also adopted a stock option plan
authorizing the grant of options to purchase an additional 10,000,000 shares of
its Common Stock. As of April 25, 1997, 4,100,000 options have been granted. The
issuance of the options and any shares issuable upon exercise of such options
are exempt from registration pursuant to Rule 701 promulgated under the
Securities Act of 1933.
On October 22, 1996, the Company commenced an offering of 1,750,000
unregistered shares of its Common Stock (the "October 22, 1996 Offering"). This
offering was made to five persons and was fully subscribed and closed on October
24, 1996. These shares were sold at a price of $0.10 per share, for a total
offering price of $175,000. On January 21, 1997, the Company and one of the
purchasers, Hemery Trustees Limited, agreed to rescind 962,500 of these shares.
The offering was not underwritten, and there were no underwriting discounts or
commissions. This sale was exempt from registration in reliance upon Rule 504
promulgated under the Securities Act of 1933. The aggregate offering price did
not exceed $1,000,000, and
<PAGE>
the offering was otherwise in compliance with Rules 501 and 502
promulgated under the Securities Act of 1933. These securities were sold to a
total of five private investors.
On October 25, 1996, the Company commenced an offering of 2,062,500
unregistered shares of its Common Stock (the "October 25, 1996 Offering"). This
offering was made to twenty-two persons and was fully subscribed and closed on
November 29, 1996. These shares were sold at a price of $0.40 per share, for a
total offering price of $825,000. These shares were subject to a lock-up
agreement until March 15, 1997. The offering was not underwritten, and there
were no underwriting discounts or commissions. This sale was exempt from
registration in reliance upon Rule 504 promulgated under the Securities Act of
1933. The aggregate offering price of the October 25, 1996 Offering, together
with the October 22, 1996 Offering, did not exceed $1,000,000, and the offering
was otherwise in compliance with Rules 501 and 502 promulgated under the
Securities Act of 1933. These securities were sold to a total of twenty-two
private investors. On January 13, 1997, the Company instructed its transfer
agent to remove from the March 15, 1997 lock-up thirty percent (30%) of such
Common Stock.
On January 22, 1997, the Company commenced an offering of 962,500
unregistered shares of its Common Stock (the "January 22, 1997 Offering"). This
offering was made to two persons and was fully subscribed and closed on January
22, 1997. These shares were sold at a price of $0.10 per share, for a total
offering price of $96,250. The offering was not underwritten, and there were no
underwriting discounts or commissions. This sale was exempt from registration in
reliance upon Rule 504 promulgated under the Securities Act of 1933. The
aggregate offering price of the January 22, 1997 Offering, together with the
October 22, 1996 Offering and the October 25, 1996 Offering, did not exceed
$1,000,000, and the offering was otherwise in compliance with Rules 501 and 502
promulgated under the Securities Act of 1933. These securities were sold to a
total of two private investors.
Item 5. Indemnification of Directors and Officers.
The Company's By-Laws require it to indemnify to the fullest extent
permitted by law each person that the Company is empowered by law to indemnify.
The Company's Certificate of Incorporation requires it to indemnify to the
fullest extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.
Section 145 of the Delaware General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorney's fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit, or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct
<PAGE>
was unlawful. In a derivative action, i.e. one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
The Company's Certificate of Incorporation and By-Laws also contain
provisions stating that no director shall be liable to the Company or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law (for
unlawful payment of dividends, or unlawful stock purchases or redemptions) or
(4) a transaction from which the director derived an improper personal benefit.
The intention of the foregoing provisions is to eliminate the liability of the
Company's directors to the Company or its stockholders to the fullest extent
permitted by Section 102(b)(7) of the Delaware General Corporation Law, as
amended from time to time.
<PAGE>
PART F/S
PlayStar Corporation
(a Delaware Corporation)
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 27, 1996
(Unaudited)
<PAGE>
PlayStar Corporation
FOR THE PERIOD OCTOBER 3, 1996 TO NOVEMBER 27, 1996
(Unaudited)
(U.S.$)
CONTENTS
Review Engagement Report 1
Consolidated Balance Sheet 2
Consolidated Statement of Income 3
Consolidated Statement of Retained Earnings 4
Consolidated Statement of Changes in Shareholders' Equity 5
Consolidated Statement of Changes in Financial Position 6
Notes to Consolidated Financial Statements 7-8
<PAGE>
[FRUITMAN KATES CHARTERED ACCOUNTANTS LETTERHEAD]
REVIEW ENGAGEMENT REPORT
To: PlayStar Corporation
We have reviewed the balance sheet of PlayStar Corporation as at November
27, 1996 and the statements of income and retained earnings, statement of
changes in shareholders' equity and statement of changes in financial
position for the period from October 3, 1996 to November 27, 1996. Our
review was made in accordance with generally accepted standards for review
engagements and accordingly consisted primarily of inquiry, analytical
procedures and discussions related to information supplied to us by the
company.
A review does not constitute an audit and consequently we do not express an
audit opinion on these financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that these financial statements are not, in all material respects,
in accordance with generally accepted accounting principles.
Toronto, Ontario /s/ FRUITMAN KATES
December 5, 1996 CHARTERED ACCOUNTANTS
<PAGE>
PlayStar Corporation
CONSOLIDATED BALANCE SHEET
AS AT NOVEMBER 27, 1996
(Unaudited)
(U.S.$)
ASSETS
CURRENT
Cash $825,000
Development costs (Note 2) 242,202 $1,067,202
-------
OTHER
Incorporation costs 4,241
$1,071,443
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 15,980
LONG-TERM
Shareholders' advances (Note 3) 54,263
SHAREHOLDERS' EQUITY
CAPITAL STOCK
Authorized
30,000,000 common shares at $.0001
Issued and Outstanding
15,812,500 common shares $1,581
PAID-IN CAPITAL 999,619 1,001,200
------- ---------
$1,071,443
Approved on Behalf of the Board:
/s/ Simon Bramson Director
/s/ Julius Patta Director
<PAGE>
PlayStar Corporation
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD OCTOBER 3, 1996 TO NOVEMBER 27, 1996
(Unaudited)
(U.S.$)
REVENUE $ NIL
COST OF SALES NIL
GROSS PROFIT NIL
EXPENSES
General and administrative $ NIL
Depreciation NIL NIL
NET INCOME $ NIL
<PAGE>
PlayStar Corporation
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR THE PERIOD OCTOBER 3, 1996 TO NOVEMBER 27, 1996
(Unaudited)
(U.S.$)
RETAINED EARNINGS, beginning of period $ NIL
NET INCOME NIL
RETAINED EARNINGS, end of period $ NIL
------
<PAGE>
PlayStar Corporation
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD OCTOBER 3, 1996 TO NOVEMBER 27, 1996
(Unaudited)
(U.S.$)
Common stock Additional
shares Amount Paid-in Capital
Common stock issued in exchange
for all of the issued and
outstanding shares of PlayStar
Limited in October, 1996 12,000,000 $1,200 $-
Issuance of stock for $175,000 U.S.
in October, 1996, in connection
with a private placement offering;
$175,000 for services rendered 1,750,000 175 174,825
Issuance of stock for $825,000 U.S.
in November, 1996,
in connection with a private
placement offering 2,062,500 206 824,794
--------- ------ -------
Balance, November 27, 1996 15,812,500 $1,581 $999,619
---------- ------ --------
<PAGE>
PlayStar Corporation
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE PERIOD OCTOBER 3, 1996 TO NOVEMBER 27, 1996
(Unaudited)
(U.S.$)
CASH PROVIDED BY (USED IN) OPERATIONS:
Net income $ NIL
Changes in non-cash working capital 15,980
Cash provided by (used in) operations 15,980
--------
INVESTMENT ACTIVITIES
Development costs (246,443)
FINANCING ACTIVITIES
Share purchases 1,001,200
Shareholders' advances 54,263
1,055,463
NET INCREASE IN CASH 825,000
CASH ON HAND, beginning of period NIL
CASH ON HAND, end of period $825,000
--------
<PAGE>
PlayStar Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD OCTOBER 3, 1996 TO NOVEMBER 27, 1996
(Unaudited)
(U.S.$)
1. SIGNIFICANT ACCOUNTING POLICIES
a) Method of accounting
i)The company maintains its books and prepares its financial
statements on the accrual basis of accounting.
ii)The company's financial statements are prepared in accordance with
generally accepted accounting principles applicable in Canada. There
are no material differences in generally accepted accounting
principles used in Canada and the United States.
b) Basis of consolidation
These consolidated financial statements include the accounts of PlayStar
Corporation and its wholly-owned subsidiary, PlayStar Limited.
c) Development costs
Costs incurred are capitalized until such time as the project is
considered to be marketable. At such time these costs will be expensed
to the extent that there is income generated from the project.
d) Translation of foreign currencies
Current assets and liabilities denominated in foreign currencies have
been translated into United States dollars at the rate of exchange
prevailing at year end.
2. DEVELOPMENT COSTS
The development costs pertain to expenses incurred prior and subsequent to
incorporation and consist of the following:
Consulting fees $207,847
Professional fees 17,233
Travel 6,815
General and administrative 5,544
Telephone 4,763
--------
$242,202
3. SHAREHOLDERS' ADVANCES
These advances are non-interest bearing, due on demand.
<PAGE>
PlayStar Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD OCTOBER 3, 1996 TO NOVEMBER 27, 1996
(Unaudited)
(U.S.$)
4. INCORPORATION
The corporation was incorporated on October 3, 1996, in the State of
Delaware.
5. BUSINESS COMBINATION
On October 9, 1996, the corporation acquired 100% of the issued and
outstanding common shares of PlayStar Limited in exchange for 12,000,000
common shares of the corporation. This acquisition has been recorded using
the purchase method of accounting.
6. SHARE SUBSCRIPTION
Pursuant to a private placement Offering Memorandum dated October 22, 1996,
the company issued 1,750,000 common shares at $0.10 per share in exchange
for consulting services rendered totaling $175,000.
Pursuant to a private placement Offering Memorandum dated October 25, 1996,
the company issued 2,062,500 common shares at $0.40 per share to raise
$825,000.
<PAGE>
PART III
Item 1. Index to Exhibits.
Exhibit Description of Exhibit Page
Number
2.1 Certificate of Incorporation. 26
2.2 By-Laws. 32
3.1 Specimen Form of Stock Certificate. 40
6.1 Consulting Agreement. 41
12.1 Subsidiaries of the Company. 47
12.2 Stock Option Plan. 48
27.1 Financial Data Schedule (filed electronically 54
herewith).
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
PLAYSTAR CORPORATION
Date: April 25, 1997
By:/s/ Julius Patta
Julius Patta
President, Chief Executive
Officer, Chief Financial Officer and Treasurer
By:/s/ Simon Bramson
Simon Bramson
Secretary
<PAGE>
EXHIBIT 2.1
CERTIFICATE OF INCORPORATION
OF
GLOBAL GAMES CORPORATION
The undersigned, being of legal age, in order to form a corporation under
and pursuant to the laws of the State of Delaware, does hereby set forth as
follows:
FIRST: The name of the corporation is:
GLOBAL GAMES CORPORATION
SECOND: The address of the initial registered and principal office of this
corporation in this state is c/o United Corporate Services, Inc., 15 East North
Street, in the City of Dover, County of Kent, State of Delaware 19901 and the
name of the registered agent at said address is United Corporate Services, Inc.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized
under the corporation laws of the state of Delaware.
FOURTH: The corporation shall be authorized to issue the
following shares:
Class Number of Shares Par Value
COMMON 30,000,000 $.0001
FIFTH: The name and address of the incorporator are as follows:
NAME ADDRESS
Ray A. Barr 10 Bank Street
White Plains, New York 10606
<PAGE>
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
(1) The number of directors of the corporation shall be such as from time
to time shall be fixed by, or in the manner provided in the by-laws. Election of
directors need not be by ballot unless the By-Laws so provide.
(2) The Board of Directors shall have power without the assent or vote of
the stockholders:
(a) To make, alter, amend, change, add to or repeal the By-Laws of
the corporation; to fix and vary the amount to be reserved for any proper
purpose; to authorize and cause to be executed mortgages and liens upon
all or any part of the property of the corporation; to determine the use
and disposition of any surplus or net profits; and to fix the times for
the declaration and payment of dividends.
(b) To determine from time to time whether, and to what times and
places, and under what conditions the accounts and books of the
corporation (other than the stock ledger) or any of them, shall be open to
the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders, at any
meeting of the stockholders called for the purpose of considering any such act
or contract, or through a written consent in lieu of a meeting in accordance
with the requirements of the General Corporation Law of Delaware as amended from
time to time, and any contract or act that shall be so approved or be so
ratified by the vote of the holders of a majority of the stock of the
corporation which is represented in person or by proxy at such meeting, (or by
written consent whether received directly or through a proxy) and entitled to
vote thereon (provided that a lawful quorum of stockholders be there represented
in person or by proxy) shall be as valid and as binding upon the corporation and
upon all the stockholders as though it had been approved, ratified, or consented
to by every stockholder of the corporation, whether or not the contract or act
would otherwise be open to legal attack because of directors' interest, or for
any other reason.
(4) In addition to the powers and authorities herein before or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any by-laws from time to time made by the
stockholders; provided, however, that no by-laws so made shall invalidate any
prior act of the directors which would have been valid if such by-law had not
been made.
<PAGE>
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
<PAGE>
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this second day of October, 1996.
s/ RAY A. BARR
Ray A. Barr, Incorporator
<PAGE>
STATEMENT OF ORGANIZATION
BY THE SOLE INCORPORATOR
OF
GLOBAL GAMES CORPORATION
I, the undersigned, as sole incorporator of GLOBAL GAMES CORPORATION, do
hereby make the following statements to organize the corporation:
*That the name of the corporation is:
GLOBAL GAMES CORPORATION
*That the Certificate of Incorporation was duly filed in the office of the
Secretary of State of Delaware on the third day of October, 1996 and a certified
copy thereof was forwarded for recordation with the Recorder of Deeds of the
county in which the registered office of the corporation is located.
*That the By-Laws which are annexed hereto are hereby adopted as the
By-Laws of the corporation for the regulation of its affairs.
*That following named person(s) shall constitute the first Board of
Directors, who shall hold office until the first annual shareholders' meeting or
until successors are elected and qualify:
Julius Patta
Simon Bramson
I hereby execute the Statement as sole incorporator this 3rd day of
October, 1996.
s/ RAY A. BARR
Ray A. Barr, Sole Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
OF
GLOBAL GAMES CORPORATION
The undersigned, being the Sole Incorporator of the corporation, hereby
certifies as follows:
FIRST: The name of the corporation is:
GLOBAL GAMES CORPORATION
SECOND: The corporation hereby amends its Certificate of incorporation
as follows:
Paragraph FIRST of the Certificate of Incorporation, relating to the
corporate title of the corporation, is hereby amended to read as follows:
"FIRST: The name of the corporation is:
PlayStar Corporation"
THIRD: This Certificate of Amendment has been duly adopted in accordance
with the provisions of Section 241 of the General Corporation Law of the State
of Delaware.
FOURTH: The corporation has not received any payment for any of its stock.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that the statements
made herein are true under the penalties of perjury, this seventh day of
October, 1996.
s/ RAY A. BARR
Ray A. Barr, Sole Incorporator
<PAGE>
EXHIBIT 2.2
BY-LAWS
OF
GLOBAL GAMES CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. - The registered office shall be established
and maintained at c/o United Corporate Services, Inc., 15 East North Street,
Dover, Delaware 19901 and United Corporate Services, Inc. shall be the
registered agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES. - The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of meeting.
If the date of the annual meeting shall fall upon a legal holiday,
the meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any purpose
other than the election 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.
SECTION 3. VOTING. - Each stockholder entitled to vote in accordance
with the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote for directors
<PAGE>
and the vote upon any question before the meeting, shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten 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 4. QUORUM . - Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof. 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 the meeting.
SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders
for any purpose or purposes may be called by the President or Secretary,
or by resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. - Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than sixty days before the date of the meeting. No business other than that
stated in the notice shall be transacted at any meeting without the unanimous
consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. - Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
<PAGE>
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock 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.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. - The number of directors shall be two
(2). The directors shall be elected at the annual meeting of the stockholders
and each director shall be elected to serve until his successor shall be
elected and shall qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS. - Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES - If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 4. REMOVAL. - Any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
SECTION 5. INCREASE OF NUMBER. - The number of directors may be
increased by amendment of these By-Laws by the affirmative vote of a majority of
the directors, though less than a quorum, or, by the affirmative vote of a
majority in interest of the stockholders, at the annual meeting or at a special
meeting called for that purpose, and by like vote the additional directors may
be chosen at such meeting to hold office until the next annual election and
until their successors are elected and qualify.
SECTION 6. POWERS. - The Board of Directors shall exercise all
of the powers of the corporation except such as are by law, or by the
Certificate of Incorporation of the corporation or by these By-Laws conferred
upon or reserved to the stockholders.
<PAGE>
SECTION 7. COMMITTEES. - The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two 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
such committee or committees, the member or members thereof present at any such
meeting and not disqualified from voting, whether or not he 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.
Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these By-Laws, 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 of authority in reference to amending the Certificate of
Incorporation, adopting an agreement of 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, or amending the
By-Laws of the corporation; and unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 8. MEETINGS. - The newly elected Board of Directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent, in
writing, of all the directors.
Unless restricted by the incorporation document or elsewhere in these
By-laws, members of the Board of Directors or any committee designated by such
Board may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at such meeting.
Regular meetings of the Board of Directors may be scheduled by a
resolution adopted by the Board. The Chairman of the Board or the President or
Secretary may call, and if requested by any two directors, must call a special
meeting of the Board and give five days' notice by mail, or two days' notice
personally or by telegraph or cable to each director. The Board of Directors may
hold an annual meeting, without notice, immediately after the annual meeting of
shareholders.
SECTION 9. QUORUM. - A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the board there
<PAGE>
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.
SECTION 10. COMPENSATION. - Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. - Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the board, or of such
committee as the case may be, and such written consent is filed with the minutes
of proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. - The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one or
more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the corporation need be directors.
The officers shall be elected at the first meeting of the Board of Directors
after each annual meeting. More than two offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors, if
one be elected, shall preside at all meetings of the Board of Directors and he
shall have and perform such other duties as from time to time may be assigned
to him by the Board of Directors.
SECTION 4. PRESIDENT. - The President shall be the chief executive
officer of the corporation and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. He shall preside at all meetings of the stockholders if present
thereat, and in the absence or non-election of the Chairman of the Board of
Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation. Except as
the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
<PAGE>
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him by the
directors.
SECTION 6. TREASURER. - The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 7. SECRETARY. - The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by the law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders, upon
whose requisition the meeting is called as provided in these By-Laws. He shall
record all the proceedings of the meetings of the corporation and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the directors or the President. He shall
have the custody of the seal of the corporation and shall affix the same to all
instruments requiring it, when authorized by the directors or the President, and
attest the same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. -
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned
to them, respectively, by-the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock, signed by
the Chairman or Vice-Chairman of the Board of Directors, if they be elected,
President or Vice-President, and the Treasurer or an Assistant Treasurer, or
<PAGE>
Secretary or Assistant Secretary, shall be issued to each stockholder certifying
the number of shares owned by him in the corporation. When such certificates are
countersigned (1) by a transfer agent other than the corporation or its
employee, or, (2) by a registrar other than the corporation or its employee, the
signatures of such officers may be facsimiles.
SECTION 6. SEAL. - The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "Corporate Seal, Delaware, 1996." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. - The fiscal year of the corporation
shall be determined by resolution of the Board of Directors.
SECTION 8. CHECKS. - All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage, prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation, and such notice shall be deemed to have been given
on the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
Statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation of these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at
any annual meeting of the stockholders or at any special meeting thereof if
notice of the proposed alteration or repeal of By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws
to be made, be contained in the notice of such special meeting.
<PAGE>
ARTICLE VII
INDEMNIFICATION
No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability which may be specifically defined by law or (4) a transaction from
which the director derived an improper personal benefit, it being the intention
of the foregoing provision to eliminate the liability of the corporation's
directors to the corporation or its stockholders to the fullest extent permitted
by law. The corporation shall indemnify to the fullest extent permitted by law
each person that such law grants the corporation the power to indemnify.
<PAGE>
EXHIBIT 3.1
[SPECIMEN FORM OF STOCK CERTIFICATE]
<PAGE>
EXHIBIT 6.1
THIS AGREEMENT made as of the 16th day of April, 1997.
B E T W E E N
Dreamplay Research Corp.
an Ontario corporation
(hereinafter called the "Consultant")
OF THE FIRST PART
- and -
PlayStar Limited
a Jersey, Channel Islands corporation
(hereinafter called the "Company")
OF THE SECOND PART
WHEREAS the Company desires to have the Consultant perform computer
software research and development services at the direction and for the benefit
of the Company;
AND WHEREAS the Consultant possesses the necessary expertise in
such industry;
AND WHEREAS the Company is desirous of obtaining the services of the
Consultant subject to the terms and conditions hereinafter set forth;
AND WHEREAS the Consultant is willing, able and desirous of
providing such services to the Company;
NOW THEREFORE, in consideration of the promises and the mutual
conditions, covenants and agreements hereinafter set forth, the parties hereby
covenant and agree as follows:
<PAGE>
ARTICLE ONE
Section 1.01 Retainer of Consultant: In reliance on the Consultant's
representations and warranties contained in paragraph 2.01 below, the Company
retains the Consultant to perform the services set forth in Article Two, and the
Consultant agrees to provide such services. The Company agrees that it shall not
retain any other person or company to perform such services on its behalf.
ARTICLE TWO
SERVICES TO BE PERFORMED BY CONSULTANT
Section 2.01 Representations and Warranties:
(a) The Consultant represents and warrants that it is qualified and able
to perform the services required to be performed and that it will
provide such services and carry out such activities in accordance
with good practices.
(b) The Consultant acknowledges that the Company is relying on it for its
expertise in the design of certain software programs for the benefit
of the Company, and its technical ability to carry out such progress
with respect to the services to be provided hereunder.
Section 2.02 Description of Services: The Consultant shall, in consultation with
the Company, carry out its functions as hereinafter described. The activities in
which the Consultant shall engage in performing its services include, but are
not limited to the following:
(a) Web Site hosting and Internet access;
(b) Web Site design and development;
(c) Online Casino Games Development;
(d) Electronic Casino Management System Development;
(e) Operations Consulting;
(f) Game Client Logic and Design; and
(g) Any other services which the Company may request to be carried
out by the Consultant, and to which the Consultant agrees.
<PAGE>
Section 2.03 Extent of Services: The Consultant agrees to dedicate as much time
as is reasonably necessary in order to provide its services as hereinbefore
described while this Agreement is in effect.
Section 2.04 Reporting:The Consultant shall also submit to the Company written
reports on the status of its activities and progress, on a monthly basis on a
date to be agreed upon by the parties hereto. In addition to the aforementioned
written reports, the Consultant shall verbally inform the Company of its
activities and progress and of any new developments and the Consultant shall
regularly consult with the Company as often as is necessary and prudent to do
so.
ARTICLE THREE
CONSIDERATION FOR SERVICES
Section 3.01 Fee: The Consultant shall render to the Company, on a quarterly
basis commencing on December 1, 1996, an invoice for services rendered during
such quarter. The Consultant shall provide its services to the Company at a rate
to be agreed upon by the parties, by separate letter. Payment shall be due and
payable to the Consultant in accordance with the terms noted on each invoice.
ARTICLE FOUR
REIMBURSEMENT OF EXPENSES
Section 4.01 Consultant to Keep Records: The Consultant shall keep and maintain
detailed and timely records and receipts of all direct out-of-pocket operating
expenses incurred in providing its services to the Company and shall submit the
same to the Company no later than 15 calendar days after the end of each month.
Section 4.02 Reimbursement: The Company agrees to pay or reimburse the
Consultant for all reasonable out-of-pocket operating expenses incurred in
providing its services to the Company.
ARTICLE FIVE
OTHER RIGHTS AND OBLIGATIONS
Section 5.01 Confidentiality: The Consultant is and shall remain obligated to
maintain confidentiality and hereby agrees not to disclose any aspects of the
Company's operations, its business activities, financial condition and its
technical information to third parties either verbally or otherwise without the
prior written consent of the Company. In this regard, any and all data generated
<PAGE>
or acquired by the Consultant as it performs its services for the Company, shall
become the sole and exclusive property of the Company. The Consultant agrees not
to divulge or indicate any of the said information to third parties.
Section 5.02 Protection of Intellectual Property: Each party shall not infringe
the other party's patents, trademarks, copyrights or other intellectual property
and shall not knowingly benefit from or abet any third party's infringement
thereof. Except to the extent necessary for the parties to carry out their
obligations under this Agreement, nothing in this Agreement is intended to grant
or confer to either party by the other party any license or other right to use
or permit third parties to use such party's proprietary technology, software or
patents, or any other intellectual property.
Section 5.03 Exclusivity & Proprietary Rights Any and all software designed and
developed by the Consultant at the direction of and for the benefit and use of
the Company including, without limitation, any software developed pursuant to
Section 2.02 hereof shall become the sole and exclusive property of the Company.
The Consultant does not and will not receive, by this Agreement or otherwise any
interest therein whatsoever. All title and interest in such software shall be
deemed to be `work made for hire' and, to the extent that any such work may not
vest in the Company by operation of law or is not considered a work made for
hire, all right, title and interest are hereby irrevocably assigned to the
Company. The Company shall have the right to hold in its name all copyright
registrations or other registrations as may be appropriate.
Section 5.04 Non-Competition: For the term of this agreement, as extended from
time to time, and for the period of six months commencing thereafter, the
Consultant agrees that it will not, directly or indirectly, as sole proprietor,
shareholder, director, employee, principal or partner, solicit the employees of
the Company, the clients of the Company or carry on any activity similar to that
carried on by them hereunder in competition with the business carried on by the
Company as of the date hereof, without the prior written consent of the Company.
ARTICLE SIX
TERM, TERMINATION AND RENEWAL
Section 6.01 Term:This Agreement shall be effective as of December 1, 1996 and
shall continue for a period of three (3) years until December 1, 1999. This
Agreement may be renewed for one (1) year terms by the mutual agreement of the
parties hereto.
Section 6.02 Termination: This Agreement may terminated by either party, without
cause, upon sixty (60) days' written notice to the other party.
<PAGE>
ARTICLE SEVEN
PAYMENTS AND NOTICES
Section 7.01 Address for Notice: All payments and notices shall be made by
personal delivery or by mailing the same, postage prepaid,
(a) to the Consultant at: 50 Wellington St. E.
Top Floor
Toronto, Ontario, Canada M5E 1C8
(b) to the Company at: P.O. Box 551, 31 Broad Street
St. Helier, Jersey JE4 8XN
Channel Islands
or at such other address as either party may by notice specify, and if so
mailed, shall be conclusively deemed to have been given and received on the
fifth business day after the mailing thereof.
ARTICLE EIGHT
MISCELLANEOUS PROVISIONS
Section 8.01 Governing Law: This Agreement shall be construed and
interpreted according to the laws of the province of Ontario.
Section 8.02 Headings: The headings in this Agreement are included for
convenience only and shall not be used in construing or interpreting this
Agreement.
Section 8.03 Enurement:The terms and conditions hereof shall be binding upon and
shall inure to the benefit of the heirs, administrators, successors and assigns
of the parties hereto.
Section 8.04 Assignment: This Agreement shall not be assignable by either party
without the prior written consent of the other party which may not be withheld
unreasonably.
Section 8.05 Time:Time shall be of the essence herein.
Section 8.06 Currency: Unless otherwise indicated, all amounts noted herein
are expressed in U.S. Dollars.
Section 8.07 Further Assurances: All of the parties hereto shall, at any time
and from time to time, execute and deliver all further documents and assurances
<PAGE>
and do all things necessary or reasonably desirable to carry out the true intent
and meaning of this Agreement, and to give effect to the terms hereof.
Section 8.08 Waiver: No failure or delay by any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver in one instance be deemed to be a continuing waiver in any other
instance.
Section 8.09 Contravention: Any provision or provisions of this Agreement or of
the terms and conditions which in any way contravenes the law of any state,
province or country in which this Agreement is effective, shall in such state,
province or country, to the extent of such contravention of law, be deemed
severable and shall not affect any other provision or provisions hereof.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.
) PlayStar Limited
)
)
/s/ Witness )
Witness ) Per: /s/Director
) Director
) Dreamplay Research Corp.
)
)
/s/ Witness )
Witness ) Per: /s/ Julius Patta
Julius Patta, President, Director
<PAGE>
EXHIBIT 12.1
SUBSIDIARIES OF THE COMPANY
Name of Corporation Place of Percentage of Shares
Incorporation Held
PlayStar Limited Jersey, Channel 100%
Islands
<PAGE>
EXHIBIT 12.2
PLAYSTAR CORPORATION
a Delaware Corporation
(the "Company")
1996 STOCK OPTION PLAN
(As adopted by the Board and Shareholders on the 9th day of October, 1996)
1. Purposes
The Company's 1996 Stock Option Plan (the "Plan") is intended to attract
and retain the best available personnel for positions of substantial
responsibility with the Company and its subsidiaries, if any, and to provide
additional incentive to such persons to exert their maximum efforts toward the
success of the Company. The Plan is also intended to provide and encourage stock
ownership by officers, employee Board and employees of, and consultants to, the
Company and to afford such persons the right to increase their proprietary
interest in the Company. The above aims will be effectuated through the granting
of certain options ("Options") to purchase shares of the Company's common stock,
par value $.0001 per share (the "Common Stock"). Under the Plan, the Company may
grant "incentive stock options" ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or Options which are
not intended to be ISOs ("Non-Qualified Options"). The Company makes no warranty
as to the qualification of any Options as ISOs.
2. Administration of the Plan.
The Plan shall be administered by the Board of the Company (the "Board").
Within the limits of the express provisions of the Plan, the Board shall have
the authority, in its discretion, to take the following actions under the Plan:
(a) to determine the individuals to whom, and the time or times at which,
Options shall be granted, the number of shares of Common Stock to be subject to
each of the Options and whether such Options shall be ISOs or Non-Qualified
Options;
(b) to interpret the Plan;
(c) to prescribe, amend and rescind rules and regulations relating to
the Plan;
(d) to determine the terms and provisions of the respective stock option
agreements granting Options, including the date or dates upon which Options
shall become exercisable, which terms need not be identical;
<PAGE>
(e) to accelerate the vesting of any outstanding Options;
and
(f) to make all other determinations and take all other actions necessary
or advisable for the administration of the Plan.
In making such determinations, the Board may take into account the nature
of the services rendered by such individuals, and such other factors as the
Board, in its discretion, shall deem relevant. An individual to whom an Option
has been granted under the Plan is referred to herein as an "Optionee". The
Board's determinations on the matters referred to in this Section 2 shall be
conclusive.
3. Shares Subject to the Plan.
(a) The total number of shares of Common Stock for which Options may be
granted under the Plan shall be 10,000,000.
(b) The Company shall at all times while the Plan is in force reserve such
number of shares of Common Stock as will be sufficient to satisfy the
requirements of outstanding Options. The shares of Common Stock to be issued
upon exercise of Options shall be authorized and unissued or reacquired shares
of Common Stock.
(c) The shares of Common Stock relating to the unexercised portion of any
expired, terminated or canceled Option shall thereafter be available for the
grant of new Options under the Plan.
4. Eligibility.
(a) Options may be granted under the Plan only to officers and employees
of, and consultants to, the Company or any "subsidiary corporation" of the
Company within the meaning of Section 424 (f) of the Code (a "Subsidiary"). The
term "Company" when used in the context of an Optionee's employment, shall be
deemed to include the Company and its Subsidiaries.
(b) Nothing contained in the Plan shall be construed to limit the right of
the Company to grant stock options otherwise than under the Plan for proper
corporate purposes.
5. Terms of Options.
The terms of each Option granted under the Plan shall be determined by the
Board consistent with the provisions of the Plan, including the following:
(a) The purchase price of the shares of Common Stock subject to each
Option shall be fixed by the Board, in its discretion, at the time such Option
<PAGE>
is granted; provided, however, that in no event shall such purchase price be
less than the Fair Market Value (as defined in paragraph (g) of this Section 5)
of the shares of Common Stock as of the date such Option is granted.
(b) The dates on which each Option (or portion thereof) shall be
exercisable shall be fixed by the Board, in its discretion, at the time such
Option is granted.
(c) The expiration of each Option shall be fixed by the Board, in its
discretion, at the time such Option is granted; provided, however, that no
Option shall be exercisable after the expiration of five (5) years from the date
of its grant and each Option shall be subject to earlier termination as
determined by the Board, in its discretion, at the time such Option is granted.
(d) Options shall be exercised by the delivery, to the Company at its
principal office or at such other address as may be established by the Board
(Attention: Corporate Secretary), of written notice of the number of shares of
Common Stock with respect to which the Option is being exercised accompanied by
payment in full of the purchase price of such shares. Unless otherwise
determined by the Board at the time of grant, payment for such shares may be
made (i) in cash, (ii) by certified check or bank cashier's check payable to the
order of the Company, (iii) at the discretion of the Board, by simultaneously
exercising Options and selling the shares of Common Stock acquired thereby,
pursuant to a brokerage or similar arrangement approved by the Board, and using
the proceeds as payment of such purchase price, or (iv) by any combination of
the methods of payment described in (i) through (iii) above. The Common Stock
purchased shall thereupon be promptly delivered; provided, however, that the
Company may, in its discretion, require that an Optionee pay to the Company or
any Subsidiary, at the time of exercise, such amount as the Company deems
necessary to satisfy any obligation to withhold federal, state or local income
or other taxes incurred by reason of the exercise or transfer of shares
thereupon.
(e) An Optionee shall not have any of the rights of a holder of the Common
Stock with respect to the shares of Common Stock subject to an Option until such
shares are issued to such Optionee upon the exercise of such Option.
(f) An option shall not be transferable, except by will or the laws of
descent and distribution, and during the lifetime of an Optionee, may be
exercised only by the Optionee. No Option granted under the Plan shall be
subject to execution, attachment or other process.
(g) For the purposes of the Plan, the Fair Market Value of the Common
Stock as of any date shall be as determined in good faith by the Board and such
determination shall be binding upon the Company and upon the Optionee. The Board
may make such determination (i) if the Common Stock is not then listed and
traded upon a recognized securities exchange, upon the basis of the mean between
the lowest bid and highest asked quotations on the relevant date (as reported by
a recognized stock quotation service) or, if there are no such bid and asked
quotations on the relevant date, then upon the basis of the mean between the
lowest bid and highest asked quotations on the date nearest the relevant date or
(ii) in case the Common Stock is quoted on the National Association of
<PAGE>
Securities Dealers Automated Quotation System National Market System
("NASDAQ-NMS") or listed on one or more national securities exchanges, the Fair
Market Value of the Common Stock as of any date shall be deemed to be the mean
between the highest and lowest sale prices of the Common Stock reported on the
NASDAQ-NMS or the principal national securities exchange on which the Common
Stock is listed and traded on the immediately preceding date, or, if there is no
such sale on that date, then on the last preceding date, on which such a sale
was reported.
6. Special Provisions Applicable to ISOs.
The following special provisions shall be applicable to ISOs granted under
the Plan.
(a) No ISOs shall be granted under the Plan after ten (10) years from the
earlier of (i) the date the Plan is adopted, or (ii) the date the Plan is
approved by the Company's shareholders as provided in Section 9 hereof.
(b) If an ISO is granted to a person who owns, directly or indirectly
(within the meaning of Section 424(d) of the Code), stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
(i) the purchase price of the shares subject to the Option shall not be less
than 110% of the Fair Market Value of such shares as of the date such Option is
granted and (ii) such Option cannot be exercised more than five (5) years after
the date it is granted.
(c) If the aggregate Fair Market Value of the Common Stock with respect to
which ISOs are exercisable for the first time by any Optionee during a calendar
year exceeds $100,000, such ISOs shall be treated, to the extent of such excess,
as Non-Qualified Options. For purposes of the preceding sentence, the Fair
Market Value of the Common Stock shall be determined at the time the ISOs
covering such shares were granted.
7. Adjustment upon Changes in Capitalization.
(a) In the event that the outstanding shares of Common Stock are changed
by reason of reorganization, reclassification, stock split, combination or
exchange of shares and the like, or dividends payable in shares of Common Stock,
an appropriate adjustment shall be made by the Board in the aggregate number of
shares of Common Stock available under the Plan and in the number of shares of
Common Stock and price per share of Common Stock subject to outstanding Options.
If the Company shall be sold, reorganized, consolidated, taken private, or
merged with another corporation, or if all or substantially all of the assets of
the Company shall be sold or exchanged (a "Corporate Event"), an Optionee shall
at the time of issuance of the stock under such Corporate Event be entitled to
receive upon the exercise of his Option the same number and kind of shares of
stock or the same amount of property, cash or securities as he would have been
entitled to receive upon the occurrence of any such Corporate Event as if he had
been, immediately prior to such event, the holder of the number of shares of
Common Stock covered by his Option, provided, however, that the Board may, in
<PAGE>
its discretion, (i) accelerate the exercisability of outstanding Options, and
shorten the term thereof, to any date prior to the occurrence of such Corporate
Event, or (ii) provide for the cancellation of outstanding Options in exchange
for cash equal to the aggregate in-the-money value of such Options at the time
of such Corporate Event, as determined in its discretion.
(b) Any adjustment under this Section 7 in the number of shares of Common
Stock subject to Options shall apply proportionately to only the unexercised
portion of any Option granted hereunder. If fractions of a share would result
from any such adjustment, the adjustment shall be revised to the next lower
whole number of shares.
8. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the Plan) shall
terminate ten (10) years from the date of its adoption by the Board, and no
Option shall be granted after termination of the Plan.
(b) The Plan may at any time be terminated or, from time to time, be
modified or amended by the Board; provided, however, that the Board shall not,
without approval by the affirmative vote of the holders of a majority of the
shares of the capital stock of the Company present in person or by proxy and
entitled to vote at a meeting duly held in accordance with Delaware law, (i)
increase (except as provided by Section 7) the maximum number of shares of
Common Stock as to which Options may be granted under the Plan, (ii) reduce the
minimum purchase price at which Options may be granted under the Plan, or (iii)
change the class of persons eligible to receive Options under the Plan.
(c) No termination, modification or amendment of the Plan shall adversely
affect the rights conferred by any outstanding Options without the consent of
the affected Optionee.
9. Effectiveness of the Plan.
The Plan shall become effective upon adoption by the Board of the Company,
subject to the approval by the shareholders of the Company. Options may be
granted under the Plan prior to receipt of such approval, provided that, in the
event such approval is not obtained, the Plan and all Options granted under the
Plan shall be null and void and of no force and effect.
10. Not a Contract of Employment.
Nothing contained in this Plan or in any stock option agreement executed
pursuant hereto shall be deemed to confer upon any Optionee any right to remain
in the employ of the Company or any Subsidiary.
<PAGE>
11. Governing Law.
The Plan shall be governed by the laws of the State of Delaware without
reference to principles of conflict of laws thereof.
12. Withholding.
As a condition to the exercise of any Option, the Board may require that
an Optionee satisfy, through withholding from other compensation or otherwise,
the full amount of federal, state and local income taxes required to be withheld
in connection with such exercise.
13. No Obligation to Exercise Option.
Granting of an Option shall impose no obligation on the Optionee to
exercise such Option.
14. Use of Proceeds.
The proceeds received from sale of Common Stock pursuant to the Plan shall
be used for general corporate purposes.
15. Compliance with Law.
Appropriate legends may be placed on the stock certificates evidencing
shares issued upon exercise of Options to reflect such transfer restrictions.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and the statement of income for the period October 3, 1996 to
November 27, 1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-3-1996
<PERIOD-END> NOV-27-1996
<EXCHANGE-RATE> 1
<CASH> 825,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,067,202
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,071,443
<CURRENT-LIABILITIES> 15,980
<BONDS> 0
0
0
<COMMON> 1,581
<OTHER-SE> 999,619
<TOTAL-LIABILITY-AND-EQUITY> 1,071,443
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
