<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
INTERNET SPORTS NETWORK, INC.
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(Name of Small Business Issuer in its charter)
Florida 65-0704152
- --------------------------------- ---------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
225 Richmond Street West, Suite 403, Toronto, Ontario, Canada M5V 1W2
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(Address of principal executive offices) (Zip Code)
(416) 599-8800
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under 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
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Securities to be registered pursuant to section 12(g) of the Act:
Common Stock, par value $.001
- -----------------------------
(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. BUSINESS DEVELOPMENT
1. FORM AND YEAR OF ORGANIZATION
Internet Sports Network, Inc. was first incorporated in April, 1997
in the state of Nevada. BirchTree Capital Corporation, a Florida corporation
was incorporated in the state of Florida on October 4, 1996. BirchTree
Capital Corporation was a publicly traded corporation, trading under the
symbol BITC on the Over the Counter/Bulletin Board. Effective January 19,
1999, the stockholders of Internet Sports Network, Inc. a Nevada corporation
initiated the exchange of one hundred percent (100%) of their shares in that
corporation for nine million eighty five thousand two hundred twenty nine
(9,085,229) shares of BirchTree Capital Corporation. On February 1, 1999,
BirchTree Capital Corporation changed its name to Internet Sports Network,
Inc., a Florida corporation, and changed its OTC/BB symbol to ISNI. On
February 22, 1999, Internet Sports Network, Inc., a Nevada corporation merged
into Internet Sports Network, Inc. a Florida corporation with the Florida
corporation being the surviving entity. The surviving entity, Internet Sports
Network, Inc., a Florida corporation (the "Company" or "ISN") currently
trades on the over the counter/bulletin board as ISNI.
2. ANY BANKRUPTCY, RECEIVERSHIP OR SIMILAR PROCEEDING.
Not Applicable.
3. ANY MATERIAL RECLASSIFICATION, MERGER, CONSOLIDATION,
OR PURCHASE OR SALE OF A SIGNIFICANT AMOUNT OF ASSETS NOT IN THE ORDINARY
COURSE OF BUSINESS.
Effective February 5, 1999, the Company acquired all of the shares
of Sportsmark, Inc. an Alberta, Canada corporation, Sportsmark Promotions,
Inc., a Delaware corporation and Classroom 2000, Inc., an Alberta, Canada
corporation, and certain assets of SMP Sportsmark Promotions, International,
Inc., a Barbados Company (collectively the "Sportsmark Companies" or
"Sportsmark"). The shareholders of Sportsmark received 1,500,000 shares of
common stock of ISN and $1,254,000 cash as the consideration granted in this
agreement.
On March 5, 1999, ISN California, Inc. a California corporation was
incorporated as a wholly owned subsidiary of ISN. Effective March 5, 1999,
the Company entered into a Merger Agreement with Pickem Sports, Inc. a Maine
corporation doing business in California ("Pickem") and the individual
stockholders of Pickem Sports Inc., wherein ISN would purchase all of the
stock of Pickem Sports, Inc. in exchange for one million eight hundred
seventy-seven thousand nine hundred ninety five (1,867,995) shares of common
stock of ISN and $3,000,000 in cash. Also, pursuant to this Agreement, Pickem
Sports, Inc. merged with ISN California, Inc. with ISN California, Inc. being
the surviving entity.
Effective June 22, 1999, the Company acquired certain assets of
National Publisher Services, Inc., an Iowa corporation comprised primarily of
the its Ultimate Sports Publishing division. This division publishes certain
fantasy sports content publications. The assets included the trademarks and
other intangible properties related to these publications as well as the
assignment of certain rights under publication and distribution agreements.
The assets were acquired for 125,000 shares of common stock of ISN and
$860,000 cash.
ISN Wisconsin, a Wisconsin corporation was incorporated as a wholly
owned subsidiary of ISN. Effective June 30, 1999, the Company, ISN Wisconsin,
Inc., Innovation Partners Inc., d.b.a. SportsBuff, a Wisconsin corporation
("Sportsbuff"), and the individual shareholders of Sportsbuff entered into a
Merger Agreement, wherein ISN would purchase the stock of Sportsbuff in
exchange for six hundred sixteen thousand sixty (616,060) shares of common
stock of ISN and $1,000,000 cash. Also, pursuant to this Agreement,
Innovation Partners, Inc. merged with ISN Wisconsin, Inc. with ISN Wisconsin,
Inc. being the surviving entity.
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B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
All of the revenue from ISN is derived from contest revenues or
development agreements wherein the Company designs, implements and maintains
contest websites for other companies. The required revenue, operating profit
and loss, and identifiable assets are shown in item 2 and in the financial
exhibits attached hereto.
C. NARRATIVE DESCRIPTION OF BUSINESS.
ISN is an Internet based sports media and entertainment company
specializing in interactive sports contests, as well as offering some
non-sports games and contests. The Company offers consumers the opportunity
to get involved in their favorite sports by playing skill-testing contests
based upon the outcomes of real-life sporting events, such contests being
generally known as "fantasy sports". As well as fantasy sports, the Company
offers non-fantasy-style contests such as Internet animation games that
emulate the action of a real game, and trivia-question applications. The
Company's sources of revenue are fees from consumers who pay to enter
"pay-to-play" contests, revenues from media companies that license ISN's
applications, and fees from third parties advertising their products and
services on web sites and offline media where these contests take place.
The Company also offers sports contests in offline media such as
newspapers in order to augment its Internet distribution channel and to
establish its brand in offline channels as a migration path for the rapidly
growing number of consumers moving from offline to online media usage.
1. PRINCIPAL PRODUCTS AND THEIR MARKETS
THE MARKET
There has been no formal study of the fantasy sports market size,
but various industry publications such as Business Week, Jupiter
Communications and Silicon Alley Reporter, estimate there are 7 to 15 million
fantasy sports players online. These players participate in a variety of
pay-to-play contests as well as advertising-supported no-fee contests.
According to Media Metrix, a leading Internet and Digital Media measurement
firm, as of May 1999, there has been significant growth over the past twelve
months in overall Internet usage, including the total number of visitors, the
amount of content viewed and total the number of hours users spent online.
Media Metrix indicated that:
- The number of monthly visitors (at home and work combined)
to the Internet grew nearly 15 percent over the past twelve months from 53.9
million in May 1998 to 61.9 million in May 1999.
- The average number of unique Web pages viewed per visitor
per day increased by 23.8 percent to 37.4 pages in May 1999 from 30.2 pages
in May 1998.
- The number of pages viewed per month increased nearly 50
percent over the past twelve months, from 308 unique pages per visitor in May
1998 to 455 per visitor in May 1999.
- Total Pages Viewed on the World Wide Web in the month of
May 1999 topped 28 billion, nearly a 70 percent increase over May 1998.
- Internet users spent over 40 percent more time on the
Internet in May 1999 than they did a year ago - an increase from 5.3 average
hours per person in May 1998 to 7.6 hours in May 1999.
- The total number of hours spent on the Internet increased
by two-thirds to 1.2 billion hours in May 1999 from 709 million hours in the
same month last year.
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Sports is one of the leading categories of content that consumers access
online, along with other top categories such as news and financial
information. According to Jupiter Communications' November, 1998 report, for
more than one third of Internet news audience, sports scores and information
were the number one reason to go online. Jupiter also reports there is
significant growth potential in the sports contest market and sports contest
applications are a key way for sports sites to keep and grow user loyalty.
According to the digital media industry trade publication, Silicon Alley
Reporter, sports is a leading content application, and interactive sports
contests are the "killer application" that no sports web site can do without.
According to an April, 1999, Jupiter Communications survey of 3,000
respondents, 27.6% of users played games online such as fantasy games or
action games. According to Jupiter, of online sports contest players, only
12% were willing to pay for subscription packages. However, Jupiter reported
that advertising-supported no-fee products had 90% of users spending more
than one hour or more per week viewing the products, with 40% spending more
than three hours per week, and 8% spending more than 11 hours per week. Such
dedicated users are attractive to advertisers and vendors of online services.
The demographics of the sports fan are attractive to online advertisers and
vendors of online services, such as financial products. According to Angus
Reid's 1997 Syndicated Survey, the sports fan is more likely to live in an
affluent household (48% with household income over $40,000) and more likely
to purchase a computer, car, truck, or mutual fund (with an average
investment of $5,129) in the next 12 months.
THE PRODUCTS
ISN has a range of contest products operating in online and offline
media, in sports and non-sports categories. The Company's products permit the
customer to subscribe to the level of competition, sophistication, and cost
with which they are most comfortable.
The Company's primary revenue is currently derived from subscription
packages. These products include contests co-branded with media distribution
partners, such as major web portals, television stations and newspapers, as
well as the Company's own "Sportsrocket" branded contests.
The co-branded contests are the mass market products that provide media
partners or co-sponsors with sports contest packages to promote through their
media channels. The contests generate customer loyalty for the co-sponsor and
provides a source of revenue through sales of service subscription packages
and sponsorships. With promotion and advertising from the co-sponsor in their
media properties, the Company designs and manages contests such as football,
baseball, basketball, golf, NASCAR, hockey or investment challenge contests.
The net revenues from the subscriptions for the contests are then divided
between the co-sponsor and the Company.
The Company also designs and manages contests on a fee-for-service
basis for major Internet portals and for other media companies. These
contests are client-customized, sports and non-sports games, contests and
promotions. These products and services: drive and sustain traffic to its web
sites; attract sponsors and general advertising revenues; promote the
Sponsor's products and services; convert casual visitors to long-lasting
members; increase online sales for the Sponsor's advertisers; build brand
awareness; assist in gathering important user information through
registrations and surveys; and, create a synergy between online and
traditional media.
The Company's current marketing plan focuses on:
1. INTEGRATED CONTEST PROMOTIONS. Using cross promotions,
like the Company's pilot contest in Toronto using newspaper and television
partners in the same promotion, the Company realized a higher take up of the
contest and the sponsors achieved increased readership and viewers.
2. IMPROVED CROSS PROMOTIONS. Using the Internet permits
the Company to cost effectively promote enhanced and premium service packages
to contestants who may visit the website to access information about their
specific contest.
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3. ADDING NEW MEDIA PARTNERS. The Company will actively
target companies in the new media market to develop co-branded contests.
4. ADDING MAGAZINE PARTNERS. The Company believes that
certain magazines can be effective distribution vehicles for increased sales
of the premium series of contests.
5. INTERNATIONAL GROWTH. The Company operates contests in
South America and Europe and hopes to significantly increase its operations
in these markets as well as in Asia.
2. STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR
SERVICE.
Not applicable.
3. THE SOURCES AND AVAILABILITY OF RAW MATERIALS.
Not applicable.
4. THE IMPORTANCE OF PATENTS, TRADEMARKS, LICENSES,
FRANCHISES AND CONCESSIONS HELD.
The Company currently has an application pending with the United
States Patent and Trademark Office and the Canadian Patent and Trademark
Office for registration of the name "Internet Sports Network" as a
servicemark. The Company has registered the websites WWW.SPORTSPOOL.COM,
WWW.INTERNETSPORTSNET.COM, WWW.ULTSPORTS.COM, WWW.INTERNETSPORTSNETWORK.COM,
WWW.SPORTSBUFF.COM, WWW.SPORTSROCKET.COM AND WWW.PICKEM.COM. The Company
currently operates most of its contests on the WWW.SPORTSROCKET.COM website.
As part of the Sportsmark transaction, ISN acquired Sportsmark's
trademarks and tradenames filed in the Canadian trademark office including:
Sportsmark, All Star Challenge, Great Canadian Hockey draft, Fantasy Hockey
Dream Team, Fantasy Basketball Dream Team, Fairway Fantasy, Playoff Payoff,
Weekend Winners, Fantasy Baseball Dream Team, Fantasy Football Dream Team,
Hockey Draft Sweepstakes. As part of the transaction with National
Publisher's Services, Inc., d.b.a. Ultimate Sports, the Company was assigned
the trademarks "Ultimate Sports" and "FTA". The Company has filed the
assignment forms with the United States Patent and Trademark office. As part
of the merger by and between Innovation Partners, Inc. d.b.a. SportsBuff and
ISN, Wisconsin, ISN Wisconsin will become the surviving entity and has all
right and title to the trademarks, trade names and proprietary information
owned by SportsBuff. Such trademarks include "Buffball", "Coach B", and
"SportsBuff".
The Company does not rely on proprietary technology in providing its
sports entertainment services. While the Company uses technology which has
been customized for its own purposes, the Company has deliberately avoided
becoming overly dependent on any one technology. By avoiding reliance on any
one technology, the Company will be able to take advantage of technological
advances to provide new and improved services and superior sports contests to
its subscribers.
ISN currently has a license agreement with the National Hockey
League Player's Association to use its name in connection with its contests
through June 30, 2000 in exchange for a percentage of sales generated by NHL
contests.
ISN also has an agreement with Big Brothers and Sisters of Canada
regarding the use of its name and trademarks in the promotion of the contests
during the 1998/99 season. This "season" includes basketball, football, golf,
hockey and other sports. In exchange for this license, ISN will donate a
percentage of its membership fees to the organization.
ISN has no collective labor agreements.
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5. THE EXTENT TO WHICH THE BUSINESS OF THE SEGMENT IS OR
MAY BE SEASONAL.
Sports contests are geared towards the sports season for a
particular sport. As an example, the football season runs from August to the
Super Bowl in January; the hockey season runs from September through to the
playoffs in June; and the baseball season runs from April through to the
World Series in October. The Company offers contests surrounding most major
sporting seasons, however the majority of revenues are earned in the one or
two months prior to the start of a given sports' season. As a result, the
Company's revenues tend to be focused in the late summer, early fall prior to
the Football (NFL), Basketball (NBA) and Hockey (NHL) seasons. Additional
revenues are earned through each sport season through weekly contests and
transaction revenues, however the bulk of revenues are focused at the start
of each season.
6. THE PRACTICE OF THE REGISTRANT AND THE INDUSTRY
RELATING TO WORKING CAPITAL ITEMS.
This item is not applicable to this industry or segment.
7. DEPENDENCE ON A SINGLE OR FEW CUSTOMERS.
Not applicable.
8. BACKLOG ORDERS.
Not applicable
9. GOVERNMENT APPROVAL.
No government approval is required for any of the Company's current
products or services.
10. COMPETITION
The interactive sports contests industry is rapidly evolving and
very competitive, which the Company expects will intensify in the future.
Barriers to entry are minimal, allowing current and new competitors to launch
new products at a relatively low cost. The Company currently or potentially
competes with other companies which have sports related websites. These
competitors include ESPN.com, CDM, Inc., CBS Sportsline.com, SmallWorld
Sports, Sandbox, Commissioner.com, Prime Sports Interactive as well as many
other smaller competitors.
Many of the Company's current and potential competitors have longer
operating histories, larger customer bases, greater brand name recognition
and significantly greater financial, marketing and other resources than the
Company. In addition, other competitors may be acquired by, receive
investments from, or enter into other commercial relationships with larger,
well-established and well-financed companies as use of the Internet and other
online services increases. Certain of the Company's competitors may be able
to devote greater resources to marketing and promotional campaigns, and
devote substantially more resources to Web site and systems development then
the Company. Increased competition may result in reduced operating margins,
loss of market share and a diminished franchise value. There can be no
assurance that the Company will be able to compete successfully against
current and future competitors, and competitive pressures faced by the
Company may have a material adverse effect on the Company's business,
prospects, financial condition and results of operations. Further as a
strategic response to changes in the competitive environment, the Company
may, from time to time, make certain service or marketing decisions or
acquisitions that could have a material adverse effect on its business,
prospects, financial condition and results of operations. New technologies
and the expansion of existing technologies may increase the competitive
pressures on the Company. In addition, companies that control access to
transactions through network access or Web browsers could promote the
Company's competitors or charge the Company a substantial fee for inclusion.
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11. RESEARCH AND DEVELOPMENT COSTS
Not Applicable.
12. COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
AND REGULATIONS
The Company is not involved in a business which involves the use of
materials in a manufacturing stage where such materials are likely to result
in the violation of any existing environmental rules and/or regulations.
Further, the Company does not own any real property which would lead to
liability as a land owner. Therefore, the Company does not anticipate that
there will be any costs associated with the compliance of environmental laws
and regulations.
13. EMPLOYEES
As of the date hereof, the Company employed 30 full-time employees
and 5 part-time employees. The Company hires independent contractors on an
"as needed" basis only. The Company has no collective bargaining agreements
with its employees. The Company believes that its employee relationships are
satisfactory. In the long term, the Company will attempt to hire additional
employees as needed based on its growth rate.
D. FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS.
1. ISN currently derives net sales primarily from the
United States of America and Canada. No other foreign country or geographic
areas accounted for more than 10% of net sales. A detailed discussion of the
information on the basis of geographic areas is set forth below and in the
Financial exhibits provided in item 15 below. There were no transfers between
geographic areas during the periods ending March 31, 1999 and April 30, 1998.
Capital assets and purchased intangibles in the United States equal
approximately $12,457,000 and $0 in fiscal 1999 and 1998, respectively. The
remaining capital assets and purchased intangibles are in Canada.
i. REVENUES ATTRIBUTION.
For the 11 month period ending March 31, 1999:
A. United States: Of the Company's net revenues
$28,000 is attributable to U.S. customers, consisting of 18% of the Company's
total revenues.
B. All foreign countries: Of the Company's
revenues $124,000 is attributable to all foreign countries, consisting of 82%
of the Company's total revenues.
C. Canada: Of the Company's net sales $124,000
is attributable to Canadian customers, consisting of 82% of the Company's
total revenues.
ii. LONG-LIVED ASSETS.
Not Applicable.
2. CROSS REFERENCE TO FINANCIAL STATEMENTS.
The information requested by this section is contained in the
Financial Exhibits and provided in Item 2.
3. RISKS ATTENDANT TO FOREIGN OPERATIONS.
The primary risk attendant to foreign operations of ISN is the
effect of currency exchange rates. The unit of measurement of the Company is
the Canadian dollar while the reporting currency is the United States dollar.
The assets and liabilities of the Canadian subsidiaries are translated using
the exchange rate in effect at the year end,
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and revenue and expenses are translated at the average rate during the
period. Exchange gains or losses on translation of the Company's net equity
investments in these subsidiaries are deferred as a component of other
comprehensive income. The translation adjustments as of March 31, 1999 and
April 30, 1998 were insignificant. Management does not believe this risk is
material due to natural currency hedges in the organization, however, this is
re-evaluated periodically.
4. INTERIM FINANCIAL INFORMATION.
The financial data for geographic areas is not indicative of future
operations of the Company. The Company has made several acquisitions based in
the United States during 1999, and as such related revenues and expenses from
the United States will increase significantly as a percentage of total
revenue and in gross amounts.
E. AVAILABLE INFORMATION.
Not Applicable.
F. REPORTS TO SECURITY HOLDERS.
Not Applicable.
G. ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS.
Not Applicable.
ITEM 2 FINANCIAL INFORMATION
The following is management's discussion and analysis of ISN's financial
condition and results of operations. Detailed information is contained in the
financials included in this document. This section contains forward-looking
statements that involve risks and uncertainties, such as statements of ISN's
plans, objectives, expectations and intentions. The cautionary statements
made in this document should be read as being applicable to all related
forward-looking statements wherever they appear in this document.
The following table sets forth, for the periods indicated, selected financial
information for the Company:
<TABLE>
<CAPTION>
INTERNET SPORTS NETWORK, INC.
SELECTED FINANCIAL DATA SCHEDULE
FROM INCEPTION TO MARCH 31, 1999
Period from April 28
11 months ended 1997 (inception) to
March 31, 1999 April 30, 1998
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<S> <C> <C>
Net sales or operating revenues 152,000 77,000
Prize commitments and other direct costs 250,000 41,000
Other costs and expenses 1,466,000 670,000
Interest and bank charges 17,000 9,000
Stock Compensation, Stock Options and
Debenture related costs 796,000 -0-
Reverse acquisition and due diligence costs 546,000 -0-
Amortization of Purchased Intangibles
and Goodwill 827,000 -0-
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Net Loss before Tax (3,750,000) (643,000)
Deferred Tax Recovery 236,000 -0-
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Loss from operations (3,514,000) (643,000)
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Loss from operations per common share (.45) (.17)
</TABLE>
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<TABLE>
<CAPTION>
As at As at
March 31, 1999 April 30, 1998
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<S> <C> <C>
Cash and cash equivalents 2,928,000 9,000
Other Current Assets 211,000 76,000
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Total Current Assets 3,139,000 85,000
Purchased Intangibles and Goodwill, net 13,492,000 -0-
Equipment, Net 84,000 46,000
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Total Assets 16,715,000 131,000
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Total Current Liabilities 339,000 167,000
Deferred Income Taxes 3,855,000 -0-
Long-Term obligations -0- 196,000
and redeemable preferred stock
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Total Liabilities 4,194,000 363,000
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Common Stock 17,127,000 425,000
Deferred Compensation (449,000) -0-
Accumulated Deficit (4,157,000) (643,000)
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Total Shareholders' Equity 12,521,000 (232,000)
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Total Liabilities and Shareholders' Equity 16,715,000 131,000
---------- ---------
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Cash Dividends per common share -0- -0-
Cash Dividends declared per common share -0- -0-
</TABLE>
All references to the Company in the above table shall mean the
Company and its subsidiaries consolidated.
OVERVIEW
ISN was originally incorporated on April 28, 1997 in Nevada for the
purpose of providing interactive, computer sports entertainment through the
Internet. The Company has a limited operating history on which to evaluate
its prospects. The risks, expense, and difficulties encountered by start up
companies must be considered when evaluating ISN's prospects.
The operating expenses of ISN cannot be predicted with certainty.
They will depend on several factors, including the amount of marketing
expenses, the acceptance of the Company's services in the market, and
competition for such services, and the acquisition activities of the Company.
Management may be able to control the timing of such expenses in part by
speeding up or slowing down marketing development and distribution activities
and acquisition strategies.
From its inception in April 1997 to date, ISN has incurred costs
associated with the development of its internet sports entertainment
products, probable markets and business. ISN incurred costs for conducting
test marketing for its products and received revenues as a result. The test
marketing consisted of advertising, processing membership applications and
analysis of responses. During the period, ISN purchased computer and
telecommunication equipment as necessary to conduct its operations.
ISN financed its expenditures primarily through the sale of its
common stock. Since inception through March 31, 1999, the company issued
approximately 10,256,000 million common shares for net cash consideration of
approximately $9,178,000.
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PLAN OF OPERATIONS
These financial projections contain figures relating to plans,
expectations, future results, performance, events or other matters that are
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended. When used in the Plan of Operations,
words such as "estimate", "project", "intend", "expect", "anticipate" and
similar expressions are intended to identify forward-looking statements. Such
forward looking statements involve numerous risks and uncertainties,
pertaining to technology, development of the Company's products, and markets
for such products, timing and level of customer orders, competitive products
and pricing, changes in economic conditions and markets for the Company's
products and other risks and uncertainties. Actual results, performance and
events are likely to differ and may differ materially and adversely.
Investors are cautioned not to place undue reliance on these forward-looking
statements which speak only as to the date of the Plan of Operations. The
Company undertakes no obligation to release or deliver to investors revisions
to these forward-looking statements to reflect events or circumstances after
the date of the Plan of Operations, the occurrence of unanticipated events or
other matters.
These projections have not been prepared with a view toward
complying with published guidelines of the American Institute of Certified
Public Accountants. In addition, the Company's independent auditors have not
examined, reviewed, compiled, or applied upon procedures to the projections,
and no other independent expert has reviewed the projections.
The Company's plan of operations for the fiscal year ending March
31, 2000 consist of the following key figures:
<TABLE>
<S> <C>
- Revenues totaling $ 7,889,000
- Prize commitments and other direct costs $ 3,200,000
- Other costs and expenses $ 5,043,000
- Interest and Bank Charges $ 15,000
- Promotion and Advertising $ 1,010,000
- Loss before taxes and amortization $ (1,379,000)
- Amortization of Capital Assets $ 342,000
- Amortization of Stock compensation $ 873,000
- Amortization of Purchased Intangibles and Goodwill $ 10,333,000
- Deferred Tax recovery $ 2,713,000
- Net Loss for the year $(10,214,000)
</TABLE>
The increase in revenues from $152,000 for the period ending March
31, 1999 to $7,889,000 is due to the following key factors:
- The Company will benefit from Sportsmark and ISN
California results for the full year, whereas the March
31, 1999 figures included results of operations for 2
months and one month respectively.
- The Company has acquired SportsBuff and Ultimate Sports
Publishing subsequent to March 31, 1999, which will add
9 months of operating revenues to the Company's results.
- Additional revenues from internal growth is forecasted
based on increased sales and marketing staff as well as
an increase in promotion and advertising spending from
$367,000 to March 31, 1999 to $1,010,000.
- Further acquisition activity is anticipated during the
fiscal year ending March 31, 2000 which is expected to
generate further revenues for the Company.
Prize Commitments and other direct costs have increased from the
period ending March 31, 1999 as a direct result of the forecast increased in
revenue.
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Other costs and expenses increase from the period ending March 31,
1999 due to the addition of and forecasted hiring of additional staff to
manage the operations and administration of the Company. Increased sales
staff, and the acquisitions of other companies are also significant
contributors to the forecasted increase in other costs and expenses.
Interest and bank charges represents processing and transaction fees
from banking transactions.
The promotion and advertising increase from the prior period is
based on plans to increase awareness and traffic to the Company's internet
products.
Amortization of capital assets has increased significantly as the
Company is anticipating approximately $1 million of capital expenditures
during the year.
Amortization of purchased intangibles has increased significantly
from the prior period as the year ended March 31, 1999 only included two
months of Sportsmark and one month of Pickem amortization, whereas the year
ended March 31, 2000 will include a full 12 month amortization. In addition,
the acquisition of SportsBuff and Ultimate Sports Publishing will result in
an estimated $3.2 million in additional amortization.
The Company's management believes that an additional $3,000,000 in
funds combined with the funds already raised in private offerings and the
revenues generated by its operations will be sufficient to fund its
operations for the next twelve months under the current plan of operations.
The Company maintains its interest in acquiring companies and assets
which can benefit the Company's business and subscriber base. Currently, the
Company is reviewing potential acquisition targets which could provide
complimentary assets and market access to the Company's existing portfolio.
Included in the revenue forecast for the upcoming year is approximately $2
million from companies to be acquired. These acquisitions are not assured at
this time, and there is a risk that these acquisitions will not be completed.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities is $1,606,000, which is less than the net
loss due to amortization and other share based expenses.
Cash used by operating activities approximate ISN's net loss for the
respective periods. Since inception, the company has funded its capital
requirements by financing activities, substantially through the sale of its
equity securities.
Capital expenditures from inception to March 31, 1999 were $115,000. ISN has
current commitments to upgrade its management information system,
telecommunications system and office equipment to accommodate anticipated
growth at an estimated cost of $250,000 over the next six months. Overall,
capital expenditures, including those anticipated as a result of acquisition
activity, during the year ending March 31, 2000 is anticipated to approximate
$1,000,000.
It is anticipated that the Company will require further working capital to
fund future operations. It is expected that such funds will be obtained by
the sale of additional capital stock of the Company, although there can be no
assurance that ISN will be able to obtain such funds.
RESULTS OF OPERATIONS
FISCAL PERIOD ENDED MARCH 31, 1999 (AUDITED) AS COMPARED TO FISCAL PERIOD
ENDED APRIL 30, 1998 (AUDITED)
NET SALES OR OPERATING REVENUES. The Company generated revenues of $152,000
for the eleven months ended March 31, 1999 as compared to revenues of $77,000
for the period from April 28, 1997 (inception) to April 30, 1998. The
increase in revenues was largely attributable to the acquisition of
Sportsmark and Pickem. The results from the acquisition dates of these
companies only have been included in the financial statements of the Company.
Accordingly, two months of operating results of Sportsmark, and one month for
Pickem are included in these statements.
10
<PAGE>
LOSS FROM OPERATIONS. The Company experienced a loss of $3,514,000 for the
eleven months ended March 31, 1999 as compared to a loss of $643,000 for the
period from inception to April 30, 1998. This increased loss was largely
attributable to the following significant areas:
- Expenses associated with providing 970,000 stock options for
various services provided to the Company and employees totaling $632,000.
This amount has been calculated using the Black-Scholes options pricing model.
- Amortization of purchased intangibles acquired through the
acquisition of Sportsmark and Pickem totaling $591,000 net of tax.
- Costs associated with the reverse take over of BirchTree Capital
combined with costs of an aborted reverse take over totaling $546,000.
- Significant increases in all operating expense items have been
realized as the Company has increased its sales and production staff,
increased its marketing expenditures, and increased its prize packages for
contests in its second period of operation. The total increase in operating
expenses from internal growth is $753,000.
- Further increases to operating expenses relate to the
acquisitions of Sportsmark and Pickem, resulting in increased operating costs
of $260,000.
- An additional expense of $144,000 arose in the early conversion
of the convertible debentures. This expense is based on the difference
between the conversion rate actually used to convert the debentures to common
stock ($.40) as compared to the conversion rate contemplated in the debenture
agreement ($1.50).
LOSS FROM OPERATIONS PER COMMON SHARE. The loss per share for the 11 months
ending March 31, 1999 was $.45 per share and for the period from inception to
April 30, 1998 was $.17 per share. The increased loss per share is
attributable to expenses discussed above, offset by an increase in the
weighted average number of shares outstanding from 3,813,000 to 7,833,000.
TOTAL ASSETS. The total assets of ISN as of March 31, 1999 totaled
$16,715,000 compared to $131,000 at April 30, 1998. The increase in total
assets was attributable to two areas of significance:
- Increases in cash and cash equivalents of $2,919,000 due to the
sale of common stock, which raised approximately $8,786,000 less operating
losses and acquisition costs.
- The purchased intangibles and goodwill from the acquisition of
Sportsmark and Pickem totaled $14,319,000 on which 1999 amortization was
$827,000. These intangibles include trademarks, software licenses and
intellectual properties as well as a $3,855,000 tax effect. See chart below
for summary of assets acquired in the two transactions.
<TABLE>
<CAPTION>
As at
February 5, 1999 As at
Sportsmark Group March 5, 1999
of Companies Pickem Sports, Inc. Combined
---------------- ------------------- --------
<S> <C> <C> <C>
Net assets acquired at fair value
Working Capital $ (129,000) $ 9,000 $ (120,000)
Equipment 28,000 12,000 40,000
Purchased Intangibles & Goodwill 5,572,000 8,747,000 14,319,000
Deferred income taxes (1,592,000) (2,499,000) (4,091,000)
------------ ------------ ------------
$ 3,879,000 $6,269,000 $ 10,148,000
============ ============ ============
11
<PAGE>
Funded by:
Cash 1,254,000 3,000,000 4,254,000
Shares issued 2,625,000 3,269,000 5,894,000
------------ ------------ ------------
$ 3,879,000 $ 6,269,000 $ 10,148,000
============ ============ ============
</TABLE>
YEAR 2000
The Company has developed and acquired its computer systems with an objective
to be Year 2000 compliant. ISN has engaged the services of qualified
technicians to determine the extent to which it may be vulnerable to third
party Year 2000 issues. As a relatively new corporation, all computer
equipment purchased, in August 1997 and August 1998, is Year 2000 compliant.
The internal software written by ISN's programmers is written with the
long-date format included and consequently is Year 2000 compliant. ISN uses
Microsoft software and has installed all the available "patches" to up-date
this software. Further, Microsoft "patches" will be installed as they become
available from Microsoft in early 1999, but this affects less than .0005% of
ISN's software and does not impact on the on-going operation of the Company.
ISN has assessed and continues to asses whether its information and
non-information technology systems will be effected by the Year 2000 issues.
ISN has investigated its third party communications suppliers such as the
telephone company and its Internet service provider and found that all are in
the process of becoming Year 2000 compliant in early 1999. Based upon current
information, management believes that the necessary modifications have been
made internally to effectively continue ISN into the Year 2000, however,
management is continuing to monitor internal systems, and to assess the
readiness of its systems, to ensure Year 2000 compliance. As a contingency,
ISN has identified other communication suppliers who could provide the
necessary service at a minimal cost to the Company, and a minimal effect on
the operations of the Company. In the event no other communication suppliers
can be found, there could be a material adverse effect on the Company and its
operations. Based upon current information, ISN does not believe that the
costs associated with Year 2000 compliance is material for the Company.
ITEM 3. DESCRIPTION OF PROPERTY
The main administrative offices of the Company are located at 225
Richmond Street West, Suite 403, Toronto, Ontario, Canada M5V 1W2. The
Company leases approximately 2,270 square feet of office space in Toronto.
The lease expires on May 31, 2000 and requires lease payments of
approximately $2,500 per month. The Company also operated administrative
offices at 700-509 Richards St. Vancouver, British Columbia, Canada V6B 2Z6.
At this location, the Company leases approximately 3,155 square feet of
office space. The lease expires on September 30, 2000 and currently requires
lease payments of $26,028.72 per year. The Company has formally closed the
Vancouver offices, and is currently seeking a sublease tenant for the
Vancouver office space.
ISN California, Inc. operates at 3260 Hillview Ave., Palo Alto,
California 94304. The lease is an oral, month to month lease and requires
lease payments of approximately $640 per month.
Sportsmark's offices are located at 10201 Southport Road S.W.
Calgary, Canada T2W 4X9. Sportsmark leases approximately 3,516 square feet in
Calgary. The lease expires on March 31, 2000 and requires lease payments of
approximately $1,100 per month.
ISN Wisconsin, Inc. operates at 625 57th St, Suite 700 Kenosha,
Wisconsin 53140. ISN Wisconsin leases approximately 2,300 square feet. The
lease is a three year lease which expires January 31, 2002, although ISN
Wisconsin has an option to terminate the lease on January 31, 2000 with 120
day prior written notice to the landlord. The lease requires payments of
approximately $1,725 per month.
12
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock, as of March 31, 1999 by
(i) each stockholder known by the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock, (ii) each director of the
Company, (iii) each executive officer of the Company, and (iv) all directors
and executive officers as a group. Unless otherwise indicated, the address
for each stockholder is 225 Richmond Street West, Suite 403, Toronto,
Ontario, Canada M5V 1W2.
<TABLE>
<CAPTION>
========================================================================================================================
Title of Names/Address of Beneficial Owner Amount and Nature of Percent of Outstanding
Class Beneficial Ownership Common Stock
of shares Beneficially Owned
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Andrew DeFrancesco 1,450,650 8.1%
Chairman of the
Board/President
- ------------------------------------------------------------------------------------------------------------------------
Common Patrick S. Earle 1,102,957 6.2%
700-509 Richards St.
Vancouver, BC
V6B 2Z6 Canada
- ------------------------------------------------------------------------------------------------------------------------
Common Kenneth Crema -0- 0%
Director/Chief Executive
Officer
- ------------------------------------------------------------------------------------------------------------------------
Common Geoff Ford 675,000 3.8%
10201 Southport Road S.W. Director/Chief Operating
Suite 633 Officer/Senior Vice-President
Calgary, Alberta Canada T2W 4X9 Marketing and Sales
- ------------------------------------------------------------------------------------------------------------------------
Common Bill Gibson 675,000 3.8%
10201 Southport Road S.W. Director/Senior Vice-
Suite 633 President, Product
Calgary, Alberta Development
Canada T2W 4X9
- ------------------------------------------------------------------------------------------------------------------------
Common Brett Lindros 280,000 1.6%
Director
- ------------------------------------------------------------------------------------------------------------------------
Common David Toews -0- 0%
Chief Financial
Officer/Secretary
- ------------------------------------------------------------------------------------------------------------------------
Common Estimated all other shareholders 13,657,000 76.5%
- ------------------------------------------------------------------------------------------------------------------------
Common All executive Officers and Directors 3,080,650 17.3%
as a Group (6 persons)
========================================================================================================================
</TABLE>
NOTES TO SECURITY OWNERSHIP
(1) Management and 5% shareholders comprise approximately 4,183,607
of the approximate total of 17,841,000 issued and outstanding shares of the
Company as of March 31, 1999. By virtue of their direct ownership of the
Common Stock of the Company, management positions and organizational efforts,
may be deemed "control persons" of the Company, as those terms are defined in
the Securities Act of 1933 (the "Act"), and the rules and regulations
thereunder.
13
<PAGE>
(2) Management and insider shareholdings shown do not include
1,300,000 outstanding options to purchase common stock at the varying
exercise prices from $.40 to $1.75 per share issued to the individuals named,
until such time as said options are exercised.
(3) Except for holdings of Mr. Defrancesco, management
shareholdings shown do not include 875,000 shares granted on July 22, 1999 to
certain officers as compensation for services rendered.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Andrew DeFrancesco 28 Chairman of the Board, President
Geoff Ford 45 Director, Chief Operating Officer
Bill Gibson 46 Director, Senior Vice President Product Development
Brett Lindros 23 Director, Director of Sports Media Properties
Ken Crema 36 Director, Chief Executive Officer
David Toews 31 Chief Financial Officer, Secretary
</TABLE>
ANDREW DEFRANCESCO, CHAIRMAN, PRESIDENT. Mr. DeFrancesco joined the Company
in March 1999. Prior to this time, he was an executive Vice-President at
Dominick & Dominick Securities, Inc. Canada with responsibility for
institutional equity sales and trading, and sourcing and structuring of
equity and debt financing. Prior to joining Dominick in October, 1997, Mr.
DeFrancesco held positions as Manager of Institutional Trading and Sales from
April 1994 to April 1995 and Associate Director, Corporate Finance from April
1995 to July 1997, at C.M. Oliver & Company Limited. From March 1993 to March
1994, he served as an associate financial advisor at Midland Walwyn (now
Merrill Lynch Canada). Mr. DeFrancesco received his Bachelor of Arts in
Economics and Politics from the University of Western Ontario and completed
courses with the Canadian Securities Institute.
GEOFF FORD, DIRECTOR, CHIEF OPERATING OFFICER. Mr. Ford co-founded Sportsmark
Inc. with Director, Bill Gibson in 1986 when they created and introduced the
first large scale commercial sports contests to the Canadian and American
public. Mr. Ford concurrently ran his own consulting firm, Spectrum
Information Systems Inc. from 1986 to 1992 when he sold his interests in the
consulting firm to dedicate his full time to Sportsmark. Mr. Ford sold his
interest in Sportsmark to the Company in 1999 and joined the Company in his
current position. Mr. Ford graduated from the University of Calgary with a
Bachelor of Commerce degree in 1977.
BILL GIBSON, DIRECTOR, SENIOR VICE-PRESIDENT PRODUCT DEVELOPMENT. In 1986,
Mr. Gibson co-founded Sportsmark, Inc. with Geoff Ford and served as
President of Sportsmark. Mr. Gibson sold his interest in Sportsmark in 1999
joining the Company in his current position. Mr. Gibson graduated from the
University of Calgary with a Bachelor Degree in Commerce in Spring 1977.
BRETT LINDROS, DIRECTOR AND DIRECTOR OF SPORTS MEDIA PROPERTIES. Mr. Lindros
is a former National Hockey League player and current co-host of "Be a
Player! The Hockey Show" on TSN. Mr. Lindros was born, and completed his high
school education in London, Ontario, Canada. He entered the NHL immediately
upon graduation. Drafted by the New York Islanders in 1994 in the first
round, Mr. Lindros made great strides as an NHL player until a concussion
injury stopped his career short in 1996. Mr. Lindros is using his experience
and knowledge to continue his connection with hockey and the NHL. He brings
to the board of directors not only his well known name in hockey, but his
knowledge of the game and its players.
14
<PAGE>
KEN CREMA, DIRECTOR AND CHIEF EXECUTIVE OFFICER. Before joining the company
as Chief Executive Officer in May 1999, Mr. Crema had been involved in
Electronic Direct Marketing. Electronic Direct Marketing was founded by Mr.
Crema in 1987 as a provider of business solutions including customer service
support, order processing and distribution services. Under Mr. Crema's
direction as Chief Executive Officer and Chairman, Electronic Direct
Marketing grew to over 900 employees to become an established private
company, servicing blue chip clients including AT&T, Compaq and Microsoft. In
1998, Mr. Crema sold Electronic Direct Marketing to Teletech, a global
customer care system integration company. Mr. Crema studied Business
Administration at Sir Wilfred Laurier University in Waterloo, Ontario.
DAVID TOEWS, CHIEF FINANCIAL OFFICER AND SECRETARY. Mr. Toews joined the
Company as Vice President of Finance and has recently been appointed as Chief
Financial Officer. Mr. Toews joined the Company in June, 1999. Prior to
joining ISN, Mr. Toews was Vice President of Finance of EDM Electronic Direct
Marketing Ltd./TeleTech Canada in Toronto Ontario. In this position he was
responsible for all aspects of financial reporting, pricing and control for
the Canadian operation of TeleTech Canada. From March 1996 to September 1997,
Mr. Toews was Controller of Tee-Comm Electronics Inc. in Milton, Ontario.
From 1990 to March, 1996, Mr. Toews was employed by Coopers & Lybrand,
joining in the general practice and finishing his last year there as an audit
manager. Mr. Toews holds a Bachelor of Commerce (Honours) from McMaster
University in Hamilton, Ontario and earned the Chartered Accountant
Designation in 1992.
ITEM 6. EXECUTIVE COMPENSATION
The following table and attached notes sets forth the compensation
of the Company's executive officers and directors during each of the fiscal
years since inception of the Company. The remuneration described in the table
does not include the cost to the Company of benefits furnished to the named
executive officers, including premiums for health insurance, reimbursement of
expenses, and other benefits provided to such individual that are extended in
connection with the ordinary conduct of the Company's business. The value of
such benefits cannot be precisely determined, but the executive officers
named below did not receive other compensation in excess of the lesser of
$25,000 or 10% of such officer's cash compensation.
During the 1997-1998 fiscal year, beginning April 28, 1997
(inception) through April 30, 1998, no Officer or Director received any cash
consideration for salary, nor any aggregate remuneration for health insurance
and expenses, in excess of $40,000.
During the 1998-1999 fiscal year, beginning May 1, 1998 through
March 31, 1999, two directors received cash consideration for salary, in
excess of $40,000. Patrick Earle received $96,000 and Roger Earle received
$58,500.
The following table sets forth all compensation scheduled to be
received for services rendered to the Company in all capacities during the
1999-2000 fiscal year by those persons who are the Company's executive
officers and directors. No such individuals are scheduled to receive a total
annual salary and bonus which exceeds $100,000 during the 1999-2000 fiscal
year, ending March 31, 2000.
15
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
-----------------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------- -----------------------------------------------------
Name and Principal Other Restricted Securities All other
Position annual Stock Underlying LTIP Compen-
Year Salary Bonus Compen- Awards Options/ Payouts sation
sation SARs
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Andrew DeFrancesco 2000 0 0 None None 450,000(2) None None
Chairman, President (1)
- -----------------------------------------------------------------------------------------------------------------------------------
Kenneth Crema 2000 0 TBD None None 350,000(3) None None
Chief Executive Officer
- -----------------------------------------------------------------------------------------------------------------------------------
Geoff Ford 2000 $75,000 TBD None None 150,000(4) None None
Director/Chief
Operating Officer/
Senior
Vice-President
Marketing and Sales
- -----------------------------------------------------------------------------------------------------------------------------------
Bill Gibson 2000 $75,000 TBD None None 150,000(4) None None
Director/Senior
Vice President
Business Development
- -----------------------------------------------------------------------------------------------------------------------------------
Brett Lindros 2000 0 0 None None 150,000(4) None None
Director/ Director of
Sports Media
- -----------------------------------------------------------------------------------------------------------------------------------
David Toews 2000 $73,000 TBD None None 50,000(5) None None
Chief Financial Officer/
Secretary
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See financial statements for fiscal year detail of executive
compensation.
NOTES TO EXECUTIVE COMPENSATION
(1) In order to maintain reduced operating overhead and provide
incentives, certain officers and directors receive common stock in lieu of cash
consideration for salaries accrued but not paid. Andrew DeFrancesco received
700,000 shares of common stock, in lieu of cash consideration, and at a cost
basis of $.40 per share, for services rendered but not paid during the period
April 27, 1997 through February 28, 1999. These shares were provided to Mr.
DeFrancesco for his role in the Birchtree Capital Corp. transaction and not in
his capacity as Chairman.
(2) Reflects options granted by the Company to Andrew DeFrancesco in
January 1999 to purchase 200,000 shares of Company Common Stock at the exercise
price of $.40 per share with such options expiring on or before January 4, 2004;
and options granted to Andrew DeFrancesco to purchase 250,000 shares of Company
Common Stock at the exercise price of $1.75 per share granted in January 1999.
See "Options Outstanding" and "Certain Transactions".
(3) Reflects options granted by the Company to Ken Crema in January
1999 to purchase 350,000 shares of Company Common Stock at the exercise price
of $1.75 per share. See "Options Outstanding" and "Certain Transactions".
(4) Reflects options granted by the Company to Geoff Ford, Bill
Gibson, and Brett Lindros in January-February 1999 to purchase 150,000
shares of Company Common Stock at the exercise price of $1.75 per share; with
such options expiring on or before March 25, 2004. See "Options Outstanding"
and "Certain Transactions."
16
<PAGE>
(5) Reflects options to purchase 50,000 shares of common stock
granted to David Toews as an incentive to accept service with the Company as
Vice President of Finance and subsequently Chief Financial Officer in
January, 1999 at the exercise price of $1.75 per share; with such options
expiring on or before March 25, 2004. An additional 100,000 options at the
exercise price of $4.275 were granted in June.
The Company carries officers and directors liability insurance,
disability and life insurance benefits, as well as health insurance. The
health disability and life insurance benefits are available to employees of
the Company only. Only three executive officers or directors are currently
covered by employment agreements. The Company does not maintain any pension
plan, profit sharing plan or similar retirement or employee benefit plans.
Mr. Crema's relationship, while not subject to a formal agreement,
is subject to a written memorandum wherein Mr. Crema is to receive no cash
compensation until completion of the next round of private financing.
Thereafter Mr. Crema shall receive $10,000 per month. Like, Mr. Crema, Mr.
DeFrancesco is scheduled to receive cash compensation of $10,000 per month
upon completion of the next round of private financing.
Mr. Gibson's employment agreement is for a term of three years. The
terms of this agreement specifies a salary as disclosed herein above.
Mr. Ford's employment agreement is for a term of three years years.
The terms of this agreement specifies a salary as disclosed herein above.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Individual Grants As of March 31, 1999 Grant Date Value
- --------------------------------------------------------------------------------------------------------------------
Name Number of Percent of total Exercise Expiration Grant date
securities options/SARs or base Date present value $
underlying granted to price
Options/SARs employees in ($/Sh)
granted (#) fiscal year
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Andrew DeFrancesco 200,000 5.9% $.40 2/28/04 $0
250,000 7.3% $1.75 3/25/04 $0
- --------------------------------------------------------------------------------------------------------------------
Ken Crema 350,000 10.2% $1.75 3/25/04 $0
- --------------------------------------------------------------------------------------------------------------------
Geoff Ford 150,000 4.4% $1.75 3/25/04 $0
- --------------------------------------------------------------------------------------------------------------------
Bill Gibson 150,000 4.4% $1.75 3/25/04 $0
- --------------------------------------------------------------------------------------------------------------------
Brett Lindros 150,000 4.4% $1.75 3/25/04 $0
- --------------------------------------------------------------------------------------------------------------------
David Toews 50,000 1.5% $1.75 3/25/04 $0
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As part of the agreement between BirchTree Capital Corporation and
Internet Sports Network, Inc., ISN was required to pay cash consideration of
two hundred fifty thousand dollars ($250,000). Certain shareholders of the
Company agreed to pay the cash consideration in exchange for options to
purchase stock from a large BirchTree shareholder. These shareholders, Benitz
& Partners and Striker Capital, were each granted an option to purchase
500,000 shares of common stock at a total purchase price of $10 from the
shareholder. These shareholders also agreed to cancel 350,000 shares each of
common stock held by these shareholders prior to the exchange. The options
were exercised with the net result being that each of these shareholders
netted an additional 150,000 shares for paying the cash consideration of the
exchange.
17
<PAGE>
Certain officers and directors of the Company were granted options
to purchase common stock at the exercise price of $.40 per share on January
5, 1999. The right to purchase 155,000 shares of common stock were granted to
these officers and directors with a further 350,000 granted to consultants
who later became officers and/or directors. Options to purchase 100,000
shares of common stock have been exercised, the remaining 405,000 may be
exercised immediately and expire on February 28, 2004.
Directors of the Company were granted options to purchase common
stock pursuant to an Option Agreement on January 19, 1999. This option
agreement vests immediately and is exercisable over a five year period at the
exercise price of $1.75 per share. The shares underlying the options are
subject to piggyback and demand registration rights.
Officers of the Company were granted options to purchase common
stock pursuant to an Option Agreement on February 1 and March 5, 1999. These
options granted hereunder vest over a two year period commencing on March 26,
1999 and are exercisable over a five year period at an exercise price of
$1.75. With the exception of those options granted to Mr. Ford and Mr.
Gibson, which vest immediately, 25% of the options granted vest every six
months commencing March 26, 1999 and ending March 26, 2001. Vesting is
conditioned upon employment on the vesting date. If the Company is acquired,
merged, or reorganized, or if the services of the officers are terminated
without cause by the board of directors, all options shall vest immediately.
These options have piggyback and demand registration rights.
In February 1999, the Company granted 250,000 options to purchase
common stock at the exercise price of $1.75 to Dominick & Dominick
Securities, Inc. as payment for financial services rendered to the Company.
This option is exercisable for a period of two years commencing February 3,
1999 and ending February 2, 2001. Dominick & Dominick Securities, Inc.
transferred 200,000 of the options to companies affiliated with Dominick or
its affiliates resulting in Dominick holding 50,000 options. Also in
February, 1999, 50,000 options were granted to Sandalwood Investments as
compensation for consulting services. 250,000 options to purchase common
stock were reserved by the Company to grant to individual professional
athletes in exchange for their services to the Company.
In June, 1999, the Company entered into a settlement agreement with
Mr. Patrick S. Earle, former director and President of the Company to
terminate his employment with and director's position with the Company. This
Agreement requires the Company to pay Mr. Earle cash consideration of $60,000.
ITEM 8. LEGAL PROCEEDINGS
To the best knowledge of management, there are no other legal
proceedings pending or threatened against the Company.
ITEM 9. MARKET PRICE OF AND DIVIDENDS OF THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDERS MATTERS
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON
EQUITY AND OTHER STOCKHOLDERS MATTERS
A. MARKET INFORMATION
MARKET FOR THE ISSUER'S COMMON STOCK
AND RELATED MATTERS
The Company's common stock trades in the over-the-counter bulletin
board market as ISNI since the BirchTree Capital Corporation/ISN merger of
January 1999.
18
<PAGE>
The following table sets forth the high and low bid prices for the
Company's common stock for each quarter within the last two fiscal years.
Information is only available since January 1999. The prices below also
reflect inter-dealer quotations, without retail mark-up, mark-down or
commissions and may not represent actual transactions:
<TABLE>
<CAPTION>
Quarter ended Low Bid High Bid
------------------------------------------------------------
<S> <C> <C>
March 31, 1999 $4.63 $4.75
June 30, 1999 $6.56 $6.63
July 22, 1999 $6.00 $6.25
</TABLE>
B. HOLDERS
As of June 30, 1999, there were approximately 150 holders of Company
Common Stock, as reported by the Company's transfer agent.
C. DIVIDENDS
The Company has not paid any dividends on its Common Stock. The
Company currently intends to retain any earnings for use in its business, and
therefore does not anticipate paying cash dividends in the foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
As part of the initial incorporation of Internet Sports Network in
Nevada in April, 1997, the Company issued stock to certain of its founders at
the stock's par value or $.001. This issuance consisted of 1,102,957 shares
of common stock issued to Patrick Earle, 100,000 shares issued to Caulfield
Management and 450,000 shares issued to Mr. Neil Podmore. The sale of these
securities were exempt from registration on the basis of Section 3(a)(11) of
the Securities Act of 1933 (the "Act"). The proceeds of this sale were used
to fund incorporation and other start-up costs of the Company.
In July 1997, the Company sold common stock at the price of $.02 per
share to 22 investors all of whom were non-U.S. Residents, and of whom only 3
were non-accredited but sophisticated investors as defined under Regulation D
of the Act. In connection with this issuance the Company relied upon an
exemption available under Regulation S of the Act. The issuance consisted of
a total of 1,767,500 shares of common stock with total proceeds raised of
approximately $35,000. The funds were used for operations of the Company.
In Fall of 1997, the Company sold common stock at the price of $.25
per share to 17 investors all of whom were accredited and all of whom were
non-U.S. residents. Of these investors all but 17 had a pre-existing
shareholder and business relationship with the Company. In connection with
this issuance, the Company relied upon an exemption available under
Regulation S of the Act. The issuance consisted of 1,579,543 shares issued
for a total of approximately $396,000. The proceeds were used for the
operations of the Company.
In November and December 1997, the Company sold convertible
debentures, convertible to common stock at a rate of one share for every
$1.50 principal amount of debenture, to five individuals pursuant to an
offering relying upon Rule 506 of the Act. All of the investors were
accredited investors. The Company raised a total of $196,500 selling 131
debentures. The proceeds of the offering were used to expand the Company's
services and to begin a marketing program of these services. These investors
agreed, on or about November, 1998 to convert their
19
<PAGE>
debentures to common stock of the Company at the conversion ratio of one
share per $.40 of principal resulting in 491,250 shares issued.
In April-September 1998, the Company offered common stock of the
Company at a price of $.40 per share. The Company sold 2,236,594 shares of
common stock to 22 investors raising approximately $885,000. The shares were
sold to accredited investors only who were non-U.S. Residents in reliance on
Rule 506 of the Act. The proceeds were used to fund Company operations.
In late November-December 1998, the Company had entered into an
agreement with Digital Data Networks to conduct a share exchange wherein
Digital Data Networks, Inc. would be the surviving entity to be renamed
Internet Sports Network, Inc. Pursuant to that agreement, Digital Data
Networks and two directors of Digital Data Network, Inc. agreed to pay a
total of $370,000 to the Company in exchange for shares of common stock at
$.40 per share. Digital Data Networks, Inc., while not an accredited
investor, had access through its due diligence process to all material
information regarding the Company. The directors were accredited investors
who also had access to information by reason of their participation in the
due diligence process. The Company relied upon an exemption available under
3(a)(11) of the Act. In late December, 1998, the Company realized that it
would not have shareholder approval of the agreement with Digital Data
Networks, Inc. Accordingly, and in accordance with the agreement with Digital
Data Networks, Inc., the Company terminated the agreement with Digital Data
Networks. As part of a settlement between the two companies, Digital Data
Networks was reimbursed for the costs it incurred in connection with the
transaction and retained 150,000 shares of common stock. The rest of the
common stock was returned to ISN.
In early January, 1999, the Company issued a total of 650,000 shares
to Brett and Eric Lindros for services rendered to the Company and to Colony
Investments for financial advisory services rendered to the Company. The
Company relied upon an exemption available under 3(a)(11) of the Act. All
three investors are accredited investors. No funds were received in this
transaction.
In January, 1999, the Company entered into a share exchange and
merger agreement with BirchTree Capital Corp. In that agreement, the
shareholders of the Company exchanged their shares for stock in BirchTree
Capital Corp. The total newly issued shares contemplated to be issued under
this agreement consisted of up to 9,085,229 shares of common stock of
BirchTree Capital Corp. to be delivered to Internet Sports Network
shareholders who delivered their stock for exchange. No funds were received
in this transaction.
In January 1999, the Company issued 700,000 shares of common stock
to Mr. Andrew DeFrancesco. These shares were issued in exchange for services
rendered by Mr. DeFrancesco in the Birchtree Capital Corporation transaction
and were valued at $.40 per share. The Company relied on an exemption
available under Regulation S of the Act. Mr. DeFrancesco is an accredited
investor with a long history with the Company. No funds were received by the
Company in this transaction.
In January, 1999, the Company offered up to $1,000,000 worth of
common stock utilizing Rule 504 of Regulation D of the Securities Act of 1933
at the price of $1.75 per share. In this offering, 20 shareholders purchased
a total of 571,000 shares of common stock at a total price of $999,425. The
funds raised hereby were used to acquire Sportsmark and to fund Company
operations.
On February 5, 1999, the Company acquired the Sportsmark companies
for 1,500,000 shares of common stock and cash. The Sportsmark entities were
accredited investors as that term is used in Regulation D of the Act. The
Company relied upon Regulation S as an exemption to this offering.
20
<PAGE>
In late January-April, 1999, the Company offered up to 4,571,429
shares of common stock for a total consideration of $6 million to $8 million
to non-U.S. residents. Investors purchased common stock totaling a total of
4,454,472 shares for a total consideration of approximately $7,795,000. The
proceeds were used to acquire Sportsmark and Pickem and to fund operations of
the Company.
Effective March 5, 1999, the Company acquired Pickem Sports. In this
acquisition the Company issued a total of 1,987,955 shares to 3 Pickem
shareholders in exchange for all of the common stock of Pickem. the Pickem
shareholders were accredited investors and the Company relied on the
exemption available under 3(a)(11) of the Act for this issuance.
In February-April 1999, the Company offered common stock to
accredited U.S. residents only, relying upon an exemption available under
Rule 506 of Regulation D of the Act. In this offering, a total of 31
investors acquired a total of 653,183 shares, for a total consideration of
$1,143,070. The proceeds were used to fund the operations of the Company.
ITEM 11. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Certificate of Incorporation authorizes the issuance
of 50,000,000 shares of common stock, $.001 par value per share, of which
approximately 17,841,000 shares were outstanding at March 31, 1999.
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common
stock have no cumulative voting rights. Accordingly, the holders of in excess
of 50% of the aggregate number of shares of Common Stock outstanding will be
able to elect all of the directors of the Company and to approve or
disapprove any other matter submitted to a vote of all shareholders. See
"Principal Shareholders."
Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time, by the Board of
Directors in its discretion, from funds legally available therefor. The
Company does not currently anticipate paying any dividends on its Common
Stock. In the event of a liquidation, dissolution or winding up of the
Company, the holders of shares of common stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. Holders of
common stock have no preemptive rights to purchase the Company's common
stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the outstanding shares of
common stock are fully paid and non-assessable.
Shares of Common Stock are registered at the transfer agent and are
transferable at such office by the registered holder (or duly authorized
attorney) upon surrender of the Common Stock certificate, properly endorsed.
No transfer shall be registered unless the Company is satisfied that such
transfer will not result in a violation of any applicable federal or state
securities laws. The Company's transfer agent is Interwest Transfer Company,
whose address is 1981 E. Murray Holiday Road, Salt Lake City, UT 84117.
OPTIONS
As of March 31, 1999, the Company had authorized a total of
3,415,000 options; of which 2,550,000 were held by officers and directors of
the Company at March 31, 1999 and of which 1,300,000 were held by now current
officers and directors of the Company. See Stock Option Summary for number of
options issued, exercise price, and expiration for each holder thereof.
21
<PAGE>
In general, each Option (i) entitles the holder thereof to purchase
one share of Common Stock, (ii) will be exercisable for a period of (varied
time), commencing (a varied number of) months from the final delivery by the
Company of Common Stock (each Unit consisting of one share of Common Stock)
sold in the offering and (iii) is detachable and separately transferable only
during such exercise period.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Corporation Law and the Company's Certificate of
Incorporation and Bylaws authorize indemnification of a director, officer,
employee or agent of the Company against expenses incurred by him or her in
connection with any action, suit, or proceeding to which such person is named
a party by reason of having acted or served in such capacity, except for
liabilities arising from such person's own misconduct or negligence in
performance of duty. In addition, even a director, officer, employee or agent
of the Company who was found liable for misconduct or negligence in the
performance of duty may obtain such indemnification if, in view of all the
circumstances in the case, a court of competent jurisdiction determines such
person is fairly and reasonably entitled to indemnification. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
In response to this item, the Company hereby incorporates the
Financial Statements attached hereto as an Exhibit and states that the
reporting of Supplementary Data is not applicable to the Company.
ITEM 14. ACCOUNTANTS
The Company has engaged Ernst & Young, LLP as its auditors as of
May, 1999 replacing Davidson & Company who were dismissed as of that date.
The decision to engage Ernst & Young, LLP was approved by the Board of
Directors. There were no disagreements with Davidson & Company. Davidson &
Company expressed an opinion without reservation on the financial statements
for the period from inception to April 30, 1998, dated June 25, 1998.
22
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Consolidated financial statements for the Company for the period from
inception, April 28, 1997 to April 30, 1998 and for the eleven months
ending March 31, 1999.
ISN financial statements for the periods ending April 30, 1998
Classroom 2000 Inc. financial statements for the period ending January
31, 1999, December 31, 1998 and 1997.
Classroom 2000 Inc. 1999, 1998, 1997
Sportsmark, Inc. financial statements for the periods ending January
31, 1999, November 30, 1998 and 1999.
Sportsmark Promotions, Inc. financial statements for the periods ending
January 31, 1999, December 31, 1999, December 31, 1998
Pickem Sports, Inc. financial statements for the periods ending
December 31, 1997 and 1998.
(b) Exhibits
2.1 Agreement for the Exchange of Common Stock between Birch Tree
Capital Corp. and Eric P. Littman, and Internet Sports
Network, Inc.
2.2 Share Purchase Agreement between Internet Sports Network, Inc.
and Sportsmark Inc., Sportsmark Promotions, Inc. & Classroom
2000 Inc. and Assets of SMP Sportsmark Promotions
International, Inc.
2.3 Merger Agreement between Torsten Heycke, Rafael Furst, Perry
Friedman, Pickem Sports, Inc., and Internet Sports Network,
Inc.
2.4 Agreement for the Purchase of Certain Assets of Ultimate
Sports Publishing, Inc. By and Between National Publisher
Services, Inc. And Internet Sports Network, Inc.
2.5 Agreement and Plan of Merger between Innovation Partners, Inc.
and Internet Sports Network, Inc.
3(i) Articles of Incorporation and Amendments of Internet Sports
Network, Inc.
3(ii) Bylaws of Internet Sports Network, Inc.
4.1 Form of Consultant's Option Agreement and Certificate
4.2 Form of Officer/Director Option Agreement and Certificate
4.3 Common Stock Certificate Specimen
10.1 Lease for Toronto office
10.2 Lease for Vancouver office
10.3 Employment Agreement for Bill Gibson
10.4 Employment Agreement for Geoff Ford
10.5 Settlement Agreement with Digital Data Networks
10.6 Settlement Agreement with Patrick S. Earle
21 List of Subsidiaries of Company
23
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the Registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERNET SPORTS NETWORK, INC.
By: /s/ Ken Crema
-------------------------------
Ken Crema
Its: Chief Executive Officer
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Ken Crema Chief Executive Officer, Director July 23, 1999
- -----------------------
Ken Crema
/s/ Andrew DeFrancesco Chairman of the Board, President July 23, 1999
- -----------------------
Andrew DeFrancesco
/s/ Geoff Ford Director, Chief Operating Officer July 23, 1999
- ----------------------- Senior Vice President
Geoff Ford Marketing and Sales
/s/ Bill Gibson Director, Senior Vice President July 23, 1999
- ----------------------- Product Development
Bill Gibson
/s/ Brett Lindros Director, Director of Sports Media July 23, 1999
- ----------------------- Relations
Brett Lindros
/s/ David Toews Chief Financial Officer, Secretary July 23, 1999
- -----------------------
David Toews
</TABLE>
24
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
INTERNET SPORTS NETWORK, INC.
MARCH 31, 1999
<PAGE>
AUDITORS' REPORT
To the Shareholders of
INTERNET SPORTS NETWORK, INC.
We have audited the accompanying consolidated balance sheet of INTERNET SPORTS
NETWORK, INC. as of March 31, 1999, and the related consolidated accompanying
statements of operations and comprehensive loss, cash flows and shareholders'
equity for the eleven month period from May 1, 1998 to March 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of March 31, 1999 and the consolidated results of its operations and
its cash flows for the eleven month period from May 1, 1998 to March 31, 1999 in
conformity with generally accepted accounting principles in the United States.
Toronto, Canada,
June 11, 1999. Chartered Accountants
<PAGE>
<TABLE>
<CAPTION>
INTERNET SPORTS NETWORK, INC.
CONSOLIDATED BALANCE SHEET
(All dollar and share amounts in thousands, except per share data)
====================================================================================================================
MARCH 31, APRIL 30,
1999 1998
- --------------------------------------------------------------------------------------------------------------------
(U. S. Dollars)
ASSETS
<S> <C> <C>
Current
Cash and cash equivalents $ 2,928 $ 9
Receivables 182 31
Prepaid expenses 29 45
-------- --------
3,139 85
Purchased intangibles and goodwill, net (Note 3) 13,492 -
Equipment, net (Note 4) 84 46
-------- --------
$ 16,715 $ 131
====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable $ 171 $ 95
Accrued liabilities 80 72
Accrued prize commitments 31 -
Accrued commission on stock issuance 57 -
-------- --------
339 167
Deferred income taxes (Note 7) 3,855 -
Convertible debentures (Note 5) - 196
-------- --------
4,194 363
-------- --------
Commitments (Note 9)
Shareholders' equity (Note 6)
Common stock and additional paid-in capital, $0.001 par value,
50,000 shares authorized (1998 - 20,000)
17,841 outstanding (1998 - 5,000) 17,127 425
Share subscriptions receivable for 1,703 shares subscribed - (14)
Deferred compensation (449) -
Accumulated deficit (4,157) (643)
-------- --------
12,521 (232)
-------- --------
$ 16,715 $ 131
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
INTERNET SPORTS NETWORK, INC.
CONSOLIDATED STATEMENT OF OPERATIONS and COMPREHENSIVE LOSS
(All dollar and share amounts in thousands, except per share data)
====================================================================================================================
FISCAL YEAR
APRIL 25, 1997
(INCEPTION)
11 MONTHS ENDING THROUGH
MARCH 31, 1999 APRIL 30, 1998
- --------------------------------------------------------------------------------------------------------------------
(U.S. Dollars)
<S> <C> <C>
REVENUES $ 152 $ 77
-------------- ---------------
EXPENSES
Prize commitments and other direct costs 250 41
Wages and salaries 385 223
Consulting fees 267 67
Advertising 367 185
Depreciation 23 8
Interest and bank charges 17 9
General and administrative 424 187
Amortization of purchased intangibles and goodwill 827 -
Debt conversion inducement (Note 5) 144 -
Options granted for services provided 632 -
Amortization of stock compensation 20 -
Reverse acquisition and due diligence costs 546 -
-------------- --------------
Total expenses 3,902 720
-------------- --------------
Loss before Income Taxes (3,750) (643)
Deferred income tax recovery (Note 7) 236 -
-------------- --------------
Net loss and comprehensive loss $ (3,514) $ (643)
====================================================================================================================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.45) $ (0.17)
====================================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,833 3,813
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
INTERNET SPORTS NETWORK, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(All dollar and share amounts in thousands, except per share data)
===================================================================================================================================
COMMON
STOCK AND
ADDITIONAL STOCK
PAID IN SUBSCRIPTIONS DEFERRED ACCUMULATED
CAPITAL RECEIVABLE COMPENSATION DEFICIT TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
(U.S. Dollars)
<S> <C> <C> <C> <C> <C>
Founders' shares subscribed upon inception
on April 25, 1997 for $0.001 per share $ 2 $ (2) $ - $ - $ -
Shares issued for cash 398 (12) - - 386
Shares issued in exchange for amounts payable 33 - - - 33
Share issuance costs (8) - - - (8)
Net loss - - - (643) (643)
--------- ----------- -------- -------- ---------
Balance at April 30, 1998 425 (14) - (643) (232)
Shares issued on exchange for convertible
debentures 362 - - - 362
Shares issued in exchange for amounts payable 37 - - - 37
Shares issued on acquisition of Sportsmark Group
of Companies 2,625 - - - 2,625
Shares issued in acquisition of Pickem Sports, Inc. 3,269 - - - 3,269
Shares issued for services 522 - - - 522
Shares issued for cash 9,249 - - - 9,249
Deferred compensation related to stock options 469 - (469) - -
Amortization of deferred compensation related
to stock options - - 20 - 20
Options granted for services provided 632 - - - 632
Payment of subscription receivable - 14 - - 14
Share issuance costs (463) - - - (463)
Net loss - - - (3,514) (3,514)
--------- ----------- -------- -------- ---------
Balance at March 31, 1999 $ 17,127 $ - $ (449) $ (4,157) $ 12,521
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
INTERNET SPORTS NETWORK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(All dollar and share amounts in thousands, except per share data)
===================================================================================================================
FISCAL YEAR
APRIL 25, 1997
(INCEPTION)
11 MONTHS ENDING THROUGH
MARCH 31, 1999 APRIL 30, 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES (U.S. Dollars)
Net loss $ (3,514) $ (643)
Adjustment to reconcile net loss to
net cash used in operating activities:
Depreciation 23 8
Amortization of deferred compensation 20 -
Amortization of purchased intangibles and goodwill 827 -
Deferred income tax recovery (236) -
Debt conversion inducement 144 -
Options granted for services provided 632 -
Shares issued for services 522 -
Changes in other operating assets and liabilities:
Increase in receivables (142) (31)
Decrease (increase) in prepaid expenses 16 (45)
Increase in accounts payable 72 128
Increase in accrued liabilities 30 72
---------------- --------------
Net cash used in operating activities (1,606) (511)
---------------- --------------
INVESTING ACTIVITIES
Purchase of Sportsmark Group of Companies (1,254) -
Purchase of Pickem Sports, Inc. (3,000) -
Purchase of equipment (21) (54)
---------------- --------------
Net cash used in investing activities (4,275) (54)
---------------- --------------
FINANCING ACTIVITIES
Proceeds from sale of convertible debentures - 196
Proceeds from sale of capital stock, net of share issuance costs
($463; April 30, 1998 - $8) 8,800 378
---------------- --------------
Net cash provided by financing activities 8,800 574
---------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,919 9
CASH AND CASH EQUIVALENTS:
Beginning of period 9 -
---------------- --------------
End of period $ 2,928 $ 9
===================================================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
INVESTING ACTIVITIES
Net assets of Pickem Sports, Inc. acquired for shares (3,269) -
Net assets of Sportsmark Group of Companies acquired for shares (2,625) -
FINANCING ACTIVITIES
Common stock issued in exchange for
convertible debentures $ 196 $ -
Shares issued on acquisition of Pickem Sports, Inc. 3,269 -
Shares issued on acquisition of Sportsmark Group of Companies 2,625 -
Shares issued for services 522 -
Accrued interest settled for shares 22 -
Common stock issued in exchange for accounts
payable paid by shareholder 37 33
===================================================================================================================
Cash interest paid $ 10 -
Cash taxes paid - -
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
===============================================================================
NOTE 1. NATURE AND CONTINUANCE OF OPERATIONS
Internet Sports Network, Inc. ("ISN" or the "Company") was
incorporated on April 25, 1997 (Inception) under the laws of the
State of Nevada, United States and its principal business
activities include the development and marketing of sports contest
organization services administered through the Internet.
Substantially all of the Company's operations are conducted by its
wholly-owned subsidiaries in the United States and Canada.
Pursuant to the reverse acquisition and subsequent merger, the
state of incorporation has changed to Florida, United States.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
REVERSE ACQUISITION OF BIRCH TREE CAPITAL CORP.
Effective January 19, 1999, Birch Tree Capital Corp. ("BTC")
acquired all the shares of Internet Sports Network, Inc. ("ISN")
pursuant to an Agreement for the Exchange of Common Stock (the
"Agreement"). BTC was formed on October 6, 1996 as a holding
company, whose shares were quoted on the OTC Electronic Bulletin
Board. At the time of the merger, BTC had no assets or
liabilities. Pursuant to the Agreement, ISN's common shareholders
received an aggregate of approximately 9,085 shares of the
restricted common stock of BTC, representing approximately 90% of
the common stock outstanding upon consummation of the transaction.
Accordingly, for accounting purposes, ISN has been treated as the
purchaser, and the acquisition has been accounted for as a reverse
acquisition. The legal parent company, BTC, was deemed to be a
continuation of ISN, and accordingly, these consolidated financial
statements are a continuation of the financial statements of ISN,
the legal subsidiary and not the legal parent. In these
consolidated financial statements the comparative figures are
those of ISN. After the acquisition, BTC and ISN merged, and the
merged entity changed its name to Internet Sports Network, Inc. As
a result of the transaction, ISN's year end was changed to March
31.
The acquisition has been accounted for using the purchase method
with the cost of the purchase being a nominal value of $1.
Costs related to the reverse acquisition of BTC and due diligence
on proposed transactions which were not completed have been
charged to the consolidated statement of operations and
comprehensive loss.
BUSINESS COMBINATIONS
The business combinations have been accounted for under the
purchase method of accounting, and the Company includes the
results of operations of the acquired business from the date of
acquisition. Net assets of the companies acquired are recorded at
their fair value at the date of acquisition. The excess of the
purchase price over the fair value of net assets acquired is
included in purchased intangibles and goodwill in the accompanying
consolidated balance sheet.
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
===============================================================================
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D...)
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company has defined cash and cash equivalents to include cash
and time deposits with original maturities of 90 days or less.
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of its holdings
of cash held by one deposit taking institution. The Company
manages its credit risk by depositing its cash in high-quality,
regulated deposit taking institutions.
PURCHASED INTANGIBLES AND GOODWILL
Purchased intangibles consist primarily of software, licenses,
customer lists, trademarks and contest agreements. Purchased
intangibles of approximately $9,637 are stated net of total
accumulated amortization of $591 at March 31, 1999 in the
accompanying consolidated balance sheet. Purchased intangibles are
being amortized on a straight-line basis principally over two
years.
Goodwill of approximately $3,855 is stated net of total
accumulated amortization of $236 at March 31, 1999 in the
accompanying consolidated balance sheet. Goodwill is being
amortized on a straight-line basis principally over two years.
LONG-LIVED ASSETS
In accordance with Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standard ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, the carrying value of
intangible assets and other long-lived assets is reviewed on a
regular basis for the existence of facts or circumstances, both
internally and externally, that may suggest impairment. To date,
no such impairment has been indicated. Should there be an
impairment in the future, the Company will measure the amount of
the impairment based on discounted expected future cash flows from
the impaired assets. The cash flow estimates that will be used
will contain management's best estimates, using appropriate and
customary assumptions and projections at the time.
ADVERTISING COSTS
The cost of advertising is expensed as incurred.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
===============================================================================
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D....)
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board
["APB"] Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations, in accounting for its
employee stock options rather than the alternative fair value
accounting allowed by SFAS No. 123, "Accounting for Stock-Based
Compensation". APB No. 25 provides that the compensation expense
relative to the Company's employee stock options is measured based
on the intrinsic value of the stock option. SFAS No. 123 requires
companies that continue to follow APB No. 25 to provide a pro
forma disclosure of the impact of applying the fair value method
of SFAS No. 123.
SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one principal business segment across
domestic and international markets. International sales, including
export sales from the United States to Canada, represented
approximately 82% and 100% of net sales for the periods ended
March 31, 1999 and April 30, 1998, respectively. No other foreign
country or geographic area accounted for more than 10% of net
sales in any of the periods presented. There were no transfers
between geographic areas during the periods ended March 31, 1999
and April 30, 1998. Capital assets and purchased intangibles in
the United States equalled approximately $12,457 and nil in fiscal
1999 and 1998, respectively. The remaining capital assets and
purchased intangibles are in Canada.
COMPREHENSIVE INCOME (LOSS)
As of May 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income, which establishes standards for the
reporting and display of comprehensive income and its components
in the consolidated financial statements. There are no items of
comprehensive income (loss) that require additional reporting.
FOREIGN CURRENCY TRANSLATION
The unit of measurement of the Company is the Canadian dollar
while its reporting currency is the United States dollar. The
assets and liabilities of the Canadian subsidiaries are translated
using the exchange rate in effect at period end, and revenues and
expenses are translated at the average rate during the period.
Exchange gains or losses on translation of the Company's net
equity investments in these subsidiaries are deferred as a
separate component of other comprehensive income. The translation
adjustments as at March 31, 1999 and April 30, 1998 were
insignificant.
EQUIPMENT
Equipment is recorded at cost. Amortization is provided over the
estimated useful life of the asset using the declining balance
basis at the following rates:
<TABLE>
<CAPTION>
<S> <C>
Office equipment and furniture 20%
Computer equipment 30%
</TABLE>
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
===============================================================================
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D....)
REVENUE RECOGNITION
The Company earns revenue from membership and other fees received
for Internet-based sports information and sports contest
organization services. Membership fees are received prior to the
beginning of a particular sport season or event and recorded as
deferred income until recognized in income ratably over the season
or upon completion of the event. Other fees received for
Internet-based sports information and sports contest organization
services are recognized in income ratably over the season or upon
completion of the event.
PRIZE AWARDS
Members, as well as non-members, are entitled to enter into
contests provided by the Company. Prizes are awarded upon
completion of the sports season or event and are paid by the
Company or the contest's sponsors. Prize awards are fixed in
amount and determinable prior to commencement of the season or
event and are expensed at the commencement of the season or event
to which they relate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and
cash equivalents, receivables, accounts payable, accrued
liabilities, accrued prize commitments and accrued commission on
stock issuance. It is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising
from these financial instruments. The carrying amounts of these
current assets and liabilities approximates their fair values due
to their immediate or short-term nature.
INCOME TAXES
Income taxes are accounted for utilizing the liability method.
Deferred income taxes are provided to represent the tax
consequence on future years for temporary differences between the
financial reporting and tax basis of assets and liabilities.
Deferred income taxes are measured utilizing enacted tax rates
expected to be in effect in the years in which the temporary
differences are expected to reverse. A valuation allowance has
been provided for the total amount of deferred tax assets that
would otherwise be recorded for income tax benefits primarily
relating to operating loss carryforwards, as realization cannot be
determined to be more likely than not.
LOSS PER SHARE
Basic loss per share excludes any dilutive effects of options and
convertible debentures. Basic loss per share is computed using the
weighted-average number of common shares outstanding during the
period and includes common shares issued subsequent to the period
end for which all consideration had been received prior to the
period end and which no other contingencies existed. Diluted loss
per share is equal to the basic loss per share as the effect of
the stock options and convertible debentures is anti-dilutive.
There are no other dilutive common stock equivalent shares
outstanding during the period. Common stock equivalent shares are
excluded from the computation if their effect is anti-dilutive.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
===============================================================================
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D....)
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
New accounting pronouncements having relative applicability to the
Company include Statements of Financial Accounting Standards No.
132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", effective for fiscal years beginning
after December 15, 1998 and No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years
beginning after June 15, 2000. SFAS No. 132 revises employers'
disclosures about pension and other postretirement benefit plans.
SFAS No. 133 requires that all derivative instruments be recorded
on the consolidated balance sheets at their fair value. Changes in
the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it
is, the type of hedge transaction. The Company does not expect
that the adoption of SFAS Nos. 132 and 133 will have a material
impact on its consolidated financial statements because the
Company does not provide for pension or other postretirement
benefits, nor does it currently hold any derivative instruments.
Adoption of these statement will not impact the Company's
financial position, results of operations or cash flows and any
effect will be limited to the form and content of disclosures.
Additionally, the Accounting Standards Executive Committee of the
American Institute of CPA's issued Statement of Position 98-1,
"Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use" and Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities", which are
effective for fiscal years beginning after December 15, 1998.
Adoption of these standards is not expected to have a material
impact on the Company's financial position, results of operations
or cash flows.
NOTE 3. BUSINESS COMBINATIONS
Effective February 5, 1999, the Company acquired 100% of the
shares of three companies under common ownership and software
license rights from a fourth company (the "Sportsmark Group of
Companies"). The Sportsmark Group of Companies conduct and
administer sports contest services for their clients.
Effective March 5, 1999, the Company acquired 100% of the shares
of Pickem Sports, Inc., ("Pickem"). The business of Pickem
consisted of adaptable software to support the Company's growth in
sports pools run through the Internet.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
================================================================================
NOTE 3. BUSINESS COMBINATIONS (CONT'D....)
The transactions are summarized as follows:
<TABLE>
<CAPTION>
===================================================================================================
As at
February 5, 1999, As at
Sportsmark Group March 5, 1999,
of Companies Pickem Sports, Inc
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net assets acquired at fair values:
Working capital $ (129) $ 9
Equipment 28 12
Purchased intangibles 3,980 6,248
Goodwill 1,592 2,499
Deferred income taxes (1,592) (2,499)
------------ ------------
$ 3,879 $ 6,269
------------ ------------
Funded by:
Cash $ 1,254 $ 3,000
Shares of common stock 2,625 3,269
------------ ------------
$ 3,879 $ 6,269
===================================================================================================
</TABLE>
Purchased intangibles related to the acquisition of the Sportsmark
Group of Companies consist of developed contest software,
licenses, participant lists, customer lists, trademarks and domain
names.
Purchased intangibles related to the acquisition of Pickem consist
of developed contest software, customer contracts, client lists,
contest agreements, trademarks and domain names.
The unaudited pro forma combined consolidated financial
information for the aggregate of the Sportsmark Group of Companies
and Pickem acquisitions described above and accounted for under
the purchase method of accounting, as though the acquisitions had
occurred on May 1, 1998, would have resulted in net sales of
$2,053; loss before income taxes of $8,624; net loss of $6,750;
and basic and diluted loss per share of $0.63 for the period ended
March 31, 1999. The pro forma net loss includes amortization of
purchased intangibles and goodwill of $6,562 for the period ended
March 31, 1999. This unaudited pro forma combined consolidated
financial information is presented for illustrative purposes only
and is not necessarily indicative of the consolidated results of
operations in future periods or the results that actually would
have been realized had the Company been a combined company during
the specified period.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
================================================================================
NOTE 4. EQUIPMENT
Equipment consists of the following:
<TABLE>
<CAPTION>
==================================================================
MARCH 31, APRIL 30,
1999 1998
------------------------------------------------------------------
<C> <C> <C>
Computer equipment $ 83 $ 33
Office equipment and furniture 32 21
----------- -----------
115 54
Less accumulated depreciation (31) (8)
----------- -----------
Equipment, net $ 84 $ 46
==================================================================
</TABLE>
NOTE 5. CONVERTIBLE DEBENTURES
Convertible debentures bear interest, payable quarterly, at the
rate of 10% per annum and were to mature on December 12, 2002. The
debentures could have been prepaid at any time without penalty.
Commencing in December 1998, each debenture was convertible, at
the option of the holder, unless previously redeemed or
repurchased, at a convertible rate of one share of common stock
per $1.50 principal amount of debenture.
In order to facilitate the reverse acquisition, the Company
offered to exchange the principal amount of debentures for shares
of the Company's common stock at a per share price of $0.40
resulting in the issuance of approximately 491 common shares. The
value of shares issued on conversion of the debentures includes
the inducement provided to the debenture holders of $144 and $22
of accrued interest which had been previously charged to the
Statement of Operations was forfeited by the debenture holders on
conversion.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
================================================================================
NOTE 6. SHAREHOLDERS' EQUITY
COMMON STOCK
The authorized share capital of ISN which, for accounting
purposes, is deemed to have acquired BTC effective January 19,
1999, consisted of 20,000 common shares with a par value of
$0.001. Changes in the capital stock of ISN to January 19, 1999,
the effective date of the business combination with BTC, were as
follows:
<TABLE>
<CAPTION>
COMMON STOCK AND
NUMBER AND PAID-IN CAPITAL
OF SHARES $
<S> <C> <C>
----------------------------------------------------------------------------------
Founders' shares subscribed upon inception
on April 25, 1997 for $0.001 per share,
net of subscription receivable 1,653 -
Shares issued for cash, net of subscription
receivable 3,217 386
Shares issued in exchange for amounts payable 130 33
Share issuance costs -- (8)
----------------------------------------------------------------------------------
Balance at April 30, 1998 5,000 411
Shares issued in exchange for convertible
debentures (Note 5) 491 362
Shares issued in exchange for amounts payable 93 37
Shares issued for services 1,500 522
Shares issued for cash 2,001 801
----------------------------------------------------------------------------------
BALANCE JANUARY 19, 1999 9,085 2,133
==================================================================================
</TABLE>
During June and July 1997, ISN offered for sale to a group of
initial investors, 1,768 shares of its common stock at a per share
price of $0.02. Commencing in July 1997, ISN issued approximately
1,449 shares of its common stock at a per share price of $0.25.
During the period ended January 19, 1999, 1,500 shares were issued
for services rendered at prices ranging from $0.28 to $0.40 per
share. Included in this total are 950 shares issued to officers
and directors of ISN for marketing and financing services.
AS AT JANUARY 19, 1999
For accounting purposes, the share capital of the continuing
consolidated entity as at January 19, 1999 is computed as follows:
<TABLE>
<CAPTION>
$
------------------------------------------------------------------
<S> <C>
Existing share capital and paid-in capital of
ISN, January 19, 1999 2,133
Ascribed value of the shares of BTC --
------------------------------------------------------------------
SHARE CAPITAL AT JANUARY 19, 1999 2,133
==================================================================
</TABLE>
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
==============================================================================
NOTE 6. SHAREHOLDERS' EQUITY (CONT'D...)
As a result of the business combination, ISN became a wholly-owned
subsidiary of BTC. For accounting purposes, at January 19, 1999,
the outstanding shares of the continuing consolidated entity
consisted of the number of BTC shares issued to that date with an
ascribed value equal to the share capital of the continuing
consolidated entity as computed above. As part of the reverse
acquisition of BTC the authorized share capital of the company was
increased to 50,000 common shares with a part value of $0.001. As a
result, the number of outstanding shares of BTC as at January 19,
1999 is computed as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
----------------------------------------------------------------------------------------
<S> <C>
Existing outstanding shares of BTC, January 19, 1999 1,050
Share transactions related to the business combination
Issued to ISN shareholders 9,085
----------------------------------------------------------------------------------------
OUTSTANDING COMMON SHARES AT JANUARY 19, 1999 10,135
========================================================================================
</TABLE>
TO MARCH 31, 1999
<TABLE>
<CAPTION>
NUMBER COMMON STOCK AND
OF SHARES AND PAID-IN CAPITAL
$
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE JANUARY 19, 1999 10,135 2,133
Shares issued for cash, net of subscription receivable 5,038 8,462
Shares canceled (700) --
Shares issued on acquisition of Sportsmark Group of Companies 1,500 2,625
Shares issued on acquisition of Pickem Sports, Inc. 1,868 3,269
Deferred compensation related to stock options -- 469
Options granted for services -- 632
Share issuance costs -- (463)
-----------------------------------------------------------------------------------------------------
BALANCE MARCH 31, 1999 17,841 17,127
=====================================================================================================
</TABLE>
Included in the shares outstanding as at March 31, 1999 are 561
shares to be issued for which all consideration has been received
and which no other contingencies exist.
STOCK OPTIONS
Generally, options are granted by the Company's Board of Directors
at an exercise price of not less than the fair market value of the
Company's common stock at the date of grant. Options are generally
granted with a term of five years from the date of issuance. Option
vesting is varied ranging from the date of issuance to 2 years. The
exercise price for options granted prior to the reverse acquisition
of BTC were equal to the price of shares issued through private
placements in effect at the date of grant. Subsequent to the
reverse acquisition of BTC, the exercise price for options remained
equal to the private placement price, which represented a discount
to the quoted market price.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
==============================================================================
NOTE 6. SHAREHOLDERS' EQUITY (CONT'D...)
During the period ended March 31, 1999, the Company issued 970
options to parties other than employees and directors for services
rendered. The fair value of these options of $632 was charged to
operations.
STOCK OPTION ACTIVITY
The following table summarizes the Company's stock option activity:
<TABLE>
<CAPTION>
===================================================================================
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
-----------------------------------------------------------------------------------
<S> <C> <C>
Balance at inception and April 30, 1998 - $ -
Options granted and assumed 3,415 1.51
Options exercised 50 .80
------- ---------------
March 31, 1999 3,365 $ 1.52
===================================================================================
</TABLE>
The following table summarizes information about options
outstanding and options exercisable at March 31, 1999:
<TABLE>
<CAPTION>
=====================================================================================================================
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- -----------------------------------------
WEIGHTED AVERAGE
OPTIONS REMAINING CONTRACTUAL OPTIONS WEIGHTED AVERAGE
EXERCISE PRICE OUTSTANDING LIFE EXERCISABLE EXERCISE PRICE
-------------- ------------- ----------------------- ----------- ----------------
<S> <C> <C> <C> <C>
$ 0.40 575 5.0 years 575 $ 0.40
1.75 2,790 4.7 years 2,200 1.75
---------------------------------------------------------------------------------------------------------------------
$ 0.40 - 1.75 3,365 4.8 years 2,775 $ 1.47
=====================================================================================================================
</TABLE>
Subsequent to period end, 450 options were granted. The intrinsic
value of the options at the date of grant was $1,277. These options
vest at various intervals through June 2001.
DEFERRED COMPENSATION
The Company recorded aggregate deferred compensation of $469 during
the period ended March 31, 1999. The amount recorded represents the
difference between the grant price and the fair value of the
Company's common stock for shares subject to options granted in
fiscal 1999. Options granted below fair market value and the
associated weighted average exercise price per share were 150 and
$1.75 during fiscal 1999. The amortization of deferred compensation
will be charged to operations over the vesting period of the
options, which is 2 years. Total amortization recognized in fiscal
1999 was $20. No options were granted in fiscal 1998.
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
==============================================================================
NOTE 6. SHAREHOLDERS' EQUITY (CONT'D...)
PRO FORMA DISCLOSURE
The Company follows the intrinsic value method in accounting for
its stock options. Had compensation cost been recognized based on
the fair value at the date of grant from options granted in fiscal
1999, the pro forma amounts of the Company's net loss and net loss
per share for fiscal 1999 would have been as follows:
<TABLE>
<CAPTION>
<S> <C>
Net loss as reported $(3,514)
Net loss - pro forma $(5,559)
Basic and diluted loss per share as reported $(0.45)
Basic and diluted loss per share - pro forma $(0.71)
</TABLE>
The fair value for each option granted was estimated at the date of
grant using a Black-Scholes option pricing model, assuming no
expected dividends and the following weighted average assumptions:
<TABLE>
<CAPTION>
<S> <C>
Average risk-free interest rates 5.0%
Average expected life (in years) 5.0
Volatility factor 75.0%
</TABLE>
The weighted average fair value of options granted during fiscal
1999 was $1.25.
NOTE 7. INCOME TAXES
At March 31, 1999, the Company had net operating loss carryforwards
of approximately $2,497. Substantially all of these carryforwards
relate to the Canadian subsidiaries and will begin to expire at
various times starting in 2004.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Deferred income tax credits at March 31, 1999 reflect
the differences between the financial reporting and tax values of
the purchased intangibles. The deferred tax recovery in the
Statement of Operations relates to the amortization of the deferred
income tax liability which resulted from the Company's acquisitions
during 1999. Significant components of the Company's deferred
income tax assets are approximately as follows:
<TABLE>
<CAPTION>
=====================================================================================================
MARCH 31, APRIL 30,
1999 1998
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net operating loss carryforwards $ 2,497 $ 570
======== ========
Total deferred income tax assets $ 1,123 $ 255
Valuation allowance for deferred income tax assets $ (1,123) $ (255)
-------- --------
Net deferred income tax assets $ - $ -
=====================================================================================================
</TABLE>
<PAGE>
INTERNET SPORTS NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All dollar and share amounts in thousands, except per share data)
==============================================================================
NOTE 8. RELATED PARTY TRANSACTIONS
During the year ended April 30, 1998, the Company paid or accrued
approximately $49,000 of consulting fees for financial services
provided by one of the Company's directors and $54,000 of wages to
the Company's Chief Executive Officer, who is also one of the
Company's directors and largest shareholder.
One of the Company's shareholders has, from time to time, paid
directly to third party vendors certain of the Company's
expenditures. These amounts paid on behalf of the Company are
recorded as non-cash reductions of accounts payable. During the
eleven-month period ended March 31, 1999 and the period ended April
30, 1998, an officer and director of the Company received
approximately 93,000 and 130,000 shares of the Company's common
stock in exchange for amounts owed for expenditures made on behalf
of the Company, which approximated $37,000 and $33,000,
respectively.
NOTE 9. COMMITMENTS
The Company leases premises, office equipment and an automobile
under the terms of operating leases. The leases provide for future
minimum annual lease payments as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 187
2001 73
2002 18
2003 5
2004 and thereafter -
-----
$ 283
=====
</TABLE>
NOTE 10. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS
The comparative consolidated financial statements have been
reclassified from statements previously presented to conform to the
presentation of the March 31, 1999 consolidated financial
statements.
<PAGE>
INTERNET SPORTS NETWORK, INC.
CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1998
<PAGE>
AUTORS' REPORT
To the Shareholders of
Internet Sports Network, Inc.
We have audited the consolidated balance sheet of Internet Sports Network,
Inc. (A Development Stage Company) as at April 30, 1998 and the consolidated
statements of operations, cash flows and shareholders' equity for the period
from April 25, 1997 (Inception) to April 30, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at April 30,
1998 and the results of its operations, cash flows and shareholders' equity
for the period from April 25, 1997 (Inception) to April 30, 1998 in
accordance with generally accepted accounting principles in Canada.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
June 25, 1998
COMMENTS BY AUDITORS FOR U.S. READERS
ON CANADA - U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the expression
of a qualified opinion when the financial statements are affected by
significant uncertainties such as those referred to in Note 1 to these
financial statements. The above opinion in our report to shareholders dated
June 25, 1998 for the period from April 25, 1997 (Inception) to April 30,
1998 is not qualified with respect to, and provides no reference to, these
uncertainties since such an opinion would not be in accordance with Canadian
reporting standards for auditors when the uncertainties are adequately
disclosed in the financial statements.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
June 25, 1998
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in United States dollars)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
April 30, October 31,
1998 1998
--------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT
Cash $ 9 $ 7
Amounts receivable 31 44
Prepaid expenses and other deferred charges 45 99
------- -------
85 150
EQUIPMENT, net (Note 3) 46 49
------- -------
$ 131 $ 199
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable $ 95 $ 86
Accrued liabilities 72 123
------- -------
167 209
CONVERTIBLE DEBENTURES (Note 4) 196 24
------- -------
363 233
------- -------
COMMITMENTS AND CONTINGENCIES (Note 7 and 9)
SHAREHOLDERS' EQUITY
Common stock and additional paid in capital, $0.001
par value, 20 million shares authorized
5,000,000 and 7,229,797 shares issued and issuable 425 1,312
Receivable for 1,702,957 shares subscribed (14) -
Deficit accumulated during the development stage (643) (1,346)
------- -------
(232) (34)
------- -------
$ 131 $ 199
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States dollars)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Cumulative
April 25, 1997 Six Months Ended Amounts From
(Inception) October 31, Inception To
through ----------------------------- October 31,
April 30, 1998 1997 1998 1998
--------------- ----------- ----------- --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 77 $ 30 $ 69 $ 146
------- ------- ------- -------
EXPENSES
Prize commitments and other direct costs 51 2 74 125
Advertising 185 84 303 488
Product development costs 307 119 214 521
General and administrative 177 42 181 358
------- ------- ------- -------
Total expenses 720 247 772 1,492
------- ------- ------- -------
NET LOSS $ (643) $ (217) $ (703) $(1,346)
------- ------- ------- -------
------- ------- ------- -------
NET LOSS PER SHARE $ (0.17) $ (0.07) $ (0.11) $ (0.29)
------- ------- ------- -------
------- ------- ------- -------
WEIGHTED AVERAGE SHARES OUTSTANDING 3,813 3,113 6,290 4,663
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States dollars)
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Cumulative
April 25, 1997 Six Months Ended Amounts From
(Inception) October 31, Inception To
through ----------------------------- October 31,
April 30, 1998 1997 1998 1998
--------------- ----------- ----------- --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (643) $ (217) $ (703) $(1,346)
Adjustment to reconcile net loss to
net cash used by operating activities:
Depreciation 8 2 7 15
Changes in other operating assets and liabilities
Increase in receivables (31) (29) (13) (44)
Increase in prepaid expenses (45) (47) (54) (99)
Increase in accounts payable 128 17 28 156
Increase in accrued liabilities 72 37 51 123
------- ------- ------- -------
Net cash used by operating activities (511) (237) (684) (1,195)
------- ------- ------- -------
INVESTING ACTIVITIES
Purchase of equipment (54) (39) (10) (64)
------- ------- ------- -------
Net cash used by investing activities (54) (39) (10) (64)
------- ------- ------- -------
FINANCING ACTIVITIES
Proceeds from sale of convertible debentures 196 - - 196
Proceeds from sale of capital stock 378 302 692 1,070
------- ------- ------- -------
Net cash provided by financing activities 574 302 692 1,266
------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9 26 (2) 7
CASH AND CASH EQUIVALENTS
Beginning of period - - 9 -
------- ------- ------- -------
End of period $ 9 $ 26 $ 7 $ 7
------- ------- ------- -------
------- ------- ------- -------
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Common stock issued in exchange for
convertible debentures $ - $ - $ 172 $ 172
Accounts payable paid by shareholder 33 - 37 70
Common stock issued in exchange for accounts
payable paid by shareholder 33 - 37 70
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Expressed in United States dollars)
(in thousands)
<TABLE>
<CAPTION>
Common Deficit
Stock and Accumulated
Additional Stock During the
Paid in Subscriptions Development
Shares Capital Receivable Stage Total
------ ---------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Founders shares subscribed upon Inception
on April 25, 1997 for $0.001 per share 1,653 $ 2 $ (2) $ - $ -
Shares issued for cash during:
June - July 1997 for $0.02 per share 1,300 26 - - 26
July 1997 for $0.25 per share 945 236 - - 236
August - October 1997 for $0.02 per share 443 9 - - 9
January - February 1998 for $0.02 per share 24 1 - - 1
October 1997-April 1998 for $0.25 per share 455 114 - - 114
Shares subscribed in April 1998 for $0.25
per share 50 12 (12) - -
Shares issued in exchange for amounts payable
in April 1998 for $0.25 per share 130 33 - - 33
Share issuance costs - (8) - - (8)
Net loss - - - (643) (643)
----- ------- --------- ------- -------
Balance at April 30, 1998 5,000 425 (14) (643) (232)
Shares issued for cash during May - October
for $0.40 per share (unaudited) 1,705 682 - - 682
Shares issued in exchange for convertible
debentures in September 1998 for $0.40
per share (unaudited) 431 172 - - 172
Shares issued in exchange for amounts payable
in October 1998 for $0.40 per share
(unaudited) 93 37 - - 37
Payment of subscriptions receivable (unaudited) - - 14 - 14
Share issuance costs (unaudited) - (4) - - (4)
Net loss (unaudited) - - - (703) (703)
----- ------- --------- ------- -------
Balance at October 31, 1998 (unaudited) 7,229 $ 1,312 $ - $(1,346) $ (34)
----- ------- --------- ------- -------
----- ------- --------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)
NOTE 1. NATURE AND CONTINUANCE OF OPERATIONS
Internet Sports Network, Inc. ("ISN" or the "Company"), a company
in the development stage, was incorporated on April 25, 1997
(Inception) under the laws of the state of Nevada, United States.
and its principal business activities include the development and
marketing of sports pool organization services administered through
the internet. Substantially all of the Company's operations are
conducted by the Company's wholly-owned subsidiary, ISN Internet
Sports Network (Canada) Inc. ("ISN Canada"), a company incorporated
in July 1997 in the province of British Columbia, Canada.
These financial statements have been prepared on a going concern
basis which assumes that the Company will be able to realize its
assets and discharge its liabilities in the normal course of
business for the foreseeable future. The continuing operations of
the Company are dependent upon its ability to raise adequate
financing and achieve profitable operations in the future. These
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared and are
presented in accordance with generally accepted accounting
principles in Canada and, in all material aspects, with accounting
principles generally accepted in the United States.
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, ISN Canada. All
significant inter-company balances and transactions have been
eliminated.
INTERIM FINANCIAL STATEMENTS
The interim financial statements presented herein reflect all
adjustments, which are of a normal recurring nature and, in the
opinion of Company management, are necessary for a fair statement
of the results for the interim periods presented. Interim results
for the six months ended October 31, 1998 are not necessarily
indicative of results to be expected for the full fiscal year.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of balance sheet classification and the statements of
cash flows, the Company considers all highly liquid investments
purchased with an original maturity of three months or less to be
cash equivalents.
START-UP AND DEVELOPMENT COSTS
Since Inception, certain expenditures have been incurred primarily
for product development, business development, market development
and financing purposes. While these expenditures are intended to
benefit future periods, the Company follows the accounting policy
of expensing as incurred those expenditures not identified with
specific projects or financing activities.
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
FOREIGN CURRENCY TRANSLATION
Financial statements of the Company's Canadian subsidiary are
translated whereby all monetary assets and liabilities are
translated at the rate of exchange at the balance sheet date.
Non-monetary assets and liabilities are translated at exchange
rates prevailing at the transaction date. Income and expenses are
translated at rates which approximate those in effect on
transaction dates.
Currency translation gains and losses have been insignificant.
EQUIPMENT
Equipment is recorded at cost. Amortization is provided over the
estimated useful life of the asset using the following rates and
methods:
Office equipment and furniture 20% declining balance method
Computer equipment 30% declining balance method
REVENUE RECOGNITION
The Company earns revenue from membership and other fees received
for internet-based sports information and sports pool organization
services. Membership fees are received prior to the beginning of a
particular sport season or event and recorded as deferred income
until recognized into income rateably over the season or upon
completion of the event.
PRIZE AWARDS
Members, as well as non-members, are entitled to enter into
contests provided by the Company. Prizes are awarded upon
completion of the sports season or event and are paid by the
Company. Prize awards are fixed in amount and determinable prior to
commencement of the season or event and are recorded as accrued
liabilities when the season or event begins. Expenses relating to
prize commitments are deferred when initially accrued and amortized
rateably over the season or event to which they relate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash,
amounts receivable, accounts payable and convertible debentures. It
is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments. The carrying amount of current assets and
liabilities approximates fair value due to their immediate or short
term nature. The fair value of convertible debentures approximates
its carrying value because the stated debt terms reflect recent
market conditions.
INCOME TAXES
Income taxes are accounted for utilizing the liability method.
Deferred income taxes are provided to represent the tax consequence
on future years for temporary differences between the financial
reporting and tax basis of assets and liabilities. Deferred taxes
are measured utilizing enacted tax rates expected to be in effect
in the years in which the temporary differences are expected to
reverse. A valuation allowance has been provided for the total
amount of deferred tax assets that would otherwise be recorded for
income tax benefits primarily relating to operating loss carry
forwards, as realization cannot be determined to be more likely
than not.
LOSS PER SHARE
Basic loss per share is computed as net loss divided by the
weighted average number of common shares outstanding for the
period. Diluted loss per share is computed reflecting the potential
dilution that could result from common shares in issuable through
convertible debentures. As conversion is anti-dilutive for all
periods presented, only basic loss per share is presented.
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
New accounting pronouncements having relative applicability to the
Company include Statements of Financial Accounting Standards No.
130, "Reporting Comprehensive Income", and No. 131, "Disclosures
about Segments of an Enterprise and Related Information", both
effective for fiscal years beginning after December 15, 1997. SFAS
130 requires that an enterprise present in the same prominence as
other financial statements a comprehensive income statement.
Comprehensive income consists of net loss adjusted for any changes
in certain shareholders' equity accounts, which for the Company
there are no such adjustments. SFAS 131 establishes annual and
interim reporting standards for disclosures relating to an
enterprise's operating segments and certain geographical
information. Adoption of these statements will not impact the
Company's financial position, results of operations or cash flows
and any effect will be limited to the form and content of
disclosures.
Additionally, the Accounting Standards Executive Committee of the
American Institutes of CPA's issued Statement of Position 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained
for Internal Use" and Statement of Position 98-5, "Reporting on the
Costs of Start-up Activities", which are effective for fiscal years
beginning after December 15, 1998. Adoption of these standards is
not expected to have a material impact on the Company's financial
position, results of operations or cash flows.
NOTE 3. EQUIPMENT
Equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
April 30, October 31,
1998 1998
--------- -----------
(Unaudited)
<S> <C> <C>
Computer equipment $ 33 $ 43
Office equipment and furniture 21 21
---- ----
54 64
Accumulated depreciation (8) (15)
---- ----
Equipment, net $ 46 $ 49
---- ----
---- ----
</TABLE>
NOTE 4. CONVERTIBLE DEBENTURES
Convertible debentures bear interest, payable quarterly, at the
rate of 10% per annum and mature December 2, 2002. The debentures
may be prepaid at any time without penalty. Commencing in December
1998, each debenture is convertible, at the option of the holder,
unless previously redeemed or repurchased, at a conversion rate of
one share of common stock per $1.50 principal amount of debenture.
During September 1998, holders of $172,500 of debentures accepted
the Company's offer to exchange the principal amount of debentures
for shares of the Company's common stock at a per share price of
$0.40, resulting in the issuance of approximately 431,000 shares.
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Dollars in thousands, except per share data)
NOTE 5. COMMON STOCK
The Company records common stock and additional paid in capital
effective as of the dates of signed investor subscription
agreements. In substantially all instances other than founder
shares, the Company received sales proceeds upon receipt of
subscription agreements.
At inception on April 25, 1997, the Company's founders subscribed
for approximately 1,653,000 shares of the Company's common stock at
a per share price of $0.001. Subscription proceeds of approximately
$2,000 were received during the six months ended October 31, 1998
(unaudited).
During June and July 1997, the Company offered for sale to a group
of initial investors 1,767,500 shares of its common stock at a per
share price of $0.02 (the "Initial Investor Offering"). Most of
these shares were subscribed and paid for during this initial offer
period and substantially all sold by October 1997.
Commencing in July 1997, the Company offered for sale approximately
1,580,000 shares of its common stock at a per share price of $0.25.
Some investors who purchased $0.02 shares in July as part of the
Initial Investor Offering also purchased $0.25 shares in July to
the extent such investors sought to acquire more shares than were
available for purchase from the Initial Investor Offering. Other
sales of $0.25 shares commenced in October 1997 and the offering
was completed in April 1998.
In May, the Company commenced an offering of approximately 3
million shares of its common stock at a per share price of $0.40.
During the six months ended October 31, 1998 (unaudited), the
Company sold approximately 1.8 million shares at this offering
price and as of that date was continuing to accept subscriptions
for shares at this offering price.
NOTE 6. RELATED PARTY TRANSACTIONS
During the year ended April 30, 1998, the Company paid or accrued
approximately $49,000 of consulting fees for financial services
provided by one of the Company's directors and $54,000 of wages to
the Company's Chief Executive Officer, who is also one of the
Company's directors and largest shareholder.
One of the Company's shareholders has, from time to time, paid
directly to third party vendors certain Company expenditures. These
amounts paid on behalf of the Company are recorded as non-cash
reductions of accounts payable. During the year ended April 30,
1998 and the six months ended October 31, 1998, the shareholder
purchased approximately 130,000 and 93,000 shares of the Company's
common stock in exchange for amounts owed for expenditures made on
behalf of the Company, which approximated $33,000 and $37,000
(unaudited) during such respective periods.
NOTE 7. LEASES AND COMMITMENTS
The Company leases premises, office equipment and an automobile
under the terms of operating leases and licenses a trademark under
the terms of a license agreement. The leases and license agreement
provide for minimum annual lease and royalty payments through the
expiry dates as follows (in thousands):
<TABLE>
<S> <C>
1999 $ 51
2000 57
2001 18
2002 2
2003 and thereafter 1
----
$129
----
----
</TABLE>
<PAGE>
INTERNET SPORTS NETWORK, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars)
NOTE 8. SEGMENT INFORMATION
The Company operates in one business segment. Financial information
by geographic area is presented on the basis of ISN Canada reported
as Canada and ISN as United States. ISN Canada revenues include
approximately $16,000 relating to sales to customers in the United
States. Following is a summary of certain financial information by
geographic area (in thousands):
<TABLE>
<CAPTION>
Canada United States Total
------ ------------- -----
<S> <C> <C> <C>
Sales $ 77 $ - $ 77
----- ----- -----
----- ----- -----
Net loss $(629) $ (14) $(643)
----- ----- -----
----- ----- -----
Identifiable assets $ 122 $ 9 $ 131
----- ----- -----
----- ----- -----
</TABLE>
NOTE 9. SUBSEQUENT EVENTS
In October 1998, the Company entered into a Merger Agreement with
Digital Data Networks, Inc. ("DDN") on terms substantially
consistent with a May 1998 Letter of Intent, as amended. DDN is a
public company with operations involving wireless passenger
communication and electronic advertising on Dallas, Texas public
transit vehicles. Pursuant to terms of the Merger Agreement,
Company shareholders would exchange ISN common shares for DDN
common shares and ISN would merge with and into DDN (the "Merger"),
such that following completion of the Merger, ISN shareholders
would own approximately 86% of the merged entity. The Merger is
subject to a number of certain conditions, including, among other
things, consummation of a private financing by ISN raising in
excess of $1 million and shareholder approval by both DDN and ISN
shareholders. In connection with the proposed merger, during the
six months ended October 31, 1998, DDN purchased from the Company
625,000 shares of the Company's common stock for $250,000 cash.
Subsequent to October 31, 1998, the Company has sold approximately
250,000 shares of its common stock and received cash proceeds
therefrom of approximately $100,000.
In November 1998, holders of the remaining $24,000 of convertible
debenture accepted the Company's offer to exchange the principal
amount of debentures for shares of the Company's common stock at a
per share price of $0.40, resulting in the issuance of 60,000
shares.
<PAGE>
CLASSROOM 2000 INC.
FINANCIAL STATEMENTS
JANUARY 31, 1999
<PAGE>
AUDITORS' REPORT
To the Shareholder of
Classroom 2000 Inc.
We have audited the balance sheet of CLASSROOM 2000 INC. as at January 31,
1999 and the statements of earnings and retained earnings and cash flows for
the period then ended. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at January 31, 1999 and
the results of its operations and its cash flows for the period then ended in
accordance with generally accepted accounting principles.
Calgary, Alberta HUDSON & COMPANY
June 4, 1999 Chartered Accountants
<PAGE>
CLASSROOM 2000 INC.
BALANCE SHEET
JANUARY 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ 2,212 $ 3,432
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
CURRENT
Accounts payable $ 6,067 $ 6,921
Due to affiliated company (Note 2) 13,998 9,026
-------- --------
20,065 15,947
DUE TO SHAREHOLDER (Note 3) 56,700 56,700
-------- --------
76,765 72,647
-------- --------
SHAREHOLDER'S EQUITY
SHARE CAPITAL (Note 4) 100 100
RETAINED EARNINGS (DEFICIT) (74,653) (69,315)
-------- --------
(74,553) (69,215)
-------- --------
$ 2,212 $ 3,432
- ------------------------------------------------------------------------------------------------------------
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
_________________________________, Director
_________________________________, Director
<PAGE>
CLASSROOM 2000 INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
FOR THE PERIOD ENDED JANUARY 31, 1999
<TABLE>
- ---------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE $ 152 $ 220,435
--------- ---------
EXPENSES
Interest and bank charges 518 2,034
Office 4,972 104,963
--------- ---------
5,490 219,281
--------- ---------
NET EARNINGS (LOSS) (5,338) 1,154
RETAINED EARNINGS (DEFICIT), beginning of period (69,315) (70,469)
--------- ---------
RETAINED EARNINGS (DEFICIT), end of period $ (74,653) $ (69,315)
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CLASSROOM 2000 INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED JANUARY 31, 1999
<TABLE>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (5,338) $ 1,154
Net change in non-cash working capital balances (854) 49,752
-------- --------
Cash flows from (used in) operating activities (6,192) 50,906
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from affiliated companies 4,972 12,135
-------- --------
INCREASE (DECREASE) IN CASH (1,220) 104,841
CASH, beginning of period 3,432 -
-------- --------
CASH, end of period $ 2,212 $104,841
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CLASSROOM 2000 INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
1. GENERAL
Classroom 2000 Inc., is a privately owned company which was incorporated
on June 17, 1997 under the Alberta Business Corporations Act.
2. DUE TO AFFILIATED COMPANY
During the period the company had the following transactions with
Sportsmark Inc. which has certain shareholders who are also shareholders
of Sportsmark Holdings Inc.:
<TABLE>
<S> <C>
Balance , beginning of the period $ 9,026
Advances 7,079
Repayments (2,107)
-------------
Balance, end of period $ 13,998
-------------
-------------
</TABLE>
3. DUE TO SHAREHOLDER
Sportsmark Holdings Inc. advanced the company $56,700 with no fixed terms
of repayment.
4. SHARE CAPITAL
AUTHORIZED
Unlimited number of Class A voting shares Unlimited number of Class
B non-voting shares Unlimited number of Class C non-voting shares
ISSUED
100 Class A voting shares $ 100
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
5. INCOME TAXES
The company has non-capital income tax loss carry forwards of
approximately $68,616 and charitable donations carry forwards of $2,635
available to apply against future years taxable income. The charitable
donations expire in 2002 and the non-capital income tax loss carry
forwards expire as follows:
<TABLE>
<S> <C>
2004 $ 63,098
2006 5,518
-----------
$ 68,616
-----------
-----------
</TABLE>
6. SUBSEQUENT EVENTS
Effective February 1, 1999, the 100 Class A voting shares were sold to
Internet Sports Network, Inc. which is an unrelated company.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
8. FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, due to affiliated
companies, due to shareholder and accounts payables. Unless otherwise
noted, it is management's opinion that the company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate carrying values, unless otherwise noted.
9. COMPARATIVE FIGURES
Comparative figures for the period ended January 31, 1998 are not shown as
this information was not readily obtainable.
<PAGE>
CLASSROOM 2000 INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
AUDITORS' REPORT
To the Shareholder of
Classroom 2000 Inc.
We have audited the balance sheets of CLASSROOM 2000 INC. as at December 31,
1998 and December 31, 1997 and the statements of earnings and retained
earnings and cash flows for the years then ended. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1998 and
December 31, 1997 and the results of its operations and its cash flows for
the years then ended in accordance with generally accepted accounting
principles.
Calgary, Alberta HUDSON & COMPANY
June 4, 1999 Chartered Accountants
<PAGE>
CLASSROOM 2000 INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 3,432 $ 33,218
- -----------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable $ 6,921 $ 24,437
Due to affiliated companies (Note 2) 9,026 37,450
-----------------------------
15,947 61,887
DUE TO SHAREHOLDER (Note 3) 56,700 41,700
-----------------------------
72,647 103,587
-----------------------------
SHAREHOLDER'S EQUITY
SHARE CAPITAL (Note 4) 100 100
RETAINED EARNINGS (DEFICIT) (69,315) (70,469)
-----------------------------
(69,215) (70,369)
-----------------------------
$ 3,432 $ 33,218
- -----------------------------------------------------------------------------------------
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
_________________________________, Director
_________________________________, Director
<PAGE>
CLASSROOM 2000 INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE $ 220,435 $ 69,473
-----------------------------
EXPENSES
Advertising and promotion 42,443 17,798
Consulting 1,233 35,000
Interest and bank charges 2,034 1,354
Office 104,963 62,299
Professional fees 33,152 4,985
Salaries 35,456 18,506
-----------------------------
219,281 139,942
-----------------------------
NET EARNINGS (LOSS) 1,154 (70,469)
RETAINED EARNINGS (DEFICIT), beginning of year (70,469) -
-----------------------------
RETAINED EARNINGS (DEFICIT), end of year $ (69,315) $ (70,469)
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CLASSROOM 2000 INC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 1,154 $ (70,469)
Net change in non-cash working capital balances (42,831) 24,437
-----------------------------
Cash flows (used in) operating activities (41,677) (46,032)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from shareholders 15,000 41,700
Advances from (payments to) affiliated companies (3,109) 37,450
Issuance of share capital - 100
-----------------------------
Cash flows from financing activities 11,891 79,250
-----------------------------
INCREASE (DECREASE) IN CASH (29,786) 33,218
CASH, beginning of year 33,218 -
-----------------------------
CASH, end of year $ 3,432 $ 33,218
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CLASSROOM 2000 INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
1. GENERAL
Classroom 2000 Inc., is a privately owned company which was incorporated
on June 17, 1997 under the Alberta Business Corporations Act.
2. DUE TO AFFILIATED COMPANIES
During the year the company had the following transactions with Sportsmark
Inc. which has certain shareholders who are also shareholders of
Sportsmark Holdings Inc.:
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Balance, beginning of year $ 37,450 $ -
Management fees and GST - 37,450
Advances 59,819 15,601
Repayments (88,243) (15,601)
---------------------------
Balance, end of year $ 9,026 $ 37,450
---------------------------
</TABLE>
During the year the company had the following transactions with Sportsmark
Promotions Inc. which is owned by the shareholder of the company:
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Balance, beginning of year $ - $ -
Advances 10,369 -
Repayments (10,369) -
---------------------------
Balance, end of year $ - $ -
---------------------------
</TABLE>
3 DUE TO SHAREHOLDER
During the year the company had the following transactions with Sportsmark
Holdings Inc.:
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Balance, beginning of year $ 41,700 $ -
Advances 50,000 41,700
Repayments (35,000) -
---------------------------
Balance, end of year $ 56,700 $ 41,700
---------------------------
---------------------------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
4. SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1997
------------------------------
<S> <C> <C>
AUTHORIZED
Unlimited number of Class A voting shares
Unlimited number of Class B non-voting shares
Unlimited number of Class C non-voting shares
ISSUED
100 Class A voting shares $ 100 $ 100
------------------------------
</TABLE>
5. INCOME TAXES
The company has non-capital income tax loss carry forwards of
approximately $63,098 and charitable donations carry forwards of $2,635
available to apply against future years taxable income. These carry
forwards expire as follows:
<TABLE>
<CAPTION>
Expires Amount
------- -------
<S> <C> <C>
Charitable donations 2002 $ 2,635
Non-capital income tax loss 2004 $63,098
</TABLE>
6. SUBSEQUENT EVENTS
Effective February 1, 1999, the 100 Class A voting shares were sold to
Internet Sports Network, Inc. which is an unrelated company.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
8. FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, due to affiliated
companies, due to shareholder and accounts payable. Unless otherwise
noted, it is management's opinion that the company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate carrying values, unless otherwise noted.
9. COMPARATIVE FIGURES
Certain changes have been made to the comparative figures to correspond
with current year presentation.
<PAGE>
SPORTSMARK INC.
FINANCIAL STATEMENTS
JANUARY 31, 1999
<PAGE>
AUDITORS' REPORT
To the Shareholders of
Sportsmark Inc.
We have audited the balance sheet of SPORTSMARK INC. as at January 31, 1999
and the statements of earnings and retained earnings and cash flows for the
period then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at January 31, 1999 and
the results of its operations and its cash flows for the period then ended in
accordance with generally accepted accounting principles.
Calgary, Alberta HUDSON & COMPANY
June 11, 1999 Chartered Accountants
<PAGE>
SPORTSMARK INC.
BALANCE SHEET
JANUARY 31, 1999
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Accounts receivable $ 174,428 $ 95,161
Prepaid expenses 1,284 2,635
--------- ---------
175,712 272,765
CAPITAL ASSETS (Note 3) 40,940 38,565
--------- ---------
$ 216,652 $ 311,330
- -----------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Bank indebtedness $ 38,229 $ -
Accounts payable 93,971 153,988
Due to affiliated companies (Note 4) 299,352 317,044
--------- ---------
431,552 471,032
--------- ---------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) 2 2
RETAINED EARNINGS (DEFICIT) (214,902) (159,704)
--------- ---------
(214,900) (159,702)
--------- ---------
$ 216,652 $ 311,330
- -----------------------------------------------------------------------------------------
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
_________________________________, Director
_________________________________, Director
<PAGE>
SPORTSMARK INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
FOR THE PERIOD ENDED JANUARY 31, 1999
<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE $ 117,212 $ 1,164,305
----------- -----------
EXPENSES
Amortization 2,011 14,626
Automobile (294) 604
Computer processing 10,462 233,045
Entertainment 2,786 4,608
Interest and bank charges 3,107 16,471
Office 3,395 80,977
Postage 39,005 198,945
Professional fees 4,075 12,810
Rent 8,572 52,120
Telephone 4,964 90,961
Travel, advertising and promotion 11,796 55,777
Wages and consulting 82,531 482,003
----------- -----------
172,410 1,259,400
----------- -----------
NET EARNINGS (LOSS) (55,198) (95,095)
RETAINED EARNINGS (DEFICIT), beginning of period (159,704) (64,609)
----------- -----------
RETAINED EARNINGS (DEFICIT), end of period $ (214,902) $ (159,704)
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SPORTSMARK INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED JANUARY 31, 1999
<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (55,198) $ (95,095)
Item not affecting cash
Amortization 2,011 14,626
--------- ---------
(53,187) (80,469)
Net change in non-cash working capital balances (137,934) (88,506)
--------- ---------
Cash flows (used in) operating activities (191,121) (168,975)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITY
Purchase of capital assets (4,385) (13,073)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITY
Payments to affiliated companies (17,692) 7,728
--------- ---------
DECREASE IN CASH (213,198) (174,320)
CASH, beginning of period 174,969 271,685
--------- ---------
CASH (DEFICIENCY), end of period $ (38,229) $ 97,365
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SPORTSMARK INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
1. GENERAL
Sportsmark Inc., is a privately owned company which was incorporated on
October 20, 1986 under the Alberta Business Corporations Act.
2. SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS
Capital assets are recorded at cost and are amortized using the following
annual rates and method:
<TABLE>
<S> <C>
Office equipment - 20% declining balance
Computer equipment - 30% declining balance
</TABLE>
FOREIGN EXCHANGE
Assets, liabilities, revenue or expenses arising from foreign transactions
are translated into Canadian dollars by the use of the exchange rate in
effect at that date. At year end monetary items denominated in foreign
currency are adjusted to reflect the exchange rate in effect at the year
end date and any gain or loss which results is included in the net
earnings for that year.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
--------------------------------------------
Accumulated Net Book
Cost Amortization Value
--------------------------------------------
<S> <C> <C> <C>
Office equipment $ 20,676 $ 16,909 $ 3,767
Computer equipment 167,351 130,178 37,173
--------------------------------------------
$188,027 $147,087 $ 40,940
--------------------------------------------
</TABLE>
4. DUE TO AFFILIATED COMPANIES
During the period the company had the following transactions with
Sportsmark Holdings Inc. which is owned by certain individuals who are
shareholders of the company:
<TABLE>
<S> <C>
Balance, beginning of period $ (317,044)
Foreign exchange adjustment 3,695
-------------
Balance, end of period $ (313,349)
-------------
-------------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
4. DUE TO AFFILIATED COMPANIES (CONT.)
During the period the company had the following transactions with
Sportsmark Promotions Inc. which is owned by Sportsmark Holdings Inc.:
<TABLE>
<S> <C>
Balance, beginning of period $ -
Advances 53,970
Payments received (53,970)
-------------
Balance, end of period $ -
-------------
-------------
During the period the company had the following transactions with
Classroom 2000 Inc. which is owned by Sportsmark Holdings Inc.:
Balance, beginning of period $ -
Advances 14,369
Payments received (372)
-------------
Balance, end of period $ 13,997
-------------
-------------
</TABLE>
5. SHARE CAPITAL
<TABLE>
<S> <C>
AUTHORIZED
50 Class A common voting shares without nominal or par value
50 Class B common non-voting shares without nominal or par
value
Unlimited number of Class C common voting shares Unlimited number
of Class D preferred non-voting shares with a
fixed non-cumulative dividend at the rate of .375% and
redeemable at $1,000 per share
ISSUED
100 Class C common voting shares $ 1
1,200 Class D preferred non-voting shares 1
------------
$ 2
------------
------------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
6. INCOME TAX
The Company has non-capital income tax loss carry forwards of
approximately $257,274 available to apply against future years taxable
income. These non-capital losses expire as follows:
<TABLE>
<S> <C>
2003 $ 60,521
2004 60,034
2005 85,108
2006 51,611
</TABLE>
7. COMMITMENTS
The minimum rentals payable under long-term operating leases, exclusive of
certain operating costs for which the company is responsible are as
follows:
<TABLE>
<S> <C>
1999 $ 66,957
2000 28,086
2001 9,708
-------------
$ 104,751
-------------
-------------
</TABLE>
8. SUBSEQUENT EVENTS
Effective February 1, 1999, the 100 Class C common voting shares and 1200
Class D preferred non-voting shares were sold to Internet Sports Network,
Inc. which is an unrelated company.
9. FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, due to affiliated
companies and accounts payables. Unless otherwise noted, it is
management's opinion that the company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate
carrying values, unless otherwise noted.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
10. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
11. COMPARATIVE FIGURES
Comparative figures for the period ended January 31, 1998 are not shown as
the information was not readily obtainable.
<PAGE>
SPORTSMARK INC.
FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
<PAGE>
AUDITORS' REPORT
To the Shareholders of
Sportsmark Inc.
We have audited the balance sheets of SPORTSMARK INC. as at November 30, 1998
and November 30, 1997 and the statements of earnings and retained earnings
and cash flows for the years then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at November 30, 1998 and
November 30, 1997 and the results of its operations and its cash flows for
the years then ended in accordance with generally accepted accounting
principles.
Calgary, Alberta HUDSON & COMPANY
June 11, 1999 Chartered Accountants
<PAGE>
SPORTSMARK INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30 1998 1997
- ----------- ---- ----
<S> <C> <C>
ASSETS
CURRENT
Cash $ 174,969 $ 102,498
Accounts receivable 95,161 103,535
Prepaid expenses 2,635 -
--------- ---------
272,765 206,033
CAPITAL ASSETS (Note 3) 38,565 47,497
--------- ---------
$ 311,330 $ 253,530
--------- ---------
LIABILITIES
CURRENT
Accounts payable $ 153,988 $ 154,013
DUE TO AFFILIATED COMPANIES (Note 4) 317,044 164,124
--------- ---------
471,032 318,137
--------- ---------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) 2 2
RETAINED EARNINGS (DEFICIT) (159,704) (64,609)
--------- ---------
(159,702) (64,607)
--------- ---------
$ 311,330 $ 253,530
--------- ---------
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
_________________________________, Director
_________________________________, Director
<PAGE>
SPORTSMARK INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30 1998 1997
- ----------------------- ---- ----
<S> <C> <C>
REVENUE $ 1,164,305 $ 1,370,780
----------- -----------
EXPENSES
Amortization 14,626 17,795
Automobile 604 4,352
Computer processing 233,045 248,424
Entertainment 4,608 6,425
Interest and bank charges 16,471 8,217
Office 80,977 134,719
Postage 198,945 187,914
Professional fees 12,810 128,776
Rent 52,120 52,268
Royalties 16,453 -
Telephone 90,961 92,721
Travel, advertising and promotion 55,777 104,864
Wages and consulting 482,003 477,436
----------- -----------
1,259,400 1,463,911
----------- -----------
NET EARNINGS (LOSS) (95,095) (93,131)
RETAINED EARNINGS (DEFICIT), beginning of year (64,609) 28,522
----------- -----------
RETAINED EARNINGS (DEFICIT), end of year $ (159,704) $ (64,609)
----------- -----------
</TABLE>
<PAGE>
SPORTSMARK INC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30 1998 1997
- ----------------------- ---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (95,095) $ (93,131)
Item not affecting cash
Amortization 14,626 17,795
----------- -----------
(80,469) (75,336)
Net change in non-cash working capital balances 5,715 (51,056)
----------- -----------
Cash flows (used in) operating activities (74,754) (126,392)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITY
Purchase of capital assets (5,694) (13,073)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITY
Advances from (payments to) affiliated companies 152,919 (29,722)
----------- -----------
INCREASE (DECREASE) IN CASH 72,471 (169,187)
CASH, beginning of year 102,498 271,685
----------- -----------
CASH, end of year $ 174,969 $ 102,498
----------- -----------
</TABLE>
<PAGE>
SPORTSMARK INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 and 1997
1. GENERAL
Sportsmark Inc., is a privately owned company which was incorporated on
October 20, 1986 under the Alberta Business Corporations Act.
2. SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS
Capital assets are recorded at cost and are amortized using the following
annual rates and method:
Office equipment - 20% declining balance
Computer equipment - 30% declining balance
FOREIGN EXCHANGE
Assets, liabilities, revenue or expenses arising from foreign transactions
are translated into Canadian dollars by the use of the exchange rate in
effect at that date. At year end monetary items denominated in foreign
currency are adjusted to reflect the exchange rate in effect at the year
end date and any gain or loss which results is included in the net
earnings for that year.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
1998 1997
------ ------
Accumulated
Cost Amortization Net Book Value
-------- ------------ --------------------------
<S> <C> <C> <C> <C>
Office equipment $ 20,675 $ 16,776 $ 3,899 $ 42,803
Computer equipment 162,966 128,300 34,666 4,694
-------- -------- -------- --------
$183,641 $145,076 $ 38,565 $ 47,497
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
4. DUE TO AFFILIATED COMPANIES
During the year the company had the following transactions with Sportsmark
Holdings Inc. which is owned by certain individuals who are shareholders
of the company:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Balance, beginning of year $(201,574) $(193,846)
Advanced during the year (100,000) -
Foreign exchange adjustment (15,470) (7,728)
--------- ---------
Balance, end of year $(317,044) $(201,574)
--------- ---------
</TABLE>
<PAGE>
SPORTSMARK INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 and 1997
4. DUE TO AFFILIATED COMPANIES (CONTINUED)
During the year the company had the following transactions with Sportsmark
Promotions Inc. which is owned by Sportsmark Holdings Inc.:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Balance, beginning of year $ - $ -
Revenue 134,758 81,750
Advances 27,009 -
Payments received (161,767) (81,750)
---------- ---------
Balance, end of year $ - $ -
---------- ---------
</TABLE>
During the year the company had the following transactions with
Classroom 2000 Inc. which is owned by Sportsmark Holdings Inc.:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Balance, beginning of year $ 37,450 $ -
Revenue and GST - 37,450
Advances 51,149 -
Payments received (88,599) -
---------- ---------
Balance, end of year $ - $ 37,450
---------- ---------
</TABLE>
5 SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
AUTHORIZED
50 Class A common voting shares without nominal or par value
50 Class B common non-voting shares without nominal or par value
Unlimited number of Class C common voting shares
Unlimited number of Class D preferred non-voting shares with a
fixed non-cumulative dividend at the rate of .375% and
redeemable at $1,000 per share
ISSUED
100 Class C common voting shares $ 1 $ 1
1,200 Class D preferred non-voting shares 1 1
----- -----
$ 2 $ 2
----- -----
----- -----
</TABLE>
<PAGE>
SPORTSMARK INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 and 1997
6. INCOME TAX
The company has non-capital income tax loss carry forwards of
approximately $205,663 available to apply against future years taxable
income. The non-capital losses expire as follows:
<TABLE>
<S> <C>
2003 $ 60,521
2004 60,034
2005 85,108
</TABLE>
7. COMMITMENTS
The minimum rentals payable under long-term operating leases, exclusive of
certain operating costs for which the company is responsible are as
follows:
<TABLE>
<S> <C>
1999 $ 80,195
2000 28,086
2001 9,708
---------
$ 117,989
---------
</TABLE>
8. SUBSEQUENT EVENTS
Effective February 1, 1999, the 100 Class C common voting shares and 1200
Class D preferred non-voting shares were sold to Internet Sports Network,
Inc. which is an unrelated company.
9. FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, accounts receivables,
due to affiliated companies and accounts payables. Unless otherwise noted,
it is management's opinion that the company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate
carrying values, unless otherwise noted.
10. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
<PAGE>
SPORTSMARK PROMOTIONS INC.
FINANCIAL STATEMENTS
JANUARY 31, 1999
<PAGE>
AUDITORS' REPORT
To the Shareholder of
Sportsmark Promotions Inc.
We have audited the balance sheet of SPORTSMARK PROMOTIONS INC. as at January
31, 1999 and the statements of earnings and retained earnings and cash flows
for the period then ended. These financial statements are the responsibility
of the company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at January 31, 1999 and
the results of its operations and its cash flows for the period then ended in
accordance with generally accepted accounting principles.
Calgary, Alberta HUDSON & COMPANY
June 7, 1999 Chartered Accountants
<PAGE>
SPORTSMARK PROMOTIONS INC.
BALANCE SHEET
JANUARY 31, 1999
<TABLE>
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 23,104 $255,928
Due from affiliated companies (Note 2) 78,256 (91,728)
--------------------------
101,360 164,200
INCORPORATION COSTS 936 936
--------------------------
$102,296 $167,136
- --------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable $ 11,340 $ 76,084
--------------------------
SHAREHOLDER'S EQUITY
SHARE CAPITAL (Note 4) 100 100
RETAINED EARNINGS 90,856 90,952
--------------------------
90,956 91,052
--------------------------
$102,296 $167,136
- --------------------------------------------------------------------------------------
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
_________________________________, Director
_________________________________, Director
<PAGE>
SPORTSMARK PROMOTIONS INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
FOR THE PERIOD ENDED JANUARY 31, 1999
<TABLE>
- -----------------------------------------------------------------------------
<S> <C> <C>
REVENUE $ 50,728
EXPENSES
Office 97 186
-----------------------------
NET EARNINGS (LOSS) (97) (16,926)
RETAINED EARNINGS, beginning of period 90,953 107,878
-----------------------------
RETAINED EARNINGS, end of period $ 90,856 $ 90,952
- -----------------------------------------------------------------------------
</TABLE>
<PAGE>
SPORTSMARK PROMOTIONS INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED JANUARY 31, 1999
<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (97) $ (16,926)
Net change in non-cash working capital balances (64,743) 2,124
-----------------------------
Cash flows (used in) operating activities (64,840) (14,802)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from shareholder 2,000 -
Payments to affiliated companies (169,984) 76,841
-----------------------------
Cash flows from (used in) financing activities (167,984) 76,841
-----------------------------
DECREASE IN CASH (232,824) 62,039
CASH, beginning of period 255,928 291,867
-----------------------------
CASH, end of period $ 23,104 $ 353,906
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SPORTSMARK PROMOTIONS INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
1. GENERAL
Sportsmark Promotions Inc., is a privately owned company which was
incorporated on June 24, 1992 under the State of Delaware and which
operates in the State of Arizona. As the Company was incorporated in the
United States of America and has all of its operations in the United
States of America the financial statements are reported in United States
dollars.
2. DUE FROM AFFILIATED COMPANIES
During the period, the company had the following transactions with
Sportsmark Promotions International Inc. which is owned by Sportsmark
Holdings Inc.:
<TABLE>
<S> <C>
Balance, beginning of period $ (91,728)
Advances 24,422
Repayments 145,562
---------
Balance, end of period $ 78,256
---------
</TABLE>
During the period, the company had the following transactions with
Sportsmark Inc. which has certain shareholders who are also shareholders
of Sportsmark Holdings Inc.:
<TABLE>
<S> <C>
Balance, beginning of period $ -
Advances 52,127
Repayments (52,127)
---------
Balance, end of period $ -
---------
</TABLE>
3. DUE FROM SHAREHOLDER
During the period, the company had the following transactions with
Sportsmark Holdings Inc.:
<TABLE>
<S> <C>
Balance, beginning of period $ 2,000
Repayments (2,000)
---------
Balance, end of period $ -
---------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
4. SHARE CAPITAL
<TABLE>
<S> <C>
AUTHORIZED
10,000 voting shares
ISSUED
100 voting shares $ 100
-------
</TABLE>
5. INCOME TAXES
The company has net operating loss carry forwards of approximately $16,928
which are available to apply against future years taxable income in the
State of Arizona. These carry forwards expire in 2003.
6. SUBSEQUENT EVENTS
Effective February 1, 1999, the 100 voting shares were sold to Internet
Sports Network, Inc. which is an unrelated company.
7. FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, due from affiliated
companies and accounts payables. Unless otherwise noted, it is
management's opinion that the company is not exposed to significant
interest, currency or credit risk arising from these financial
instruments. The fair value of these financial instruments approximate
carrying values, unless otherwise noted.
8. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
9. COMPARATIVE FIGURES
Comparative figures for the period ended January 31, 1998 are not shown as
the information was not readily obtainable.
<PAGE>
SPORTSMARK PROMOTIONS INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
AUDITORS' REPORT
To the Shareholder of
Sportsmark Promotions Inc.
We have audited the balance sheets of SPORTSMARK PROMOTIONS INC. as at
December 31, 1998 and December 31, 1997 and the statements of earnings and
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1998 and
December 31, 1997 and the results of its operations and its cash flows for
the years then ended in accordance with generally accepted accounting
principles.
Calgary, Alberta HUDSON & COMPANY
June 7, 1999 Chartered Accountants
<PAGE>
SPORTSMARK PROMOTIONS INC.
BALANCE SHEETS
<TABLE>
DECEMBER 31 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash $255,928 $375,469
Due from shareholder (Note 3) 2,000 2,000
--------------------------
257,928 377,469
INCORPORATION COSTS 936 936
--------------------------
$258,864 $378,405
- --------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable $ 76,083 $134,428
Income taxes payable - 1,405
Due to affiliated companies (Note 2) 91,728 134,593
--------------------------
167,811 270,426
--------------------------
SHAREHOLDER'S EQUITY
SHARE CAPITAL (Note 4) 100 100
RETAINED EARNINGS 90,953 107,879
--------------------------
91,053 107,979
--------------------------
$258,864 $378,405
- --------------------------------------------------------------------------------------
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
_________________________________, Director
_________________________________, Director
<PAGE>
SPORTSMARK PROMOTIONS INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
<TABLE>
YEARS ENDED DECEMBER 31 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE $ 50,728 $ 109,590
-----------------------------
EXPENSES
Consulting fees 50,000 101,000
Interest and bank charges - 851
Office 186 268
Professional fees 17,468 1,429
-----------------------------
67,654 103,548
-----------------------------
Earnings (loss) before income taxes (16,926) 6,042
INCOME TAXES - 1,405
-----------------------------
NET EARNINGS (LOSS) (16,926) 4,637
RETAINED EARNINGS, beginning of year 107,879 103,242
-----------------------------
RETAINED EARNINGS, end of year $ 90,953 $ 107,879
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SPORTSMARK PROMOTIONS INC
STATEMENTS OF CASH FLOWS
<TABLE>
YEARS ENDED DECEMBER 31 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (16,926) $ 4,637
Net change in non-cash working capital balances (59,750) (6,611)
-----------------------------
Cash flows (used in) operating activities (76,676) (1,974)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (payments to) affiliated companies (42,865) 85,576
-----------------------------
INCREASE (DECREASE) IN CASH (119,541) 83,602
CASH, beginning of year 375,469 291,867
-----------------------------
CASH, end of year $ 255,928 $ 375,469
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SPORTSMARK PROMOTIONS INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
1. GENERAL
Sportsmark Promotions Inc., is a privately owned company which was
incorporated on June 24, 1992 under the State of Delaware and which
operates in the State of Arizona. As the company was incorporated in the
United States of America and has all of its operations in the United
States of America the financial statements are reported in United States
dollars.
2. DUE TO AFFILIATED COMPANIES
During the year the company had the following transactions with Sportsmark
Inc. which has certain shareholders who are also shareholders of
Sportsmark Holdings Inc.:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Balance, beginning of year $ 49,735 $ -
Consulting fees 50,000 101,000
Advances 10,228 8,735
Repayments (109,963) (60,000)
-------------------------------
Balance, end of year $ - $ 49,735
-------------------------------
</TABLE>
During the year the company had the following transactions with Sportsmark
Promotions International Inc. which is owned by Sportsmark Holdings Inc.:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Balance, beginning of year $ 84,858 $ 49,017
Revenue 50,728 109,590
Advances 290,211 183,812
Repayments (334,069) (257,561)
-------------------------------
Balance, end of year $ 91,728 $ 84,858
-------------------------------
</TABLE>
During the year the company had the following transactions with Classroom
2000 Inc. which is owned by Sportsmark Holdings Inc.:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Balance, beginning of year $ - $ -
Advances 7,000 -
Repayments (7,000) -
-------------------------------
Balance, end of year $ - $ -
-------------------------------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
3. DUE FROM SHAREHOLDER
In a prior year the company advanced Sportsmark Holdings Inc. $2,000, with
no fixed terms of repayment.
4. SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
AUTHORIZED
10,000 voting shares
ISSUED
100 voting shares $ 100 $ 100
-----------------------------
</TABLE>
5. INCOME TAXES
The company has net operating loss carry forwards of approximately $16,928
which are available to apply against future years taxable income in the
State of Arizona. These carry forwards expire in 2003.
6. SUBSEQUENT EVENTS
Effective February 1, 1999, the 100 voting shares were sold to Internet
Sports Network, Inc. which is an unrelated company.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
8. FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, due from shareholder,
due to affiliated companies and accounts payables. Unless otherwise noted,
it is management's opinion that the company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate
carrying values, unless otherwise noted.
9. COMPARATIVE FIGURES
Certain changes have been made to the comparative figures to correspond
with current year presentation.
<PAGE>
FINANCIAL STATEMENTS
PICKEM SPORTS, INC.
DECEMBER 31, 1998
<PAGE>
AUDITORS' REPORT
To the Shareholders of
PICKEM SPORTS, INC.
We have audited the accompanying balance sheets of PICKEM SPORTS, INC. as of
December 31, 1998 and 1997, and the related accompanying statements of
operations and comprehensive income, shareholders' equity and cash flows for
the year ended December 31, 1998 and the period from the date of
incorporation, March 1, 1997, to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December
31, 1998 and 1997 and the results of its operations and its cash flows for
the year ended December 31, 1998 and the period from the date of
incorporation, March 1, 1997, to December 31, 1997 in conformity with
generally accepted accounting principles in the United States.
Toronto, Canada,
June 11, 1999. Chartered Accountants
<PAGE>
PICKEM SPORTS, INC.
BALANCE SHEETS
[U.S. dollars]
As at December 31
<TABLE>
<CAPTION>
1998 1997
$ $
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents 1,395 868
Accounts receivable 12,200 --
Prepaid expenses 800 2,000
- ---------------------------------------------------------------------------------------------
14,395 2,868
Equipment, net [NOTE 3] 4,226 5,434
- ---------------------------------------------------------------------------------------------
18,621 8,302
=============================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable -- 2,850
Accrued liabilities -- 4,403
- ----------------------------------------------------------------------------------------------
-- 7,253
- ----------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock
Authorized
2,000 common shares with no par value
Issued
300 common shares -- --
Retained earnings 18,621 1,049
- ---------------------------------------------------------------------------------------------
18,621 1,049
- ---------------------------------------------------------------------------------------------
18,621 8,302
=============================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
PICKEM SPORTS, INC.
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
[U.S. dollars]
<TABLE>
<CAPTION>
PERIOD FROM
DATE OF
INCORPORATION,
MARCH 1, 1997,
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1998 1997
$ $
- -----------------------------------------------------------------------------
<S> <C> <C>
REVENUE 211,183 65,200
- -----------------------------------------------------------------------------
EXPENSES
Prize commitments and other direct costs 35,292 17,909
Wages and salaries 107,115 --
Consulting fees 5,374 631
Advertising -- 2,396
Depreciation 15,913 18,604
Interest and bank charges 10 --
General and administrative 29,907 24,611
- -----------------------------------------------------------------------------
193,611 64,151
- -----------------------------------------------------------------------------
NET EARNINGS AND COMPREHENSIVE INCOME 17,572 1,049
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
PICKEM SPORTS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
[U.S. dollars]
<TABLE>
<CAPTION>
COMMON
SHARES AND
ADDITIONAL
PAID-IN RETAINED
CAPITAL EARNINGS TOTAL
$ $ $
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, MARCH 1, 1997 -- -- --
Net earnings -- 1,049 1,049
- -----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 -- 1,049 1,049
Net earnings -- 17,572 17,572
- -----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 -- 18,621 18,621
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
PICKEM SPORTS, INC.
STATEMENTS OF CASH FLOWS
[U.S. dollars]
<TABLE>
<CAPTION>
PERIOD FROM
DATE OF
INCORPORATION,
MARCH 1, 1997,
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1998 1997
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings 17,572 1,049
Adjustment to reconcile net earnings to
net cash provided by operating activities:
Depreciation 15,913 18,604
Changes in other operating assets and liabilities:
Increase in accounts receivable (12,200) --
Decrease (increase) in prepaid expenses 1,200 (2,000)
Increase (decrease) in accounts payable (2,850) 2,850
Increase (decrease) in accrued liabilities (4,403) 4,403
- --------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 15,232 24,906
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of equipment (14,705) (24,038)
- --------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (14,705) (24,038)
- --------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents during the period 527 868
Cash and cash equivalents, beginning of period 868 --
- --------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,395 868
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Cash interest paid -- --
Cash taxes paid 866 700
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
PICKEM SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS
[All dollar and share amounts in thousands, except per share data]
December 31, 1998
1. NATURE AND CONTINUANCE OF OPERATIONS
The business of Pickem Sports, Inc. [the "Company"] consists of adaptable
software used to compile data in sports contests.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of its holdings of cash
held by one deposit taking institution. The Company manages its credit risk
by depositing its cash in high-quality, regulated deposit taking institutions.
LONG-LIVED ASSETS
In accordance with Financial Accounting Standards Board ["FASB"] Statement of
Financial Accounting Standard ["SFAS"] No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
the carrying value of fixed assets and other long-lived assets is reviewed on
a regular basis for the existence of facts or circumstances, both internally
and externally, that may suggest impairment. To date, no such impairment has
been indicated. Should there be an impairment in the future, the Company will
measure the amount of the impairment based on discounted expected future cash
flows from the impaired assets. The cash flow estimates that will be used
will contain management's best estimates, using appropriate and customary
assumptions and projections at the time.
ADVERTISING COST
The cost of advertising is expensed as incurred.
1
<PAGE>
PICKEM SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS
[All dollar and share amounts in thousands, except per share data]
December 31, 1998
COMPREHENSIVE INCOME (LOSS)
As of May 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. There
are no items of comprehensive income (loss) that require additional reporting.
EQUIPMENT
Equipment is recorded at cost less accumulated depreciation. Depreciation is
provided over the estimated useful lives of the assets using the declining
balance basis at the following rates:
<TABLE>
<CAPTION>
<S> <C>
Office equipment and furniture 20%
Computer equipment 30%
</TABLE>
REVENUE RECOGNITION
The Company earns revenue from membership and other fees received for sports
contest organization services. Membership fees are received prior to the
beginning of a particular sport season or event and recorded as deferred
income until recognized in income ratably over the season or upon completion
of the event.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable and accrued liabilities. It is management's
opinion that the Company is not exposed to significant interest currency or
credit risks arising from these financial instruments. The carrying values of
these current assets and liabilities approximate their fair values due to
their immediate or short-term nature.
INCOME TAXES
The Company has elected Subchapter S status for corporate income tax
purposes. Under this election, taxable loss and tax attributes pass through
the Company to the personal income tax return of the shareholder.
Accordingly, income taxes have not been recorded in the Company's financial
statements for 1998 and 1997.
2
<PAGE>
PICKEM SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS
[All dollar and share amounts in thousands, except per share data]
December 31, 1998
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
New accounting pronouncements having relative applicability to the Company
include Statements of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Post-retirement Benefits", effective for
fiscal years beginning after December 15, 1998 and No. 133, "Accounting for
Derivative Instruments and Hedging Activities", effective for fiscal years
beginning after June 15, 2000. SFAS No. 132 revises employers' disclosures
about pension and other post-retirement benefit plans. SFAS No. 133 requires
that all derivative instruments be recorded on the balance sheets at their
fair value. Changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it is, the type
of hedge transaction. The Company does not expect that the adoption of SFAS
Nos. 132 and 133 will have a material impact on its financial statements
because the Company does not provide for pension or other post-retirement
benefits, nor does it currently hold any derivative instruments. Adoption of
these statements will not impact the Company's financial position, results of
operations or cash flows and any effect will be limited to the form and
content of disclosures.
Additionally, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use" and Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities", which are effective for fiscal years beginning after
December 15, 1998. Adoption of these standards is not expected to have a
material impact on the Company's financial position, results of operations or
cash flows.
3. EQUIPMENT
Equipment consists of the following:
<TABLE>
<CAPTION>
1998 1997
$ $
- -----------------------------------------------------------------------------
<S> <C> <C>
Computer equipment 36,054 24,038
Office equipment and furniture 2,689 --
- -----------------------------------------------------------------------------
38,743 24,038
Less accumulated depreciation 34,517 18,604
- -----------------------------------------------------------------------------
EQUIPMENT, NET 4,226 5,434
=============================================================================
</TABLE>
3
<PAGE>
EXHIBIT 2.1
AGREEMENT FOR THE EXCHANGE OF COMMON STOCK BETWEEN
BIRCH TREE CAPITAL CORP. AND ERIC P. LITTMAN AND
INTERNET SPORTS NETWORK, INC.
<PAGE>
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), NOR REGISTERED
UNDER ANY STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS THAT TERM
IS DEFINED IN RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
AGREEMENT FOR THE EXCHANGE OF COMMON STOCK
AGREEMENT made this 19th day of January, 1999, by and among Birch
Tree Capital Corp., a Florida corporation, (the "ISSUER"), and Eric P.
Littman, ("EPL"), and Internet Sports Network, Inc., a Nevada corporation
("ISN")
In consideration of the mutual promises, covenants, and
representations contained herein, and other good and valuable consideration,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. EXCHANGE OF SECURITIES. Subject to the terms and conditions of
this Agreement, the ISSUER agrees to issue to the shareholders of ISN,
9,085,229 shares of the restricted common stock of ISSUER, $0.01 par value
(the "Shares"), in exchange for 100% of the issued and outstanding shares of
ISN such that ISN shall become a wholly owned subsidiary of the ISSUER. As a
material inducement to the transaction, EPL will cancel 3,975,000 shares of
his common stock of the ISSUER. As part of this transaction, ISSUER shall
issue 700,000 shares of restricted common stock to Andrew DeFrancesco and
such stock shall be restricted for a period of two years from its issuance.
2. REPRESENTATIONS AND WARRANTIES. ISSUER and EPL represent and
warrants to ISN the following:
a. ORGANIZATION. ISSUER is a corporation duly organized,
validly existing, and in good standing under the laws of Florida, and has all
necessary corporate powers to own properties and carry on a business, and is
duly qualified to do business and is in good standing in Florida. All actions
taken by the Incorporators, directors and shareholders of ISSUER have been
valid and in accordance with the laws of the State of Florida.
b. CAPITAL. The authorized capital stock of ISSUER consists
of 50,000,000 shares of common stock, $0.001 par value, of which 5,025,000
shares are issued and outstanding. Of these 5,025,000 shares, the EPL owns
5,000,000 shares. All outstanding shares are fully paid and non assessable,
free of liens, encumbrances, options, restrictions and legal or equitable
rights of others not a party to this Agreement. At closing, there will be no
outstanding subscriptions, options, rights, warrants, convertible securities,
or other agreements or commitments obligating ISSUER to issue or to transfer
from treasury any additional shares of its capital stock. None of the
outstanding shares of ISSUER are subject to any stock restriction agreements.
All of the shareholders of ISSUER have valid title to such shares and
acquired their shares in a lawful transaction and in accordance with the laws
of Florida.
c. OTC BULLETIN BOARD LISTING. The Company is currently listed
on the OTC Electronic Bulletin Board with the following trading symbol:
"BICP."
d. FINANCIAL STATEMENTS. The audited Financial Statements of
the ISSUER as of October 5, 1998, and the related statements of income and
retained earnings for the period then ended have been prepared in accordance
with generally accepted accounting principles consistently followed by ISSUER
throughout the periods indicated, and fairly present the financial position
of ISSUER as of the date of the financial statements.
Birch Tree Capital Corp. Stock Exchange Agreement, Page 1
<PAGE>
e. ABSENCE OF CHANGES. Since the date of the financial
statements, there has not been any change in the financial condition or
operations of ISSUER, except changes in the ordinary course of business,
which changes have not in the aggregate been materially adverse.
f. LIABILITIES. ISSUER does not have any debt, liability, or
obligation of any nature, whether accrued, absolute, contingent, or
otherwise, and whether due or to become due, that is not reflected on the
ISSUERS' financial statement. ISSUER is not aware of any pending, threatened
or asserted claims, lawsuits or contingencies involving ISSUER or its common
stock. There is no dispute of any kind between ISSUER and any third party,
and no such dispute will exist at the closing of this Agreement. At closing,
ISSUER will be free from any and all liabilities, liens, claims and/or
commitments.
g. ABILITY TO CARRY OUT OBLIGATIONS. ISSUER has the right,
power, and authority to enter into and perform its obligations under this
Agreement. The execution and delivery of this Agreement by ISSUER and the
performance by ISSUER of its obligations hereunder will not cause,
constitute, or conflict with or result in (a) any breach or violation or any
of the provisions of or constitute a default under any license, indenture,
mortgage, charter, instrument, articles of incorporation, bylaw, or other
agreement or instrument to which ISSUER or its shareholders are a party, or
by which they may be bound, nor will any consents or authorizations of any
party other than those hereto be required, (b) an event that would cause
ISSUER to be liable to any party, or (c) an event that would result in the
creation or imposition or any lien, charge or encumbrance on any asset of
ISSUER or upon the securities of ISSUER to be acquired by SHAREHOLDERS.
h. FULL DISCLOSURE. None of representations and warranties
made by the ISSUER, or in any certificate or memorandum furnished or to be
furnished by the ISSUER, contains or will contain any untrue statement of a
material fact, or omit any material fact the omission of which would be
misleading.
i. CONTRACT AND LEASES. ISSUER is not currently carrying on
any business and is not a party to any contract, agreement or lease. No
person holds a povwer of attorney from ISSUER.
j. COMPLIANCE WITH LAWS. To the best of its knowledge, ISSUER
has complied with, and is not in violation of any federal, state, or local
statute, law, and/or regulation.
k. LITIGATION. ISSUER is not (and has not been) a party to any
suit, action, arbitration, or legal, administrative, or other proceeding, or
pending governmental investigation. To the best knowledge of the ISSUER,
there is no basis for any such action or proceeding and no such action or
proceeding is threatened against ISSUER and ISSUER is not subject to or in
default with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department, agency, or
instrumentality.
l. CONDUCT OF BUSINESS. Prior to the closing, ISSUER shall
conduct its business in the normal course, and shall not (1) sell, pledge, or
assign any assets (2) amend its Articles of Incorporation or Bylaws, (3)
declare dividends, redeem or sell stock or other securities, (4) incur any
liabilities, (5) acquire or dispose of any assets, enter into any contract,
guarantee obligations of any third party, or (6) enter into any other
transaction.
m. CORPORATE DOCUMENTS. Copies of each of the following
documents, which are true complete and correct in all material respects, will
be attached to and made a part of this Agreement:
i. Articles of Incorporation;
ii. Bylaws;
iii. Minutes of Shareholders Meetings;
iv. Minutes of Directors Meetings;
v. List of Officers and Directors;
vi. Audited Financial Statements of the Company
dated October 5, 1998 statements
described in Section 2(iii);
Birch Tree Capital Corp. Stock Exchange Agreement, Page 2
<PAGE>
vii. Stock register and stock records of ISSUER
and a current, accurate list of ISSUER's
shareholders.
n. DOCUMENTS. All minutes, consents or other documents
pertaining to ISSUER to be delivered at closing shall be valid and in
accordance with the laws of Florida.
o. TITLE. The Shares to be issued pursuant to this Agreement
will be, at closing, free and clear of all liens, security interests,
pledges, charges, claims, encumbrances and restrictions of any kind. None of
such Shares are or will be subject to any voting trust or agreement. No
person holds or has the right to receive any proxy or similar instrument with
respect to such shares, except as provided in this Agreement, the ISSUER is
not a party to any agreement which offers or grants to any person the right
to purchase or acquire any of the securities to be issued pursuant to this
Agreement. There is no applicable local, state or federal law, rule,
regulation, or decree which would, as a result of the issuance of the Shares,
impair, restrict or delay any voting rights with respect to the Shares.
3. ISN represents and warrants to ISSUER the following:
a. ORGANIZATION. ISN is a corporation duly organized, validly
existing, and in good standing under its state laws of incorporation and has
all necessary corporate powers to own properties and carry on a business, and
is duly qualified to do business and is in good standing in Nevada. All
actions taken by the Incorporators, directors and shareholders of ISN have
been valid and in accordance with the laws of the state of Nevada.
b. COUNSEL. ISN represents and warrants that prior to Closing,
it has been represented by independent counsel.
4. INVESTMENT INTENT. ISN is acquiring the Shares for its own
account for purposes of investment and without expectation, desire, or need
for resale and not with the view toward distribution, resale, subdivision, or
fractionalization of the Shares.
5. CLOSING. The closing of this transaction shall take place at the
law offices of Eric P. Littman, 7695 S.W. 104th Street, Suite 210, Miami,
Florida. 33156. Unless the closing of this transaction takes place on or
before February 1, 1999, then either party may terminate this Agreement.
6. DOCUMENTS TO BE DELIVERED AT CLOSING.
a. BY THE ISSUER
b. Board of Directors Minutes authorizing the issuance of a
certificate or certificates for the 9,085,229 shares to be issued to ISN
pursuant to this Agreement and 700,000 shares to Anthony DeFrancesco.
i. Instructions to the ISSUER's transfer agent to cancel
3,975,00 shares of EPL's common stock of the ISSUER.
ii. The resignation of the current officers and directors
of ISSUER.
iii. A Board of Directors resolution appointing such person
as INS designate as a director(s) of ISSUER.
iv. Audited financial statements of ISSUER for the period
ending October 5, 1998.
v. All of the business and corporate records of ISSUER,
including but not limited to correspondence files, bank statements,
checkbooks, savings account books, minutes of shareholder and directors
meetings, financial statements, shareholder listings, stock transfer records,
agreements and contracts.
Birch Tree Capital Corp. Stock Exchange Agreement, Page 3
<PAGE>
c. ISN.
i. Delivery to the ISSUER, or to its Transfer Agent, the
certificates representing 100% of the issued and outstanding stock of ISN.
7. MISCELLANEOUS.
a. CAPTIONS AND HEADINGS. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall
in no way be deemed to define, limit, or add to the meaning of any provision
of this Agreement.
b. NO ORAL CHANGE. This Agreement and any provision hereof,
may not be waived, changed, modified, or discharged orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
c. CHOICE OF LAW. This Agreement shall be exclusively governed
by and construed in accordance with the laws of the State of Florida, If any
action is brought among the parties with respect to this Agreement or
otherwise, by way of a claim or counterclaim, the parties agree that in any
such action, and on all issues, the parties irrevocably waive their right to
a trial by jury. Exclusive jurisdiction and venue for any such action shall
be the State Courts of Miami-Dade County, Florida. In the event suit or
action is brought by any party under this Agreement to enforce any of its
terms, or in any appeal therefrom, it is agreed that the prevailing party
shall be entitled to reasonable attorneys fees to be fixed by the arbitrator,
trial court, and/or appellate court.
d. NON WAIVER. Except as otherwise expressly provided herein,
no waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (I) the failure of any party to
insist in any one or more cases upon the performance of any of the
provisions, covenants, or conditions of this Agreement or to exercise any
option herein contained shall not be construed as a waiver or relinquishment
for the future of any such provisions, covenants, or conditions, (ii) the
acceptance of performance of anything required by this Agreement to be
performed with knowledge of the breach or failure of a covenant, condition,
or provision hereof shall not be deemed a waiver of such breach or failure,
and (iii) no waiver by any party of one breach by another party shall be
construed as a waiver with respect to any other or subsequent breach.
e. TIME OF ESSENCE. Time is of the essence of this Agreement
and of each and every provision hereof.
f. ENTIRE AGREEMENT. This Agreement contains the entire
Agreement and understanding between the parties hereto, and supersedes all
prior agreements and understandings.
g. COUNTERPARTS. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
h. NOTICES. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed
to have been duly given on the date of service if served personally on the
party to whom notice is to be given, or on the third day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed, and by fax,
as follows:
ISSUER: Eric P. Littman, Esquire
and EPL 7695 S.W. 104th Street, Suite 210
Miami, Florida 33156
Birch Tree Capital Corp. Stock Exchange Agreement, Page 4
<PAGE>
ISN: Internet Sports Network, Inc.
509 Richards, Suite 700
Vancouver, B.C.
V6B 2Z6 Canada
Attention: Patrick S. Earle
Copy to: Patti McGlasson, Esquire
Horwitz and Beam
2 Venture Plaza, Suite 350
Irvine CA 92618
IN WITNESS WHEREOF, the undersigned has executed this Agreement on
January ___, 1999.
BIRCH TREE CAPITAL CORP. INTERNET SPORTS NETWORK, INC.
By: /s/ ERIC P. LITTMAN By: /s/ PATRICK S. EARLE
--------------------------------- ---------------------------------
Eric P. Littman, President Patrick S. Earle, President
/s/ ERIC P. LITTMAN
---------------------------------
Eric P. Littman, Individually
as the Selling Shareholder
Birch Tree Capital Corp. Stock Exchange Agreement, Page 5
<PAGE>
EXHIBIT 2.2
INTERNET SPORTS NETWORK, INC. PURCHASE OF
SHARES OF SPORTSMARK INC., SPORTSMARK PROMOTIONS, INC. &
CLASSROOM 2000 INC. AND ASSETS OF
SMP SPORTSMARK PROMOTIONS INTERNATIONAL, INC.
CLOSING DATE: FEBRUARY 5, 1999
<PAGE>
SHARE PURCHASE AGREEMENT
MADE EFFECTIVE AS OF THE 1st DAY OF FEBRUARY, 1999 (the "Effective Date").
BETWEEN: GEOFF FORD, of 6415 20th Street, S.W. Calgary, Alberta, T3E 5L4
("Mr. G. Ford"); WILLIAM GIBSON, of 101 Sunset Way, S.E.
Calgary, Alberta, T2X 2H6 ("Mr. Gibson"); and
ROBERT MOSER, of 433 Wilkinson Place, S.E. Calgary,
Alberta, T2J 2CZ ("Mr. Moser");
(individually a "Vendor" and collectively the "Vendors")
AND: SPORTSMARK INC. (Corporate Access No. 203552690),
corporation incorporated under the laws of Alberta having a
registered office at 1050 - 10201 Southport Road S.W.,
Calgary, Alberta, T2W 4X9;
("Targetco")
AND: INTERNET SPORTS NETWORK, INC., a company incorporated under the
laws of Nevada having a place of business at #700 - 509 Richards
Street, Vancouver, British Columbia, V6B 2Z6;
(the "Purchaser")
WHEREAS:
The authorized share capital of Targetco consists of Fifty (50) Class "A"
Common Voting Shares without par value, Fifty (50) Class "B" Common
Non-Voting Shares without par value, an unlimited number of Class "C" Voting
Shares and an unlimited number of Class "D" Preferred Non-Voting Shares, of
which only One Hundred (100) Class "C" Voting Shares and Twelve Hundred
(1,200) Class "D" Preferred Non-Voting Shares (collectively, the "Targetco
Shares") are issued and outstanding;
The Vendors are the registered and beneficial owners of the Targetco Shares
as follows:
<TABLE>
<S> <C> <C> <C>
Mr. G. Ford as to 45 Class "C" and 540 Class "D" Targetco Shares
Mr. Gibson as to 45 Class "C" and 540 Class "D" Targetco Shares
Mr. Moser as to 10 Class "C" and 120 Class "D" Targetco Shares
---------------------------------------------------
Total Targetco Shares: 100 Class "C" and 1,200 Class "D" Targetco Shares;
===================================================
</TABLE>
The Vendors have agreed to sell the Targetco Shares to the Purchaser, and the
Purchaser has agreed to purchase the Targetco Shares from the Vendors, on the
terms and conditions set forth in this Agreement; and
The Purchaser has also agreed to purchase certain assets from SMP SportsMark
Promotions International Inc. ("SMPI"), a Barbados company, pursuant to the
terms of an Asset Purchase Agreement (the "SMPI Agreement") executed
contemporaneously with this Agreement, and the Purchaser has agreed to
purchase from SportsMark Holdings Inc. ("SMH") certain loans and the shares
of SportsMark Promotions Inc. ("Promotions"), a Delaware company, and
Classroom 2000 Inc. ("Classroom 2000") an Alberta company, pursuant to the
terms of a Share Purchase Agreement (the "SMH Agreement") executed
contemporaneously with this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants
and agreements herein contained, the parties hereto do covenant and agree
(the "Agreement") each with the other as follows:
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<PAGE>
1. PURCHASE AND SALE
1.1 Subject to the terms and conditions of this Agreement, the Vendors each
agree to sell their Targetco Shares to the Purchaser, and the Purchaser
agrees with each of the Vendors to purchase their Targetco Shares, on the
Closing Date for the sum of U.S.$730,000 (the "Purchase Price").
1.2 The Purchase Price shall be paid by the Purchaser to the Vendors as
follows:
<TABLE>
<S> <C> <C>
Mr. G. Ford as to U.S.$328,500.00
Mr. Gibson as to U.S.$328,500.00
Mr. Moser as to U.S.$ 73,000.00
---------------
Total Cash Payment: U.S.$730,000.00
===============
</TABLE>
1.3 The transactions contemplated under this Agreement shall be completed at
the offices of the Purchaser's solicitors, Messrs. Campney & Murphy, P.O. Box
48800, 2100-1111 West Georgia Street, Vancouver, British Columbia, or at such
other place as may be agreed upon by the parties in writing, at 11:00 o'clock
a.m. local time in Vancouver, British Columbia (the "Time of Closing") on 5
February 1999 or on such other date as may be determined in accordance with
this Agreement or by further agreement in writing between the parties (the
"Closing Date").
2. CONDITIONS PRECEDENT
2.1 The Purchaser's obligation to carry out the terms of this Agreement and
to complete its transactions contemplated under this Agreement is subject to
the fulfilment to the satisfaction of the Purchaser of each of the following
conditions that:
(a) by the Subject Removal Date (defined below), the Purchaser
shall have been able to complete the Purchaser's Investigation
(defined below) with results to its reasonable satisfaction;
(b) by the Subject Removal Date, the directors of the Purchaser
shall have approved of this Agreement and all of the
transactions contemplated under this Agreement, in their
absolute discretion;
(c) by the Closing Date, Targetco shall have entered into written
employment and non-competition agreements with each of the
Vendors and with Mr. Peter Ford (the "Employment Agreements"),
substantially in the form which appears as Schedule "A" to
this Agreement;
(d) at the Time of Closing, the solicitors for the Vendors shall
provide an opinion dated as of the Closing Date, the form of
which appears as Schedule "B" to this Agreement;
(e) as of the Time of Closing, the Vendors and Targetco shall have
complied with all of their respective covenants and agreements
contained in this Agreement;
(f) as of the Time of Closing, the representations and warranties
of the Vendors or any one of them contained in this Agreement
or contained in any certificates or documents delivered by
them or any one of them pursuant to this Agreement shall be
completely true as if such representations and warranties had
been made by the Vendors as of the Time of Closing;
(g) at the Time of Closing, Targetco shall deliver to the
Purchaser lists of the names and contact information for at
least SEVEN HUNDRED AND FIFTY THOUSAND (750,000) different
people who at some time during the past three (3) years have
been bona fide subscribers for services from, or contestants
in games operated by, Targetco or Promotions (the "Participant
Lists"); and
(h) at the Time of Closing, the transactions contemplated under
the SMPI Agreement and the SMH Agreement shall complete
contemporaneously with the transactions contemplated herein.
2
<PAGE>
The conditions set forth above are for the exclusive benefit of the Purchaser
and each may be waived by the Purchaser in whole or in part at or before the
time indicated for removal, without prejudice to any remedies that may
otherwise be available to the Purchaser.
2.2 The Vendors' respective obligations to carry out the terms of this
Agreement and to complete their respective transactions contemplated under
this Agreement are subject to the fulfilment to their satisfaction of each of
the following conditions that:
(a) at the Time of Closing, the solicitors for the Purchaser shall
provide an opinion dated as of the Closing Date, the form of
which appears as Schedule "C" to this Agreement;
(b) as of the Time of Closing, the Purchaser shall have complied
with all of its covenants and agreements contained in this
Agreement;
(c) at the Time of Closing, the representations and warranties of
the Purchaser contained in this Agreement or contained in any
certificates or documents delivered by it pursuant to this
Agreement shall be completely true as if such representations
and warranties had been made by the Purchaser as of the Time
of Closing; and
(d) at the Time of Closing, the transactions contemplated under
the SMPI Agreement and the SMH Agreement shall complete
contemporaneously with the transactions contemplated herein.
The conditions set forth above are for the exclusive benefit of each of the
Vendors and may be waived by each of them in whole or in part at or before
the Time of Closing, without prejudice to any remedies that may otherwise be
available to the Vendors.
2.3 The Subject Removal Date shall be 5 February 1999.
3. COVENANTS, AGREEMENTS AND ACKNOWLEDGMENTS
3.1 The Vendors and Targetco jointly and severally covenant and agree with
the Purchaser that the Vendors and Targetco shall:
(a) from and including the Effective Date through to and including
the Time of Closing, permit the Purchaser, through its
directors, officers, employees and authorized agents and
representatives (collectively the "Purchaser's
Representatives") at its own cost, full access to Targetco's
books, records and property including, without limitation, all
of the Assets, contracts and minute books of Targetco, so as
to permit the Purchaser to make such investigation (the
"Purchaser's Investigation") of Targetco as the Purchaser
deems necessary;
(b) from and including the Effective Date through to and including
the Time of Closing, do all such acts and things necessary to
ensure that all of the representations and warranties of the
Vendors or any one of them contained in this Agreement or any
certificates or documents delivered by them or any one of them
pursuant to this Agreement remain true and correct;
(c) from and including the Effective Date through to and including
the Time of Closing, preserve and protect the goodwill,
Assets, business and undertaking of Targetco and, without
limiting the generality of the foregoing, carry on the
business of Targetco in a reasonable and prudent manner;
(d) from and including the Effective Date through to and after the
Time of Closing, do all such acts and things necessary to
obtain any consents that may be required under the terms of
any of the Material Contracts listed on Schedule "H" in
respect of any assignment that may be deemed to occur on
transfer of the Targetco Shares; and
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<PAGE>
(e) from and including the Effective Date through to and after the
Time of Closing, keep confidential all discussions and
communications (including all information communicated
therein) between the parties, and all written and printed
materials of any kind whatsoever exchanged by the parties,
and, if so requested by the Purchaser, the Vendors and
Targetco shall arrange for any director, officer, employee,
authorized agent or representative of Targetco to enter into
and the Vendors themselves shall enter into a non-disclosure
agreement with the Purchaser in a form acceptable to the
Purchaser acting reasonably.
3.2 The Vendors and Targetco jointly and severally covenant and agree with
the Purchaser that, from and including the Effective Date through to and
including the Time of Closing, the Vendors and Targetco shall:
(a) not do any such act or thing that would render any
representation or warranty of the Vendors or any one of them
contained in this Agreement or any certificates or documents
delivered by them or any one of them pursuant to this
Agreement untrue or incorrect; and
(b) not negotiate with any other person in respect of a purchase
and sale of any of the Targetco Shares or any part of the
Assets, other than a sale of part of the Assets in the
ordinary course of Targetco's business.
3.3 The Vendors jointly and severally acknowledge to and agree with the
Purchaser that the Purchaser's Investigation shall in no way limit or
otherwise adversely affect the rights of the Purchaser as provided for
hereunder in respect of the representations and warranties of the Vendors
contained in this Agreement or in any certificates or documents delivered by
them pursuant to this Agreement.
3.4 The Purchaser covenants and agrees with the Vendors and with Targetco
that the Purchaser shall:
(a) from and including the Effective Date through to and including
the Time of Closing, do all such acts and things necessary to
ensure that all of the representations and warranties of the
Purchaser contained in this Agreement or any certificates or
documents delivered by it pursuant to this Agreement remain
true and correct;
(b) from and including the Effective Date through to and after the
Time of Closing and subject to any obligations imposed by law
or as a result of any application for listing on a stock
exchange, keep confidential all discussions and communications
(including all information communicated therein) between the
parties, and all written and printed materials of any kind
whatsoever exchanged by the parties, and, if so requested by
the Vendors or by Targetco, the Purchaser shall arrange for any
of the Purchaser's Representatives to enter into, and the
Purchaser itself shall enter into, a non-disclosure agreement
with the Vendors and Targetco in a form acceptable to the
Vendors and Targetco acting reasonably; and
(c) from and after the Time of Closing, cause Targetco to maintain
the keyman insurance referred to on Schedule "H", or
comparable replacement keyman insurance, in respect of each of
Mr. G. Ford, Mr. Gibson and Mr. Moser, respectively, for so
long as each continues to be employed by Targetco.
3.5 The Purchaser covenants and agrees with the Vendors and with Targetco
that, from and including the Effective Date through to and including the Time
of Closing, the Purchaser shall not do any such act or thing that would
render any representation or warranty of the Purchaser contained in this
Agreement or any certificates or documents delivered by it pursuant to this
Agreement untrue or incorrect.
3.6 Immediately following the Closing, the Purchaser shall cause Targetco to
increase the number of Targetco's directors to at least three, and appoint
Mr. G. Ford as a director of Targetco to serve until the next annual general
meeting of Targetco, subject to consent to act being received from Mr. G.
Ford, and subject always to the Articles of Targetco and applicable corporate
law.
4
<PAGE>
3.7 Immediately following the Closing, the Purchaser shall cause Promotions
to increase the number of Promotion's directors to at least three, and
appoint Mr. G. Ford as a director of Promotions to serve until the next
annual general meeting of Promotions, subject to consent to act being
received from Mr. G. Ford, and subject always to the Articles of Promotions
and applicable corporate law.
3.8 Immediately following the Closing, the Purchaser shall cause Classroom
2000 to increase the number of Classroom 2000's directors to at least three,
and appoint Mr. Gibson as a director of Classroom 2000 to serve until the
next annual general meeting of Classroom 2000, subject to consent to act
being received from Mr. Gibson, and subject always to the Articles of
Classroom 2000 and applicable corporate law.
3.9 Immediately following the Closing, the Purchaser shall increase the
number of the Purchaser's directors to at least five, and appoint Mr. G. Ford
and Mr. Gibson as directors of the Purchaser, to serve until the next annual
general meeting of the Purchaser, subject to consent to act being received
from Mr. G. Ford and Mr. Gibson, and subject always to the Articles of the
Purchaser and applicable corporate law.
4. REPRESENTATIONS AND WARRANTIES
4.1 In order to induce the Purchaser to enter into this Agreement and
complete its transactions contemplated hereunder, the Vendors jointly and
severally represent and warrant to the Purchaser that:
(a) Targetco was and remains duly incorporated under the laws
of the Province of Alberta.
(b) Targetco:
(i) is a "private issuer" as that term is defined in the
SECURITIES ACT, Alberta (the "Securities Act");
(ii) does not maintain an office or mailing address, or have any
employees, agents or equipment (including any computer server
equipment) in any jurisdiction other than its jurisdiction of
incorporation; and
(iii) is in good standing with respect to the filing of annual
reports in the jurisdiction of its incorporation and in each
jurisdiction in which it carries on business;
(c) the authorized and issued share capital of Targetco is as set
forth in paragraphs A and B of the recitals to this Agreement;
(d) the Targetco Shares are validly issued and outstanding fully
paid and non-assessable common shares of Targetco registered
in the names of, and beneficially owned by, the Vendors as set
forth in paragraph B of the recitals to this Agreement free
and clear of all voting restrictions, trade restrictions,
liens, charges or encumbrances of any kind whatsoever;
(e) except for the Targetco Shares, there are no shares, options,
convertible debentures, documents, instruments or other
writings of any kind whatsoever which may constitute a
"security" of Targetco as that term is defined in the
Securities Act or any other applicable legislation and, except
as is provided for by operation of this Agreement, there are
no options, agreements or rights of any kind whatsoever to
acquire all or any part of the Targetco Shares or any interest
in them or in any other share capital of Targetco;
(f) the constating documents of Targetco have not been altered
since incorporation except in respect of the amendment to
Targetco's Articles filed on 18 February 1994;
(g) all of the material transactions of Targetco have been
promptly and properly recorded or filed in or with the books
or records of Targetco, and the minute books of Targetco
contain all records of the meetings and proceedings of
shareholders and directors of Targetco since its date of
incorporation;
5
<PAGE>
(h) to the best of their knowledge, Targetco holds all licences
and permits that are required for carrying on its business in
the manner in which such business has been carried on;
(i) Targetco is the registered and beneficial owner of all
worldwide right, title and interest in and to the properties
and assets (collectively the "Assets") listed on Schedule "D"
to this Agreement, and such Assets represent all of the
property and assets used by Targetco and which are necessary
or useful in the conduct of its business;
(j) Targetco has the corporate power to own the Assets owned by it
and carry on the business carried on by it and Targetco is
duly qualified to carry on business in all jurisdictions in
which it carries on business;
(k) Targetco has good and marketable title to the Assets free and
clear of all liens, charges and encumbrances of any kind
whatsoever save and except those specified as "Permitted
Encumbrances" on Schedule "D" to this Agreement;
(l) to the best of their knowledge, no third party privacy or
intellectual property rights, including without limitation,
copyright, trade secret or patent rights, were violated in the
creation, compilation or acquisition of the Assets by Targetco
or by any party through whom Targetco acquired title;
(m) all machinery and equipment of any kind whatsoever comprised
in the Assets are in reasonable operating condition and in a
state of reasonable maintenance and repair taking into account
their age and use;
(n) all of the bank accounts and safety deposit boxes of Targetco
are listed on Schedule "D" to this Agreement;
(o) Targetco maintains insurance against loss of, or damage to,
the Assets by all insurable risks on a replacement cost basis
and reasonable insurance with respect to public liability for
a business of its size (collectively the "Insurance
Coverage"), and all of the policies (the "Insurance Policies")
in respect of such Insurance Coverage are described on
Schedule "E" to this Agreement and all such Insurance Policies
are in good standing in all respects and not in default in any
respects;
(p) the unaudited financial statements of Targetco for its fiscal
years ended 30 November 1994, 1995, 1996, 1997 and 1998 and
the unaudited interim financial statements of Targetco for the
interim period of December 1998 (collectively, the "Targetco
Financial Statements"), copies of which appear as Schedule "F"
to this Agreement, are true and correct in every material
respect and present fairly and accurately the financial
position and results of the operations of Targetco for the
periods then ended and the Targetco Financial Statements have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis;
(q) the books and records of Targetco disclose all material
financial transactions of Targetco arising subsequent to the
preparation of the Targetco Financial Statements and such
transactions have been fairly and accurately recorded;
(r) since 31 December 1998:
(i) no dividends or other distributions of any kind whatsoever on
any shares in the capital of Targetco have been made, declared
or authorized;
(ii) Targetco has not become indebted to the Vendors or any one of
them, except for current employment compensation as described
in Schedule "G";
6
<PAGE>
(iii) none of the Vendors or any other officer, director or employee
of Targetco has become indebted or under obligation to
Targetco on any account whatsoever; and
(iv) Targetco has not guaranteed or agreed to guarantee any debt,
liability or other obligation of any kind whatsoever of any
person, firm or corporation of any kind whatsoever;
(s) there are no material liabilities of Targetco, whether direct,
indirect, absolute, contingent or otherwise which are not
disclosed or reflected in the Targetco Financial Statements
except those incurred in the ordinary course of business since
the date the Targetco Financial Statements were prepared, all
of which are recorded in the books and records of Targetco,
and except for revenue sharing obligations pursuant to the
Material Contracts listed on Schedule "H";
(t) to the best of their knowledge, the accounts receivable of
Targetco shown on the Targetco Financial Statements or
recorded in the books and records of Targetco are bona fide,
good and collectible without set-off or counterclaim;
(u) since 31 December 1998:
(i) there has not been any material adverse change of any kind
whatsoever in the financial position or condition of Targetco
or any damage, loss or other change of any kind whatsoever in
circumstances materially affecting the business or Assets or
the right or capacity of Targetco to carry on its business;
(ii) Targetco has not waived or surrendered any right of any kind
whatsoever of material value;
(iii) Targetco has not discharged, satisfied or paid any lien,
charge or encumbrance of any kind whatsoever or obligation or
liability of any kind whatsoever other than current
liabilities in the ordinary course of its business or as
expressly permitted under this Agreement;
(iv) the business of Targetco has been carried on in the ordinary
course;
(v) no new machinery or equipment of any kind whatsoever has been
ordered by, or installed or assembled on the premises of,
Targetco, except that Targetco has agreed to lease from IBM a
new server valued at approximately $2,500 on IBM's usual
equipment lease terms; and
(vi) no capital expenditures exceeding in the aggregate $10,000
have been authorized or made by Targetco;
(v) the directors, officers, employees, contractors and
consultants of Targetco and all of their compensation
arrangements with Targetco, whether as directors, officers or
employees of, or as independent contractors or consultants to,
Targetco, are as listed on Schedule "G" to this Agreement;
(w) no payments of any kind whatsoever have been made or
authorized by Targetco to or on behalf of the Vendors or any
one of them or to or on behalf of any of the directors,
officers, employees contractors or consultants of Targetco
except in accordance with those compensation arrangements
specified on Schedule "G" to this Agreement or except as
contemplated by this Agreement;
(x) there are no pensions, profit sharing, group insurance or
similar plans or other deferred compensation plans of any kind
whatsoever affecting Targetco other than those specified on
Schedule "G" to this Agreement;
(y) Targetco is not now, and has never been, a party to any
collective agreement with any labour union or other
association of employees of any kind whatsoever;
7
<PAGE>
(z) the contracts and agreements included on Schedules "A", "E"
and "G" to this Agreement and those additional contracts and
agreements specified on Schedule "H" to this Agreement
(collectively the "Material Contracts") constitute all of the
material contracts and agreements of Targetco, and current,
complete and true copies of all the Material Contracts have
been delivered to the Purchaser;
(aa) Targetco has not licensed, leased, transferred, disposed of or
encumbered any of the Assets in any way, or permitted any
third party access to any of the Assets, including in
particular the source code to the computer software and the
contestant and subscriber information included in the Assets,
except in accordance with the terms of the Material Contracts;
(bb) to the best of their knowledge, except as is noted on the
appropriate Schedule to this Agreement, the Material Contracts
are in good standing in all respects and not in default in any
respect;
(cc) except as is noted on the appropriate Schedule to this
Agreement, Targetco can terminate all of their obligations
under each of the Material Contracts without liability on not
more than one month's notice;
(dd) all tax returns and reports of Targetco required by law to be
filed have been filed and are substantially true, complete and
correct and all taxes and other government charges of any kind
whatsoever of Targetco have been paid or accrued in the
Targetco Financial Statements;
(ee) Targetco has been assessed for all applicable income and
capital tax for all of its full or partial fiscal years to and
including its fiscal year ended 31 December, 1997;
(ff) Targetco has been and will be until the completion of this
Agreement a Canadian-controlled private corporation within the
meaning of the Tax Act;
(gg) Targetco has not:
(i) made any election under Section 85 of the Income
Tax Act, R.S.C. 1952 C-148 as amended (the "Tax
Act") with respect to the acquisition or
disposition of any property, other than the three
elections made as of 15 February 1994 in respect
of transfers of property by Mr. G. Ford, Mr.
Gibson and Mr. Moser, for which the amounts
elected were the fair market values of the
property transferred;
(ii) acquired any property from a person, otherwise than
at arm's length, for proceeds greater than the fair
market value thereof; or
(iii) disposed of anything to a person, otherwise than at
arm's length, for proceeds less than the fair market
value thereof;
(hh) Targetco has made all elections required to have been made
under all applicable tax legislation in connection with any
distributions made by it and all such elections were true and
correct and made in the prescribed form and within the
prescribed time period;
(ii) adequate provision has been made for taxes payable by Targetco
for the current period for which tax returns are not yet
required to be filed and there are no agreements, waivers or
other arrangements of any kind whatsoever providing for an
extension of time with respect to the filing of any tax return
by, or payment of, any tax or governmental charge of any kind
whatsoever by Targetco;
(jj) they are not aware of any contingent tax liabilities of
Targetco of any kind whatsoever or any grounds which would
prompt a reassessment of Targetco including aggressive
treatment of income and expenses in earlier tax returns filed;
8
<PAGE>
(kk) there are no amounts outstanding and unpaid for which Targetco
has previously claimed a deduction under any applicable tax
legislation;
(ll) none of the Vendors is a "non-resident of Canada" within the
meaning of that phrase as it is used in the Canada INCOME TAX
ACT;
(mm) Targetco has made all collections, deductions, remittances and
payments of any kind whatsoever and filed all reports and
returns required by it to be made or filed under the
provisions of all applicable statutes requiring the making of
collections, deductions, remittances or payments of any kind
whatsoever in those jurisdictions in which it carries on
business;
(nn) Targetco is "Canadian" within the meaning of the INVESTMENT
CANADA ACT, R.S.C. 1985 C-28, as amended (the "Investment
Canada Act");
(oo) to the best of their knowledge, there are no actions, suits,
judgments, investigations or proceedings of any kind
whatsoever outstanding, pending or threatened against or
affecting the Vendors or any one of them or Targetco at law or
in equity or before or by any federal, provincial, state,
municipal or other governmental department, commission, board,
bureau or agency of any kind whatsoever and there is no basis
therefor;
(pp) to the best of their knowledge, Targetco is not in breach of
any law, ordinance, statute, regulation, bylaw, order or
decree of any kind whatsoever;
(qq) the Vendors and Targetco have good and sufficient right and
authority to enter into this Agreement and complete their
respective transactions contemplated under this Agreement on
the terms and conditions set forth herein;
(rr) to the best of their knowledge, the execution and delivery of
this Agreement, the performance of their respective
obligations under this Agreement and the completion of their
respective transactions contemplated under this Agreement will
not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute
default under, the constating documents of Targetco
or any indenture, mortgage, agreement, lease, licence
or other instrument of any kind whatsoever to which
Targetco, the Vendors or any one or more of them is a
party or by which any one of them is bound, or any
judgment or order of any kind whatsoever of any court
or administrative body of any kind whatsoever by
which any one of them is bound; and
(ii) result in the violation of any law or regulation of
any kind whatsoever by any of the Vendors or by
Targetco;
(ss) neither Targetco nor the Vendors nor any of them has incurred
any liability for brokers' or finder's fees of any kind
whatsoever with respect to this Agreement or any transaction
contemplated under this Agreement; and
(tt) to the best of their knowledge, the representations and
warranties of the Vendors contained in this Agreement disclose
all material facts specifically relating to the transactions
involving the Vendors and Targetco contemplated under this
Agreement which materially and adversely affect, or in the
future may materially and adversely affect, their respective
abilities to perform their respective obligations under this
Agreement.
4.2 The representations and warranties of the Vendors contained in this
Agreement shall be true at the Time of Closing as though they were made at
the Time of Closing and they shall survive the completion of the transactions
contemplated under this Agreement and remain in full force and effect
thereafter for the benefit of the Purchaser for a
9
<PAGE>
period of five (5) years after the Time of Closing in respect of
representations and warranties relating to tax matters, and for a period of
two (2) years after the Time of Closing in respect of all other
representations and warranties.
4.3 In order to induce the Vendors to enter into this Agreement and complete
their respective transactions contemplated hereunder, the Purchaser
represents and warrants to the Vendors that:
(a) the Purchaser was and remains duly incorporated under the laws
of Nevada and the Purchaser is in good standing with respect
to the filing of annual reports in that jurisdiction; and
(b) to the best of its knowledge, the Purchaser holds all licences
and permits that are required for carrying on its business in
the manner in which such business has been carried on.
4.4 The representations and warranties of the Purchaser contained in this
Agreement shall be true at the Time of Closing as though they were made at
the Time of Closing and shall terminate on and not survive the completion of
the transactions contemplated under this Agreement.
5. INDEMNITY
5.1 Notwithstanding the completion of the transactions contemplated under
this Agreement or the Purchaser's Investigation, the representations,
warranties and acknowledgments of the Vendors or any one of them contained in
this Agreement or any certificates or documents delivered by them or any one
of them pursuant to this Agreement shall survive the completion of the
transactions contemplated by this Agreement and shall continue in full force
and effect thereafter for the benefit of the Purchaser for a period of five
(5) years after the Time of Closing in respect of representations, warranties
and acknowledgments relating to tax matters, and for a period of two (2)
years after the Time of Closing in respect of all other representations,
warranties and acknowledgments. If any of the representations, warranties or
acknowledgments given by the Vendors or any one of them in this Agreement are
found to be untrue or there is a breach of any covenant or agreement in this
Agreement on the part of the Vendors or any one of them, the Vendors shall
jointly and severally indemnify and save harmless the Purchaser from and
against any and all liability, claims, debts, demands, suits, actions,
penalties, fines, losses, costs (including legal fees and disbursements as
charged by a lawyer to his own client), damages and expenses of any kind
whatsoever which may be brought or made against the Purchaser by any person,
firm or corporation of any kind whatsoever or which may be suffered or
incurred by the Purchaser, directly or indirectly, arising out of or as a
consequence of any such misrepresentation or breach of warranty,
acknowledgment, covenant or agreement. Without in any way limiting the
generality of the foregoing, this shall include any loss of any kind
whatsoever which may be suffered or incurred by the Purchaser, directly or
indirectly, arising out of a misrepresentation or breach of warranty related
to any material assessment or reassessment levied upon Targetco for tax,
interest and/or penalties for any period up to and including the Closing Date
and all claims, demands, costs (including legal fees and disbursements s
charged by a lawyer to his own client) and expenses of any kind whatsoever in
respect of the foregoing.
6. CLOSING DOCUMENTS
6.1 At the Time of Closing, the Vendors shall deliver to the solicitors for
the Purchaser:
(a) a certified true copy of the resolutions of the directors of
Targetco evidencing that the directors of the Targetco have
approved this Agreement and all of the transactions of
Targetco contemplated hereunder and the resolutions shall
include specific reference to:
(i) the sale and transfer of the Targetco Shares from
the Vendors to the Purchaser as provided for in
this Agreement;
(ii) the cancellation of the share certificates (the "Old
Share Certificates") representing the Targetco Shares
held as set forth in paragraph B of the recitals to
this Agreement; and
10
<PAGE>
(iii) the issuance of a new share certificate (the "New
Share Certificate") representing the Targetco Shares
registered in the name of the Purchaser;
(b) the Old Share Certificates;
(c) the New Share Certificate;
(d) the Participant Lists;
(e) the Employment Agreements referred to in subparagraph 2.1(c)
of this Agreement;
(f) the solicitor's opinion referred to in subparagraph 2.1(d)
of this Agreement;
(g) all the minute books and corporate seals of Targetco;
(h) a certificate of confirmation signed by the Vendors in the
form attached as Schedule "I" to this Agreement;
(i) a release in the form of Schedule "J" to this Agreement (the
"RELEASE") from each of the Vendors and Peter Ford of all
claims against Targetco or any of Promotions or Classroom 2000
for any outstanding amounts owing by Targetco or any of
Promotions or Classroom 2000 to any of the Vendors or Peter
Ford on account of any loans, bonuses, reimbursements,
compensation, fees, royalties, dividends or other
consideration whatsoever, except only as provided in the
Employment Agreements; and
(j) any other materials that are, in the opinion of the solicitors
for the Purchaser, reasonably required to complete the
transactions contemplated under this Agreement.
6.2 At the Time of Closing, the Purchaser shall deliver to the solicitors
for the Vendors:
(a) certified true copies of the resolutions of the directors of
the Purchaser, evidencing that the directors of the Purchaser
have approved this Agreement and all of the transactions of
the Purchaser contemplated hereunder;
(b) the Purchase Price as provided for in subparagraph 1.2 of this
Agreement;
(c) the solicitor's opinion referred to in subparagraph 2.2 (a)
of this Agreement; and
(d) a certificate of confirmation signed by a director or officer
of the Purchaser in the form attached as Schedule "K" to this
Agreement.
7. GENERAL
7.1 Time and each of the terms and conditions of this Agreement shall be of
the essence of this Agreement and any waiver by the parties of this paragraph
7.1 or any failure by them to exercise any of their rights under this
Agreement shall be limited to the particular instance and shall not extend to
any other instance or matter in this Agreement or otherwise affect any of
their rights or remedies under this Agreement.
7.2 The Schedules to this Agreement incorporated by reference and the
recitals to this Agreement constitute a part of this Agreement.
7.3 This Agreement constitutes the entire Agreement between the parties
hereto in respect of the matters referred to herein and there are no
representations, warranties, covenants or agreements, expressed or implied,
collateral hereto other than as expressly set forth or referred to herein.
11
<PAGE>
7.4 The headings in this Agreement are for reference only and do not
constitute terms of the Agreement.
7.5 The provisions contained in this Agreement which, by their terms,
require performance by a party to this Agreement subsequent to the Closing
Date of this Agreement, shall survive the Closing Date of this Agreement.
7.6 No alteration, amendment, modification or interpretation of this
Agreement or any provision of this Agreement shall be valid and binding upon
the parties hereto unless such alteration, amendment, modification or
interpretation is in written form executed by the parties directly affected
by such alteration, amendment, modification or interpretation.
7.7 Whenever the singular or masculine is used in this Agreement the same
shall be deemed to include the plural or the feminine or the body corporate
as the context may require.
7.8 The parties hereto shall execute and deliver all such further documents
and instruments and do all such acts and things as any party may, either
before or after the Closing Date, reasonably require in order to carry out
the full intent and meaning of this Agreement.
7.9 Any notice, request, demand and other communication to be given under
this Agreement shall be in writing and shall be delivered by hand or by
telecopier to the parties at their following respective addresses:
To the Vendors or Targetco:
c/o SportsMark Holdings Inc.
Attention: Mr. Geoff Ford
633 - 10201 Southport Road
Calgary, Alberta, T2W 4X9
Telephone: (403) 259-6160
Telecopier: (403) 252-2438
with a copy to:
Clark Wilson, Barristers & Solicitors
Attention: Mr. William C. Helgason
800 - 855 West Georgia Street
Vancouver, B.C., V6C 3H1
Telephone: (604) 643-3103
Telecopier: (604) 687-6314
To the Purchaser:
Internet Sports Network, Inc.
#700 - 509 Richards Street
Vancouver, B.C., V6B 2Z6
Attention: Mr. Roger Earle
Telephone: (604) 684-1880
Telecopier: (604) 684-1870
with a copy to:
Campney & Murphy, Barristers & Solicitors
Attention: Mr. Andrew G. Kadler
2100 - 1111 West Georgia Street
Vancouver, B.C., V7X 1K9
Telephone: (604) 661-7522
Telecopier: (604) 688-0829
12
<PAGE>
or to such other addresses as may be given in writing by the parties hereto
in the manner provided for in this paragraph, and shall be deemed to have
been received, if delivered by hand, on the date of delivery, or if delivered
by telecopier, on the date that it is sent.
7.10 This Agreement or any rights hereunder may be assigned by the Purchaser
with the consent of the Vendors, not to be unreasonably delayed or withheld,
but any such assignment shall not release the Purchaser from its obligations
hereunder.
7.11 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the Province of British Columbia.
7.12 This Agreement may be signed by the parties in as many counterparts as
may be deemed necessary, each of which so signed shall be deemed to be an
original, and all such counterparts together shall constitute one and the
same instrument.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of
the Effective Date first above written.
SIGNED, SEALED & DELIVERED )
by GEOFF FORD )
in the presence of: )
)
- ------------------------------------------------------- ) /s/ GEOFF FORD
Signature of Witness ) ------------------
) GEOFF FORD
Name: )
------------------------------------------------- )
Address: )
----------------------------------------------- )
)
- ------------------------------------------------------- )
Occupation: )
------------------------------------------ )
13
<PAGE>
SIGNED, SEALED & DELIVERED )
by WILLIAM GIBSON )
in the presence of: )
)
- ------------------------------------------------------ ) /s/ WILLIAM GIBSON
Signature of Witness ) ------------------
) WILLIAM GIBSON
Name: )
------------------------------------------------- )
Address: )
----------------------------------------------- )
)
- ------------------------------------------------------- )
Occupation: )
------------------------------------------ )
SIGNED, SEALED & DELIVERED )
by ROBERT MOSER )
in the presence of: )
)
) /s/ ROBERT MOSER
Signature of Witness ) ------------------
Name: ) ROBERT MOSER
------------------------------------------------- )
Address: )
----------------------------------------------- )
)
- ------------------------------------------------------- )
Occupation: )
------------------------------------------ )
14
<PAGE>
THE CORPORATE SEAL of SPORTSMARK INC. was )
hereunto affixed in the presence of: )
)
) c/s
)
- ------------------------------------------------------- )
Name: )
Title: )
)
)
)
- ------------------------------------------------------- )
Name: )
Title: )
THE CORPORATE SEAL of INTERNET SPORTS )
NETWORK, INC. was hereunto affixed in the presence )
of: )
) c/s
)
)
)
- ------------------------------------------------------- )
Name: )
Title: )
)
)
)
- ------------------------------------------------------- )
Name: )
Title: )
15
<PAGE>
ADDENDUM
THIS ADDENDUM dated for reference the 5th day of February, 1999,
BETWEEN: INTERNET SPORTS NETWORK, INC., a company incorporated under the laws
of Nevada having a place of business at #700 - 509 Richards Street,
Vancouver, British Columbia, V6B 2Z6;
("ISN")
AND: GEOFF FORD, of 6415 20th Street, S.W. Calgary, Alberta, T3E 5L4
("Mr. G. Ford"); WILLIAM GIBSON, of 101 Sunset Way,
S.E. Calgary, Alberta, T2X 2H6 ("Mr. Gibson"); and
ROBERT MOSER, of 433 Wilkinson Place, S.E. Calgary,
Alberta, T2J 2CZ ("Mr. Moser");
(individually a "Vendor" and collectively the "Vendors")
AND: PETER FORD, of 1050 - 10201 Southport Road S.W. Calgary, Alberta,
T2W 4X9 ("Peter Ford")
AND: SPORTSMARK INC. (Corporate Access No. 203552690),
a corporation incorporated under the laws of Alberta having a
registered office at 1050 - 10201 Southport Road S.W., Calgary,
Alberta, T2W 4X9;
("SMI")
AND: SPORTSMARK HOLDINGS INC. (Corporate Access No. 205311954),
a corporation incorporated under the laws of Alberta having a
registered office at 1900, 715 - 5 Avenue S.W., Calgary, Alberta,
T2P 2X6
("SMH");
AND: SPORTSMARK PROMOTIONS INC. (Corporate No. 732176013),
a corporation incorporated under the laws of Delaware having a
registered office at 1900, 715 - 5 Avenue S.W., Calgary, Alberta,
T2P 2X6
("SMP");
AND: CLASSROOM 2000 INC. (Corporate Access No. 207442955),
a corporation incorporated under the laws of Alberta having a
registered office at 800, 550 - 11 Avenue S.W., Calgary, Alberta,
T2R 1M7
("C2K");
AND: SMP SPORTSMARK PROMOTIONS INTERNATIONAL INC. (Company No. 7860),
a corporation incorporated under the laws of Barbados having a
registered office at Chancery Chambers, High Street, Bridgetown,
Barbados;
("SMPI")
WHEREAS:
<PAGE>
The Vendors, SMI and ISN entered into a Share Purchase Agreement (the "SMI
Agreement") dated 1 February 1999 pursuant to which ISN agreed to purchase
the shares of SMI from the Vendors;
SMH, SMP, C2K and ISN entered into a Share Purchase Agreement (the "SMH
Agreement") dated 1 February 1999 pursuant to which ISN agreed to purchase
certain loans and the shares of SMP and C2K from SMH;
SMPI and ISN entered into an Asset Purchase Agreement (the "SMPI Agreement")
dated 1 February 1999 pursuant to which ISN agreed to purchase certain assets
from SMPI in exchange for shares of ISN;
The SMI Agreement, the SMH Agreement and the SMPI Agreement (collectively,
the "Agreements") each contain conditions precedent (collectively, the
"Conditions") for the benefit of each of the parties to the Agreements, one
of which in each of the Agreements is the concurrent completion of all the
transactions contemplated under all of the Agreements;
The SMI Agreement provides for the Vendors and Peter Ford to enter into
employment agreements with SMI (the "Employment Agreements"), effective upon
closing of the transactions under the SMI Agreement on 5 February 1999; and
The parties hereto have agreed on the terms set out below to complete the
transactions under the SMI Agreement and the SMH Agreement on 5 February
1999, and the transactions under the SMPI Agreement on 12 February 1999;
NOW THIS ADDENDUM WITNESSES that in consideration of the premises and the
covenants and agreements herein contained and for other good and valuable
consideration (the receipt and sufficiency of which being hereby acknowledged
by each party), the parties covenant and agree as follows:
The CDN$356,700 portion of the Purchase Price due under the SMH Agreement
shall be payable by ISN issuing in favor of SMH a Promissory Note in that
amount, dated and delivered to SMH on 5 February 1999, due without interest
on 12 February 1999;
The Closing Date under the SMPI Agreement shall be amended to 12 February
1999;
The Employment Agreements shall not take effect until the transactions
contemplated in the SMPI Agreement have been completed, but the Employment
Agreements shall thereupon take effect as of 5 February 1999;
Each of the parties to this Addendum hereby waives and removes all conditions
precedent for the benefit of that party contained in any of the Agreements,
without prejudice to any rights or remedies that party may have whatsoever in
respect of any misrepresentation, breach of warranty, default or neglect by
any other party;
All other terms of the Agreements shall continue in full force and effect;
This Addendum may be executed in counterparts, and each counterpart shall
constitute an original portion of this Addendum; and
This Addendum shall not be effective until it has been executed by each of
the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date set out above.
SIGNED, SEALED & DELIVERED )
by GEOFF FORD )
in the presence of: )
)
/s/ WILLIAM D. GIBSON ) /s/ GEOFF FORD
- -------------------------------------------------------- ) -----------------
Signature of Witness ) GEOFF FORD
)
Name: WILLIAM D. GIBSON )
--------------------------------------------------- )
Address: 101 Sunset Way S.E. )
----------------------------------------------- )
Calgary, AB T2X 3C1 )
- -------------------------------------------------------- )
Occupation: Businessman )
-------------------------------------------- )
SIGNED, SEALED & DELIVERED )
by WILLIAM GIBSON )
in the presence of: )
)
/s/ ROB MOSER ) /s/ WILLIAM GIBSON
- ------------------------------------------------------- ) ------------------
Signature of Witness ) WILLIAM GIBSON
)
Name: Rob Moser )
------------------------------------------------- )
Address: 423 Wilkinson Place SE )
---------------------------------------------- )
Calgary, AB T2J 2C2 )
- ------------------------------------------------------- )
Occupation: Businessman )
------------------------------------------- )
SIGNED, SEALED & DELIVERED )
by ROBERT MOSER )
in the presence of: )
)
/s/ WILLIAM D. GIBSON ) /s/ ROBERT MOSER
- ------------------------------------------------------- ) -----------------
Signature of Witness ) ROBERT MOSER
)
Name: William D. Gibson )
------------------------------------------------- )
Address: 101 Sunset Way S.E. )
---------------------------------------------- )
Calgary, AB T2X 3C1 )
- ------------------------------------------------------- )
Occupation: )
------------------------------------------- )
<PAGE>
SIGNED, SEALED & DELIVERED )
by PETER FORD )
in the presence of: )
)
/s/ G.M. FORD ) /s/ PETER FORD
- ------------------------------------------------------ ) ---------------
Signature of Witness ) PETER FORD
)
Name: G.M. Ford )
------------------------------------------------- )
Address: )
---------------------------------------------- )
Calgary, AB )
- ------------------------------------------------------ )
Occupation: Businessman )
------------------------------------------ )
THE CORPORATE SEAL of INTERNET SPORTS )
NETWORK, INC. was hereunto affixed in the presence )
of: )
) c/s
)
)
- ------------------------------------------------------
Name:
Title:
- ------------------------------------------------------
Name:
Title:
THE CORPORATE SEAL of SMP SPORTSMARK )
PROMOTIONS INTERNATIONAL INC. )
was hereunto affixed in the presence of: )
) c/s
)
)
/s/ Trevor A. Carmichael
- ------------------------------------------------------
Name: Trevor A. Carmichael
Title: Director
/s/ Harold L. Cole
- ------------------------------------------------------
Name: Harold L. Cole
Title: Director
<PAGE>
THE CORPORATE SEAL of SPORTSMARK INC. was )
hereunto affixed in the presence of: )
)
) c/s
)
/s/ William D. Gibson )
- ---------------------------------------------------------- )
Name: William D. Gibson )
Title: President )
)
)
/s/ G.M. Ford )
- ---------------------------------------------------------- )
Name: G.M. Ford )
Title: Vice President )
Duly Executed and Delivered on behalf of )
SPORTSMARK HOLDINGS INC. by its authorized )
signatory(ies): )
)
)
) c/s
- ---------------------------------------------------------- )
Name: )
Title: )
)
)
- ---------------------------------------------------------- )
Name: )
Title: )
<PAGE>
THE CORPORATE SEAL of SPORTSMARK )
PROMOTIONS INC. was hereunto affixed in the )
presence of: )
) c/s
)
)
)
- ---------------------------------------------------------- )
Name: )
Title: )
)
)
- ---------------------------------------------------------- )
Name: )
Title: )
THE CORPORATE SEAL of CLASSROOM 2000 INC. )
was hereunto affixed in the presence of: )
)
) c/s
)
)
- ---------------------------------------------------------- )
Name: )
Title: )
)
)
- ---------------------------------------------------------- )
Name: )
Title: )
<PAGE>
EXHIBIT 2.3
MERGER AGREEMENT BETWEEN TORSTEN HEYCKE,
RAFAEL FURST, PERRY FRIEDMAN, PICKEM SPORTS, INC.
AND INTERNET SPORTS NETWORK, INC.
<PAGE>
MERGER AGREEMENT
MADE EFFECTIVE AS OF THE 1st DAY OF March, 1999 (the "Effective Date").
<TABLE>
<S> <C>
BETWEEN: TORSTEN HEYCKE, of 323 High Street, Ashland, Oregon, 97520 ("Mr. Heycke");
RAFAEL FURST, of 480 Matadero Ave., Palo Alto, California 94306 ("Mr. Furst"); and
PERRY FRIEDMAN, of 1604 Chelsea Way, Redwood City, California, 94062
("Mr. Friedman");
(individually a "Vendor" and collectively the "Vendors")
AND: PICKEM SPORTS, INC. (Corporate Charter No. 19971836 D), a corporation incorporated under
the laws of Maine, U.S.A., having a registered office at
P.O. Box 7230, Lewiston, Maine, 04243 7230, and an office at 3260 Hillview Avenue, First
Floor, Palo Alto, California, 94304;
("Targetco")
AND: INTERNET SPORTS NETWORK, INC., a company incorporated under the laws of Florida
having a place of business at #700 - 509 Richards Street, Vancouver, British Columbia, V6B 2Z6;
(the "Merger Parent")
</TABLE>
WHEREAS:
The authorized share capital of Targetco consists of 2,000 common shares
without par value of which 300 common shares (the "Targetco Shares") are
issued and outstanding;
The Vendors are the registered and beneficial owners of the Targetco Shares as
follows:
<TABLE>
<S> <C> <C>
Mr. Heycke as to 100 Targetco Shares
Mr. Furst as to 100 Targetco Shares
Mr. Friedman as to 100 Targetco Shares
-------------------
Total Targetco Shares: 300;
===================
</TABLE>
The Vendors and the Merger Parent have agreed to merge Targetco with a
wholly-owned subsidiary of the Merger Parent to be incorporated under the
laws of California (the "Subsidiary"), in the course of which merger the
Vendors shall exchange the Targetco Shares for shares of the Merger Parent
and cash consideration as described herein, on the terms and conditions set
forth in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants
and agreements herein contained, the parties hereto do covenant and agree
(the "Agreement") each with the other as follows:
1. MERGER AND EXCHANGE OF SHARES
1.1 Subject to the terms and conditions of this Agreement, the Vendors and
the Merger Parent each agree to merge Targetco with the Subsidiary in
accordance with Articles of Merger to be filed in Maine and California, and
the Vendors agree to transfer their Targetco Shares to the Merger Parent in
connection with the merger, and in connection therewith the Merger Parent
agrees to deliver to the Vendors on the Closing Date consideration (the
"Consideration") comprised of THREE MILLION U.S. DOLLARS (U.S.$3,000,000)
(the "Cash Portion") and ONE MILLION, EIGHT HUNDRED SIXTY-SEVEN THOUSAND NINE
HUNDRED AND NINETY-FIVE (1,867,995) common shares of the Merger Parent (the
"Merger Parent's Shares").
1
<PAGE>
1.2 Upon the merger of Targetco with the Subsidiary:
(a) the surviving corporation shall be a California corporation
with Articles of merger and Bylaws in the form attached to
this Agreement as Schedule "M"; and
(b) the initial directors and officers of the surviving
corporation shall be as described in Schedule "N".
1.3 The Cash Portion of the Consideration shall be delivered by the Merger
Parent to the Vendors by wire transfer or bank cashier's cheque, and the
Merger Parent's Shares shall be issued to the Vendors at a price of U.S.$1.75
per Merger Parent's Share, as follows:
<TABLE>
<S> <C> <C>
Mr. Heycke as to U.S.$1,000,000 and 622,665 Merger Parent's Shares
Mr. Furst as to U.S.$1,000,000 and 622,665 Merger Parent's Shares
Mr. Friedman as to U.S.$1,000,000 and 622,665 Merger Parent's Shares
------------------------------------------------------
Totals: U.S.$3,000,000 and 1,867,995 Merger Parent's Shares.
</TABLE>
1.4 The Merger Parent may apply to have its shares listed for public trading
on a recognized stock exchange in Canada or the United States (the
"Listing"). To facilitate the potential Listing of the Merger Parent, each of
the Vendors acknowledges to and agrees with the Merger Parent that the Merger
Parent's Shares will be subject to the following transfer restrictions, and
the certificates issued for the Merger Parent's Shares will bear a
corresponding legend:
(a) if the Listing does not occur within two years after the
Closing Date, then all the Merger Parent's Shares shall be
released from any transfer restrictions under this Agreement,
and may thereafter be transferred in accordance with the
articles of the Merger Parent and applicable law; and
(b) if the Listing does occur within two years after the Closing
Date, then the following portions of the Merger Parent's
Shares shall be released from any transfer restrictions under
this Agreement, and may thereafter be transferred in
accordance with the articles of the Merger Parent and
applicable law:
(i) 25% shall be released one year after the Listing;
(ii) a further 25%, for a total of 50%, shall be released
fifteen months after the Listing;
(iii) a further 25%, for a total of 75%, shall be released
eighteen months after the Listing; and
(iv) a further 25%, for a total of 100%, shall be released
twenty-one months after the Listing.
1.5 The transactions contemplated under this Agreement shall be completed at
the offices of the Merger Parent's solicitors, Messrs. Campney & Murphy, P.O.
Box 48800, 2100-1111 West Georgia Street, Vancouver, British Columbia, or at
such other place as may be agreed upon by the parties in writing, at 11:00
o'clock a.m. local time in Vancouver, British Columbia (the "Time of
Closing") on 12 March 1999 or on such other date as may be determined in
accordance with this Agreement or by further agreement in writing between the
parties (the "Closing Date").
1.6 Contemporaneously with the execution and delivery of this Agreement, the
Merger Parent shall pay to the attorney for the Vendors, in trust, a
non-refundable deposit in the sum of U.S.$300,000 (the "Deposit"), such
deposit to be held in trust pending the Closing Date. The Vendors shall be
liable to return the Deposit only if they fail to complete the transactions
contemplated in this Agreement and the Merger Parent is not in default.
2. CONDITIONS PRECEDENT
2.1 The Merger Parent's obligation to carry out the terms of this Agreement
and to complete its transactions contemplated under this Agreement is subject
to the fulfilment of each of the following conditions that:
2
<PAGE>
(a) by the Subject Removal Date (defined below), the Merger Parent
shall have been able to complete the Merger Parent's
Investigation (defined below) with results to its reasonable
satisfaction;
(b) by the Subject Removal Date, the Merger Parent shall have, or
indirectly through Targetco shall have, entered into written
employment and non-competition agreements with each of the
Vendors (the "Employment Agreements"), substantially in the
form which appears as Schedule "A" to this Agreement;
(c) by the Subject Removal Date, the directors of the Merger
Parent shall have approved of this Agreement and all of the
transactions contemplated under this Agreement, in their
absolute discretion;
(d) at the Time of Closing, the solicitors for the Vendors shall
provide an opinion dated as of the Closing Date, the form of
which appears as Schedule "B" to this Agreement;
(e) as of the Time of Closing, the Vendors and Targetco shall have
complied with all of their respective covenants and agreements
contained in this Agreement; and
(f) as of the Time of Closing, the representations and warranties
of the Vendors or any one of them contained in this Agreement
or contained in any certificates or documents delivered by
them or any one of them pursuant to this Agreement shall be
completely true as if such representations and warranties had
been made by the Vendors as of the Time of Closing;
The conditions set forth above are for the exclusive benefit of the Merger
Parent and each may be waived by the Merger Parent in whole or in part at or
before the time indicated for removal, without prejudice to any remedies that
may otherwise be available to the Merger Parent.
2.2 The Vendor's respective obligations to carry out the terms of this
Agreement and to complete their respective transactions contemplated under
this Agreement are subject to the fulfilment to their satisfaction of each of
the following conditions that:
(a) at the Time of Closing, the solicitors for the Merger Parent
shall provide an opinion dated as of the Closing Date, the
form of which appears as Schedule "C" to this Agreement;
(b) as of the Time of Closing, the Merger Parent shall have
complied with all of its covenants and agreements contained in
this Agreement; and
(c) at the Time of Closing, the representations and warranties of
the Merger Parent contained in this Agreement or contained in
any certificates or documents delivered by it pursuant to this
Agreement shall be completely true as if such representations
and warranties had been made by the Merger Parent as of the
Time of Closing.
The conditions set forth above are for the exclusive benefit of each of the
Vendors and may be waived by each of them in whole or in part at or before the
Time of Closing, without prejudice to any remedies that may otherwise be
available to the Vendors.
2.3 The Subject Removal Date shall be March 1, 1999.
3. COVENANTS, AGREEMENTS AND ACKNOWLEDGMENTS
3.1 The Vendors and Targetco jointly and severally covenant and agree with
the Merger Parent that the Vendors and Targetco shall:
(a) from and including the Effective Date through to and including
the Time of Closing, permit the Merger Parent, through its
directors, officers, employees and authorized agents and
representatives
3
<PAGE>
(collectively the "Merger Parent's Representatives") at its
own cost, full access to Targetco's books, records and
property including, without limitation, all of the Assets,
contracts and minute books of Targetco, so as to permit the
Merger Parent to make such investigation (the "Merger Parent's
Investigation") of Targetco as the Merger Parent deems
necessary, provided that the Merger Parent's Investigation
shall be undertaken in a reasonable manner and fashion so as
not to interfere with the daily business operations of
Targetco;
(b) from and including the Effective Date through to and including
the Time of Closing, do all such acts and things necessary to
ensure that all of the representations and warranties of the
Vendors or any one of them contained in this Agreement or any
certificates or documents delivered by them or any one of them
pursuant to this Agreement remain true and correct;
(c) from and including the Effective Date through to and including
the Time of Closing, preserve and protect the goodwill,
Assets, business and undertaking of Targetco and, without
limiting the generality of the foregoing, carry on the
business of Targetco in a reasonable and prudent manner; and
(d) from and including the Effective Date through to and
including the Time of Closing, keep confidential all
discussions and communications (including all information
communicated therein) between the parties, and all written
and printed materials of any kind whatsoever exchanged by
the parties, and, if so requested by the Merger Parent, the
Vendors and Targetco shall arrange for any director,
officer, employee, authorized agent or representative of
Targetco to enter into and the Vendors themselves shall
enter into a non-disclosure agreement with the Merger
Parent in a form acceptable to the Merger Parent acting
reasonably, which form shall permit confidential disclosure
to the Vendors' consultants, accountants and attorneys to
the extent necessary for them to verify the representations
and warranties contained in this Agreement.
3.2 The Vendors and Targetco jointly and severally covenant and agree with
the Merger Parent that, from and including the Effective Date through to and
including the Time of Closing, the Vendors and Targetco shall not do any such
act or thing that would render any representation or warranty of the Vendors
or any one of them contained in this Agreement or any certificates or
documents delivered by them or any one of them pursuant to this Agreement
untrue or incorrect.
3.3 The Vendors and Targetco jointly and severally covenant and agree with
the Merger Parent that, from and including the date the directors of the
Merger Parent approve of this Agreement and all of the transactions
contemplated under this Agreement and the Purchaser has completed its
investigation to its satisfaction, the Vendors and Targetco shall not
negotiate with any other person in respect of a merger of any of the Targetco
Shares or any part of the Assets, other than a sale of part of the Assets in
the ordinary course of Targetco's business.
3.4 The Vendors jointly and severally acknowledge to and agree with the
Merger Parent that the Merger Parent's Investigation shall in no way limit or
otherwise adversely affect the rights of the Merger Parent as provided for
hereunder in respect of the representations and warranties of the Vendors
contained in this Agreement or in any certificates or documents delivered by
them pursuant to this Agreement.
3.5 The Merger Parent covenants and agrees with the Vendors and with
Targetco that the Merger Parent shall:
(a) from and including the Effective Date through to and including
the Time of Closing, do all such acts and things necessary to
ensure that all of the representations and warranties of the
Merger Parent contained in this Agreement or any certificates
or documents delivered by it pursuant to this Agreement remain
true and correct; and
(b) from and including the Effective Date through to and including
the Time of Closing and subject to any obligations imposed by
law or as a result of any application for listing on a stock
exchange, keep
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confidential all discussions and communications (including all
information communicated therein) between the parties, and all
written and printed materials of any kind whatsoever exchanged
by the parties, and, if so requested by the Vendors or by
Targetco, the Merger Parent shall arrange for any of the
Merger Parent's Representatives to enter into, and the Merger
Parent itself shall enter into, a non-disclosure agreement
with the Vendors and Targetco in a form acceptable to the
Vendors and Targetco acting reasonably, which form shall
permit confidential disclosure to the Merger Parent's
consultants, accountants and attorneys to the extent necessary
for them to verify the representations and warranties
contained in this Agreement.
3.6 The Merger Parent covenants and agrees with the Vendors and with
Targetco that, from and including the Effective Date through to and including
the Time of Closing, the Merger Parent shall not do any such act or thing
that would render any representation or warranty of the Merger Parent
contained in this Agreement or any certificates or documents delivered by it
pursuant to this Agreement untrue or incorrect.
4. REPRESENTATIONS AND WARRANTIES
4.1 In order to induce the Merger Parent to enter into this Agreement and
complete its transactions contemplated hereunder, the Vendors jointly and
severally represent and warrant to the Merger Parent that:
(a) Targetco was and remains duly incorporated under the laws
of the State of Maine.
(b) Targetco:
(i) is a "private issuer" as that term is defined in any
applicable securities legislation (the "Securities Act");
(ii) does not maintain an office or mailing address, or have
any employees, agents or equipment (including any computer
server equipment) in any jurisdiction other than its
jurisdiction of incorporation, California and Oregon; and
(iii) is in good standing with respect to the filing of annual
reports in the jurisdiction of its incorporation and in each
jurisdiction in which it carries on business;
(c) the authorized and issued share capital of Targetco is as set
forth in paragraphs A and B of the recitals to this Agreement;
(d) the Targetco Shares are validly issued and outstanding fully
paid and non-assessable common shares of Targetco registered
in the names of, and beneficially owned by, the Vendors as set
forth in paragraph B of the recitals to this Agreement free
and clear of all voting restrictions, trade restrictions,
liens, charges or encumbrances of any kind whatsoever;
(e) except for the Targetco Shares, there are no shares, options,
convertible debentures, documents, instruments or other
writings of any kind whatsoever which may constitute a
"security" of Targetco as that term is defined in the
Securities Act or any other applicable legislation and, except
as is provided for by operation of this Agreement, there are
no options, agreements or rights of any kind whatsoever to
acquire all or any part of the Targetco Shares or any interest
in them or in any other share capital of Targetco;
(f) the constating documents of Targetco have not been altered
since its incorporation on 27 February 1997;
(g) all of the material transactions of Targetco have been
promptly and properly recorded or filed in or with the books
or records of Targetco, and the minute books of Targetco
contain all records of the meetings and proceedings of
shareholders and directors of Targetco since its date of
incorporation;
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(h) to the best of their knowledge, information and belief,
Targetco holds all licences and permits that are required for
carrying on its business in the manner in which such business
has been carried on;
(i) Targetco is the registered and beneficial owner of all of the
properties and assets (collectively the "Assets") listed on
Schedule "D" to this Agreement, and such Assets represent all
of the property and assets used by Targetco and which are
necessary or useful in the conduct of its business;
(j) Targetco has the corporate power to own the Assets owned by it
and carry on the business carried on by it and Targetco is
duly qualified to carry on business in all jurisdictions in
which it carries on business;
(k) Targetco has good and marketable title to the Assets free and
clear of all liens, charges and encumbrances of any kind
whatsoever save and except those specified as "Permitted
Encumbrances" on Schedule "D" to this Agreement;
(l) to the best of their knowledge, information and belief, no
third party privacy or intellectual property rights, including
without limitation, copyright, trade secret or patent rights,
were violated in the creation, compilation or acquisition of
the Assets by Targetco or by any party through whom Targetco
acquired title;
(m) all machinery and equipment of any kind whatsoever comprised
in the Assets are in reasonable operating condition and in a
state of reasonable maintenance and repair taking into account
their age and use;
(n) all of the bank accounts and safety deposit boxes of Targetco
are listed on Schedule "D" to this Agreement;
(o) Targetco does not maintain insurance against loss of, or
damage to, the Assets or public liability;
(p) the unaudited financial statements of Targetco for its
financial years ended 31 December 1997 and 1998 (collectively
the "Targetco Financial Statements"), copies of which appear
as Schedule "E" to this Agreement, are true and correct in
every material respect and present fairly and accurately the
financial position and results of the operations of Targetco
for the periods then ended, and the 1998 Targetco Financial
Statement has been prepared in accordance with generally
accepted accounting principles applied on a consistent basis;
(q) the books and records of Targetco disclose all material
financial transactions of Targetco arising subsequent to the
preparation of the Targetco Financial Statements and such
transactions have been fairly and accurately recorded;
(r) since 31 December 1998:
(i) no dividends or other distributions of any kind
whatsoever on any shares in the capital of Targetco have
been made, declared or authorized, except as disclosed
in the Targetco Financial Statements;
(ii) Targetco has not become indebted to the Vendors or any
one of them, except for current employment compensation as
described in Schedule "F";
(iii) none of the Vendors or any other officer, director or
employee of Targetco has become indebted or under obligation
to Targetco on any account whatsoever; and
(iv) Targetco has not guaranteed or agreed to guarantee any
debt, liability or other obligation of any kind whatsoever of
any person, firm or corporation of any kind whatsoever;
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(s) there are no material liabilities of Targetco, whether direct,
indirect, absolute, contingent or otherwise which are not
disclosed or reflected in the Targetco Financial Statements
except those incurred in the ordinary course of business since
the date the Targetco Financial Statements were prepared, all
of which are recorded in the books and records of Targetco;
(t) the accounts receivable of Targetco shown on the Targetco
Financial Statements or recorded in the books and records of
Targetco are bona fide, good and collectible without set-off
or counterclaim;
(u) since 31 December 1998:
(i) there has not been any material adverse change of any kind
whatsoever in the financial position or condition of Targetco
or any damage, loss or other change of any kind whatsoever in
circumstances materially affecting the business or Assets or
the right or capacity of Targetco to carry on its business;
(ii) Targetco has not waived or surrendered any right of any kind
whatsoever of material value;
(iii) Targetco has not discharged, satisfied or paid any lien,
charge or encumbrance of any kind whatsoever or obligation or
liability of any kind whatsoever other than current
liabilities in the ordinary course of its business or as
expressly permitted under this Agreement, ;
(iv) the business of Targetco has been carried on in the ordinary
course;
(v) except as set forth in Schedule "G", no new machinery or
equipment of any kind whatsoever has been ordered by, or
installed or assembled on the premises of, Targetco; and
(vi) except as set forth in Schedule "G", no capital expenditures
exceeding in the aggregate $10,000 have been authorized or
made by Targetco;
(v) the directors, officers, employees, contractors and
consultants of Targetco and all of their compensation
arrangements with Targetco, whether as directors, officers or
employees of, or as independent contractors or consultants to,
Targetco, are as listed on Schedule "F" to this Agreement;
(w) no payments of any kind whatsoever have been made or
authorized by Targetco to or on behalf of the Vendors or any
one of them or to or on behalf of any of the directors,
officers, employees contractors or consultants of Targetco
except in accordance with those compensation arrangements
specified on Schedule "F" to this Agreement or except as
contemplated by this Agreement;
(x) there are no pensions, profit sharing, group insurance or
similar plans or other deferred compensation plans of any kind
whatsoever affecting Targetco other than those specified on
Schedule "F" to this Agreement;
(y) Targetco is not now, and has never been, a party to any
collective agreement with any labour union or other
association of employees of any kind whatsoever;
(z) the contracts and agreements included on Schedules "A" and "F"
to this Agreement and those additional contracts and
agreements specified on Schedule "G" to this Agreement
(collectively the "Material Contracts") constitute all of the
material contracts and agreements of Targetco. In particular,
Targetco does not maintain insurance of any kind;
(aa) Targetco has not licensed, leased, transferred, disposed of or
encumbered any of the Assets in any way, or permitted any
third party access to any of the Assets, including in
particular the source code to the computer software and the
contestant and subscriber information included in the Assets,
except in accordance with the terms of the Material Contracts;
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(bb) except as is noted on Schedule "G" to this Agreement, the
Material Contracts are in good standing in all respects and
not in default in any respect;
(cc) except as is noted on Schedule "G" to this Agreement, Targetco
can terminate all of their obligations under each of the
Material Contracts without liability on not more than one
month's notice;
(dd) all tax returns and reports of Targetco required by law to be
filed have been filed and are substantially true, complete and
correct and all taxes and other government charges of any kind
whatsoever of Targetco have been paid or accrued in the
Targetco Financial Statements;
(ee) Targetco has been assessed for all applicable income and other
tax remittances for all of its full or partial fiscal years to
and including its fiscal year ended 31 December, 1997;
(ff) Targetco has not:
(i) acquired any property from a person, otherwise than at
arm's length, for proceeds greater than the fair market value
thereof; or
(ii) disposed of anything to a person, otherwise than at arm's
length, for proceeds less than the fair market value thereof;
(gg) Targetco has made all elections required to have been made
under all applicable tax legislation in connection with any
distributions made by it and all such elections were true and
correct and made in the prescribed form and within the
prescribed time period;
(hh) adequate provision has been made for taxes payable by Targetco
for the current period for which tax returns are not yet
required to be filed and there are no agreements, waivers or
other arrangements of any kind whatsoever providing for an
extension of time with respect to the filing of any tax return
by, or payment of, any tax or governmental charge of any kind
whatsoever by Targetco;
(ii) they are not aware of any contingent tax liabilities of
Targetco of any kind whatsoever or any grounds which would
prompt a reassessment of Targetco including aggressive
treatment of income and expenses in earlier tax returns filed;
(jj) there are no amounts outstanding and unpaid for which
Targetco has previously claimed a deduction under any
applicable tax legislation;
(kk) Targetco has made all collections, deductions, remittances and
payments of any kind whatsoever and filed all reports and
returns required by it to be made or filed under the
provisions of all applicable statutes requiring the making of
collections, deductions, remittances or payments of any kind
whatsoever in those jurisdictions in which it carries on
business;
(ll) to the best of their knowledge, there are no actions, suits,
judgments, investigations or proceedings of any kind
whatsoever outstanding, pending or threatened against or
affecting Targetco at law or in equity or before or by any
federal, provincial, state, municipal or other governmental
department, commission, board, bureau or agency of any kind
whatsoever and there is no basis therefor;
(mm) to the best of their knowledge, Targetco is not in breach of
any law, ordinance, statute, regulation, bylaw, order or
decree of any kind whatsoever;
(nn) the Vendors and Targetco have good and sufficient right and
authority to enter into this Agreement and complete their
respective transactions contemplated under this Agreement on
the terms and conditions set forth herein;
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(oo) to the best of their knowledge, the execution and delivery of
this Agreement, the performance of their respective
obligations under this Agreement and the completion of their
respective transactions contemplated under this Agreement will
not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute
default under, the constating documents of Targetco
or any indenture, mortgage, agreement, lease, licence
or other instrument of any kind whatsoever to which
Targetco, the Vendors or any one or more of them is a
party or by which any one of them is bound, or any
judgment or order of any kind whatsoever of any court
or administrative body of any kind whatsoever by
which any one of them is bound; and
(ii) result in the violation of any law or regulation of
any kind whatsoever by any of the Vendors or by
Targetco;
(pp) neither Targetco nor the Vendors nor any of them has
incurred any liability for brokers' or finder's fees of
any kind whatsoever with respect to this Agreement or any
transaction contemplated under this Agreement; and
(qq) the representations and warranties of the Vendors contained
in this Agreement disclose all material facts specifically
relating to the transactions involving the Vendors and
Targetco contemplated under this Agreement which
materially and adversely affect, or in the future may
materially and adversely affect, their respective
abilities to perform their respective obligations under
this Agreement.
4.2 The representations and warranties of the Vendors contained in this
Agreement shall be true at the Time of Closing as though they were made at
the Time of Closing and they shall survive the completion of the transactions
contemplated under this Agreement and remain in full force and effect
thereafter for the benefit of the Merger Parent for a period of five (5)
years after the Time of Closing in respect of representations and warranties
relating to tax matters, and for a period of two (2) years after the Time of
Closing in respect of all other representations and warranties.
4.3 The Merger Parent shall complete the Merger Parent's Investigation no
later than the Subject Removal Date.
4.4 In order to induce the Vendors to enter into this Agreement and complete
their respective transactions contemplated hereunder, the Merger Parent
represents and warrants to the Vendors that:
(a) the Merger Parent was and remains duly incorporated under the
laws of Florida and the Merger Parent is in good standing with
respect to the filing of annual reports in that jurisdiction;
(b) the Subsidiary will on the Closing Date be duly incorporated
under the laws of California and will be in good standing with
respect to the filing of annual reports in that jurisdiction;
(c) as of the Effective Date, the authorized share capital of the
Merger Parent consists of 50,000,000 common shares with a par
value of $0.001 per share, of which 12,885,229 common shares
were issued and outstanding (the "Effective Date Issued
Capital");
(d) as of the Closing Date, the authorized share capital of the
Subsidiary will consist of 10,000,000 shares, of which
1,000,000 shares will be issued and outstanding in the name of
the Merger Parent;
(e) on the Closing Date, the Merger Parent's Shares shall be
validly issued and outstanding fully paid and non-assessable
common shares of the Merger Parent registered in the names of,
and beneficially owned by, the Vendors as set forth in
paragraph 1.2 of this Agreement, and all of the Effective Date
Issued Capital shall be validly issued and outstanding fully
paid and non-assessable common shares of the Merger Parent;
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(f) as of the Effective Date, except for the Effective Date Issued
Capital and except as disclosed in Schedule "K" there were no
shares, options, convertible debentures, documents,
instruments or other writings of any kind whatsoever which may
constitute a "security" of Merger Parent as that term is
defined in the applicable securities legislation;
(g) as of the Effective Date, the constating documents of the
Merger Parent had not been altered since its merger on 22
February 1999. Copies of the Merger Parent's articles of
incorporation and bylaws are attached to this Agreement as
Schedule "L";
(h) all tax returns and reports of the Merger Parent required by
law to be filed have been filed and are substantially true,
complete and correct and all taxes and other government
charges of any kind whatsoever of the Merger Parent have been
paid or accrued in the Merger Parent Financial Statements;
(i) all of the material transactions of the Merger Parent have
been promptly and properly recorded or filed in or with the
books or records of the Merger Parent, and the minute books of
the Merger Parent contain all records of the meetings and
proceedings of shareholders and directors of the Merger Parent
since its date of incorporation;
(j) to the best of their knowledge, information and belief, the
Merger Parent holds all licences and permits that are required
for carrying on its business in the manner in which such
business has been carried on;
(k) the Merger Parent has the corporate power to own the assets
owned by it and carry on the business carried on by it and the
Merger Parent is duly qualified to carry on business in all
jurisdictions in which it carries on business;
(l) to the best of its knowledge, information and belief, no third
party privacy or intellectual property rights, including
without limitation, copyright, trade secret or patent rights,
were violated in the creation, compilation or acquisition of
assets by the Merger Parent or by any party through whom the
Merger Parent acquired title;
(m) the unaudited financial statements of the Merger Parent for
its fiscal year ended 30 April 1998 and the unaudited
financial statements of the Merger Parent for the interim six
month period ended 31 October 1998 (collectively the "Merger
Parent Financial Statements"), copies of which appear as
Schedule "L" to this Agreement, are true and correct in every
material respect and present fairly and accurately the
financial position and results of the operations of the Merger
Parent for the periods then ended and the Merger Parent
Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis;
(n) the books and records of the Merger Parent disclose all
material financial transactions of the Merger Parent arising
subsequent to the preparation of the Merger Parent Financial
Statements and such transactions have been fairly and
accurately recorded;
(o) except as disclosed to the Vendors in the Schedules to this
Agreement, there are no material liabilities of the Merger
Parent, whether direct, indirect, absolute, contingent or
otherwise which are not disclosed or reflected in the Merger
Parent Financial Statements except those incurred in the
ordinary course of business since the date the Merger Parent
Financial Statements were prepared, all of which are recorded
in the books and records of the Merger Parent;
(p) to the best of its knowledge, there are no actions, suits,
judgments, investigations or proceedings of any kind
whatsoever outstanding, pending or threatened against or
affecting the Merger Parent at law or in equity or before or
by any federal, provincial, state, municipal or other
governmental
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department, commission, board, bureau or agency of any kind
whatsoever, except that a potential claim against the Merger
Parent has been threatened by Digital Data Networks, Inc.
("DDN") in respect of a proposed merger of the Merger Parent
and DDN which did not proceed, in respect of which a written
settlement agreement has been executed without commencement of
legal proceedings;
(q) to the best of its knowledge, the Merger Parent is not in
breach of any law, ordinance, statute, regulation, bylaw,
order or decree of any kind whatsoever;
(r) the Merger Parent has good and sufficient right and authority
to enter into this Agreement and complete the transactions
contemplated under this Agreement on the terms and conditions
set forth herein;
(s) to the best of its knowledge, the execution and delivery of
this Agreement, the performance of their respective
obligations under this Agreement and the completion of their
respective transactions contemplated under this Agreement will
not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute
default under, the constating documents of the Merger
Parent or any indenture, mortgage, agreement, lease,
licence or other instrument of any kind whatsoever to
which the Merger Parent is a party to or by which it
is bound, or any judgment or order of any kind
whatsoever of any court or administrative body of any
kind whatsoever by which the Merger Parent is bound;
and
(ii) result in the violation of any law or regulation of
any kind whatsoever by the Merger Parent; and
(t) the representations and warranties of the Merger Parent
contained in this Agreement disclose all material facts
specifically relating to the transactions involving the
Merger Parent contemplated under this Agreement which
materially and adversely affect, or in the future may
materially and adversely affect, the Merger Parent's
ability to perform its obligations under this Agreement.
4.5 The representations and warranties of the Merger Parent contained in
this Agreement shall be true at the Time of Closing as though they were made
at the Time of Closing and shall survive the completion of the transactions
contemplated under this Agreement and remain in full force and effect
thereafter for the benefit of the Vendors for a period of Two (2) years after
the Time of Closing.
5. INDEMNITY
5.1 Notwithstanding the completion of the transactions contemplated under
this Agreement or the Merger Parent's Investigation, the representations,
warranties and acknowledgments of the Vendors or any one of them contained in
this Agreement or any certificates or documents delivered by them or any one
of them pursuant to this Agreement shall survive the completion of the
transactions contemplated by this Agreement and shall continue in full force
and effect thereafter for the benefit of the Merger Parent for a period of
five (5) years after the Time of Closing in respect of representations,
warranties and acknowledgments relating to tax matters, and for a period of
two (2) years after the Time of Closing in respect of all other
representations, warranties and acknowledgments. If any of the
representations, warranties or acknowledgments given by the Vendors or any
one of them in this Agreement are found to be untrue or there is a breach of
any covenant or agreement in this Agreement on the part of the Vendors or any
one of them, the Vendors shall jointly and severally indemnify and save
harmless the Merger Parent from and against any and all liability, claims,
debts, demands, suits, actions, penalties, fines, losses, costs (including
legal fees and disbursements as charged by a lawyer to his own client),
damages and expenses of any kind whatsoever which may be brought or made
against the Merger Parent by any person, firm or corporation of any kind
whatsoever or which may be suffered or incurred by the Merger Parent,
directly or indirectly, arising out of or as a consequence of any such
misrepresentation
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or breach of warranty, acknowledgment, covenant or agreement. Without in any
way limiting the generality of the foregoing, this shall include any loss of
any kind whatsoever which may be suffered or incurred by the Merger Parent,
directly or indirectly, arising out of any material assessment or
reassessment levied upon Targetco for tax, interest and/or penalties for any
period up to and including the Closing Date and all claims, demands, costs
(including legal fees and disbursements as charged by a lawyer to his own
client) and expenses of any kind whatsoever in respect of the foregoing.
5.2 Notwithstanding the completion of the transactions contemplated under
this Agreement, the representations, warranties and acknowledgments of the
Merger Parent contained in this Agreement or any certificates or documents
delivered by the Merger Parent pursuant to this Agreement shall survive the
completion of the transactions contemplated by this Agreement and shall
continue in full force and effect thereafter for the benefit of the Vendors
for a period of two (2) years after the Time of Closing. If any of the
representations, warranties or acknowledgments given by the Merger Parent in
this Agreement are found to be untrue or there is a breach of any covenant or
agreement in this Agreement on the part of the Merger Parent, the Merger
Parent shall indemnify and save harmless the Vendors from and against any and
all liability, claims, debts, demands, suits, actions, penalties, fines,
losses, costs (including legal fees and disbursements as charged by a lawyer
to his own client), damages and expenses of any kind whatsoever which may be
brought or made against the Vendors by any person, firm or corporation of any
kind whatsoever or which may be suffered or incurred by the Vendors, directly
or indirectly, arising out of or as a consequence of any such
misrepresentation or breach of warranty, acknowledgment, covenant or
agreement.
5.3 Any party (an "Indemnified Party") requesting indemnity under this
Section shall provide demand and notice of such request to the party from
whom the Indemnified Party requests indemnity (the "Indemnifying Party") in
writing, within 20 days of receipt of notice (constructive or actual) of the
claim for which indemnity is requested. The Indemnifying Party shall then
have 10 days within which to acknowledge and accept responsibility for such
indemnity. If within 10 days of notice the Indemnifying Party accepts
responsibility for indemnity under this provision, the Indemnified Party
shall cooperate with the Indemnifying Party, who shall take primary
responsibility for defense of such claim, including choice of counsel. The
Indemnified Party may retain additional counsel of their own choosing, but at
the Indemnified Party's expense. Any Indemnified Party for whose claim the
Indemnifying Party has accepted responsibility under this provision shall not
negotiate, compromise or settle any claim against the Indemnified Party
without the Indemnifying Party's written consent.
6. CLOSING DOCUMENTS
6.1 At the Time of Closing, the Vendors shall deliver to the solicitors for
the Merger Parent:
(a) a certified true copy of the resolutions of the directors of
Targetco and the Subsidiary evidencing that the directors of
the Targetco and the Subsidiary have approved this Agreement
and all of the transactions of Targetco contemplated hereunder
and the resolutions shall include specific reference to:
(i) the transfer of the Targetco Shares from the
Vendors to the Merger Parent as provided for in this
Agreement;
(ii) the cancellation of the share certificates (the "Old
Share Certificates") representing the Targetco Shares
held as set forth in paragraph B of the recitals to
this Agreement; and
(iii) approval of the Articles of Merger whereby Targetco
is merged with the Subsidiary;
(b) the Old Share Certificates;
(c) duly executed Articles of Merger in form for filing in the
States of Maine and California;
(d) the Employment Agreements referred to in subparagraph 2.1(b)
of this Agreement;
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(e) the solicitor's opinion referred to in subparagraph 2.1(d)
of this Agreement;
(f) all the minute books and corporate seals of Targetco;
(g) a certificate of confirmation signed by the Vendors in the
form attached as Schedule "H" to this Agreement;
(h) a release in the form of Schedule "I" to this Agreement (the
"Release") from each of the Vendors of all claims against
Targetco for any outstanding amounts owing by Targetco to any
of the Vendors on account of any loans, bonuses,
reimbursements, compensation, fees, royalties, dividends or
other consideration whatsoever, except only as provided in the
Employment Agreements; and
(i) any other materials that are, in the opinion of the solicitors
for the Merger Parent, reasonably required to complete the
transactions contemplated under this Agreement.
6.2 At the Time of Closing, the Merger Parent shall deliver to the
solicitors for the Vendors:
(a) certified true copies of the resolutions of the directors of
the Merger Parent and the Subsidiary, evidencing that the
directors of the Merger Parent and the Subsidiary have
approved this Agreement and all of the transactions of the
Merger Parent and the Subsidiary contemplated hereunder;
(b) the balance of the Cash Portion after payment of the Deposit
as provided for in subparagraph 1.6 of this Agreement, which
balance is to be divided equally and paid by wire transfer or
bank cashier's cheque separately paid and addressed to each of
the three Vendors;
(c) share certificates representing the Merger Parent's Shares
registered in the individual names of the Vendors as provided
for in subparagraph 1.3 of this Agreement;
(d) the solicitor's opinion referred to in subparagraph 2.2(a)
of this Agreement; and
(e) a certificate of confirmation signed by an officer or director
of the Merger Parent in the form attached as Schedule "J" to
this Agreement.
7. GENERAL
7.1 Time and each of the terms and conditions of this Agreement shall be of
the essence of this Agreement and any waiver by the parties of this paragraph
7.1 or any failure by them to exercise any of their rights under this
Agreement shall be limited to the particular instance and shall not extend to
any other instance or matter in this Agreement or otherwise affect any of
their rights or remedies under this Agreement.
7.2 The Schedules to this Agreement incorporated by reference and the
recitals to this Agreement constitute a part of this Agreement.
7.3 This Agreement constitutes the entire Agreement between the parties
hereto in respect of the matters referred to herein and there are no
representations, warranties, covenants or agreements, expressed or implied,
collateral hereto other than as expressly set forth or referred to herein.
7.4 The headings in this Agreement are for reference only and do not
constitute terms of the Agreement.
7.5 The provisions contained in this Agreement which, by their terms,
require performance by a party to this Agreement subsequent to the Closing
Date of this Agreement, shall survive the Closing Date of this Agreement.
13
<PAGE>
7.6 No alteration, amendment, modification or interpretation of this
Agreement or any provision of this Agreement shall be valid and binding upon
the parties hereto unless such alteration, amendment, modification or
interpretation is in written form executed by the parties directly affected
by such alteration, amendment, modification or interpretation.
7.7 Whenever the singular or masculine is used in this Agreement the same
shall be deemed to include the plural or the feminine or the body corporate
as the context may require.
7.8 The parties hereto shall execute and deliver all such further documents
and instruments and do all such acts and things as any party may, either
before or after the Closing Date, reasonably require in order to carry out
the full intent and meaning of this Agreement.
7.9 Any notice, request, demand and other communication to be given under
this Agreement shall be in writing and shall be delivered by hand or by
telecopier to the parties at their following respective addresses:
to Targetco: Pickem Sports, Inc.
Attention: Mr. Torsten Heycke
3260 Hillview Avenue, First Floor
Palo Alto, California, 94304
Telephone: (800) 809-1148
Telecopier: (650) 858-2711
to Mr. Heycke: TORSTEN HEYCKE
323 High Street
Ashland, Oregon, 97520
Telephone: (541) 482-7038
Telecopier: (541) 482-6340
to Mr. Furst: RAFAEL FURST
480 Matadero Ave.
Palo Alto, California 94306
Telephone: (650) 858-2711
Telecopier: (650) 850-3660
to Mr. Friedman: PERRY FRIEDMAN
1604 Chelsea Way
Redwood City, California, 94062
Telephone: (650) 858-2711
Telecopier: (650) 850-3660
and in the case of Targetco and each of the Vendors, with a copy to:
Bonneau & Geismar, LLC
Attention: Mr. John W. Geismar
P.O. Box 7230, 100 Lisbon Street
Lewiston, Maine, 04243-7230
Telephone: (207) 777-5200
Telecopier: (207) 777-0037
To the Merger Parent or the Subsidiary:
Internet Sports Network, Inc.
#700 - 509 Richards Street
Vancouver, B.C., V6B 2Z6
Attention: Mr. Roger Earle
14
<PAGE>
Telephone: (604) 684-1880
Telecopier: (604) 684-1870
with a copy to: Campney & Murphy, Barristers & Solicitors
Attention: Mr. Andrew G. Kadler
2100 - 1111 West Georgia Street
Vancouver, B.C., V7X 1K9
Telephone: (604) 661-7522
Telecopier: (604) 688-0829
or to such other addresses as may be given in writing by the parties hereto in
the manner provided for in this paragraph, and shall be deemed to have been
received, if delivered by hand, on the date of delivery, or if delivered by
telecopier, on the date that it is sent.
7.10 This Agreement or any rights hereunder may be assigned by the Merger
Parent, but any such assignment shall not release the Merger Parent from its
obligations hereunder.
7.11 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the State of California, and all disputes arising
under this Agreement shall be resolved in, and the parties hereto submit to
the jurisdiction of, the State or Federal Courts of California.
7.12 This Agreement may be signed by the parties in as many counterparts as
may be deemed necessary, each of which so signed shall be deemed to be an
original, and all such counterparts together shall constitute one and the
same instrument.
15
<PAGE>
IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of the
Effective Date first above written.
SIGNED, SEALED & DELIVERED )
by TORSTEN HEYCKE )
in the presence of: )
)
/S/ NANCY A. BESTOR ) /S/ TORSTEN HEYCKE
Signature of Witness ) TORSTEN HEYCKE
)
Name: NANCY A. BESTOR )
Address: 334 HIGH STREET )
ASHLAND, OR 97520 )
Occupation: SELF EMPLOYED )
)
)
)
SIGNED, SEALED & DELIVERED )
by RAFAEL FURST )
in the presence of: )
)
/S/ PERRY FRIEDMAN ) /S/ RAFAEL FURST
Signature of Witness ) RAFAEL FURST
)
Name: PERRY FRIEDMAN )
Address: 1604 CHELSEA WAY )
REDWOOD CITY, CA 94061 )
Occupation: VP OF TECHNOLOGY )
)
)
)
16
<PAGE>
SIGNED, SEALED & DELIVERED )
by PERRY FRIEDMAN )
in the presence of: )
)
/s/ RAFAEL FURST ) /S/ PERRY FRIEDMAN
- --------------------------------
Signature of Witness ) PERRY FRIEDMAN
)
Name: RAFAEL FURST )
Address: 480 MATADERO AVE )
PALO ALTO, CA 94306 )
Occupation: VP BUSINESS DEVELOPMENT )
)
)
)
THE CORPORATE SEAL of PICKEM SPORTS, INC. )
was hereunto affixed in the presence of: )
)
) c/s
)
/s/ TORSTEN HEYCKE )
- --------------------------------
Name: Torsten Heycke
Title: President
/s/ RAPHAEL FURST
- --------------------------------
Name: Raphael Furst
Title: Treasurer
THE CORPORATE SEAL of INTERNET SPORTS )
NETWORK, INC. was hereunto affixed in the presence )
of: )
) c/s
)
)
/s/ PATRICK S. EARLE
- --------------------------------
Name: Patrick S. Earle
Title: President
/s/ D. ROGER EARLE
- --------------------------------
Name: D. R. Earle
Title: Secretary
17
<PAGE>
SCHEDULE "A"
EMPLOYMENT AGREEMENT
PICKEM SPORTS INC.
3260 Hillview Avenue, First Floor
Palo Alto, California, 94304
To: March 1, 1999
Re: EMPLOYMENT AGREEMENT
This Agreement contains the terms and conditions of your employment with
Pickem Sports Inc. (the "Company").
You will be employed for a term (the "Term") of two (2) years commencing
effective upon closing of the Merger Agreement between you, the Company and
others dated March 1, 1999 unless your employment is terminated or the Term
is extended in accordance with the provisions of this Agreement.
1. DEFINITIONS
In this Agreement:
(a) "AFFILIATE" has the same meaning as in the corporate statute
applicable to the Company or any successor legislation, as
amended from time to time.
(b) "AGREEMENT" means this letter agreement and schedules attached
to this letter agreement, as amended or supplemented from time
to time.
(c) "BOARD" means the board of directors of the Company.
(d) "BUSINESS OF THE COMPANY" means the business carried on by the
Company from time to time, and includes without limitation the
provision of entertainment services including the distribution
of sports related information and the operation of contests
involving the predicted outcome of sporting events.
(e) "CAUSE" includes:
(i) any willful failure by you in the performance of any
of your material duties under this Agreement;
(ii) your conviction of a crime (indictable level or
penalized by incarceration or a lesser crime
involving moral turpitude), or any act involving
money or other property involving the Company or any
other member of the Group that would constitute a
crime in the jurisdiction involved;
(iii) any act of fraud, misappropriation, dishonesty,
embezzlement or similar conduct against the Company
or an Affiliate or customer of the Company;
(iv) the use of illegal drugs or the habitual and
disabling use of alcohol or drugs;
(v) any material breach of any of the terms of this
Agreement which remains uncured after the expiration
of ten days following the delivery of written notice
of such breach to you by the Company or if cure
cannot be completed within ten days after such
notice, you fail to diligently commence and pursue
such cure;
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<PAGE>
(vi) any threatened or actual attempt by you to secure any
personal profit in connection with the Business of
the Company or the corporate opportunities of any
member of the Group other than pursuant to this
Agreement or your investment in the Group;
(vii) any act which is materially injurious to the
Business of the Company; and
(viii) after notice from the Company and opportunity to cure
your failure to devote adequate time to the Business
of the Company, or conduct by you amounting to
insubordination or inattention to, or substandard
performance of, your duties and responsibilities
under this Agreement.
(f) "COMPANY" means Pickem Sports, Inc., a company incorporated
under the laws of California.
(g) "COMPETITIVE BUSINESS" means any business or enterprise that
competes with the Business of the Company.
(h) "CONFIDENTIAL INFORMATION" means all confidential or
proprietary facts, data, techniques and other information
relating to the Business of the Company which may before or
after the date of this Agreement be disclosed to you by the
Company or by any other member of the Group or which may
otherwise come within your knowledge or which may be developed
by you in the course of your employment under this Agreement
or from any other Confidential Information.
(i) "GROUP" means the Company and its Affiliates.
(j) "INTELLECTUAL PROPERTY RIGHTS" means all rights in respect of
intellectual property including, without limitation, all
patent, industrial design, integrated circuit topography,
know-how, trade secret, privacy and trade-mark rights and
copyright, to the extent those rights may subsist anywhere in
the universe.
(k) "PERSON" means any individual, partnership, limited
partnership, joint venture, syndicate, sole proprietorship,
company or corporation with or without share capital,
unincorporated association, trust, trustee, executor,
administrator or other legal personal representative,
regulatory body or agency, government or governmental agency
or entity however designated or constituted.
2. EMPLOYMENT
The terms of your employment will be as follows:
(a) POSITION AND RESPONSIBILITIES: You will be employed by the
Company in the position set out on Schedule "A" to this
Agreement, and you will fulfil the duties and responsibilities
set out on Schedule "A" to this Agreement, subject to changes
consistent with the usual duties and responsibilities of that
position as may be reasonably prescribed by the Board from
time to time.
(b) SCOPE OF DUTIES: During your employment, you will devote the
whole of your time, attention and abilities during normal
business hours to the duties hereby granted and accepted and
you will give the Company the full benefit of your knowledge,
expertise, technical skill and ingenuity.
(c) SALARY: You will receive an annual salary (the "Salary") in
the amount set out on Schedule "A" to this Agreement, subject
to changes by mutual agreement, payable in accordance with the
Company's standard salary payment schedule. Payment of your
Salary will be subject to income tax source deductions and
other deductions required by applicable law.
2
<PAGE>
(d) STOCK OPTIONS: You will be entitled to participate in any
stock option plans as are now or may hereafter be established
and offered by the Company for the benefit of its employees
generally.
(e) MEDICAL, INSURANCE AND OTHER BENEFITS: You will be entitled to
participate in any medical, dental, health, life and accident
insurance programs as are now or may hereafter be established
and offered by the Company for the benefit of its employees
generally.
(f) REIMBURSEMENT OF EXPENSES: You will be entitled to
reimbursement of reasonable expenses incurred in the course of
fulfilling your employment duties and responsibilities to the
Company, as may be specifically approved by the Board in
advance or expressly permitted in accordance with the
Company's expense policies in effect from time to time.
(g) VACATION ENTITLEMENT: You will receive the period of paid
vacation set out on Schedule "A" to this Agreement. Your
vacation must be taken in accordance with the Company's
vacation policies in effect from time to time.
(h) EXTENSION OF TERM: If the Company does not prior to expiry of
the Term or any extension of the Term provide you with written
notice that the Company does not wish to extend the Term, and
if you do not prior to expiry of the Term or any extension of
the Term provide the Company with written notice that you do
not wish to extend the Term, then upon expiry of the Term and
every extension of the Term, the Term of this Agreement will
be deemed to be extended for an additional one year period on
the same terms and conditions as provided for under this
Agreement, unless otherwise agreed in writing.
3. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
As consideration for your employment with the Company, you covenant and agree as
follows:
(a) DISCLOSURE: You will make prompt and full disclosure to the
Company of any discovery, invention, development, production,
process, improvement or other work product conceived, made,
improved upon or participated in by you, solely or jointly, in
the course of, arising from or relating to any Intellectual
Property Rights of or your employment with the Company or any
other member of the Group (the "Work Products").
(b) ASSIGNMENT: The Company will hold all Intellectual
Property Rights in respect of the Work Products for the
exclusive benefit of the Company and you agree not to claim
or apply for registration or challenge the Company's
registration of, any such Intellectual Property Rights.
Your acceptance of the terms of this Agreement constitutes
your absolute, unconditional and irrevocable assignment,
transfer and conveyance of all past, present and future
right, title, benefit and interest in and to all
Intellectual Property Rights in respect of the Work
Products. You hereby waive in favour of the Company all
claims of any nature whatsoever that you now or hereafter
may have for infringement of any Intellectual Property
Rights for the Work Products so assigned to the Company.
To the extent that copyright may subsist in the Work
Products, you hereby waive all past, present and future
moral rights you may have.
(c) INTELLECTUAL PROPERTY PROTECTION: The Work Products and
all related Intellectual Property Rights will be the
absolute and exclusive property of the Company. The
Company may apply for patent, copyright or other
intellectual property protection in the Company's name or,
where such procedure is proper, in your name, anywhere in
the world. You will, at the Company's request, execute all
documents and do all such acts and things considered
necessary by the Company to obtain, confirm or enforce any
Intellectual Property Rights in respect of the Inventions.
In case the Company requires but is unable to secure your
signature for any such purpose in a timely manner, you
hereby irrevocably designate and appoint the Company and
any duly authorized officer or agent of the
3
<PAGE>
Company as your agent and attorney, to act for you and in your
behalf and stead to execute any such documents and to do all
other lawfully permitted acts to carry out the intent of this
provision, with the same legal force and effect as if executed
or done by you.
4. OBLIGATIONS OF EMPLOYMENT
You further covenant and agree as follows:
(a) PERFORMANCE AND DUTY TO THE COMPANY: Throughout your
employment you will well and faithfully serve the Company and
use all reasonable endeavours to promote the interests of the
Company. You will act honestly, in good faith and in the best
interests of the Company. You will adhere to all applicable
policies of the Company.
(b) BUSINESS OF THE COMPANY: You will not, during your employment
with the Company, engage in any business, enterprise or
activity that is contrary to or detracts from the Business of
the Company or the proper fulfilment of your duties and
responsibilities to the Company.
(c) CONFIDENTIALITY: You will retain all Confidential
Information developed, utilised or received by the Company
and each other member of the Group in the strictest
confidence and will not disclose or permit the disclosure
of Confidential Information in any manner other than in the
course of your employment with and for the benefit of the
Company or as required by law or a regulatory authority
having jurisdiction. You will not use Confidential
Information for your own personal benefit or permit it to
be used for the benefit of any Person other than the
Company, either during your employment with the Company or
thereafter. You will take all reasonable precautions to
prevent any Person from having unauthorized access to
Confidential Information or use of it. In particular, you
will not record, copy, modify or part with any Confidential
Information, in whole or in part, except solely in
accordance with the written approval of the Company or only
as may be required to carry out your duties under this
Agreement. All copies of Confidential Information, and all
documents and electronic or other records which now or
hereafter may contain Confidential Information, are and
will remain the exclusive and absolute property of the
Company.
(d) EXCEPTIONS: Any obligations specified in subsection 4(c)
will not apply to the following:
(i) any information which is presently in the public
domain; or
(ii) any information that subsequently becomes part of the
public domain through no fault of your own.
(e) RESTRICTIONS: You will comply with all of the restrictions set
forth below at all times during your employment and for a
period of eighteen months after the termination of your
employment:
(i) you will not, either individually or in conjunction
with any Person, as principal, agent, director,
officer, employee, investor or in any other manner
whatsoever, directly or indirectly, engage in or
become financially interested in any Competitive
Business within North America, except as a passive
investor holding not more than one percent of the
publicly traded stock of a corporation in which
you are not involved in management;
(ii) you will not, either directly or indirectly, on your
own behalf or on behalf of others, solicit, divert or
appropriate or attempt to solicit, divert or
appropriate to any Competitive Business, any Business
or actively sought prospective Business of the
Company or any customers with whom the Company or any
other member of the Group has current agreements
relating to
4
<PAGE>
the Business of the Company, or with whom you have
dealt, or with whom you have supervised negotiations
or business relations, or about whom you have
acquired Confidential Information in the course of
your employment;
(iii) you will not, either directly or indirectly, on your
own behalf or on behalf of others, solicit, divert or
hire away, or attempt to solicit, divert, or hire
away, any independent contractor or any person
employed by the Company or any other member of the
Group or persuade or attempt to persuade any such
individual to terminate his or her employment with
the Company; and
(iv) you will not directly or indirectly impair or seek to
impair the reputation of the Company or any other
member of the Group, nor any relationships that the
Company or any other member of the Group has with its
employees, customers, suppliers, agents or other
parties with which the Company or any other member of
the Group does business or has contractual relations.
(f) NO PERSONAL BENEFIT: You will not receive or accept for your
own benefit, either directly or indirectly, any commission,
rebate, discount, gratuity or profit from any Person having or
proposing to have one or more business transactions with the
Company or any other member of the Group, without the prior
approval of the Board, which may be withheld.
(g) CUSTOMER CONTACTS: During your employment you will communicate
and channel to the Company all knowledge, business and
customer contacts and any other information that could concern
or be in any way beneficial to the Business of the Company.
Any such information communicated to the Company as aforesaid
will be and remain the property of the Company notwithstanding
any subsequent termination of your employment.
(h) RETURN OF COMPANY PROPERTY: Upon termination of your
employment, you will promptly return to the Company all
Company property including all written or other fixed
information including, without limitation, documents, tapes,
discs, memory devices and copies thereof, and any other
material on any medium in your possession or control
pertaining to the Business of the Company, without retaining
any copies or records of any Confidential Information
whatsoever. You will also return any keys, pass cards,
identification cards or other property belonging to the
Company.
5. TERMINATION
(a) MUTUAL AGREEMENT: Your employment may be terminated at any
time upon the mutual written agreement by the parties.
(b) RESIGNATION: If for any reason you should wish to leave the
Company you will provide the Company one month prior written
notice of your intention.
(c) WITH CAUSE: The Company may terminate your employment at any
time for Cause, immediately upon delivery by the Company to
you of a notice of termination of your employment for Cause,
in which case you will not be entitled to receive any further
compensation, severance pay, notice, payment in lieu of notice
or damages of any kind, except only any compensation accrued
and owing under this Agreement but unpaid at the date of
termination of your employment.
(d) WITHOUT CAUSE: The Company may terminate your employment at
any time without Cause by providing you with the greater of
the following:
(i) three months written notice or payment in lieu of
notice; or
5
<PAGE>
(ii) the minimum notice or payment in lieu of notice
prescribed by the employment standards legislation
applicable to the Company or any successor
legislation, as amended from time to time.
You will not be entitled to receive any further severance pay, notice,
payment in lieu of notice or damages of any kind and you will not be
entitled to receive any further compensation, except only any
compensation accrued and owing under this Agreement but unpaid at the
date of termination of your employment. Payments in lieu of notice will
be subject to all income tax source deductions and other deductions
required by law. In the event of your termination without cause by the
Company, the 18 month restriction provided for in section 4(e) shall,
with respect to subsection 4(e)(I) only, be reduced to 12 months.
6. AGREEMENT VOLUNTARY AND EQUITABLE
You acknowledge that you have carefully considered and understand the terms
of employment contained in this Agreement, that you have had the opportunity
to obtain independent legal advice regarding this Agreement, that you
consider the terms of this Agreement to be mutually fair and equitable, and
that you have executed this Agreement voluntarily and of your own free will.
7. IRREPARABLE HARM
You acknowledge and agree that any breach of section 3, subsection 4(c) or
subsection 4(e) of this Agreement by you will cause irreparable harm to the
Company and in addition to all of the remedies available to the Company by
law, the Company will be entitled to equitable relief including without
limitation, injunctive relief to ensure your compliance with section 3 and
subsections 4(c) and 4(e) of this Agreement.
8. ASSIGNMENT AND ENUREMENT
You may not assign this Agreement, any part of this Agreement or any of your
rights under this Agreement without the prior written consent of the Company.
This Agreement enures to the benefit of and is binding upon you and the
Company and your respective heirs, executors, administrators, successors and
permitted assigns.
9. SEVERABILITY
If any provision or portion of this Agreement is determined to be invalid or
unenforceable for any reason, then that provision or portion will be severed
from this Agreement, and the rest of this Agreement will remain in full force
and effect.
10. ENTIRE AGREEMENT
This Agreement contains the whole agreement between you and the Company with
respect to your employment by the Company, and there are no representations,
warranties, collateral terms or conditions, express or implied, other than as
set forth in this Agreement. This Agreement supersedes any written or oral
agreement or understanding between you and the Company. No change or
modification of this Agreement will be valid unless it is in writing and
initialled by both parties.
11. NOTICE
Any notice required or permitted to be given hereunder must be in writing and
will be sufficiently given or made if delivered or sent by registered mail to
the address of the parties set out on page 1 hereof. Any notice so given will
be deemed to have been given and to have been received on the day of delivery
if it is a business day and otherwise on the next succeeding business day or,
if mailed, on the third business day following the mailing thereof (excluding
each day during which there exists any interruption of postal services due to
strike, lockout or other cause). Addresses for notice may be changed by
giving notice in accordance with this section.
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<PAGE>
12. NON-WAIVER
No failure or delay by you or the Company in exercising any power or right
under this Agreement will operate as a waiver of such power or right. Any
consent or waiver by you or by the Company to any breach or default under
this Agreement will be effective only in the specific instance and for the
specific purpose for which it was given.
13. SURVIVAL OF TERMS
The provisions of sections 1, 3, 5 and 7 and of subsections 4(c), 4(e), 4(g)
and 4(h) of this Agreement will survive the termination of your employment.
14. FURTHER ASSISTANCE
The parties will execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
15. TIME
Time is of the essence of this Agreement.
16. GOVERNING LAWS
This Agreement will be construed in accordance with and governed by the laws
of the state in which you reside and carry out your duties and obligations
under this Agreement.
17. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
will be deemed to be an original and all of which will constitute one
Agreement.
PICKEM SPORTS, INC.
By:
--------------------
Name:
------------------
Title:
-----------------
I acknowledge and accept the terms and conditions of my employment with the
Company as set out above.
DATED this 1st day of March, 1999. ___________________________________
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<PAGE>
SCHEDULE "A"
Employee's Name ______________
Commencement Date and Term: Commencing _______, for Two (2) Years
Position: ______________
Duties & Responsibilities ______________
Salary: $100,000 per annum
Paid Vacation: Four Weeks per annum
PICKEM SPORTS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
I acknowledge and accept the terms and conditions of my employment with the
Company as set out above.
DATED this 1st day of March, 1999.
- ------------------------------------
<PAGE>
EXHIBIT 2.4
AGREEMENT FOR THE PURCHASE
OF CERTAIN ASSETS OF
ULTIMATE SPORTS PUBLISHING, INC.
BY AND BETWEEN
NATIONAL PUBLISHER SERVICES, INC.,
AND
INTERNET SPORTS NETWORK, INC.
<PAGE>
AGREEMENT FOR THE PURCHASE
OF CERTAIN ASSETS OF
ULTIMATE SPORTS PUBLISHING, INC.
BY AND BETWEEN
NATIONAL PUBLISHER SERVICES, INC.,
AN IOWA CORPORATION
(AS "SELLER")
AND
INTERNET SPORTS NETWORK, INC.
A FLORIDA CORPORATION
(AS "BUYER")
1
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement"), is dated as of July 1,
1999, (the "execution date") by and between National Publisher Services,
Inc., an Iowa corporation ("NPS" or "Seller") and Internet Sports Network,
Inc., a Florida corporation ("Buyer") with respect to the following:
R E C I T A L S
A. Seller is the owner of certain assets of Ultimate Sports
Publishing, a division of Seller ("USP").
B. Buyer desires to purchase certain assets of USP from Seller and
Seller desires to sell certain assets of USP to Buyer on the terms and subject
to the conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties hereto
agree as follows:
1. ASSETS TO BE TRANSFERRED.
On the Closing Date, Sellers shall sell, assign and transfer
to Buyer certain assets of Seller described in EXHIBIT "A" and incorporated
herein by this reference as if set forth in full (the "Assets").
2. PRICE AND TERMS.
2.1 PURCHASE PRICE. Buyer shall remit to Seller, as
and for the purchase price of the Assets, the following consideration:
a. 125,000 shares of Common stock of Buyer equal
in value to eight hundred fifty thousand dollars ($850,000.00) (the
"Shares"). The Shares shall be delivered to Buyer over a two year period
commencing within ten days of the Closing Date or July 11, 1999. On each of
July 11, 1999, October 11, 1999, January 11, 2000, April 11, 2000, July 11,
2000, October 11, 2000, January 11, 2001 and April 11, 2001 a certificate
representing 15,625 Shares, a proxy and a stock power shall be delivered to
Seller. The Shares shall be issued immediately upon the execution of this
Agreement and delivered to counsel for Buyer, Horwitz & Beam. The delivery of
the Shares shall be subject to an escrow agreement by and between Buyer and
Seller outlining the conditions of the release of the certificates, a form of
which is attached hereto as EXHIBIT "B" (the "Escrow Agreement").
Concurrently with the execution of this Agreement, Seller shall execute 7
blank irrevocable stock powers with medallion guaranteed signatures and 7
irrevocable proxies to be held by Horwitz & Beam and released to Seller
according to the terms of the Escrow Agreement. The form of stock power and
proxy is attached hereto as EXHIBIT "C".
b. eight hundred sixty thousand dollars
($860,000.00) in cash due and payable to Seller from Buyer upon the execution
of this Agreement. Buyer and Seller further acknowledge that certain funds
will change hands on the Closing Date as related to certain deposits and
prepaid expenses pertaining to the 1999 football publications.
2.2 TRANSACTION TAXES AND OTHER CLOSING COSTS. Any
sales, use or similar transfer taxes, and any transfer, recording or similar
fees and charges arising in connection with the transfer of the Assets from
Seller to Buyer shall be borne by the party incurring such costs. Each party
shall bear their own costs and expenses related to the closing including, but
not limited to fees of legal counsel, accountants and other consultants or
representatives incurred in connection with the transactions contemplated
herein.
2.3 COMMISSIONS AND BROKERAGE FEES. All brokerage
fees and finder's fees shall be borne by the Party incurring such fees.
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3. REPRESENTATIONS AND WARRANTIES BY SELLER
Seller represents and warrants the following:
3.1 DUE DILIGENCE DOCUMENTS. Seller has delivered to
Buyer copies of the books and records related to the Assets material to the
transaction and as requested by Buyer (the "Due Diligence Documents"). The
Due Diligence Documents delivered by Seller are complete and accurate and
fairly present the information provided. If such information includes
financial statements, these financial statements have been prepared in a
manner consistent with prior periods and reflect all material assets,
liabilities and changes in capital.
3.2 ACCOUNTS RECEIVABLE. Seller represents that any and
all accounts receivable transferred as part of the Assets as of the date
hereof and at Closing that arose in the ordinary course of business of USP,
represent valid obligations due to the USP, and have been or are collectible
in the ordinary and usual course of business of USP in their aggregate
recorded amounts in accordance with their terms.
3.3 CONTRACTS. Seller represents and warrants that it has
delivered to Buyer copies of all the following contracts, understandings,
commitments and agreements which are being transferred as part of the Assets.
Seller represents that there are no other contracts, understandings,
commitments and agreements to which pertain to the Assets that have not been
disclosed to Buyer:
(a) Oral or written contracts, understandings
or commitments, whether in the ordinary course of business or not, involving
a present or future obligation to deliver goods or services;
(b) Bonus, incentive or deferred
compensation, profit sharing, pension, vacation, group insurance or employee
welfare plans of any nature whatsoever;
(c) Collective bargaining agreements or other
contracts or commitments to or with any labor union, employee representative
or group of employees;
(d) Employment contracts, and all other
contracts, agreements or commitments (whether written or oral) to or with
individual employees, agents or representatives, for a period in excess of
thirty days, identifying the individual and his position;
(e) Oral or written contracts, understandings
or commitments regarding the Assets which require the consent of any party
thereto to the consummation of the transactions contemplated by the Agreement;
(f) Contracts, agreements or commitments
which restrict the ability of Sellers to carry on its business anywhere in
the world; and
(g) Any other contract or commitment which is
or may be material to the use of the Assets by Buyer.
To the best of Seller's knowledge there has not been any material default in
any obligation to be performed by USP or Seller in connection with the Assets
under any contract, commitment or agreement which default could adversely
affect the Assets in a material manner, and Seller has not waived any right
under any such contract, commitment or agreement so as to adversely affect
the Assets. Seller acknowledges that any contract, commitment, understanding
or agreement that has not been disclosed to Buyer and which is not related to
the business of the Company shall remain the obligation of the Seller insofar
as it does not relate to the Assets transferred herein.
3.4 TRADEMARKS, LICENSES, ETC. Seller represents and
warrants that it has delivered a list of all trademarks, trade names,
trademark licenses, service marks, patents, patent applications therefor,
franchises, licenses, copyrights authorizations, product registrations being
transferred as part of the Assets (hereinafter "licenses and other
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rights"). Seller represents and warrants that it is the owner of all licenses
and other rights being transferred hereby and that such licenses and other
rights are not the subject of any lien or encumbrance preventing their
transfer to Buyer.
3.5 LITIGATION. There is no actual or threatened
litigation, action, proceeding, claim, complaint, accusation, or governmental
investigation pending or threatened, nor is there basis for any against or
affecting the Assets. To the best of Seller's knowledge, there is no
outstanding order, judgment or award by any court, arbitrator or governmental
body against or affecting the Assets.
3.6 INSURANCE. Seller represents and warrants that it has
delivered a list of all full force and effect fire, liability and other
insurance insuring the Assets, in amounts and against such losses and risks
as are therein set out, and represent and warrant that these policies for
such insurance as is shown to be in effect on the date of this Agreement will
be outstanding and duly in force on the Closing Date.
3.7 INDEBTEDNESS AND GUARANTIES. Seller represents and
warrants that they have delivered a full list, including the names of the
parties thereto and summary description of the terms thereof, of all debt
instruments, loan agreements, indentures, guaranties or other obligations,
whether written or oral, relating to indebtedness for borrowed money, money
loaned to others or the performance of any obligation secured by or secured
in part by the Assets. Seller represents and warrants that all such
obligations except those assumed by Buyer as indicated in EXHIBIT "D" shall
remain the sole and complete obligation of Seller and that Seller shall
indemnify and defend Buyer from any and all obligations thereunder.
3.8 TAXES. The Company has duly filed all required
federal, state, local, foreign and other tax returns, notices and reports
(including, but not limited to, income, property, sales, use, franchise,
capital stock, excise, added value, employees' income withholding, social
security and unemployment tax returns) required to be filed in connection
with the Assets.
3.9 DUE AUTHORIZATION AND VALIDITY OF AGREEMENT. Seller
has all requisite power and authority to enter into this Agreement, to sell
and convey the Assets and to carry out the other provisions and conditions
hereof. This Agreement has been duly authorized, executed and delivered by
Seller and constitutes a valid and legally binding agreement of Seller
enforceable in accordance with its terms.
3.10 FULL DISCLOSURE. No representation or warranty of
Seller made in this Agreement, nor any written statement furnished by Seller
pursuant hereto, or in connection with the transactions contemplated hereby,
heretofore furnished to Buyer by Seller, contains or will contain any untrue
statement of a material fact which affects the business of financial
condition of the Company or Seller, or omits or will omit to state a material
fact necessary to make the statements or facts contained herein or therein
not misleading.
3.12 INVESTMENT REPRESENTATIONS. Seller acknowledges that
the Shares are restricted securities" (as such term is defined under the
Securities Act of 1933), that the certificates representing this Shares will
include a restrictive legend, and, except as otherwise set forth in this
Agreement, that the Shares cannot be sold unless registered with the United
States Securities and Exchange Commission ("SEC") and qualified by
appropriate state securities regulators, or unless Seller obtains written
consent from Buyer and otherwise complies with an exemption from such
registration and qualification. Seller further represents and warrants that:
a. Seller has adequate means of providing for current needs
and contingencies, has no need for liquidity in the Shares, and is able to
bear the economic risk of an investment in the Shares of the size
contemplated. Seller represents that Seller is able to bear the economic risk
of the investment and at the present time could afford a complete loss of
such investment. Seller has had a full opportunity to inspect the books and
records of the Buyer and to make any and all inquiries of Buyer's officers
and directors regarding Buyer as Seller has deemed appropriate.
b. Seller is an "Accredited Investor" as that term is
defined in Regulation D of the Act or Seller, either alone or with Seller's
professional advisers who are unaffiliated with, have no equity interest in
and are not compensated by Buyer or any affiliate or selling agent of Buyer,
directly or indirectly, has sufficient knowledge and experience in
4
<PAGE>
financial and business matters that Seller is capable of evaluating the
merits and risks of an investment in the Shares and of making an informed
investment decision with respect thereto and have the capacity to protect
Seller's interests in connection with Seller's proposed investment in the
Shares.
c. Seller is acquiring the Shares solely for Seller's own
account as principal, for investment purposes only and not with a view to the
resale or distribution thereof, in whole or in part, and no other person or
entity has a direct or indirect beneficial interest in such Shares.
d. Seller will not sell or other-wise transfer the Shares
without registration under the Act or an exemption therefrom and fully
understands and agrees that Sellers must bear the economic risk of the
investment in the Shares-for an indefinite period of time because, among
other reasons, the Shares have not been registered under the Act or under the
securities laws of any state and, therefore, cannot be resold, pledged,
assigned or other-wise disposed of unless they are subsequently registered
under the Act and under the applicable securities laws of such states or
unless an exemption from such registration is available.
e. Seller understands that Buyer is under no obligation to
register the Shares on Seller's behalf or to assist Seller in complying with
any exemption from registration under the Act, except as set forth herein.
f. Seller understands it is purchasing the Shares without
being furnished any offering literature or prospectus other than any specific
information which Seller may have requested that Buyer provide Seller.
4. REPRESENTATIONS AND WARRANTIES BY BUYER.
4.1 ORGANIZATION AND CAPACITY. Buyer is an corporation
with legal capacity to enter into this Agreement under the laws under the
State of Florida.
4.2 AUTHORITY. The execution of this Agreement by Buyer,
its delivery to Seller and the performance of its terms has been fully
authorized by those individuals required to do so, and no further action will
be necessary on its part to make this Agreement valid and binding upon Buyer
in accordance with its terms.
5. AGREEMENTS BY SELLER.
5.1 NOTICES AND APPROVALS. Buyer and Sellers agree to
cooperate in giving all notices to third parties and obtaining all consents,
approvals, permits and authorizations which may be necessary in connection
with this Agreement and the consummation of the transactions contemplated
herein.
5.2 PERSONAL SERVICES AGREEMENTS. As a condition of this
Agreement, Seller has agreed to provide the services of Robert McIlwain, Nick
Russo and O'Neill Creative Enterprises, Inc. (the "Service Providers") to
Buyer. In connection with this, Buyer and Seller has approved the terms of
such personal services agreement of which executed copies are being delivered
concurrently herewith. Seller agrees that it will do nothing to dissuade any
of the Service Providers to enter into the Personal Services Agreements nor
will it terminate, lay off or transfer any such Service Providers without the
prior written consent of Buyer during the terms of the Personal Service
Agreements. The Personal Service Agreements are attached hereto as EXHIBIT
"E" and incorporated herein by this reference. Seller understands and
acknowledges that the continued requirement of Buyer to deliver the Shares
pursuant to the schedule set forth in this Agreement is subject to the Robert
McIlwain providing continued services to Buyer.
5.3 CIRCULATION/OVERHEAD AGREEMENT. As a condition to
this Agreement, Seller and Buyer have entered into a Circulation/Overhead
Agreement, the form of which is attached hereto as EXHIBIT "F" wherein Seller
will provide Buyer will certain marketing and publishing services. Seller
understand and acknowledges that its performance under the
Circulation/Overhead Agreement is a material consideration for Buyer entering
into this Agreement and that Seller shall utilize its best efforts to perform
in good faith under the terms of that agreement.
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5.4 ASSIGNMENT OF TRADEMARKS. Part of the Assets consist
of trademarks owned by Seller. Seller has executed and delivered in the form
attached hereto as EXHIBIT "G" trademark assignments. Seller agrees to
execute such further documentation as may be necessary to transfer and assign
the trademarks to Buyer.
5.5 FURTHER INSTRUMENTS. Sellers will, at the request of
Buyer, execute and deliver to Buyer all such further instruments,
assignments, assurances and documents as Buyer may reasonably request in
connection with the carrying out of this Agreement.
6. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE.
In addition to all obligations of Buyer contained in this Agreement,
the obligation of Buyer to close shall be subject to the following conditions
precedent:
6.1 COMPLIANCE WITH OBLIGATIONS. Fulfillment by Seller of
its covenants, obligations and agreements as set forth in this Agreement.
6.2 CORRECTNESS OF REPRESENTATIONS. The representations
of Seller contained in this Agreement shall be accurate in all material
respects on the date when made and shall also be accurate on the Closing Date
to the same extent as if made on such date and that all covenants, agreement
and conditions required by this Agreement to be performed by Sellers prior to
Closing have been performed on or prior to the Closing Date.
6.3. DELIVERY OF DOCUMENTS. Execution and delivery of the
following documents to Buyer:
a. The Personal Services Agreements attached hereto as
Exhibit "E".
b. The Circulation/Overhead Agreement attached hereto as
Exhibit "F".
c. The trademark assignment forms attached hereto as
Exhibit "G"
d. Irrevocable proxies and Irrevocable stock powers
attached hereto as Exhibit "C".
e. The Escrow Agreement attached hereto as Exhibit "B"
f. The Asset Purchase Agreement.
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE.
In addition to all obligations of Seller contained in this
Agreement, the obligation of Sellers to close shall be subject to the
following conditions precedent:
7.1 CORRECTNESS OF REPRESENTATIONS. The representations
and warranties of Buyer contained in this Agreement shall be accurate in all
material respects on the Closing Date to the same extent as if made on such
date, and that all conditions precedent to Closing to be performed by Buyer
shall have been performed.
7.2 COMPLIANCE WITH OBLIGATIONS. Fulfillment by Buyer of
its covenants, obligations, and agreements as set forth in this Agreement.
7.3 DELIVERY OF DOCUMENTS: Execution and Delivery of the
following documents:
a. The Personal Services Agreements attached
hereto as Exhibit "E".
b. The Circulation/Overhead Agreement attached
hereto as Exhibit "F".
c. The Escrow Agreement attached hereto as
Exhibit "B"
d. The Asset Purchase Agreement.
e. A certificate representing 15,625 shares of
common stock of Buyer.
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7.4 DELIVERY OF PURCHASE PRICE. Delivery by Buyer of
the full Purchase Price as outlined in section 2 herein.
8. OTHER AGREEMENTS.
8.1 FURTHER ASSURANCES. From time to time, at Buyer's
request, whether at or after the Closing and without further consideration,
Sellers will execute and deliver such further instruments of assignment,
conveyance and transfer as are necessary to transfer full an complete title
to the Shares.
8.2 MAINTENANCE AND RETENTION OF BOOKS AND RECORDS. For
a period of seven years after the Closing Date, the parties shall retain all
books or records relating to the Assets, and any party, wishing to dispose or
destroy books or records, shall provide not less than sixty days prior
written notice to the other parties of such proposed action. If the recipient
of such notice desires to obtain any of such documents, it may do so by
notifying the other party in writing at any time prior to the scheduled date
for such destruction or disposal. Such notice must specify the documents
which the requesting party wishes to obtain. The parties shall then promptly
arrange for the delivery of such documents. All out-of-pocket costs
associated with the delivery of the requested documents shall be paid by the
requesting party.
8.3 CONFIDENTIALITY. Each party hereto will hold and
will cause its consultants and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law, all documents and
information concerning the other party furnished it by such other party or
its representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have
been (i) previously known by the party to which it was furnished, (ii) in the
public domain through no fault of such party, or (iii) later lawfully
acquired from other sources by the party to which it was furnished), and each
party will not release or disclose such information to any other person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with this Agreement. Each party shall
be deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar information. In the
event of termination of this Agreement, each party shall use its best efforts
to return to the other party all documents and copies thereof received from
the other party that contain information subject to the confidentiality
requirements of this Section.
9. CLOSING DATE AND TERMINATION.
9.1 CLOSING. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of the Company at 10:00 o'clock a.m. on the date that the all
conditions precedent are satisfied by Buyer and Seller but no later than July
11, 1999.
9.2 TERMINATION. This Agreement may be terminated: (i) at
any time prior to Closing by mutual consent of all parties, or (ii) by either
Buyer or Seller should the party responsible fail to fulfil all conditions
precedent prior to the Closing Date unless waived by the non responsible
party.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. The
representations and agreements made herein are true and binding as of the
date hereof and shall continue in full force and effect on and after the
Closing Date notwithstanding any investigations which may have been made by
any of the parties prior thereto.
11. INDEMNIFICATION. Buyer and Seller shall indemnify and hold
harmless each other from any liability, damage, deficiency, loss, cost or
expense, including attorney fees and any costs of investigation (being
hereafter referred to as "Costs"), arising from or attributable to any breach
of any representation, warranty or agreement made by either party herein or
in any certificate delivered at the Closing with respect thereto.
12. EXPENSES. Each party hereto shall bear their own expenses
incurred pursuant to this Agreement except as otherwise specifically set
forth herein.
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13. ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits referred to herein which are incorporated herein by this
reference, and the agreements referred to herein, shall constitute the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby.
14. CONSTRUCTION. The parties hereto agree that this Agreement
shall be construed in accordance with the laws of the State of Florida
without giving effect to its principles of conflicts of laws. The parties
irrevocably consent to the jurisdiction of the courts of the state of Iowa or
such other place as Buyer has an office at the time of the claim or dispute
for resolution of any and all claims and disputes arising out of this
Agreement.
15. INVALID PROVISIONS. If any provision hereof is held to be
illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable. This
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically by the Company as
a part hereof a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and legal, valid and enforceable.
16. NUMBER AND GENDER OF WORDS. When the context so requires in
this Agreement, words of gender shall include either or both of the other
genders and the singular number shall include the plural.
17. ASSIGNMENT. This Agreement shall be binding upon the parties
hereto, their successors and assigns, and prior to the Closing Date shall not
be assignable without the express written consent of all parties hereto.
18. AMENDMENTS. This Agreement may be amended only by a written
agreement executed by all of the parties hereto.
19. NOTICES. Any notice, request, instruction, or other document
required by the terms of this Agreement, or deemed by any of the Parties
hereto to be desirable, to be given to any other Party hereto shall be in
writing and shall be given by facsimile, personal delivery, overnight
delivery, or mailed by registered or certified mail, postage prepaid, with
return receipt requested, to the following addresses:
To: "Seller" National Publisher Services, Inc.
9 Bridge Street, Bldg C
Metuchen, NJ 08840
To: "Buyer" Internet Sports Network, Inc.
225 Richmond Street West, Suite 403
Toronto, Ontario
Canada M5V 2W1
With a copy to: Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, California 92618
Attention: Patti L. W. McGlasson, Esq.
Fax: 949/453-9416
The persons and addresses set forth above may be changed from time
to time by a notice sent as aforesaid. If notice is given by facsimile,
personal delivery, or overnight delivery in accordance with the provisions of
this Section, said notice shall be conclusively deemed given at the time of
such delivery. If notice is given by mail in accordance with the provisions
of this Section, such notice shall be conclusively deemed given seven
business days after deposit thereof in the United States mail.
20. AUTHORITY. Each party executing this Agreement warrants his
authority to execute this Agreement.
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21. COUNTERPARTS. This Agreement may be executed in several
counterparts and it shall not be necessary for each party to execute each of
such counterparts, but when all of the parties have executed and delivered
one of such counterparts, the counterparts, when taken together, shall be
deemed to constitute one and the same instrument, enforceable against each
party in accordance with its terms.
22. FACSIMILE SIGNATURES. The parties hereto agree that this
Agreement may be executed by facsimile signatures and such signatures shall
be deemed originals. The parties further agree that within ten days following
the execution of this Agreement, they shall exchange original signature pages.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day and year first above written.
"SELLER" "BUYER"
NATIONAL PUBLISHER SERVICES, INC. INTERNET SPORTS NETWORK, INC.
By: /s/ MARK HARRIS By: /s/ KEN CREMA
---------------------------------- -------------------------------
Its: Its: Chief Executive Officer
---------------------------------
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EXHIBIT 2.5
AGREEMENT AND PLAN OF MERGER BETWEEN
INNOVATION PARTNERS, INC. AND INTERNET SPORTS NETWORK, INC.
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Merger Agreement ("Agreement") is made effective as of June 30, 1999
("Effective Date") by and
BETWEEN: Jeffrey R. Thomas ("Vendor")
AND: Innovation Partners, Inc. a Wisconsin Corporation; ("Targetco")
AND: Internet Sports Network, Inc., a Florida corporation;
(the "Merger Parent")
WHEREAS the authorized share capital of Targetco consists of 9,000 common
shares par value ($1.00) of which 8,190 common shares (the "Targetco Shares")
are issued and outstanding;
The Shareholders of Targetco are the registered and beneficial owners of the
Targetco Shares as follows:
<TABLE>
<S> <C> <C>
Mr. Thomas as to 7,110 Targetco Shares
Mr. Casalena as to 225 Targetco Shares
Mr. Dreckmann as to 270 Targetco Shares
Mr. Wingeard as to 180 Targetco Shares
Mr. Young as to 135 Targetco Shares
Mr. Bloxdorf as to 90 Targetco Shares
Mr. Sussman as to 90 Targetco Shares
Mr. Michener as to 90 Targetco Shares
---------------------
Total Targetco Shares: 8,190;
=====================
</TABLE>
The Shareholders of Targetco and the Merger Parent have agreed to merge
Targetco with ISN Wisconsin, Inc. (the "Subsidiary"), in the course of which
merger the shares of Targetco shall be automatically converted into the right
to receive shares of the Merger Parent and cash consideration as described
herein, on the terms and conditions set forth in this Agreement and the Plan
of Merger to be attached hereto as a portion of Exhibit 1.1;
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
parties hereto agree as follows:
1. MERGER AND EXCHANGE OF SHARES
1.1 Subject to the terms and conditions of this Agreement, Targetco, the
Vendor and the Merger Parent each agree to merge Targetco with and into the
Subsidiary in accordance with Articles and a Plan of Merger, copies of which
are attached hereto as Exhibit 1.1 to be filed in Wisconsin, and in
connection therewith the Merger Parent agrees to deliver to the Shareholders
of Targetco on the Closing Date consideration (the "Consideration") comprised
of one million dollars (U.S.$1,000,000) (the "Cash Portion") and six hundred
six thousand sixty shares (606,060) of common stock of Merger Parent, which,
when issued, will constitute ____% of the total outstanding shares of the
Merger Parent (the "Merger Parent's Shares").
1.2 Upon the merger of Targetco with the Subsidiary:
(a) the surviving corporation shall be the Subsidiary with
Articles of Incorporation and Bylaws in the form attached to this Agreement
as Schedule 1.2(a); and
(b) the initial directors and officers of the subsidiary shall be
as described in Schedule 1.2(b).
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1.3 The Cash Portion of the Consideration shall be delivered by the
Merger Parent to Godfrey & Kahn, S.C., as exchange agent for the shareholders
of Targetco, by wire transfer, and the Merger Parent's Shares shall be issued
to the Shareholders of Targetco in proportion to the share holdings of each
Vendor in Targetco as listed on Schedule 1.3, and, as applicable, subject to
the terms of an Escrow Agreement dated ___________. Notwithstanding the fact
that certain of the Consideration is held pursuant to the Escrow Agreement,
no Consideration under this Agreement or any other agreement delivered
hereunder including, but not limited to the Employment Agreement (as defined
in Section 2.1(a) hereof) shall be subject to any right of offset of the
Merger Parent for any reason whatsoever.
1.4 The transactions contemplated under this Agreement shall be
completed at the offices of the Merger Parent's counsel, Horwitz & Beam, Two
Venture Plaza, Suite 350, Irvine, CA 92618, or at such other place as may be
agreed upon by the parties in writing, at 11:00 o'clock a.m. local time in
Irvine, CA (the "Time of Closing") on July 16, 1999 or on such other date as
may be determined in accordance with this Agreement or by further agreement
in writing between the parties (the "Closing Date").
1.5 On July 2, 1999, the Merger Parent deposited with its counsel US
$200,000 (the "Deposit"), Deposit is to be held in trust pending the Closing
Date. The Deposit shall be returned by the shareholders of Targetco only if
they fail to complete the transactions contemplated in this Agreement and the
Merger Parent is not in default. In order to treat the transaction as if the
closing had occurred as the Effective Date, but subject to the closing
occurring, parties agree that the Vendor's will operate the business for the
account of the Merger Parent from the period of June 30, 1999 to the Time of
Closing ("Interim Period"). Accordingly, all revenues and expenses of
Targetco for the Interim Period (including regularly scheduled payment
obligations under any Material Contracts that come due during the Interim
Period), and the assets and liabilities related thereto, will be accrued to
the Merger Parent (subject to indemnification to the extent provided in
Paragraph 5, below).
2. CONDITIONS PRECEDENT
2.1 The Merger Parent's obligation to carry out the terms of this
Agreement and to complete its transactions contemplated under this Agreement
is subject to the fulfillment of each of the following conditions that:
(a) at the Time of Closing, Merger Parent shall have entered into
a written employment and non-competition agreement with Jeff Thomas
[("THOMAS")](the "Employment Agreement"), substantially in the form which
appears as Schedule 2.1(a) to this Agreement;
(b) at the Time of Closing, the directors of the Merger Parent
shall have approved his Agreement and all of the transactions contemplated
under this Agreement, in their absolute discretion;
(c) as of the Time of Closing, the Vendor and Targetco shall have
complied with their respective covenants and agreements contained in this
Agreement in all material respects; and
(d) as of the Time of Closing, the representations and warranties
of the Vendor contained in this Agreement or contained in any certificates or
documents delivered by them or any one of them pursuant to this Agreement
shall be, in all material respects, true as if such representations and
warranties had been made by the Vendor as of the Time of Closing;
The conditions set forth above are for the exclusive benefit of the Merger
Parent and each may be waived by the Merger Parent in whole or in part at or
before the time indicated for removal, without prejudice to any remedies that
may otherwise be available to the Merger Parent.
2.2 The Vendor's respective obligations to carry out the terms of this
Agreement and to complete their respective transactions contemplated under
this Agreement are subject to the fulfillment to their satisfaction of each
of the following conditions that:
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(a) as of the Time of Closing, the Merger Parent shall have
complied with all of its covenants and agreements contained in this
Agreement; and
(b) at the Time of Closing, the representations and warranties of
the Merger Parent contained in this Agreement or contained in any
certificates or documents delivered by it pursuant to this Agreement shall
be, in all material respects, true as if such representations and warranties
had been made by the Merger Parent as of the Time of Closing.
(c) by the Time of Closing, Targetco shall have completed its due
diligence investigation with results to its reasonable satisfaction; and
(d) at the Time of Closing, Merger Parent shall have entered into
the Employment Agreement.
The conditions set forth above are for the exclusive benefit of each of the
Vendor and may be waived by each of them in whole or in part at or before the
Time of Closing, without prejudice to any remedies that may otherwise be
available to the Vendor.
3. COVENANTS, AGREEMENTS AND ACKNOWLEDGMENTS
3.1 Vendor and Targetco jointly and severally covenant and agree with
the Merger Parent that the Shareholders of Targetco and Targetco shall:
(a) from and including the Effective Date through to and including
the Time of Closing, do all such commercially reasonable acts and things
necessary to ensure that all of the representations and warranties of Vendor
and/or Targetco contained in this Agreement or any certificates or documents
delivered by them or any one of them pursuant to this Agreement remain true
and correct;
(b) from and including the Effective Date through to and including
the Time of Closing, preserve and protect the goodwill, Assets, business and
undertaking of Targetco and, without limiting the generality of the
foregoing, carry on the business of Targetco in a reasonable and prudent
manner; and
(c) from and including the Effective Date through to and including
the Time of Closing, keep confidential all discussions and communications
(including all information communicated therein) between the parties, and all
written and printed materials of any kind whatsoever exchanged by the
parties, and, if so requested by the Merger Parent, the Vendor and Targetco
shall arrange for any director, officer, employee, authorized agent or
representative of Targetco to enter into and the Vendor shall enter into a
non-disclosure agreement with the Merger Parent in a form acceptable to the
Merger Parent acting reasonably, which form shall permit confidential
disclosure to the Vendor's consultants, accountants and attorneys to the
extent necessary for them to verify the representations and warranties
contained in this Agreement.
3.2 Vendor and Targetco jointly and severally covenant and agree with
the Merger Parent that, from and including the Effective Date through to and
including the Time of Closing, Vendor and Targetco shall not intentionally do
any such act or thing that would render any representation or warranty of
Vendor or Targetco contained in this Agreement or any certificates or
documents delivered by them or any one of them pursuant to this Agreement
untrue or incorrect.
3.3 Vendor and Targetco jointly and severally covenant and agree with
the Merger Parent that, from and including the date hereof through the Time
of Closing, unless this agreement terminates, that Vendor and Targetco shall
not negotiate with any other person in respect of a merger of any of the
Targetco Shares or any part of the Assets, other than a sale of part of the
Assets in the ordinary course of Targetco's business.
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3.4 The Merger Parent covenants and agrees with Vendor and Targetco that
the Merger Parent shall:
(a) from and including the Effective Date through to and including
the Time of Closing, do all such acts and things necessary to ensure that all
of the representations and warranties of the Merger Parent contained in this
Agreement or any certificates or documents delivered by it pursuant to this
Agreement remain true and correct;
(b) from and including the Effective Date through to and including
the Time of Closing and subject to any obligations imposed by law or as a
result of any application for listing on a stock exchange or filing required
by the Securities and Exchange Commission, keep confidential all discussions
and communications (including all information communicated therein) between
the parties, and all written and printed materials of any kind whatsoever
exchanged by the parties, and, if so requested by Vendor or by Targetco, the
Merger Parent shall arrange for any of the Merger Parent's Representatives to
enter into, and the Merger Parent itself shall enter into, a non-disclosure
agreement with Vendor and Targetco in a form acceptable to Vendor and
Targetco acting reasonably, which form shall permit confidential disclosure
to the Merger Parent's consultants, accountants and attorneys to the extent
necessary for them to verify the representations and warranties contained in
this Agreement;
(c) from and including the Effective Date through to and
including the Time of Closing, preserve and protect the goodwill, assets,
business and undertaking of Merger Parent and, without limiting the
generality of the foregoing, carry on the business of Merger Parent in a
reasonable and prudent manner; and
3.5 The Merger Parent covenants and agrees with the Vendor and with
Targetco that, from and including the Effective Date through to and including
the Time of Closing, the Merger Parent shall not do any such act or thing
that would render any representation or warranty of the Merger Parent
contained in this Agreement or any certificates or documents delivered by it
pursuant to this Agreement untrue or incorrect.
4. REPRESENTATIONS AND WARRANTIES
4.1 In order to induce the Merger Parent to enter into this Agreement
and complete its transactions contemplated hereunder, Vendor represents and
warrants to the Merger Parent that:
(a) Targetco was and remains duly incorporated under the laws
of the State of Wisconsin.
(b) Targetco:
(i) is a "private issuer" as that term is defined in
any applicable securities legislation (the "Securities Act");
(ii) does not maintain an office or mailing address, or
have any employees, agents or equipment (including any computer server
equipment) in any jurisdiction other than its jurisdiction of incorporation;
and
(iii) is in good standing with respect to the filing of
annual reports and taxes in the jurisdiction of its incorporation and in each
jurisdiction in which it carries on business except where the failure to be
so qualified would not have a material adverse effect on Targetco;
(c) the authorized and issued share capital of Targetco is as
set forth in paragraphs A and B of the Recitals to this Agreement;
(d) the Targetco Shares are validly issued and outstanding
fully paid and non-assessable common shares of Targetco registered in the
names of, and beneficially owned by, the Shareholders of Targetco as set
forth in paragraph B of the Recitals to this Agreement free and clear of all
voting restrictions, trade restrictions, liens, charges or encumbrances of
any kind whatsoever;
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(e) except for the Targetco Shares, there are no shares,
options, convertible debentures, documents, instruments or other writings of
any kind whatsoever which may constitute a "security" of Targetco as that
term is defined in the Securities Act or any other applicable legislation
and, except as is provided for by operation of this Agreement, there are no
options, agreements or rights of any kind whatsoever to acquire all or any
part of the Targetco Shares or any interest in them or in any other share
capital of Targetco;
(f) the articles of incorporation and bylaws of Targetco
produced to Merger Parent have not been altered, amended or modified except
as set forth therein;
(g) to the best of Vendor's knowledge, all of the material
transactions of Targetco have been promptly and properly recorded or filed in
or with the books or records of Targetco, and the minute books of Targetco
contain all records of the meetings and proceedings of shareholders and
directors of Targetco since its date of incorporation;
(h) to the best of Vendor's knowledge, information and belief,
Targetco holds only a license, now expired pending renewal, issued by the
National Football League Players Association;
(i) Targetco is the registered and beneficial owner of all of
the properties and assets (collectively the "Assets") listed on Schedule
4.1(i) to this Agreement, and such Assets represent all of the property and
assets used by Targetco and which are necessary or useful in the conduct of
its business;
(j) Targetco has the corporate power to own the Assets owned by
it and carry on the business carried on by it and Targetco is duly qualified
to carry on business in all jurisdictions in which it carries on business
except where the failure to be so qualified would not have a material adverse
effect on the assets or business of Targetco;
(k) to the best of Vendor's knowledge, Targetco has good and
marketable title to the Assets, to the best of Vendor's knowledge, free and
clear of all liens, charges and encumbrances of any kind whatsoever save and
except those specified as "Permitted Encumbrances" on Schedule 4.1(k) to this
Agreement;
(l) to the best of Vendor's knowledge, information and belief,
no third party privacy or intellectual property rights, including without
limitation, copyright, trade secret or patent rights, were violated in the
creation, compilation or acquisition of the Assets by Targetco or by any
party through whom Targetco acquired title;
(m) to the best of Vendor's knowledge, all machinery and
equipment of any kind whatsoever comprised in the Assets are in reasonable
operating condition and in a state of reasonable maintenance and repair
taking into account their age and use;
(n) all of the bank accounts and safety deposit boxes of
Targetco are listed on Schedule 4.1(n) to this Agreement;
(o) to the best of Vendor's knowledge, all of the insurance
policies insuring against the loss of, or damage to, the Assets or public
liability are listed in Schedule 4.1(o) to this Agreement;
(p) the unaudited financial statements of Targetco for its
fiscal year ended 31 December 1998 (collectively the "Targetco Financial
Statements"), copies of which appear as Schedule 4.1(p) to this Agreement,
taken as a whole, are true and correct in all material respects and present
accurately the financial position and results of the operations of Targetco
for the periods then ended;
(q) to the best of Vendor's knowledge, the books and records of
Targetco disclose all material financial transactions of Targetco arising
subsequent to the preparation of the Targetco Financial Statements and such
transactions have been accurately recorded;
(r) since 31 December 1998:
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(i) no dividends or other distributions of any kind
whatsoever on any shares in the capital of Targetco have been made, declared
or authorized, except as disclosed in the Targetco Financial Statements and
except for amounts distributed to the shareholders of Targetco as a result of
Targetco's S corporation status;
(ii) to the best of his knowledge, Targetco has not become
indebted to the Shareholders of Targetco or any one of them, except for
current employment compensation as described in Schedule 4.1(4)(ii);
(iii) to the best of Vendor's knowledge, none of the
Shareholders of Targetco or any other officer, director or employee of
Targetco has become indebted or under obligation to Targetco on any account
whatsoever; and
(iv) to the best of Vendor's knowledge, Targetco has not
guaranteed or agreed to guarantee any debt, liability or other obligation of
any kind whatsoever of any person, firm or corporation of any kind whatsoever;
(s) to the best of Vendor's knowledge, there are no material
liabilities of Targetco, whether direct, indirect, absolute, contingent or
otherwise which are not disclosed or reflected in the Targetco Financial
Statements except those incurred in the ordinary course of business since the
date the Targetco Financial Statements were prepared, all of which are
recorded in the books and records of Targetco;
(t) the accounts receivable of Targetco shown on the Targetco
Financial Statements or recorded in the books and records of Targetco are
bona fide, good and, to the best knowledge of Vendor, collectible without
set-off or counterclaim;
(u) except as set forth on Schedule 4.1(v) since 31 December 1998:
(i) there has not been any material adverse change of any
kind whatsoever in the financial position or condition of Targetco or any
damage, loss or other change of any kind whatsoever in circumstances
materially affecting the business or Assets or the right or capacity of
Targetco to carry on its business;
(ii) Targetco has not waived or surrendered any right of
any kind whatsoever of material value;
(iii) Targetco has not discharged, satisfied or paid any
lien, charge or encumbrance of any kind whatsoever or obligation or liability
of any kind whatsoever other than current liabilities in the ordinary course
of its business or as expressly permitted under this Agreement;
(iv) the business of Targetco has been carried on in the
ordinary course;
(v) except as set forth in Schedule 4.1(u)(v), no new
machinery or equipment of any kind whatsoever has been ordered by, or
installed or assembled on the premises of, Targetco; and
(vi) except as set forth in Schedule (4.1(u)(vi), no
capital expenditures exceeding in the aggregate $10,000 have been authorized
or made by Targetco;
(v) the directors, officers, employees, contractors and
consultants of Targetco and all of their compensation arrangements with
Targetco, whether as directors, officers or employees of, or as independent
contractors or consultants to, Targetco, are as listed on Schedule 4.1(v) to
this Agreement;
(w) no payments of any kind whatsoever have been made or
authorized by Targetco to or on behalf of the Shareholders of Targetco or any
one of them or to or on behalf of any of the directors, officers, employees
contractors or consultants of Targetco except in accordance with those
compensation arrangements specified on Schedule 4.1(w) to this Agreement or
except as contemplated by this Agreement;
(x) there are no pensions, profit sharing, group insurance or
similar plans or other deferred compensation plans of any kind whatsoever
affecting Targetco other than those specified on Schedule 4.1(x) to this
Agreement;
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(y) Targetco is not now, and has never been, a party to any
collective agreement with any labor union or other association of employees
of any kind whatsoever;
(z) the contracts and agreements included on Schedules ___ and ___
to this Agreement and those additional contracts and agreements specified on
Schedule 4.1(z) to this Agreement (collectively the "Material Contracts")
constitute all of the material contracts and agreements of Targetco. In
particular, Targetco does not maintain insurance of any kind;
(aa) Targetco has not licensed, leased, transferred, disposed of or
encumbered any of the Assets in any way, or permitted any third party access
to any of the Assets, including in particular the source code to the computer
software and the contestant and subscriber information included in the
Assets, except in accordance with the terms of the Material Contracts;
(bb) except as is noted on Schedule 4.1(bb) to this Agreement, the
Material Contracts are in good standing in all respects and that Targetco is
not in default in any respect;
(cc) except as is noted on Schedule 4.1(cc) to this Agreement,
Targetco can terminate all of its obligations under each of the Material
Contracts without liability on not more than one month's notice;
(dd) to the best of Vendor's knowledge, all tax returns and reports
of Targetco required by law to be filed have been filed and are substantially
true, complete and correct and all taxes and other government charges of any
kind whatsoever of Targetco have been paid or accrued in the Targetco
Financial Statements;
(ee) to the best of Vendor's knowledge, Targetco has been assessed
for all applicable income and other tax remittances for all of its full or
partial fiscal years to and including its fiscal year ended 31 December, 1998;
(ff) Targetco has not:
(i) acquired any property from a person, otherwise than at
arm's length, for proceeds greater than the fair market value thereof; or
(ii) disposed of anything to a person, otherwise than at
arm's length, for proceeds less than the fair market value thereof;
(gg) Targetco has made all elections required to have been made
under all applicable tax legislation in connection with any distributions
made by it and all such elections were true and correct and made in the
prescribed form and within the prescribed time period;
(hh) to the best of Vendor's knowledge, adequate provision has been
made for taxes payable by Targetco for the current period for which tax
returns are not yet required to be filed and there are no agreements, waivers
or other arrangements of any kind whatsoever providing for an extension of
time with respect to the filing of any tax return by, or payment of, any tax
or governmental charge of any kind whatsoever by Targetco;
(ii) Vendor is not aware of any contingent tax liabilities of
Targetco of any kind whatsoever or any grounds which would prompt a
reassessment of Targetco including aggressive treatment of income and
expenses in earlier tax returns filed;
(jj) there are no amounts outstanding and unpaid for which Targetco
has previously claimed a deduction under any applicable tax legislation;
(kk) Targetco has made all collections, deductions, remittances and
payments of any kind whatsoever and filed all reports and returns required by
it to be made or filed under the provisions of all applicable statutes
requiring the making of collections, deductions, remittances or payments of
any kind whatsoever in those jurisdictions in which
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it carries on business;
(ll) to the best of his knowledge and except as disclosed on Schedule
4.1(ll), there are no actions, suits, judgments, investigations or proceedings
of any kind whatsoever outstanding, pending or threatened against or affecting
Targetco at law or in equity or before or by any federal, provincial, state,
municipal or other governmental department, commission, board, bureau or agency
of any kind whatsoever and there is no basis therefor;
(mm) to the best of his knowledge, Targetco is not in breach of
any law, ordinance, statute, regulation, bylaw, order or decree of any kind
whatsoever;
(nn) Vendor and Targetco have good and sufficient right and authority
to enter into this Agreement and complete their respective transactions
contemplated under this Agreement on the terms and conditions set forth herein;
(oo) to the best of Vendor's knowledge, the execution and delivery of
this Agreement, the performance of their respective obligations under this
Agreement and the completion of their respective transactions contemplated under
this Agreement will not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute default under, the
incorporation documents of Targetco or any indenture, mortgage, agreement,
lease, license or other instrument of any kind whatsoever to which Targetco, or
Vendor is a party or by which any one of them is bound, or any judgment or order
of any kind whatsoever of any court or administrative body of any kind
whatsoever by which any one of them is bound; and
(ii) result in the violation of any law or regulation of any
kind whatsoever by any of the Shareholders of Targetco or by Targetco;
(pp) neither Targetco nor the Shareholders of Targetco nor any of them
has incurred any liability for brokers' or finder's fees of any kind whatsoever
with respect to this Agreement or any transaction contemplated under this
Agreement; and
4.2 The representations and warranties of the Vendor contained in this
Agreement shall be true at the Time of Closing as though they were made at
the Time of Closing and they shall survive the completion of the transactions
contemplated under this Agreement and remain in full force and effect
thereafter for the benefit of the Merger Parent for a period of five (5)
years after the Time of Closing in respect of representations and warranties
relating to tax matters, and for a period of two (2) years after the Time of
Closing in respect of all other representations and warranties.
4.3 In order to induce the Vendor to enter into this Agreement and complete
his respective transactions contemplated hereunder, the Merger Parent
represents and warrants to the Vendor that:
(a) the Merger Parent was and remains duly incorporated under the laws
of Florida and the Merger Parent is in good standing with respect to the filing
of annual reports in that jurisdiction;
(b) the Subsidiary is duly incorporated under the laws of Wisconsin and
is in good standing with respect to the filing of annual reports in that
jurisdiction;
(c) as of the Effective Date, the authorized share capital of the
Merger Parent consists of 50,000,000 common shares with a par value of $0.001
per share;
(d) the authorized share capital of the Subsidiary consists of 9,000
shares, of which 9,000 shares will be issued and outstanding in the name of the
Merger Parent;
(e) on the Closing Date, the Merger Parent's Shares shall be validly
issued and outstanding fully paid and non-assessable common shares of the Merger
Parent registered in the names of, and beneficially owned by, the
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Shareholders of Targetco as set forth in paragraph 1.2 of this Agreement, and
all of the Effective Date Issued Capital shall be validly issued and
outstanding fully paid and non-assessable common shares of the Merger Parent;
(f) the books and records of the Merger Parent disclose all material
financial transactions of the Merger Parent arising subsequent to the
preparation of the Merger Parent Financial Statements and such transactions
have been fairly and accurately recorded;
(g) except as disclosed to the Vendor in the Schedules to this
Agreement, there are no material liabilities of the Merger Parent, whether
direct, indirect, absolute, contingent or otherwise which are not disclosed
or reflected in the Merger Parent Financial Statements except those incurred
in the ordinary course of business since the date the Merger Parent Financial
Statements were prepared, all of which are recorded in the books and records
of the Merger Parent;
(h) to the best of its knowledge, there are no actions, suits,
judgments, investigations or proceedings of any kind whatsoever outstanding,
pending or threatened against or affecting the Merger Parent at law or in
equity or before or by any federal, provincial, state, municipal or other
governmental department, commission, board, bureau or agency of any kind
whatsoever;
(i) to the best of its knowledge, the Merger Parent is not in breach
of any law, ordinance, statute, regulation, bylaw, order or decree of any
kind whatsoever;
(j) the Merger Parent has good and sufficient right and authority to
enter into this Agreement and complete the transactions contemplated under
this Agreement on the terms and conditions set forth herein;
(k) to the best of its knowledge, the execution and delivery of this
Agreement, the performance of their respective obligations under this Agreement
and the completion of their respective transactions contemplated under this
Agreement will not:
(i) conflict with, or result in the breach of or the
acceleration of any indebtedness under, or constitute default under, the
incorporation documents of the Merger Parent or any indenture, mortgage,
agreement, lease, license or other instrument of any kind whatsoever to which
the Merger Parent is a party to or by which it is bound, or any judgment or
order of any kind whatsoever of any court or administrative body of any kind
whatsoever by which the Merger Parent is bound; and
(ii) result in the violation of any law or regulation
of any kind whatsoever by the Merger Parent; and
(iii) the representations and warranties of the Merger
Parent contained in this Agreement disclose all material facts specifically
relating to the transactions involving the Merger Parent contemplated under
this Agreement which materially and adversely affect, or in the future may
materially and adversely affect, the Merger Parent's ability to perform its
obligations under this Agreement.
4.5 The representations and warranties of the Merger Parent contained in
this Agreement shall be true at the Time of Closing as though they were made
at the Time of Closing and shall survive the completion of the transactions
contemplated under this Agreement and remain in full force and effect
thereafter for the benefit of the Vendors for a period of Two (2) years after
the Time of Closing.
5. INDEMNITY
5.1 Notwithstanding the completion of the transactions contemplated under
this Agreement or the Merger Parent's Investigation, the representations,
warranties and acknowledgments of the Vendor contained in this Agreement or
any certificates or documents delivered by him pursuant to this Agreement
shall survive the completion of the transactions contemplated by this
Agreement and shall continue in full force and effect thereafter for the
benefit of the Merger Parent
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for a period of five (5) years after the Time of Closing in respect of
representations, warranties and acknowledgments relating to tax matters, and
for a period of two (2) years after the Time of Closing in respect of all
other representations, warranties and acknowledgments. If any of the
representations, warranties or acknowledgments given by the Vendor in this
Agreement are found to be untrue or there is a breach of any covenant or
agreement in this Agreement on the part of the Vendor, the Vendor shall
indemnify and save harmless the Merger Parent from and against any and all
liability, claims, debts, demands, suits, actions, penalties, fines, losses,
costs (including legal fees and disbursements as charged by a lawyer to his
own client), damages and expenses of any kind whatsoever which may be brought
or made against the Merger Parent by any person, firm or corporation of any
kind whatsoever or which may be suffered or incurred by the Merger Parent,
directly or indirectly, arising out of or as a consequence of any such
misrepresentation or breach of warranty, acknowledgment, covenant or
agreement. Without in any way limiting the generality of the foregoing, this
shall include any loss of any kind whatsoever which may be suffered or
incurred by the Merger Parent, directly or indirectly, arising out of any
material assessment or reassessment levied upon Targetco for tax, interest
and/or penalties for any period up to and including the Closing Date and all
claims, demands, costs (including legal fees and disbursements as charged by
a lawyer to his own client) and expenses of any kind whatsoever in respect of
the foregoing.
5.2 Notwithstanding the completion of the transactions contemplated under
this Agreement, the representations, warranties and acknowledgments of the
Merger Parent contained in this Agreement or any certificates or documents
delivered by the Merger Parent pursuant to this Agreement shall survive the
completion of the transactions contemplated by this Agreement and shall
continue in full force and effect thereafter for the benefit of the Vendor
for a period of two (2) years after the Time of Closing. If any of the
representations, warranties or acknowledgments given by the Merger Parent in
this Agreement are found to be untrue or there is a breach of any covenant or
agreement in this Agreement on the part of the Merger Parent, the Merger
Parent shall indemnify and save harmless the Vendor from and against any and
all liability, claims, debts, demands, suits, actions, penalties, fines,
losses, costs (including legal fees and disbursements as charged by a lawyer
to his own client), damages and expenses of any kind whatsoever which may be
brought or made against the Vendor by any person, firm or corporation of any
kind whatsoever or which may be suffered or incurred by the Vendor, directly
or indirectly, arising out of or as a consequence of any such
misrepresentation or breach of warranty, acknowledgment, covenant or
agreement.
5.3 The determination of any liability claim, lien, encumbrance, charge, fine
or penalty for which indemnification may be claimed under this Section 5
shall be net of any tax (or other) benefit derived in insurance or other
proceeds received (but adjusted for any tax incurred as a result of the
receipt of such insurance proceeds or indemnification) by the party bearing
such liability claim, lien, encumbrance, charge, fine or penalty as a result
thereof.
5.4 Neither the Vendor nor the Merger Parent shall be required to provide
indemnification under Section 5.1, above, with respect to the warranties and
representations set forth in Section 4, unless the amount of damages incurred
by Merger Parent or the Vendor (net of taxes and insurance proceeds received
as provided in Paragraph 5.3, above) shall exceed in the aggregate $50,000
(the "Basket Amount") and then only for amounts in excess of the Basket
Amount. Notwithstanding the foregoing and in no event shall the aggregate
liability with respect to all claims of indemnification made by either the
Vendor or the Merger Parent exceed an aggregate amount of $250,000 (the "Cap
Amount"). Neither party shall indemnify the other from and any punitive,
consequential or indirect damages, or any asserted or established claim for
any damages which provides for recovery based on any multiple of losses, lost
profits or anticipated profits.
5.5 Any party (a "Claiming Party") requesting indemnity under this Section
shall provide demand and notice of such request to the party from whom the
Claiming Party requests indemnity (the "Indemnifying Party") in writing,
within 20 days of receipt of notice (constructive or actual) of the claim for
which indemnity is requested. The Indemnifying Party shall then have 10 days
within which to acknowledge and accept responsibility for such indemnity. If
within 10 days of notice the Claiming Party accepts responsibility for
indemnity under this provision, the Claiming Party shall cooperate with the
Indemnifying Party, who shall take primary responsibility for defense of such
claim, including choice of counsel. The Claiming Party may retain additional
counsel of their own choosing, but at the Indemnified Party's expense. Any
Claiming Party for whose claim the Indemnifying Party has accepted
responsibility under this provision shall not negotiate, compromise or settle
any claim against the Claiming Party without the Indemnifying Party's written
consent.
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5.6 Notwithstanding any of the provisions set forth in this Section 5, in
the event that the Indemnifying Party can establish that the Claiming Party
had knowledge on or before the Time of Closing, of a breach of any warranty
or representation, then the Indemnifying Party shall not be liable under this
Section 5 for any loss resulting from or arising out of any such breach.
5.7 The sole remedy of the Merger Parent for any and all claims of the
nature described in Paragraph 5.1, above, shall be the indemnity set forth in
Paragraph 5.1 and the sole remedy of the Vendor for any and all claims of the
nature described in Paragraph 5.2, above, shall be the indemnity set forth in
Paragraph 5.2, in each case as limited by the provisions set forth in this
Section 5. The parties' indemnification obligations pursuant to Paragraphs
5.1 and 5.2, above, shall terminate upon the expiration of the applicable
time limits listed in this Section 5 (the "Survival Time"). Any claims for
indemnification not submitted in writing by the Claiming Party prior to the
Survival Time shall be deemed to have been waived. Any claims for
indemnification made in good faith by the Claiming Party in writing prior to
the Survival Time and the right of indemnity with respect thereto shall
survive such termination until resolved or judicially determined.
6. CLOSING DOCUMENTS
6.1 At the Time of Closing, the Shareholders of Targetco shall deliver to
the counsel for the Merger Parent:
(a) a certified true copy of the resolutions of the directors of
Targetco and the Subsidiary evidencing that the directors of the Targetco and
the Subsidiary have approved this Agreement and all of the transactions of
Targetco contemplated hereunder and the resolutions shall include specific
reference to:
(i) the cancellation of the share certificates (the "Old Share
Certificates") representing the Targetco Shares held as set forth in paragraph B
of the recitals to this Agreement; and
(ii) approval of the Articles of Merger whereby Targetco is
merged with the Subsidiary;
(b) the Old Share Certificates;
(c) duly executed Articles of Merger in form for filing in the
State of Wisconsin;
(d) the Employment Agreement referred to in subparagraph 2.1
(b) of this Agreement;
(e) all the minute books and corporate seals of Targetco; and
(f) a release in the form of Schedule "G" to this Agreement
(the "Release") from each of the Shareholders of Targetco of all claims
against Targetco for any outstanding amounts owing by Targetco to any of the
Shareholders of Targetco on account of any loans, bonuses, reimbursements,
compensation, fees, royalties, dividends or other consideration whatsoever,
except only as provided in the Employment Agreements.
6.2 At the Time of Closing, the Merger Parent shall deliver to the counsel
for the Vendor:
(a) certified true copies of the resolutions of the directors
of the Merger Parent and the Subsidiary, evidencing that the directors of the
Merger Parent and the Subsidiary have approved this Agreement and all of the
transactions of the Merger Parent and the Subsidiary contemplated hereunder;
(b) the balance of the Cash Portion after payment of the
Deposit as provided for in subparagraph 1.6 of this Agreement, as set forth
on Schedule 1.3, which balance is to be paid by wire transfer to Godfrey &
Kahn, S.C. as exchange agent for the Shareholders of Targetco;
(c) share certificates representing the Merger Parent's Shares
registered in the individual names of the Shareholders of Targetco as
provided for in subparagraph 1.3 of this Agreement;
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(d) a certificate of confirmation signed by an officer or
director of the Merger Parent in the form attached as Schedule ____ to this
Agreement.
7. GENERAL
7.1 Time and each of the terms and conditions of this Agreement shall be of
the essence of this Agreement and any waiver by the parties of this paragraph
7.1 or any failure by them to exercise any of their rights under this
Agreement shall be limited to the particular instance and shall not extend to
any other instance or matter in this Agreement or otherwise affect any of
their rights or remedies under this Agreement.
7.2 The Schedules to this Agreement incorporated by reference and the
recitals to this Agreement constitute a part of this Agreement.
7.3 This Agreement constitutes the entire Agreement between the parties
hereto in respect of the matters referred to herein and there are no
representations, warranties, covenants or agreements, expressed or implied,
collateral hereto other than as expressly set forth or referred to herein.
7.4 The headings in this Agreement are for reference only and do not
constitute terms of the Agreement.
7.5 The provisions contained in this Agreement which, by their terms,
require performance by a party to this Agreement subsequent to the Closing
Date of this Agreement, shall survive the Closing Date of this Agreement.
7.6 No alteration, amendment, modification or interpretation of this
Agreement or any provision of this Agreement shall be valid and binding upon
the parties hereto unless such alteration, amendment, modification or
interpretation is in written form executed by the parties directly affected
by such alteration, amendment, modification or interpretation.
7.7 Whenever the singular or masculine is used in this Agreement the same
shall be deemed to include the plural or the feminine or the body corporate
as the context may require.
7.8 The parties hereto shall execute and deliver all such further documents
and instruments and do all such acts and things as any party may, either
before or after the Closing Date, reasonably require in order to carry out
the full intent and meaning of this Agreement.
7.9 Any notice, request, demand and other communication to be given under
this Agreement shall be in writing and shall be delivered by hand or by
telecopier to the parties at the addresses indicated in the signature block
to this Agreement or to such other addresses as may be given in writing by
the parties hereto in the manner provided for in this paragraph, and shall be
deemed to have been received, if delivered by hand, on the date of delivery,
or if delivered by telecopier, on the date that it is sent.
7.10 This Agreement or any rights hereunder may be assigned by the Merger
Parent, but any such assignment shall not release the Merger Parent from its
obligations hereunder.
7.11 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the State of Wisconsin, and all disputes arising
under this Agreement shall be resolved in, and the parties hereto submit to
the jurisdiction of, the State or Federal Courts of Wisconsin.
7.12 This Agreement may be signed by the parties in as many counterparts as
may be deemed necessary, each of which so signed shall be deemed to be an
original, and all such counterparts together shall constitute one and the
same instrument.
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IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of
the Effective Date first above written.
MERGER PARENT TARGETCO
INTERNET SPORTS NETWORK, INC. INNOVATION PARTNERS, INC.
By: /s/ KEN CREMA By: /s/ JEFFREY A. THOMAS
--------------------------- --------------------------
Its: Chief Executive Officer Its: President
VENDORS
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SCHEDULE "A"
Employment Agreement
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made, entered into, and
effective as of July __, 1999 (the "Effective Date"), by and between Internet
Sports Network, Inc., a Florida corporation ("Company"), and Jeff Thomas, an
individual ("Employee").
RECITALS
A. Company desires to have an employment agreement with Employee and
Employee desires to enter into an employment agreement with Company for the
position set forth in Schedule A subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto hereby agree as follows:
AGREEMENT
1. Term and Duties. Company hereby employs Employee in the position set out
on Schedule A to this Agreement, and Employee agrees to fulfil the duties and
responsibilities set out on Schedule A to this Agreement, subject to changes
consistent with the usual duties and responsibilities of that position as may
be reasonably prescribed by the Board of Directors of the Company (the
"Board") from time to time. Employee shall devote his full time and attention
to the business of Company as shall be required to perform the required
services and duties. Employee at all times during the employment term shall
strictly adhere to and obey all policies, rules and regulations established
from time to time governing the conduct of employees of Company.
2. Duties of Employee.
2.1 Employee agrees to perform Employee's services efficiently and
to the best of Employee's ability. Employee agrees throughout the term of
this Agreement to devote his full time, energy and skill to the business of
the Company and to the promotion of the best interests of the Company.
2.2 Employee agrees that he shall not at any time, either during or
subsequent to his employment term, unless expressly consented to in writing
by Company, either directly or indirectly use or disclose to any person or
entity any confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of Company,
including, but not limited to, information concerning the customers of
Company, Company's marketing methods, compensation paid to employees,
independent contractors or suppliers and other terms of their employment or
contractual relationships, financial and business records, know-how, or any
other information concerning the business of Company, its manner of
operations, or other data of any kind, nature or description. Employee agrees
that the above information and items are important, material and confidential
trade secrets and these affect the successful conduct of Company's business
and its goodwill. This non-disclosure obligation does not apply to any
information which is presently in the public domain, or any information that
subsequently becomes part of the public domain through no fault of Employee.
2.3 Employee will not, during his employment with the Company,
engage in any business, enterprise or activity that is contrary to or
detracts from the business of the Company or the proper fulfillment of his
duties and responsibilities to the Company.
2.4 Employee acknowledges that as this Agreement is entered into in
connection with the sale of the controlling interest of the Company by
Employee to Parent Company, he will comply with all the restrictions set
forth below at all times during his employment and for a period of twenty
four (24) months after the termination of his employment:
a. Employee will not, either individually or in
conjunction with any person, as principal, agent,
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director, officer, employee, investor or in any other manner whatsoever,
directly or indirectly engage in or become financially interested in any
competitive business within the State of Wisconsin, except as a passive
investor holding not more than one percent of the publicly traded stock of a
corporation in which Employee is not involved in management;
b. Employee will not, either directly or indirectly, on
its own behalf of on behalf of others, solicit, divert or appropriate or
attempt to solicit, divert or appropriate to any competitive business, any
business or actively sought prospective business of the Company or any
customers with whom the Company or any affiliate of the Company has current
agreements relating to the business of the Company, or with whom Employee has
dealt, or with whom Employee has supervised negotiations or business
relations, or about whom Employee has acquired confidential information in
the course of Employee's employment;
c. Employee will not, either directly or indirectly, on
Employee's behalf or on behalf of others, solicit, divert or hire away, or
attempt to solicit, divert, or hire away, any independent contractor or any
person employed by the Company or any affiliate of the Company or persuade or
attempt to persuade any such individual to terminate his or her employment
with the Company; and,
d. Employee will not directly or indirectly impair or seek
to impair the reputation of the Company or any affiliate of the Company, nor
any relationship that the Company or any affiliate of the Company has with
its employees, customers, suppliers, agents or other parties with which the
Company or any other affiliate of the Company does business or has
contractual relations;
e. Employee will not receive or accept for its own
benefit, either directly or indirectly, any commission, rebate, discount,
gratuity or profit from any person having or proposing to have one or more
business transactions with the Company or any affiliate of the Company,
without the prior approval of the Board, which may be withheld; and,
f. Employee will, during the term of this employment with
the Company, communicate and channel to the Company all knowledge, business
and customer contacts and any other information that could concern or be in
any way beneficial to the business of the Company. Any such information
communicated to the Company as aforesaid will be and remain the property of
the Company notwithstanding any subsequent termination of Employee's
employment.
3. Compensation.
3.1 Subject to the termination of this Agreement as provided
herein, Company shall compensate Employee for his services hereunder at an
annual salary set forth in Schedule A, subject to changes by mutual
agreement, payable in accordance with the Company's standard salary payment
schedule. Payment of Employee's Salary will be subject to income tax source
deductions and other deductions required by applicable law.
3.2 Employee is also eligible to receive such additional
compensation as the Board of Directors of Company determines is proper in
recognition of Employee's contributions and services to Company. Such
additional compensation shall be paid to Employee on the anniversary date of
this Agreement during the Employment Term, and at such other times as may be
determined by the Board of Directors.
3.3 In addition to the compensation set forth above, Employee shall
be entitled to participate in or to receive benefits under all of Company's
employee benefit plans made available by Company now or in the future to
similarly situated employees, subject to the terms, conditions and overall
administration of such plans. Employee shall be entitled to participate in or
to receive benefits under all of Company's employee benefit plans made
available by Company or in the future to similarly situated employees,
subject to the terms, conditions and overall administration of such plans.
Including but not limited to 401(k) plans, IRA plans, E.R.I.S.A Plans, any
other retirement or benefit plans that the Company has made available to
similarly situated employees.
4. Expenses. Company shall reimburse Employee for all pre-approved
reasonable business related expenses incurred by Employee in the course of
his normal duties on behalf of the Company. In compensating Employee for
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expenses, the ordinary and usual business guidelines and documentation
requirements shall be adhered to by Company and Employee.
(a) Employee will be required to incur travel, meals, entertainment
and other business expenses on behalf of the Company in the performance of
Employee's duties hereunder. Company will reimburse Employee for all such
reasonable business expenses incurred by Employee in connection with
Company's business upon presentation of receipts or other acceptable
documentation of the expenditures.
5. Assignment of Intellectual Property Rights. As consideration for
your employment with Company, Employee covenants and agrees as follows:
(a) Employee will make prompt and full disclosure to the Company of
any discovery, processes, inventions, patents, computer software, copyrights,
trademarks and other intangible rights (collectively referred to as
"Intellectual Property") that may be conceived, made, improved upon,
developed, or participated by Employee, solely or jointly, in the course of,
arising from or relating to any Intellectual Property Rights of the Company,
or his employment with the Company or any affiliate of the Company (the "Work
Products").
(b) The Company will hold all Intellectual Property Rights in
respect of the Work Products for the exclusive benefit of the Company and
Employee agrees not to claim or apply for registration or challenge the
Company's registration of, any such Intellectual Property Rights. Employee's
acceptance of the terms of this Agreement constitutes an absolute,
unconditional and irrevocable assignment, transfer and conveyance of all
past, present and future right, title, benefit and interest in and to all
Intellectual Property Rights in respect of the Work Products. Employee hereby
waives, in favor of the Company, all claims of any nature whatsoever that
Employee now or hereafter may have for infringement of any Intellectual
Property Rights for the Work Products so assigned to the Company. To the
extent that copyright may subsist in the Work Products, Employee hereby
waives all past, present and future moral rights he may have.
(c) The Work Products and all related Intellectual Property Rights
will be the absolute and exclusive property of the Company. The Company may
apply for patent, copyright or other intellectual property protection in the
Company's name or, where such procedure is proper, in Employee's name,
anywhere in the world. Employee will, at the Company's request, execute all
documents and do all such acts and things considered necessary by the Company
to obtain, confirm or enforce any Intellectual Property Rights in respect of
the Inventions. In case the Company requires, but is unable to secure
Employee's signature for any such purpose in a timely manner, Employee hereby
irrevocably designate and appoint the Company and any duly authorized officer
or agent of the Company as Employee's agent and attorney, to act for Employee
and in Employee's behalf an stead to execute any such documents and to do all
other lawfully permitted acts to carry out the intent of this provision, with
the same legal force and effect as if executed or done by Employee. This
power of attorney is coupled with an interest.
6. Disability of Employee.
6.1 Employee shall be considered disabled if, due to illness or
injury, either physical or mental, Employee is unable to perform Employee's
customary duties as an employee of Company for more than thirty (30) days in
the aggregate out of a period of twelve (12) consecutive months. The
disability shall be determined by a certification from a physician.
6.2 If Employee is determined to be disabled, Company shall
continue to pay Employee's base salary for the initial ninety (90) days of
"disability." The continuation of the salary compensation after the initial
ninety (90) days shall be determined by the Board of Directors of the Company.
7. Termination By Company.
7.1 Unless terminated earlier as provided in this Agreement,
Employee shall be employed for a term set forth in Schedule A. Thereafter,
the employment term shall continue on an at will basis until terminated at
the option of Company or Employee upon thirty (30) days prior written notice.
This Agreement may be terminated at any time by
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written agreement between the parties, or as provided in Section 8.2 below.
This Agreement will terminate immediately upon Employee's death.
7.2 Company may terminate this Agreement for cause at any time
without notice. For purposes of this Agreement, the term "cause" shall
include, but not be limited to, the following: a material breach of or
failure to perform any covenant or obligation in this Agreement, disloyalty,
dishonesty, neglect of duties, unprofessional conduct, acts of moral
turpitude, disappearance, felonious conduct or fraud, the use of illegal
drugs or the habitual and disabling use of alcohol and drugs, embezzlement or
similar conduct.
8. Termination By Employee. Employee may terminate this Agreement without
cause upon thirty (30) days prior written notice to Company. All obligations
of Employee to Company under section 2.4 and 6 shall survive the termination
of this Agreement.
9. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto their respective devisees, legatees, heirs,
legal representatives, successors, and permitted assigns. The preceding
sentence shall not affect any restriction on assignment set forth elsewhere
in this Agreement.
10. Effect of Combination or Dissolution. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of Company, or by any
merger or consolidation in which Company is not the surviving or resulting
corporation, or upon any transfer of all or substantially all of the
outstanding shares or assets of Company. Instead, the provisions of this
Agreement shall be binding on and inure to the benefit of Company's
creditors, the surviving business entity or the business entity to which such
shares or assets shall be transferred.
11. Arbitration. If a dispute or claim shall arise with respect to any of the
terms or provisions of this Agreement, or with respect to the performance by
either of the parties under this Agreement, other than a dispute with respect
to Section 2 of this Agreement, then either party may, with notice as herein
provided, require that the dispute be submitted under the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). Each party
shall bear one-half (1/2) of the cost of appointing the arbitrator and of
paying such arbitrator's fees. The written decision of the arbitrator(s)
ultimately appointed by or for both parties shall be binding and conclusive
on the parties. Judgment may be entered on such written decision of the
single arbitrator in any court having jurisdiction. Any arbitration
undertaken pursuant to the terms of this section shall occur in the county of
the Company's office in Santa Clara County, California, or in the county of
such other state that the Company has an office at the time of the
arbitration as is designated by the Company.
12. Assignment. Subject to all other provisions of this Agreement, any
attempt to assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm, Company, or
corporation without the prior written consent of the other party, shall be
invalid, and may, at the option of such other party, result in an incurable
event of default resulting in termination of this Agreement and all rights
hereby conferred.
13. Choice of Law. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State
of Florida including all matters of construction, validity, performance, and
enforcement and without giving effect to the principles of conflict of laws.
14. Indemnification. Company shall indemnify, defend and hold Employee
harmless, to the fullest extent permitted by law, for all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney's fees
that Employee shall incur or suffer that arise from, result from or relate to
the discharge of Employee's duties under this Agreement. Company shall
maintain adequate insurance for this purpose or shall advance Employee any
expenses incurred in defending any such proceeding or claim to the maximum
extent permitted by law.
15. Entire Agreement. Except as provided herein, this Agreement, including
exhibits, contains the entire agreement of the parties, and supersedes all
existing negotiations, representations, or agreements and all other oral,
written, or other communications between them concerning the subject matter
of this Agreement. There are no representations, agreements, arrangements, or
understandings, oral or written, between and among the parties hereto
relating to the
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subject matter of this Agreement that are not fully expressed herein.
16. Severability. If any provision of this Agreement is unenforceable,
invalid, or violates applicable law, such provision, or unenforceable portion
of such provision, shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
17. Captions. The captions in this Agreement are inserted only as a matter of
convenience and for reference and shall not be deemed to define, limit,
enlarge, or describe the scope of this Agreement or the relationship of the
parties, and shall not affect this Agreement or the construction of any
provisions herein.
18. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
19. Modification. No change, modification, addition, or amendment to this
Agreement shall be valid unless in writing and signed by all parties hereto.
20. Attorneys' Fees. Except as otherwise provided herein, if a dispute should
arise between the parties including, but not limited to arbitration, the
prevailing party shall be reimbursed by the non- prevailing party for all
reasonable expenses incurred in resolving such dispute, including reasonable
attorneys' fees exclusive of such amount of attorneys' fees as shall be a
premium for result or for risk of loss under a contingency fee arrangement.
21. Taxes. Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make such
payment. Any withholding taxes in the nature of a tax on income shall be
deducted from payments due, and the party required to withhold such tax shall
furnish to the party receiving such payment all documentation necessary to
prove the proper amount to withhold of such taxes and to prove payment to the
tax authority of such required withholding.
22. NOT FOR THE BENEFIT OF CREDITORS OR THIRD PARTIES. The provisions of this
Agreement are intended only for the regulation of relations among the
parties. This Agreement is not intended for the benefit of creditors of the
parties or other third parties and no rights are granted to creditors of the
parties or other third parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted, adopted,
or acted in reliance upon this Agreement.
23. FACSIMILE SIGNATURES. Facsimile signatures shall be acceptable and
binding as originals.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the Effective Date.
INTERNET SPORTS NETWORK, INC. EMPLOYEE
By: /s/ KEN CREMA By: /s/ JEFFREY A. THOMAS
---------------------------- ------------------------------
Its: Chief Executive Officer
6
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EXHIBIT 3(i)
ARTICLES OF INCORPORATION AND AMENDMENTS
OF INTERNET SPORTS NETWORK, INC.
<PAGE>
ARTICLES OF INCORPORATION
OF
BIRCH TREE CAPITAL CORP.
The undersigned, desiring to form a corporation (the "Corporation")
under the laws of Florida, hereby adopts the following Articles of
Incorporation.
ARTICLE 1
CORPORATE NAME
The name of the Corporation is Birch Tree Capital Corp.
ARTICLE II
PURPOSE
The Corporation shall be organized or any and all purposes
authorized under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000
shares of common stock, $.001 par value.
ARTICLE V
PLACE OF BUSINESS
The initial address of the principal place of business of this
corporation in the State of Florida shall be 1428 Brickell Avenue, 8th Floor,
Miami, FL 33131. The Board of Directors may at any time and from time to time
move the principal office of this corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall be not less than one (1) and,
subject to such minimum may be increased or decreased from time to time in
the manner provided in the By-Laws. The number of persons constituting the
initial Board of Directors shall be 1. The Board of Directors shall be
elected by the Stockholders of the corporation at such time and in such
manner as provided in he ByLaws. The name and addresses of the initial Board
of Directors and officers are as follows:
Eric P. Littman President/Director
1428 Brickell Avenue, 8th Floor
Miami, FL 33131
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other
securities of the Corporation except to the extent such right may be granted
by an amendment to these Articles of Incorporation or by a resolution of the
board of Directors.
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ARTICLE VIII
AMENDMENT OF BYLAWS
Anything in these Articles of Incorporation, the Bylaws, or the
Florida Corporation Act notwithstanding, bylaws shall not be adopted,
modified, amended or repealed by the shareholders of the Corporation except
upon the affirmative vote of a simple majority vote of the holders of all the
issued and outstanding shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1 INSPECTION OF BOOKS. The board of directors shall make
reasonable rules to determine at what times and places and under what
conditions the books of the Corporation shall be open to inspection by
shareholders or a duly appointed representative of a shareholder.
9.2 CONTROL SHARE ACQUISITION. The provisions relating to any
control share acquisition as contained in Florida Statutes now, or
hereinafter amended, and any successor provision shall not apply to the
Corporation.
9.3 QUORUM. The holders of shares entitled to one-third of the
votes at a meeting of shareholders shall constitute a quorum.
9.4 REQUIRED VOTE. Acts of shareholders shall require the approval
of holders of 0.01% of the outstanding votes of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICES
To the fullest extent permitted by law, no director or officer of
the Corporation shall be personally liable to the Corporation or its
shareholders for damages for breach of any duty owed to the Corporation or
its shareholders. In addition, the Corporation shall have the power, in its
By-Laws or in any resolution of its stockholders or directors, to undertake
to indemnify the officers and directors of this corporation against any
contingency or peril as may be determined to be in the best interests of this
corporation, and in conjunction therewith, to procure, at this corporation's
expense, policies of insurance.
ARTICLE XI
SUBSCRIBER
The name and address of the person signing these Articles of
Incorporation as subscriber is:
Eric P. Littman
1428 Brickell Avenue, 8th Floor
Miami, FL 33131
ARTICLE XII
CONTRACTS
No contract or other transaction between this corporation and any
person, firm or corporation shall be affected by the fact that any officer or
director of this corporation is such other party or is, or at some time in
the future becomes, an officer, director or partner of such other contracting
party, or has now or hereafter a direct or indirect interest in such contract.
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ARTICLE XIII
RESIDENT AGENT
The name and address of the initial resident agent of this
corporation is:
Eric P. Littman
1428 Brickell Avenue, 8th Floor
Miami, FL 33131
IN WITNESS WHEREOF, I have hereunto subscribed to and executed these
Articles of Incorporation this on September 25, 1996.
/s/ ERIC P. LITTMAN
----------------------------
Eric P. Littman, Subscriber
Subscribed and Sworn on September 25, 1996
Before me:
/s/ ISABEL J. CANTERA
- -------------------------------
Isabel Cantera, Notary Public
My Commission Expires:
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CERTIFICATE DESIGNATING PLACE OF BUSINESS OR
DOMICILE FOR SERVICE OF PROCESS WITHIN THIS STATE
NAMING THE AGENT UPON WHOM PROCESS MAY BE SERVED
Having been named to accept service of process for Birch Tree
Capital Corp. at the place designated in the Articles of Incorporation, the
undersigned is familiar with and accepts the obligations of that position
pursuant to F.S. 607.0501(3).
/s/ ERIC P. LITTMAN
-------------------------
Eric P. Littman
<PAGE>
ARTICLES OF AMENDMENT TO
BIRCH TREE CAPITAL CORP.
THE UNDERSIGNED, being the sole director and president of BIRCH TREE
CAPITAL CORP., does hereby amend its Articles of Incorporation as follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be Internet Sports Network, Inc.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on January 27, 1999 and that
the number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation this on January 27, 1999.
/s/ ERIC P. LITTMAN
- ----------------------------
Eric P. Littman, President
The foregoing instrument was acknowledged before me on January 27,
1999, by Eric P. Littman, who is personally known to me.
/s/ PAULINE B. BROWN
---------------------------
Notary Public
My commission expires:
<PAGE>
EXHIBIT 3(ii)
BYLAWS OF INTERNET SPORTS NETWORK, INC.
<PAGE>
BY-LAWS
OF
BIRCH TREE CAPITAL CORP.
ARTICLE I. MEETING OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
this corporation shall be held on the 30th day of June of each year or at
such other time and place designated by the Board of Directors of the
corporation. Business transacted at the annual meeting shall include the
election of directors of the corporation. If the designated day shall fall on
a Sunday or legal holiday, then the meeting shall be held on the first
business day thereafter.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders
shall be held when directed by the President or the Board of Directors, or
when requested in writing by the holders of not less than 10% of all the
shares entitled to vote at the meeting. A meeting requested by shareholders
shall be called for a date not less than 3 nor more than 30 days after the
request is made, unless the shareholders requesting the meeting designate a
later date. The call for the meeting shall be issued by the Secretary, unless
the President, Board of Directors, or shareholders requesting the meeting
shall designate another person to do so.
SECTION 3. PLACE. Meetings of shareholders shall be held at the
principal place of business of the corporation or at such other place as may
be designated by the Board of Directors.
SECTION 4. NOTICE. Written notice stating the place, day and hour of
the meeting and in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 3 nor more than 30
days before the meeting, either personally or by first class mail, or by the
direction of the President, the Secretary or the officer or persons calling the
meeting to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETING. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this Article to each shareholder
of record on a new record date entitled to vote at such meeting.
SECTION 6. SHAREHOLDER QUORUM AND VOTING. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders unless otherwise provided by
law.
SECTION 7. VOTING OF SHARES. Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders.
SECTION 8. PROXIES. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized attorney-in-fact.
No proxy shall be valid after the duration of 11 months from the date thereof
unless otherwise provided in the proxy.
SECTION 9. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action
required by law or authorized by these by-laws or the Articles of Incorporation
of this corporation or taken or to be taken at any annual or special meeting of
shareholders, 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.
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ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION. Directors need not be residents of this
state or shareholders of this corporation.
SECTION 3. COMPENSATION. The Board of Directors shall have
authority to fix the compensation of directors.
SECTION 4. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
votes against such action or abstains from voting in respect thereto because of
an asserted conflict of interest.
SECTION 5. NUMBER. This corporation shall have a minimum of 1
director but no more than 7.
SECTION 6. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the next shareholder meeting or until his earlier resignation, removal
from office or death. If no shareholder meeting takes place, each director shall
continue to serve until such meeting takes place. At each shareholder the
shareholders shall elect directors to hold office until the next succeeding
shareholder meeting. Each director shall hold office for a term for which he is
elected and until his successor shall have been elected and qualified or until
his earlier resignation, removal from office or death.
SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
SECTION 8. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
SECTION 9. QUORUM AND VOTING. a majority of the number of
directors fixed by these by-laws shall constitute a quorum for the
transaction of business. The act of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors.
SECTION 10. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in such resolution shall have and may
exercise all the authority of the Board of Directors, except as is provided by
law.
SECTION 11. PLACE OF MEETING. Regular and special meetings of the
Board of Directors shall be held at the principal place of business of the
corporation or as otherwise determined by the Directors.
SECTION 12, TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of
the Board of Directors shall be held without notice on the first Monday of
the calendar month two (2) months following the end of the corporation's
fiscal, or if the said first Monday is a legal holiday, then on the next
business day. Written notice of the time and place of special meetings of the
board of Directors shall be given to each director by either personal
delivery, telegram or cablegram at least three (3) days before the meeting or
by notice mailed to the director at least 3 days before the meeting.
Notice of a meeting of the Board of Directors need not be given to
any director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the
meeting, the time of the meeting, or the manner in which it has been called
or convened, except when a director states, at the beginning of the meeting,
any objection to the transaction of business because the meeting is not
lawfully called or convened.
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Neither the business to be transacted at, nor the purpose, of any
regular or special meeting of the Board of Directors need be specified in the
notice of waiver of notice of such meeting. A majority of the directors
present, whether or not a quorum exists, may adjourn any meeting of the Board
of Directors to another time and place. Notice of any such adjourned meeting
shall be given to the directors who were not present at the time of the
adjournment, and unless the time and place of adjourned meeting are announced
at the time of the adjournment, to the other directors. Meetings of the Board
of Directors may be called by the chairman of the board, by the president of
the corporation or by any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
SECTION 13. ACTION WITHOUT A MEETING. Any action, required to be taken
at a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, is
signed by such number of the directors, or such number of the members of the
committee, as the case may be, as would constitute the requisite majority
thereof for the taking of such action, is filed in the minutes of the
proceedings of the board or of the committee. Such actions shall then be deemed
taken with the same force and effect as though taken at a meeting of such board
or committee whereat all members were present and voting throughout and those
who signed such action shall have voted in the affirmative and all others shall
have voted in the negative. For informational purposes, a copy of such signed
actions shall be mailed to all members of the board or committee who did not
sign said action, provided however, that the failure to mail said notices shall
in no way prejudice the actions of the board or committee.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS. The officers of this corporation shall consist of
a president, a secretary and a treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as may
be deemed necessary may be elected or appointed by the Board of Directors from
time to time. Any two or more offices may be held by the same person.
SECTION 2. DUTIES. The officers of this corporation shall have the
following duties:
The President shall be the chief executive officer of the corporation,
shall have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the shareholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the shareholders and Board of Directors, send all notices of all meetings and
perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual matings of shareholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
SECTION 3. REMOVAL OF OFFICERS. An officer or agent elected or
appointed by the Board of Directors may be removed by the board whenever in
its judgment the best interests of the corporation will be served thereby.
Any vacancy in any office may be filed by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in this corporation
shall be entitled to have a certificate representing all shares to which he
is entitled. No certificate shall be issued for any share until such share is
fully paid.
SECTION 2. FORM. Certificates representing shares in this
corporation shall be signed by the President or Vice
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President and the Secretary or an Assistant Secretary and may be sealed with
the seal of this corporation or a facsimile thereof.
SECTION 3. TRANSFER OF STOCK. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. If the shareholder
shall claim to have lost or destroyed a certificate of shares issued by the
corporation, a new certificate shall be issued upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the deposit
of a bond or other indemnity in such amount and with such sureties, if any, as
the board may reasonably require.
ARTICLE V. BOOKS AND RECORDS
SECTION 1. BOOKS AND RECORDS. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, Board of Directors and committee of directors.
This corporation shall keep at its registered office, or principal
place of business a record of its shareholders, giving the names and addresses
of all shareholders and the number of the shares held buy each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 2. SHAREHOLDERS' INSPECTION RIGHTS. Any person who shall have
been a holder of record of shares of voting trust certificates therefor at least
six months immediately preceding his demand or shall be the holder of record of,
or the holder of record of voting trust certificates for, at least five percent
of the outstanding shares of the corporation, upon written demand stating the
purpose thereof, shall have the right to examine, in person or by agent or
attorney, at any reasonable time or times, for any proper purpose its relevant
books and records of accounts, minutes and records of shareholders and to make
extracts therefrom.
SECTION 3. FINANCIAL INFORMATION. Not later than four months after the
close of each fiscal year, this corporation shall prepare balance sheet showing
in reasonable detail the financial condition of the corporation as of the close
of its fiscal year, and a profit and loss statement showing the results of the
operations of the corporation during the fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates of shares of the corporation, the corporation shall mail to each
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement. The balance sheets and profit
and loss statements shall be filed in the registered office of the corporation
in this state, shall be kept for at least five years, and shall be subject to
inspection during business hours by any shareholder or holder of voting trust
certificates, in person or by agent.
ARTICLE VI. DIVIDENDS
The Board of Directors of this corporation may, from time to time,
declare and the corporation may pay dividends on its shares in cash, property or
its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent subject to the provisions of the
Florida Statutes.
ARTICLE VII. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be in
circular form.
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ARTICLE VIII. AMENDMENT
These by-laws may be altered, amended or repealed, and new by-laws may
be adopted by the majority vote of the directors of the corporation.
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EXHIBIT 4.1
FORM OF CONSULTANT'S OPTION AGREEMENT AND CERTIFICATE
<PAGE>
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is dated as of June 1, 1999,
by and between INTERNET SPORTS NETWORK, INC. (the "Company"), and __________
("______").
WHEREAS, the Company proposes to issue to ______ ______ options (the
"Options"), each such Option entitling the holder thereof to purchase one
share of Common Stock, $.001 par value, of the Company (the "Shares") at an
exercise price of $____ per share.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION A. OPTION CERTIFICATES. The Option Certificates to be delivered
pursuant to this Agreement (the "Option Certificates") shall be in the form set
forth in EXHIBIT A, attached hereto and made a part hereof. The Option
Certificates shall be executed on behalf of the Company by its Chief Executive
Officer, President, or any Vice President under its corporate seal reproduced
thereon and attested by its corporate secretary or one of its assistant
secretaries. Option Certificates may be exchanged at the Optionholder's option,
when surrendered to the Company for another Option Certificate or other Option
Certificates of like tenor and representing in the aggregate a like number of
Options.
SECTION B. RIGHT TO EXERCISE OPTIONS. Each Option may be exercised
immediately after each vesting date (hereinafter defined) until 11:59 P.M.
(Pacific Standard time) on the date that is two years after the date of this
Agreement (the "Expiration Date"). Each Option not exercised on or before the
Expiration Date shall expire. Subject to the provisions of this Option
Agreement, including Section 10 hereof, the holder of each Option shall have the
right to purchase from the Company, and the Company shall issue and sell to each
such Optionholder, at an initial exercise price per share of $____, subject to
adjustment as provided herein (the "Exercise Price"), one fully paid and
nonassessable Share upon surrender to the Company of the Option Certificate
evidencing such Option, with the form of election to purchase duly completed and
signed and evidence of payment of the Exercise Price. Payment of the Exercise
Price shall be made by wire transfer or check to the Company. A check for the
option price shall not be considered delivered until good funds are received by
the Company.
Upon surrender of such Option Certificate and payment of the Exercise
Price, the Company shall cause to be issued and delivered promptly to the Option
holder a certificate for the Shares issuable upon the exercise of the Option or
Options evidenced by such Option Certificate. The Options evidenced by an Option
Certificate shall be exercisable at the election of the Option holder thereof,
either as an entirety or from time to time for less than all of the number of
Options specified in the Option Certificate.
SECTION C. VESTING. Although granted as of the date of this Agreement,
the Options shall vest over a six month period. On the date of this Agreement
the initial ______ Options shall vest immediately. The second ______ options
shall vest only upon the conclusion of _________'s Consulting Agreement with the
Company and then only upon the terms contained therein. The Company shall issue
two option certificates. The first option certificate shall be delivered with
this Agreement. The second option certificate shall be held by the Company until
satisfaction of the conditions of its exercise.
SECTION D. RESERVATION OF SHARES. The Company will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Shares or its authorized and issued Shares held in its
treasury for the purpose of enabling it to satisfy any obligation to issue
Shares upon exercise of Options, the full number of Shares deliverable upon the
exercise of all outstanding Options. The Company covenants that all Shares which
may be issued upon exercise of Options will be validly issued, fully paid and
nonassessable outstanding Shares of the Company.
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SECTION E. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
__________ represents and warrants to the Company that ___________ is
acquiring the Options for investment and with no present intention of
distributing or reselling any of the Options. The Shares and the certificate
or certificates evidencing any such Shares shall bear the following legend:
"THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE."
Certificates for Shares without such legend shall be issued if such shares
are sold pursuant to an effective registration statement under the Act or if
the Company has received an opinion from counsel reasonably satisfactory to
counsel for the Company, that such legend is no longer required under the
Act. Certificates for Options or Shares shall also bear such legends as may
be required from time to time by law.
SECTION F. REGISTRATION RIGHTS.
A. PIGGYBACK REGISTRATION RIGHTS. If the Company at any time proposes
to register any of its securities under the Act, including an SB-2 Registration
Statement or otherwise, it will each such time give written notice to all
holders of outstanding Shares and Options of its intention so to do. The Shares
underlying these options shall be registered to the extent required to permit
the sale or other disposition by ___________ of the Shares so registered;
provided, however, that the Company may, as a condition precedent to the
effectiveness of such registration, require ___________ to agree with the
Company and the managing underwriter or underwriters of the offering to be made
by the Company in connection with such registration that ___________ will not
sell any securities of the same class or convertible into the same class as
those registered by the Company (including any class into which the securities
registered by the Company are convertible) for such reasonable period after such
registration becomes effective (not exceeding 120 days) as shall then be
specified in writing by such underwriter or underwriters if in the opinion of
such underwriter or underwriters the Company's offering would be materially
adversely affected in the absence of such an agreement. All expenses incurred by
the Company in complying with this Section, including without limitation all
registration and filing fees, listing fees, printing expenses, fees and
disbursements of all independent accounts, or counsel for the Company and or
counsel for the sellers and the expense of any special audits incident to or
required by any such registration and the expenses of complying with the
securities or blue sky laws of any jurisdiction shall be paid by the Company.
Notwithstanding the foregoing, sellers shall pay all underwriting discounts or
commissions with respect to shares sold by the sellers.
B. INDEMNIFICATION.
(i) In the event of any registration of any of its Shares
under the Act pursuant to this Section, the Company hereby indemnifies and
holds harmless the sellers of such Shares (which phrase shall include any
underwriters of such Shares), their respective directors and officers, and
each other person who participates, in the offering of such Shares and each
other person, if any, who controls such sellers, or such participating
persons within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which each such seller or any such director
or officer or participating person or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such Shares were registered under the Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon any omission or alleged omission
to state therein an material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse each such
Seller and each director, officer or participating or controlling person for
any legal or any other expenses reasonably incurred by such Seller or such
director, officer or participating or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of is
based upon an untrue statement or
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alleged untrue statement or omission or alleged omission made in such
registration statement, preliminary prospectus or prospectus or amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such Seller
specifically stating that it is for use therein. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of such Seller or such directors, officer or participating or controlling
person, and shall survive the transfer of such Shares by such Seller.
(ii) Each holder of any Shares or Options shall by
acceptance thereof indemnify and hold harmless the Company and its directors
and officers, and each person, if any who controls the Company, against any
losses, claims, damages or liabilities, joint or several, to which the
Company or any director or officer or any such person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which Shares were registered under the Act at the request of such holder, any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary prospectus, prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by or on behalf
of such holder specifically stating that it is for use therein; and will
reimburse the Company or such director, officer or person for any legal or
any other expense reasonably incurred in connection with investigation or
defending any such loss, claim, damage, liability or action.
C. RULE 144. If the Company shall be subject to the reporting
requirements of Section 13 of the 1934 Act, the Company will use its best
efforts timely to file all reports required to be filed from time to time with
the Commission (including but not limited to the reports under Section 13 and
15(d) of the 1934 Act referred to in subparagraph (c)(1) of Rule 144 adopted by
the Commission under the Act). If there is a public market for any Shares of the
Company at any time that the Company is not subject to the reporting
requirements of either of said Section 13 or 15(d), the Company will, upon the
request of any holder of any Shares or Options, use its best efforts to make
publicly available the information concerning the Company referred to in
subparagraph (c)(2) of said Rule 144. The Company will furnish to each holder of
any shares or Options, promptly upon request, (i) a written statement of the
Company's compliance with the requirements of subparagraphs (c)(1) or (c)(2), as
the case may be, of said Rule 144, and (ii) written information concerning the
Company sufficient to enable such holder to complete any Form 144 required to be
filed with the Commission pursuant to said Rule 144.
SECTION G. NOTICES TO COMPANY AND ___________. Any notice or demand
authorized by this Agreement to be given or made by any registered holder of any
Option Certificate to or on the Company shall be sufficiently give or made if
sent by registered mail, postage prepaid, addressed (until another address is
filed in writing by the Company with the holders) to the Company as in the
address set forth in the execution block of this Agreement.
SECTION H. SUPPLEMENTS AND AMENDMENTS. The Company and ___________ may
from time to time supplement or amend this Agreement without the approval of any
Optionholders (other than ___________) in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and
___________ may deem necessary or desirable and which the Company and
___________ deem shall not adversely affect the interests of the Optionholders.
SECTION I. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or ___________ shall bind and
inure to the benefit of their respective successors and assigns hereunder.
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SECTION J. GOVERNING LAW. This Agreement and each Option
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of California and for all proposes shall be governed by and
construed in accordance with the laws of said State.
SECTION K. COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. The Parties agree that facsimile signatures of this Agreement
shall be deemed a valid and binding execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the date and year first above written.
INTERNET SPORTS NETWORK, INC.
By:______________________________ By:_____________________________
Ken Crema
Its: Chief Executive Officer
Address: Address:
11 Charlotte St., 2nd Floor _________________________________
Toronto, Ontario, Canada M5V 2H5 _________________________________
_________________________________
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<PAGE>
OPTION CERTIFICATE
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE OPTIONS, SHARES OR OTHER SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE FROM 12:00 P.M. PACIFIC STANDARD TIME,
ON JUNE 1, 1999 UNTIL
11:59 P.M., PACIFIC STANDARD TIME ON MAY 31, 2001
No. ___ ______ Options
OPTION CERTIFICATE
INTERNET SPORTS NETWORK, INC.
This Option Certificate certifies that __________ ("___________") or
registered assigns, is the registered holder of 25,000 Options (the "Options")
expiring March 31, 2001 (the "Expiration Date"), to purchase shares of Common
Stock (the "Shares") of INTERNET SPORTS NETWORK, INC., a Florida corporation
(the "Company"). Each Option entitles the holder to purchase from the Company
before 11:59 p.m. (Pacific Standard time) on the "Expiration Date" one fully
paid and nonassessable share of Common Stock of the Company at the initial
exercise price for each Option of $____ per share (the "Exercise Price"), upon
surrender of this Option Certificate and payment of the Exercise Price at an
office or agency of the Company, but only subject to the terms and conditions
set forth herein and in the Option Agreement. Payment of the Exercise Price may
be permitted by check or wire transfer. Payment shall be deemed accepted only
upon the receipt of good funds by the Company. As used herein, "Share" or
"Shares" refers to the Common Stock of the Company. In the event that upon any
exercise of Options evidenced hereby, the number of Options exercised shall be
less than the total number of Options evidence hereby, there shall be issued to
the holder hereof or his or her assignee a new Option Certificate evidencing the
number of Options not exercised. No adjustment shall be made for any cash
dividends on any Shares issuable upon exercise of this Option.
No Option may be exercised after 11:59 P.M. (Pacific Standard Time)
on the Expiration Date. All Options evidenced hereby shall thereafter be
void.
The Options evidenced by this Option Certificate are part of a duly
authorized issue of Options issued pursuant to an Option Agreement, dated
effective as of June 1, 1999 (the "Option Agreement"), duly executed by the
Company and ___________ which Option Agreement and the Consulting Agreement by
and between Company and ___________ which are both hereby incorporated by
reference herein and made a part of this instruments and are hereby referred to
for a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder of the Option
Certificates of Shares).
The Company may deem and treat the person(s) registered in the
Company's register as the absolute owner(s) of this Option Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, and of any distribution to the
holder(s) hereof, and for all purposes, and the Company shall not be affected by
any notice to the contrary.
All terms used in this Option Certificate which are defined in the
Option Agreement shall have the meaning assigned to them in the Option
Agreement.
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
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OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE OPTIONS, SHARES OR OTHER SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
IN WITNESS WHEREOF, the Company has caused this Option Certificate
to be duly executed under its corporate seal.
Dated: June 1, 1999 INTERNET SPORTS NETWORK, INC.
By:____________________________
Ken Crema
ITS: Chief Executive Officer
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ELECTION TO PURCHASE
(To be executed upon exercise of Option)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase ______ Shares and
herewith authorizes payment for such Shares in the amount of $_____ all in
accordance with the terms hereof. The undersigned requests that certificates
for such Shares be registered as follows:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
</TABLE>
all of whose addresses are ____________________________________________________,
and that such certificates be delivered to _______________________ whose address
is _______________________________. If said number of Shares is less than all of
the Shares purchasable hereunder, the undersigned requests that a new Option
Certificate representing the remaining balance of the Shares be registered in
the name of __________, whose address is ___________________________________
________________ and that such Certificates be delivered to the attention of
___________________ at the above address.
Dated:____________________ By:______________________________________
Its:_____________________________________
A-3
<PAGE>
EXHIBIT 4.2
FORM OF OFFICER/DIRECTOR OPTION AGREEMENT AND CERTIFICATE
<PAGE>
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is dated as of April 1, 1999, by
and between INTERNET SPORTS NETWORK, INC. (the "Company"), and
__________________ ("___________").
WHEREAS, the Company proposes to issue to ______________ _______ options
(the "Options"), each such Option entitling the holder thereof to purchase one
share of Common Stock, $.001 par value, of the Company (the "Shares") at an
exercise price of $____ per share.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION 1. OPTION CERTIFICATES. The Option Certificates to be
delivered pursuant to this Agreement (the "Option Certificates") shall be in the
form set forth in EXHIBIT A, attached hereto and made a part hereof. The Option
Certificates shall be executed on behalf of the Company by its Chief Executive
Officer, President, or any Vice President under its corporate seal reproduced
thereon and attested by its corporate secretary or one of its assistant
secretaries. Option Certificates may be exchanged at the Optionholder's option,
when surrendered to the Company for another Option Certificate or other Option
Certificates of like tenor and representing in the aggregate a like number of
Options.
SECTION 2. RIGHT TO EXERCISE OPTIONS. Each Option may be exercised
immediately after each vesting date (hereinafter defined) until 11:59 P.M.
(Pacific Standard time) on the date that is five years after the date of this
Agreement (the "Expiration Date"). Each Option not exercised on or before the
Expiration Date shall expire. Subject to the provisions of this Option
Agreement, including Section 10 hereof, the holder of each Option shall have the
right to purchase from the Company, and the Company shall issue and sell to each
such Optionholder, at an initial exercise price per share of $____, subject to
adjustment as provided herein (the "Exercise Price"), one fully paid and
nonassessable Share upon surrender to the Company of the Option Certificate
evidencing such Option, with the form of election to purchase duly completed and
signed and evidence of payment of the Exercise Price. Payment of the Exercise
Price shall be made by wire transfer or check to the Company. A check for the
option price shall not be considered delivered until good funds are received by
the Company.
Upon surrender of such Option Certificate and payment of the Exercise
Price, the Company shall cause to be issued and delivered promptly to the Option
holder a certificate for the Shares issuable upon the exercise of the Option or
Options evidenced by such Option Certificate. The Options evidenced by an
Option Certificate shall be exercisable at the election of the Option holder
thereof, either as an entirety or from time to time for less than all of the
number of Options specified in the Option Certificate.
SECTION 3. VESTING. Although granted as of the date of this Agreement,
the Options shall vest over the below time period. An initial 50% of the
options shall vest as of December 1, 1999 (the "Vesting Dates"). The remaining
50% options shall vest on June 1, 2000. The vesting of the Options is expressly
conditioned on the holder's employment as an officer or director on the Vesting
Dates. If the holder is not employed as an officer or holds the position of
director on the Vesting Dates, the Options to be vested on that date will not
vest and no future Options are due.
Notwithstanding the above, if the holder is terminated from the officer or
director position because of a change in control of the Company prior to the
Vesting Dates or the Company is purchased, merges with, or reorganizes such that
a change in control occurs, the entire amount of the Options due under this
Agreement shall immediately vest and be exercisable according to the terms
hereof by the holder.
SECTION 4. RESERVATION OF SHARES. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Shares or its authorized and issued Shares held in
its treasury for the purpose of enabling it to satisfy any obligation to issue
Shares upon exercise of Options, the full number of Shares deliverable upon the
exercise of all outstanding Options. The Company
<PAGE>
covenants that all Shares which may be issued upon exercise of Options will be
validly issued, fully paid and nonassessable outstanding Shares of the Company.
SECTION 5. REGISTRATION UNDER THE SECURITIES ACT OF 1933. ___________
represents and warrants to the Company that ___________ is acquiring the Options
for investment and with no present intention of distributing or reselling any of
the Options. The Shares and the certificate or certificates evidencing any such
Shares shall bear the following legend:
"THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
IS AVAILABLE."
Certificates for Shares without such legend shall be issued if such shares are
sold pursuant to an effective registration statement under the Act or if the
Company has received an opinion from counsel reasonably satisfactory to counsel
for the Company, that such legend is no longer required under the Act.
Certificates for Options or Shares shall also bear such legends as may be
required from time to time by law.
SECTION 6. REGISTRATION RIGHTS.
A. PIGGYBACK REGISTRATION RIGHTS. If the Company at any time proposes
to register any of its securities under the Act, including an SB-2 Registration
Statement or otherwise, it will each such time give written notice to all
holders of outstanding Shares and Options of its intention so to do. The
Company will use best efforts at the request of ___________, if applicable, to
register the shares underlying these options on a form S-8 registration
statement. Upon the written request of a holder or holders of any such Shares
or Options given within 30 days after receipt of any such notice, the Company
will use its best efforts to cause all such Shares, the holders of which (or of
the Options for which upon exercise thereof the Company will issue Shares) shall
have so requested registration thereof, to be registered under the Act (with the
securities which the Company at the time propose to register), all to the extent
requisite to permit the sale or other disposition by the prospective sellers of
the Shares so registered; provided, however, that the Company may, as a
condition precedent to the effectiveness of such registration, require each
prospective seller to agree with the Company and the managing underwriter or
underwriters of the offering to be made by the Company in connection with such
registration that such seller will not sell any securities of the same class or
convertible into the same class as those registered by the Company (including
any class into which the securities registered by the Company are convertible)
for such reasonable period after such registration becomes effective (not
exceeding 30 days) as shall then be specified in writing by such underwriter or
underwriters if in the opinion of such underwriter or underwriters the Company's
offering would be materially adversely affected in the absence of such an
agreement. All expenses incurred by the Company in complying with this Section,
including without limitation all registration and filing fees, listing fees,
printing expenses, fees and disbursements of all independent accounts, or
counsel for the Company and or counsel for the sellers and the expense of any
special audits incident to or required by any such registration and the expenses
of complying with the securities or blue sky laws of any jurisdiction shall be
paid by the Company. Notwithstanding the foregoing, sellers shall pay all
underwriting discounts or commissions with respect to shares sold by the
sellers. Notwithstanding the above, the Company shall not be obligated to
register the securities underlying the option more often than every 120 days in
the case of an S-8 or every 365 days in the case of any other type of
registration statement.
B. INDEMNIFICATION.
(i) In the event of any registration of any of its Shares under the
Act pursuant to this Section, the Company hereby indemnifies and holds harmless
the sellers of such Shares (which phrase shall include any underwriters of such
Shares), their respective directors and officers, and each other person who
participates, in the offering of such Shares and each other person, if any, who
controls such sellers, or such participating persons within the meaning of the
Act, against any losses, claims, damages or liabilities, joint or several, to
which each such seller or any such director or officer or participating person
or controlling person may become subject under the Act or
<PAGE>
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained, on the effective date thereof,
in any registration statement under which such Shares were registered under the
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon any omission
or alleged omission to state therein an material fact required to be stated
therein or necessary to make the statements therein not misleading; and will
reimburse each such Seller and each director, officer or participating or
controlling person for any legal or any other expenses reasonably incurred by
such Seller or such director, officer or participating or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, preliminary
prospectus or prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Seller specifically stating that it is for use
therein. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Seller or such directors, officer or
participating or controlling person, and shall survive the transfer of such
Shares by such Seller.
(ii) Each holder of any Shares or Options shall by acceptance thereof
indemnify and hold harmless the Company and its directors and officers, and each
person, if any who controls the Company, against any losses, claims, damages or
liabilities, joint or several, to which the Company or any director or officer
or any such person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in any
registration statement under which Shares were registered under the Act at the
request of such holder, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary prospectus, prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by or on behalf of such
holder specifically stating that it is for use therein; and will reimburse the
Company or such director, officer or person for any legal or any other expense
reasonably incurred in connection with investigation or defending any such loss,
claim, damage, liability or action.
C. RULE 144. If the Company shall be subject to the reporting
requirements of Section 13 of the 1934 Act, the Company will use its best
efforts timely to file all reports required to be filed from time to time with
the Commission (including but not limited to the reports under Section 13 and
15(d) of the 1934 Act referred to in subparagraph (c)(1) of Rule 144 adopted by
the Commission under the Act). If there is a public market for any Shares of
the Company at any time that the Company is not subject to the reporting
requirements of either of said Section 13 or 15(d), the Company will, upon the
request of any holder of any Shares or Options, use its best efforts to make
publicly available the information concerning the Company referred to in
subparagraph (c)(2) of said Rule 144. The Company will furnish to each holder
of any shares or Options, promptly upon request, (i) a written statement of the
Company's compliance with the requirements of subparagraphs (c)(1) or (c)(2), as
the case may be, of said Rule 144, and (ii) written information concerning the
Company sufficient to enable such holder to complete any Form 144 required to be
filed with the Commission pursuant to said Rule 144.
SECTION 7. NOTICES TO COMPANY AND _______. Any notice or demand
authorized by this Agreement to be given or made by any registered holder of any
Option Certificate to or on the Company shall be sufficiently give or made if
sent by registered mail, postage prepaid, addressed (until another address is
filed in writing by the Company with the holders) to the Company as in the
address set forth in the execution block of this Agreement.
SECTION 8. SUPPLEMENTS AND AMENDMENTS. The Company and ___________ may
from time to time supplement or amend this Agreement without the approval of any
Optionholders (other than ___________) in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and
___________ may deem necessary or desirable and which the Company and
<PAGE>
___________ deem shall not adversely affect the interests of the Optionholders.
SECTION 9. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or ___________ shall bind and
inure to the benefit of their respective successors and assigns hereunder.
SECTION 10. GOVERNING LAW. This Agreement and each Option Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of California and for all proposes shall be governed by and construed in
accordance with the laws of said State.
SECTION 11. COUNTERPARTS. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. The Parties
agree that facsimile signatures of this Agreement shall be deemed a valid and
binding execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date and year first above written.
INTERNET SPORTS NETWORK, INC.
By: By:
------------------------------- --------------------------------
Ken Crema
Its: Chief Executive Officer
Address:
11 Charlotte Street, 2nd Floor
Toronto, Ontario Canada M5V 2H5
<PAGE>
OPTION CERTIFICATE
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE OPTIONS, SHARES OR OTHER SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE FROM 12:00 P.M. PACIFIC STANDARD TIME,
ON APRIL 1, 1999 UNTIL
11:59 P.M., PACIFIC STANDARD TIME ON MARCH 31, 2004
No. ___ _______ Options
OPTION CERTIFICATE
INTERNET SPORTS NETWORK, INC.
This Option Certificate certifies that __________________ ("___________")
or registered assigns, is the registered holder of _______ Options (the
"Options") expiring March 31, 2004 (the "Expiration Date"), to purchase shares
of Common Stock (the "Shares") of INTERNET SPORTS NETWORK, INC., a Florida
corporation (the "Company"). Each Option entitles the holder to purchase from
the Company before 11:59 p.m. (Pacific Standard time) on the "Expiration Date"
one fully paid and nonassessable share of Common Stock of the Company at the
initial exercise price for each Option of $____ per share (the "Exercise
Price"), upon surrender of this Option Certificate and payment of the Exercise
Price at an office or agency of the Company, but only subject to the terms and
conditions set forth herein and in the Option Agreement. Payment of the
Exercise Price may be permitted by check or wire transfer. Payment shall be
deemed accepted only upon the receipt of good funds by the Company. As used
herein, "Share" or "Shares" refers to the Common Stock of the Company. In the
event that upon any exercise of Options evidenced hereby, the number of Options
exercised shall be less than the total number of Options evidence hereby, there
shall be issued to the holder hereof or his or her assignee a new Option
Certificate evidencing the number of Options not exercised. No adjustment shall
be made for any cash dividends on any Shares issuable upon exercise of this
Option.
No Option may be exercised after 11:59 P.M. (Pacific Standard Time) on the
Expiration Date. All Options evidenced hereby shall thereafter be void.
The Options evidenced by this Option Certificate are part of a duly
authorized issue of Options issued pursuant to an Option Agreement, dated
effective as of April 1, 1999 (the "Option Agreement"), duly executed by the
Company and ___________ which Option Agreement is hereby incorporated by
reference in and made a part of this instruments and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder of the Option
Certificates of Shares).
The Company may deem and treat the person(s) registered in the Company's
register as the absolute owner(s) of this Option Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, and of any distribution to the holder(s) hereof,
and for all purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Option Certificate which are defined in the Option
Agreement shall have the meaning assigned to them in the Option Agreement.
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER
A-1
<PAGE>
THE SECURITIES ACT OF 1933. THE OPTIONS, SHARES OR OTHER SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
IN WITNESS WHEREOF, the Company has caused this Option Certificate to be
duly executed under its corporate seal.
Dated: April 1, 1999 INTERNET SPORTS NETWORK, INC.
By:____________________________
Its: President
A-2
<PAGE>
ELECTION TO PURCHASE
(To be executed upon exercise of Option)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase ______ Shares and herewith
authorizes payment for such Shares in the amount of $_____ all in accordance
with the terms hereof. The undersigned requests that certificates for such
Shares be registered as follows:
Name Number of Shares
------ ------------------
all of whose addresses are ____________________________________________________,
and that such certificates be delivered to _______________________ whose address
is _________________________________________________________________. If said
number of Shares is less than all of the Shares purchasable hereunder, the
undersigned requests that a new Option Certificate representing the remaining
balance of the Shares be registered in the name of __________________, whose
address is ____________________________________________________ and that such
Certificates be delivered to the attention of ___________________ at the above
address.
Dated:____________________ By:____________________________________
Its:___________________________________
A-3
<PAGE>
EXHIBIT 4.3
COMMON STOCK CERTIFICATE SPECIMEN
1
<PAGE>
SPECIMEN
INTERNET SPORTS NETWORK, INC.
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.00 PER SHARE
THIS CERTIFIES THAT ___________________________________________ is the
record holder of ________________________________________________ Shares of
Internet Sports Network, Inc., Common Stock transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
_______________________________ ________________________________
Secretary President
2
<PAGE>
EXHIBIT 10.1
TORONTO OFFICE LEASE AGREEMENT
<PAGE>
Commercial Lease
Page 1 of 7
made the 6th day of May
one thousand nine hundred and ninety-nine
In Pursuance of the Short Forms of Leases Act
Between
217-225 RICHMOND STREET WEST LIMITED
hereinafter called the "Lessor"
OF THE FIRST PART
AND
ISN INTERNET SPORTS NETWORK INC.
hereinafter called the "Lessee"
OF THE SECOND PART
PREMISES WITNESSETH that in consideration of the rents, covenants and
agreements hereinafter reserved and contained on the part of the
said Lessee, to be paid, observed and performed, the said Lessor
has demised and leased and by these presents both demise and
lease unto the said Lessee.
ALL THOSE CERTAIN PREMISES excluding any part of the external
walls known and described as the WEST side of the third floor of
the building known municipally as 217-225 Richmond Street West
(the "Building"), Suite 403, Toronto, consisting of approximately
Two Thousand, Two Hundred and Seventy (2,270) square feet of Full
Floor Leaseable (or "Gross Rentable") Floor Area which includes a
proportionate share of the Common Area to of the Floor.
Hereinafter referred to as the "Demised Premises, Leased Premises
or the Premises". All rent, operating costs, escalations, hydro,
taxes and other costs shall be calculated using the Full Floor
Leaseable Area.
TERM TO HAVE AND TO HOLD the Leased Premises for and during the term
hereinafter called the "Term", of One (1) Year, One Half (1/2)
Month to be computed from the 15th day of May, 1999 and from
thenceforth ensuing and to be fully completed and ended on the
31st day of May, 2000.
RENTAL The Lessee covenants and agrees to pay the Lessor Minimum rental
as follows:
During the Term from May 15, 1999 through to May 31, 2000 Minimum
Rent shall be payable at an amount of Forty Thousand, Eight
Hundred and Sixty Dollars ($40,860.00) per annum based on a rate
of Eighteen Dollars ($18.00) per square foot payable in equal
monthly installments of Three Thousand, Four Hundred and Five
Dollars ($3,405.00) in advance on or before the first day of each
and every month during the said term;
1
<PAGE>
BUSINESS
TAXES AND to pay all business taxes in respect of the business carried
on by the Lessee in and upon or by reason of their occupancy of
the premises hereby demised:
REPAIRS AND to repair (reasonable wear and tear, and damage by fire,
lightning and tempest only excepted); subject to Schedule "B"
AND that the said Lessor may enter and view state of repair;
AND that the said Lessee will repair according to notice in
writing (reasonable wear and tear and damage by fire, lightning
and tempest excepted); subject to Schedule "B"
AND that they will leave the premises in good repair (reasonable
wear and tear and damage by fire, lightning and tempest only
excepted); subject to Schedule "B"
ASSIGNMENT subject to Schedule "B"
/AND will not assign or sub-let the whole or any part of the
demised premises without leave; the Lessee hereby waives and
renounces the benefit of any present or future act of the
Legislature of Ontario which would allow the Lessee to assign or
sub-let this lease, without leave of the Lessor.
AND the said Lessee covenants with the said Lessor, its
successors and assigns:
TYPE OF (a) THAT the said demised premises will not, during the said
BUSINESS term, be at any time used for any other purpose than that of a
general office.
FIXTURES (b) AND THAT no fixtures, goods or chattels of any kind will,
except in the ordinary course of business, be removed from the
demised premises during the term hereby demised or at any time
thereafter without the written consent of the Lessor, its
successors or assigns, being first had and obtained, until all
rent in arrears as well as all rent to become due during the
remainder of the term hereby granted shall have been fully paid,
or the payment thereof secured to the satisfaction of the Lessor
or its assigns.
ELECTRIC (c) THAT the Lessee will not, during the said term or at any
POWER time prior or subsequent thereto, purchase, acquire or use any
electric current for lighting or other purposes except from the
company or corporation which shall for the time supply the
Lessor with electric current for such purposes in the said
building; the intention being that without the written consent
of the Lessor, there shall be only one system of electric
lighting in the said building.
(d) THE Lessee hereby covenants to pay all charges for electric
energy (for light and power) and gas used by the Lessee in the
demised premises.
PARTITIONS, (e) THAT if the Lessee shall during the said term desire to
ALTERATIONS affix or erect partitions, counters or fixtures in any part of
the walls, floors or ceilings of the demised premises, it may do
so at its own expense at any time and from time to time provided
that the Lessee's rights to make such alterations to the demised
premises shall be subject to the following conditions: --
(1) THAT before undertaking any such alterations, the Lessee
shall submit to the Lessor a plan showing the proposed
alterations and shall obtain the approval and consent of the
Lessor to the same.
2
<PAGE>
(2) THAT all such alterations shall conform to all building
by-laws, if any, then in force affecting the demised premises.
(3) THAT such alterations will not be of such kind or extent as
to in any manner weaken the structure of the building after the
alterations are completed or reduce the value of the building.
(f) THAT, except as herein provided the Lessee will not erect or
affix or remove or change the location or style of any partitions
or fixtures, without the written consent of the Lessor being
first had and obtained.
(g) THAT, at the expiration of the term hereby granted, or any
renewal thereof, all fixtures belonging to the Lessee shall
remain upon the demised premises until taken down by the Lessor,
and the Lessee shall forthwith, upon the same being taken down,
remove the same from the demised premises first paying to the
Lessor the expense of such taking down and making good all damage
occasioned to the demised premises by the taking down or removal
thereof.
BANKRUPTCY (h) THAT, if the term hereby granted or the goods and chattels
OR of the Lessee or any assignee or sub-tenant shall be at any time
INSOLVENCY seized or taken in execution or attachment, or if the Lessee or
any such assignee or sub-tenant shall make an assignment for the
benefit of creditors or shall become bankrupt or insolvent, or
make a proposal to its creditors, or without the consent of the
Lessor being first obtained in writing, shall make a sale, under
the Bulk Sales Act, in respect of goods on the premises, or
being a company shall become subject to any legislative
enactment relating to liquidation or winding up, either
voluntary or compulsory, the said term shall immediately become
forfeited and void, and an amount equivalent to the next ensuing
three months' rent shall be at once due and payable.
RULES AND (i) THAT the Lessee and its clerks, servants and agents will at
REGULATIONS all times during the occupancy of the demised premises observe
and conform to such reasonable rules and regulations as shall be
made by the Lessor from time to time including the rules and
regulations set forth in Schedule "A" hereto and of which the
Lessee shall be notified, such rules and regulations being
deemed to be incorporated in and form part of these presents.
REMODELING (j) THAT, in the event of the Lessor desiring at any time
AND SALE during the term, or any renewal thereof, to remodel the said
building, or any part thereof, or to take down the said
building, the Lessee will on receiving six months' notice in
writing, surrender this lease and all the remainder of the term,
if any, then yet to come and unexpired, as from the day
mentioned in such notice, and will, subject nevertheless to the
provisions hereinbefore contained thereupon, vacate the premises
and yield up to the Lessor the peaceable possession thereof. IT
IS UNDERSTOOD that the said six months' notice need not expire
at the end of any year or at the end of any month, and in the
event of the day fixed for termination of the lease expiring on
some other day than the last day of a month, the rent for such
month shall be apportioned for the broken period.
3
<PAGE>
IT IS AGREED between the Parties hereto that in the event of a
sale of the said premises or if the said premises be
expropriated or condemned by any Department of the Federal,
Provincial or Municipal Governments than the Lessor shall have
the right notwithstanding anything herein contained to terminate
this lease upon giving three months' notice in writing to the
Lessee of his intention so to do or by paying the said Lessee a
bonus of three months' rent, in which latter event, the Lessee
undertakes to vacate the said premises at the expiration of
thirty (30) days from the delivery of such notice.
PROTECTIVE THE LESSEE agrees to pay the cost of any installations,
INSTALLATIONS additions, or alterations to the said premises that the Lessor
may be required to make by any Municipal, Provincial or other
governing authority, or requested by any private protective
system used by the Lessees, for the security and protection of
the Lessee and his employees and his or their effects including
but not so as to limit the foregoing installations, additions
and alterations for fire and theft protection and all such
installations, additions, or alterations shall forthwith become
the property of the Lessor.
DISTRESS AND the Lessee further covenants, promises and agrees with the
Lessor that notwithstanding any present or future Act of the
Legislature of the Province of Ontario, none of the goods or
chattels of the Lessee at any time during the continuance of the
term hereby created on the said demised premises shall be exempt
from levy by distress for rent in arrears by the Lessee as
provided for by the said Section of said Act, and that upon any
claim being made for such exemption by the Lessee or on distress
being made by the Lessor, this covenant and agreement may be
pleaded as an estoppel against the Lessee in any action brought
to test the right to the levying upon any such goods as are
named exempted in the said Section, the Lessee waiving as he
hereby does all and every benefit that could or might have
accrued to him under and by virtue of the said section of the
said act but for the above covenant.
The Lessor covenants with the Lessee for quiet enjoyment.
The lessor further covenants with the Lessee as follows:
TAXES AND (a) To pay all taxes and rates, municipal, parliamentary or
RATES otherwise, including water rates for the normal supply of cold
water to the said premises, assessed against the demised
premises of the Lessor or Lessee on account thereof saving and
excepting any business taxes and taxes upon personal property or
income of the Lessee, license fees, or other taxes imposed upon
the property, business or income of the Lessee;
PROVIDED THAT;
4
<PAGE>
(i) IN THE EVENT of the Lessee being assessed as a Separate
School Supporter, and by reason thereof the amount of the taxes
payable on the said premises being increased over the amount
payable on an assessment as a Public School Supporter, then and
in such event the Lessee covenants and agrees with the Lessor to
pay to the Lessor the amount of such increase upon demand being
made therefor in writing by the Lessor. It is understood and
agreed that such increase shall be payable by the Lessee
notwithstanding the fact that at the time such demand is made,
the Lessee may have ceased to be a tenant of the Lessor. In the
event of the Lessee failing to pay to the Lessor the amount of
such increase upon demand as herein provided, then the Lessor
shall have the same rights and remedies for collection thereof as
for the rent in arrears.
(ii) THE LESSEE covenants and agrees to and with the Lessor that
if there shall be an increase in municipal taxes payable by the
landlord over the amount shown by the immediately last tax bill
issued by the municipality in which the demised premises are
situate prior to the date of this lease the Lessee will pay any
such increase apportioned over the term of the within lease and
the renewal (if any) hereinbefore provided and that any such
increase in municipal taxes shall be deemed to be part of the
rent reserved hereunder and all the remedies available to the
Lessor relating to rent both hereunder and at law shall apply,
mutatis mutandis, thereto.
HEATING (b) To heat the said premises between the 15th day of October
and the 1st day of May next ensuing in each year in such manner
as to keep the said premises at a reasonable temperature for the
reasonable use thereof by the Lessee during reasonable business
hours except during the making of repairs, and in case the
boilers, engines, pipes, o r other apparatus or any of them used
in effecting the heating of the said demised premises shall at
any time become incapable of heating said premises as aforesaid,
or be damaged or destroyed, to repair said damage or replace
said boilers, engines, pipes or apparatus or any of them or (at
the option of the Lessor) substitute other heating apparatus
therefor within a reasonable time, provided, however, that the
Lessor shall not be liable for indirect or consequential damages
for personal discomfort or illness arising from any default of
the Lessor;
ACCESS (c) To give the Lessee, his agents, clerks, servants and all
persons transacting business with the Lessee, in common with
other persons, the right to enter the demised premises by means
of the main entrance on 225 Richmond Street West and free use of
the stairway and passages from the street to the said premises
at all reasonable times, subject to rules and regulations in
regard to the said building as may be passed from time to time.
PROVISO for re-entry by the said Lessor on non-payment of rent
or non-performance of covenants. Subject to Schedule "B"
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VOIDANCE OF IT IS FURTHER DECLARED AND AGREED that in case the said premises
LEASE VACANT or any part thereof, become and remain vacant and unoccupied for
OR IMPROPER the period of fifteen days, or be used by any other person or
USE persons, or for any other purpose than as above provided,
without the written consent of the Lessor, this lease shall, at
the option of the Lessor, cease and be void, and the term hereby
created expire and be at an end, anything hereinbefore to the
contrary notwithstanding and the proportionate part of the
current rent shall thereupon become immediately due and payable,
and the Lessor may re-enter and take possession of the premises
as though the Lessee or other occupant or occupants of said
premises were holding over after the expiration of the term; or
in such case instead of determining this lease as aforesaid and
re-entering upon the demised premises, the Lessor may take
possession of the demised premises, or any part or parts
thereof, and let and manage the same and grant any lease or
leases thereof upon such terms as to the Lessor or its assigns
may appear to be reasonable, and demand, collect, receive and
distrain for all rental which shall become payable in respect
thereof, and apply the said rentals after deducting all expenses
incurred in connection with the demised premises and in the
collection of the said rent including reasonable commission for
the collection thereof and the management of the demised
premises, upon the rent hereby reserved, and the Lessor and its
assigns and every such agent acting as aforesaid from time to
time, shall in so acting be the agents of the Lessee, who alone
shall be responsible for their acts, and the Lessor and its
assigns shall not be accountable for any moneys except those
actually received, notwithstanding any act, neglect, omission or
default or any such agent acting as aforesaid.
WATER AND GAS AND IT IS FURTHER DECLARED AND AGREED THAT the Lessor shall not
DAMAGE be liable for any damage to any property at any time upon the
demised premises arising from gas, steam, water, rain or snow,
which may leak into, issue or flow from any part of the said
building, or from the gas, water, steam or drainage pipes or
plumbing works of the same or from any other place or quarter or
for any damage caused by or attributable to the condition or
arrangement of any electric or other wires in the said building.
The Lessee shall be liable for any damage done by reason of
water being left running from the taps in the demised premises
or from gas permitted to escape therein.
RISKS OF AND the Lessor shall not be responsible for any personal injury
INJURY which shall be sustained by the Lessee or any employee,
customer, or other person who may be upon the demised premises
or in the said building or the entrances or appurtenances
thereto. All risks of any such injury being assumed by the
Lessee, who shall hold the Lessor harmless and indemnified
therefrom.
NOTICE OF THE Lessee shall give the Lessor prompt written notice of any
ACCIDENT accident or other defect in the sprinkler system, water pipes,
gaspipes or heating apparatus, telephone, electric or other
wires on any part of the premises.
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INSURANCE THE Lessee covenants with the said Lessor that his said business
to be so carried on in the said building will not be of such a
nature as to increase the insurance risk on the said premises or
cause the Lessor to pay an increased rate of insurance premiums
on the said premises by reason thereof and it is distinctly
understood that in case said business so carried on by the
Lessee is or becomes of such a nature to increase the insurance
risk or causes the Lessor and/or other occupants of the said
building to pay an increased rate of insurance premiums, that
the Lessee will from time to time pay to the Lessor the
increased amount of insurance premiums which the said Lessor and
other occupants of the said building have to pay in consequence
thereof; provided that the Lessee covenants that he will not
carry on or permit to be carried on any business in the said
building which may make void or voidable any insurance held by
the Lessor or the other occupants of the said building, subject
to Schedule "B".
BUSINESS PROVIDED that the Lessee will not do or permit anything to be
NOT TO BE A done on the said premises or permit or keep anything therein
NUISANCE which may be annoying to the Lessor or other occupants of the
aid building or which the said Lessor may deem to be a nuisance
and that no machinery shall be used therein which shall cause
any undue vibration in or to the said premises and that in case
of the Lessor or any other occupants of the said building
reasonably complaining that any machinery or operation or
process is a nuisance to it or them or which causes any undue
vibration or noise in the said premises, that upon receiving
notice thereof, the said Lessee will immediately abate such
nuisance. The said Lessee covenants not to obstruct or
interfere with the rights of the Lessor or other occupants of
the said building or in any way injure or annoy them or conflict
with any of the rule and regulations of the Board of Health or
with any Statue or municipal by-law, subject to Schedule "B".
SIGN AND IT IS HEREBY FURTHER AGREED by and between the said Lessor
and the said Lessee that no sign, advertisement or notice shall
be inscribed, painted or affixed by the said Lessee on any part
of the outside or inside of the building whatever, unless of
such manner, color, size and style and in such places upon or in
said building as shall be first designated by the Lessor, and,
furthermore , the Lessee, on ceasing to be Lessee of the demised
premises, will, before removing his goods and fixtures from the
said premises, cause any sign as aforesaid to be removed or
obliterated at his own expense and in a workmanlike manner to
the satisfaction of the Lessor.
ELEVATOR THE Lessor undertakes to maintain elevators in said building
which are to be run during the ordinary business hours of every
business day of the year, but not during the public holidays or
Sundays, except at the option of the Lessor. The Lessee shall,
subject to the Lessor's rules and regulations, have free use of
such elevators in common with others lawfully using the same,
but the Lessee and its employees and all other persons using any
such elevator shall do so at its, his, or her or their sole
risk, and under no circumstances shall the Lessor be held
responsible for any damage or injury happening to any person
whilst using such elevator, or occasioned o any person by such
elevator or any appurtenances and whether such damage or injury
shall happen by reason of the act, omission or negligence or
otherwise of the Lessor, or any of its employees, servants,
agents or otherwise howsoever.
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WATER THE Lessor agrees to pay for normal water consumed on the said
premises but in the event of any abnormal consumption of water
either by reason of the character of the business carried on by
the Lessee or by the use of mechanical or other contrivances the
Lessee consents to the installation of a water meter at his own
expense, if necessary, and further agrees to pay for the excess
water consumed on the said premises.
PLATE THE Lessee agrees at his own expense to replace any plate glass
GLASS or other glass that has been broken or removed during the term
of the within lease or of any renewal thereof and will during
the said term keep the plate glass fully insured in some company
approved by the Lessor.
FIRE PROVIDED that if during the term herein or any renewal thereof
the premises shall be destroyed or damaged by fire or the
elements then the following provisions shall apply:
(a) If the demised premises shall be so badly injured as to be
unfit for occupancy, and as to be incapable of being repaired
with reasonable diligence within on hundred and twenty days of
the happening of such injury, then the term hereby granted shall
cease and be at an end to all intents and purposes from the date
of such damage or destruction, and the Lessee shall immediately
surrender the same, and yield up possession of the demised
premises to the Lessor, and the rent from the time of such
surrender shall be apportioned;
(b) If the demised premises shall be capable, with reasonable
diligence, of being repaired and rendered fit for occupancy
within one hundred and twenty days from the happening of such
injury as aforesaid, but if the damage is such as to render the
demised premises wholly unfit for occupancy, then the rent
hereby reserved shall not run or accrue after such injury, or
while the process of repair is going on, and the Lessor shall
repair the same with all reasonable speed, and the rent shall
recommence immediately after such repairs shall be completed.
(c) If the demised premises shall be repaired within one
hundred and twenty days as aforesaid, and if the damage is such
that the said premises are capable of being partially used, then
until such damage shall have been repaired, the rent shall abate
in the proportion that the part of the demised premises rendered
unfit for occupancy bears to the whole of the demised premises.
NO ABATEMENT THERE shall be no abatement from or reduction of the rent due
OF RENT hereunder, nor shall the Lessee be entitled to damages, losses,
costs or disbursements from the Lessor during the term hereby
created on, caused by or on account of fire, (except as above),
water, sprinkler systems, partial or temporary failure or
stoppage of heat, light, elevator, live steam or plumbing
service in or to the said premises or building, whether due to
acts of God, strikes, accidents, the making of alterations,
repairs, renewals, improvements, structural changes to the said
premises or buildings or the equipment or systems supplying the
said services, or from any cause whatsoever; provided that the
said failure or stoppage be remedied within a reasonable time.
RIGHT TO SHOW THAT the Lessee will permit the Lessor to exhibit the demised
PREMISES premises during the last three months of the term to any
prospective tenant and will permit all persons having written
authority therefor to view the said premises at all reasonable
hours, on prior notice.
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NOTICES THAT any notice which either of the parties is required or
permitted to give pursuant to any provision of this lease may,
if intended for the Lessee, be given by a writing left at the
demised premises or mailed by registered mail addressed to the
Lessee at the demised premises, and if intended for the lessor
by a writing left at the premises of the Lessor at 489 College
Street, Suite 401, Toronto, Ontario, M6G 1A5 or mailed by
registered mail addressed to the Lessor at the Lessor's said
premises, and such notice shall be deemed to have been given at
the time it was delivered or mailed, as the case may be.
OVER PROVIDED further and it is hereby agreed that should the Lessee
BUILDING hold over after the expiration of this lease and the Lessors
thereafter accept rent for the said premises, the Lessee shall
hold the said premises as a monthly tenant only of the Lessors
but subject in all other respects to the terms and conditions of
this lease.
The words importing the singular number only shall include the
plural, and vice versa, and words importing the masculine gender
shall include the feminine gender, and words importing persons
shall include firms and corporations and vice versa.
Unless the context otherwise required, the word "Lessor" and the
word "Lessee" wherever used herein shall be construed to include
and shall mean the executors, administrators, successors and/or
assigns of the said Lessor and Lessee, respectively, and when
there are two or more Lessees bound by the same covenants herein
contained, their obligations shall be joint and several.
**Save and except for the rent which shall be twice the minimum
base rent of the last year of this lease agreement.
Schedules "A" and "B" annexed hereto shall form a part of this
Lease Agreement.
DEPOSIT The Lessor acknowledges receipt of first and last month's rent
in the amount of SEVEN THOUSAND, TWO HUNDRED AND EIGHTY-SIX
DOLLARS AND SEVENTY CENTS ($7,286.70) inclusive of GST, to be
held without interest which sum shall be applied by the Lessor
against the first and last month's payment of base minimum rent
as they shall come due hereunder (the "ADVANCE RENT").
At the Lessor's option, that portion of the Advance Rent to be
applied against the last month's Base Minimum Rent may be
applied as security for the performance by the Lessee of the
covenants and obligations on its part contained in this Lease
throughout the balance of the Term (the "Security Deposit"). If
the Security Deposit, or any portion thereof is appropriated and
applied by the Lessor for any sums due and payable to the Lessor
pursuant to this Lease, then the Lessee shall upon written
demand of the Lessor, forthwith remit to the Lessor a sufficient
amount in cash to restore the Security Deposit to the original
sum deposited, and the Lessee's failure to do so within five (5)
days after receipt of such demand shall constitute a breach of
this Lease.
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Lessee covenants to provide the Lessor with a minimum of twelve
(12) post-dated rent cheques on the execution of this Lease and
on each anniversary date of this Lease. Lessor shall have the
right to insist on post-dated cheques only if the Tenant has
delivered its rent late three times or more.
IN WITNESS Whereof the parties hereto have executed these
presents.
SIGNED, SEALED and DELIVERED ISN INTERNET SPORTS NETWORK, INC.
(LESSEE)
Per:____________________________________________
I have the authority to bind the Corporation.
Per:____________________________________________
I have the authority to bind the Corporation.
217-225 RICHMOND STREET WEST LIMITED
(LESSOR)
Per:____________________________________________
I have the authority to bind the Corporation.
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SCHEDULE OF RULES AND REGULATIONS FORMING PART OF THE WITHIN LEASE
1. The sidewalks, entrances, elevators, stairways and corridors of the
building shall not be obstructed by any tenants or used by them for any other
purpose than for ingress and egress to and from their respective offices, and no
tenant shall place or allow to be placed in the hallways, corridors or stairways
any waste paper, dust, garbage, refuse or any thing whatever that shall tend to
make them appear unclean, untidy or filthy;
2. The floors, sky-lights and windows that reflect or admit light into
passageways or into any place in the said building shall not be covered or
obstructed by any of the tenants, and no awnings shall be put over any window;
the water closets and other water apparatus shall not be used for any purpose
other than those for which they were constructed, and no sweepings, rubbish,
rags, ashes or other substances shall be thrown therein, and any damage
resulting to them from misuse shall be borne by the tenant by whom or by whose
employee the damage was excused.
3. All window signs, interior signs and signs on glass doors must be approved
in writing by the Lessor before the Lessee engages a sign contractor to paint
said signs, and all such signs shall be painted in the form previously so
approved by the Lessor.
4. In the event that the Lessor provides and installs a Public Directory
Board inside the main entrance to the building, the tenant's or tenants' name or
names shall be placed on the said Board at the expense of such tenant or
tenants, same to be charged to the tenant or tenants in the month's bill for
rent next rendered, and shall be recoverable as rent.
5. If any sign, advertisement or notice shall be inscribed, painted affixed
by the Lessee on or to any part of the said building whatsoever, then the Lessor
shall be at liberty to enter on said premises and pull down and take away any
such sign, advertisement or notice, and the expense thereof shall be payable by
the Lessee.
6. If by reason of any alterations which the Lease may make or may permit to
be made, with or without the consent of the Lessor, to any part of the demised
properties or to any fixtures in the demised premises, the addition of any
equipment or the use of any material which the Lessee, its employees or other
persons permitted by the Lessee to be on the premises may use or keep in the
said premises, or any change in the type of occupancy of the demised premises
which the Lessee may make or permit to be made, there is any increase in the
insurance premiums payable by the Lessor on any fire insurance which may be in
effect or which the Lessor may hereafter place upon the building of which the
demised premises form a part, the Lessee agrees to pay to the Lessor the amount
of such increase, and the parties agree that a statement by the insurance broker
of the Lessor of the amount of such increase shall be final and binding upon the
parties.
7. No safety, machinery, equipment, heavy merchandise or anything liable to
injure or destroy any part of the building shall be taken into it without the
consent of the Lessor in writing, and the Lessor shall in all cases retain the
power to limit the weight and indicate the place where such safe or the like is
the stand, and the cost of repairing any and all damage done in the building by
taking in or putting out such safe or the like or during the time it is in or on
the premises, shall be said for on demand by the tenant who so causes it. No
tenant shall load any floor beyond the reasonable weight carrying capacity as
set forth in the municipal or other codes applicable to the building.
8. In order that the demised premises may be kept in a good state of
preservation and cleanliness, the tenant shall during the continuance of its
lease permit the janitor or caretaker of the Lease to take charge of and clear
the demised premises.
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9. No tenant shall employ any person or persons other than the janitor or
caretaker of the Lessor for the purpose of such cleaning or of taking charge of
said premises, it being understood and agreed that the Lessor shall be in no
wise responsible to any tenant for any loss of property from the demised
premises, however occurring, or any damage done to the furniture or other
effects of any tenant by the janitor or caretaker of any of its employees, and
or at any time during emergencies.
10. The Lessor shall the demised premises of reasonable hours in the day/to
examine the same to make such repairs and alterations as it shall deem necessary
for the safety and preservation of the building, and also during the three
months previous to the expiration of the lease of the demised premises, to
exhibit the said premises to be let and put upon them its usual notice "For
Rent", which said notice shall not be removed by any tenant.
11. Nothing shall be thrown by the tenants, their clerks or servants, out of
the windows or doors or down the passages and sky-lights of the building.
12. No animals shall be kept in or about the premises.
13. If the Lessee desires telegraph or telephone, call bell or other private
signal connections, the Lessor reserves the right to direct the electricians or
other workmen as to where and how the wires are to be introduced, and without
such directions no boring or cutting for wires shall take place. No other wires
of any kind shall be introduced without the written consent of the Lessor.
14. No one shall use the leased premises for sleeping apartments or
residential purposes.
15. Tenants and their employees shall not make or commit any improper noise in
the building, or in any way interfere with or annoy other tenants or those
having business with them.
16. All tenants must observe strict care not to allow t heir windows to remain
open so as to admit rain or snow, or no as to interfere with the heating of the
building. The tenants neglecting this rule will be responsible for any injury
caused to the property of other tenants or to the property of the Lessor by such
carelessness. The Lessee, when closing offices for business, day or evening,
shall close all windows and lock all doors.
17. The Lessee agrees not to place any additional locks upon any doors of the
demised premises and not to permit any duplicate keys to be made therefor; but
to use only additional keys, obtained from the Lawyer, at the expense of the
Lessee, and to surrender to Lessor on the termination of the lease all keys of
the said premises.
18. The Lessee shall give to the Lessor prompt written notice of any accident
or any defect in the water pipes, gas pipes, heating apparatus, telephone or
electric light, or other wires in any part of said building.
19. My inflammable oils or other inflammable, dangerous or explosive materials
shall be kept or permitted to be kept in the demised premises.
20. The caretaker will have charge of all radiators and will give all
information for the management of the same, and the Lessee shall give to the
Lessor prompt written notice of any accident to or defects in the water pipes or
heating apparatus.
21. No bicycles or other vehicles be brought within the building or upon the
Lessor's property, including any lane or courtyard.
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22. Nothing shall be placed on the outside of windows or projections of the
demised premises. No air-conditioning equipment shall be placed at the windows
of the demised premises without the consent in writing of the Lessor.
23. Spikes, hooks, nails, screws or knobs shall not be put into the walls or
woodwork.
24. No freight, furniture or packages will be received in the building or
carried up or down in the elevator between the hours of 8 a.m. and 6 p.m.
25. All glass, locks and trimmings in or upon the doors or windows of the
demised premises shall be kept whole and whenever any part thereof shall become
broken, the same shall be immediately replaced or repaired under the direction
and to the satisfaction of the Lessor, and such replacements and repairs shall
be paid for by the Lessee.
26. No heavy equipment of any kind shall be moved within the building without
skids being laced under the same, and without the consent of the Lessor in
writing.
27. Any alterations, additions, renewals or changes made in the partitions or
divisions of the rooms or linoleum floors during the currency of this lease
shall, if made at the request of the Lessee, be done by the Lessor at the
expense of the Lessee, and shall be subject to the approval in writing and
direction of the Lessor.
28. The Lessor shall not be liable for any damage to any property at any time
on the demised premises, nor for the theft of any of the said property, nor
shall it be liable for any escape or leakage of smoke, gas, water, rain or snow,
however caused, nor for any accident to the property of the Lessee.
29. Any person entering upon the roof of the building does so at his own risk.
30. The Lessee shall not enter into any contract with any person or persons or
corporations for the purpose of supplying towels, soap or sanitary supplies,
etc., ice or spring water, unless the said person or persons or corporations
agree that the time and place of delivery for such articles and the elevator
service to be used in connection therewith shall be subject to such rules and
regulations as the Lessor may from time to time prescribe.
31. Tenants, their agents and employees shall not take food into the elevator
or into public or revised portions of the building unless such food is carried
in covered receptacles approved by the Lessor in writing.
32. The Lessor reserves the right to restrict the use of the demised premises
to the Lessee and/or the employees after 6 p.m.
33. No tenant shall make a door-to-door canvass of the building for the
purpose of selling any products or services to the other tenants without the
written consent of the Lessor.
34. No tenant shall be permitted to do cooking or to operate cooking apparatus
except in a portion of the building rented for the purpose.
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35. The Lessor shall have the right to make such other and further reasonable
rules and regulations and to alter, amend or cancel all rules and regulations as
in its judgement may from time to time be needed for the safety, care and
cleanliness of the building and for the preservation of good order therein and
the same shall be kept and observed by the tenants, their clerks and servants.
The Lessor may from time to time waive any of such rules and regulations as
applied to particular tenants and is not liable to the Lessee for breaches
thereof by other tenants.
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SCHEDULE "B"
OF THE LEASE AGREEMENT BETWEEN
ISN INTERNET SPORTS NETWORK INC. (THE "LESSEE")
AND
217-225 RICHMOND STREET WEST LIMITED (THE "LESSOR")
1.00 DEFINITIONS
1.01 "Additional Rent" means any and all sums of money or charges to be
paid to the Lessor whether or not the same are designated "Additional Rent" and
all such sums are payable in lawful money of Canada without deduction,
abatement, set-off or compensation whatsoever.
1.02 "Proportionate Share" means a fraction having, as its numerator, the
Full Floor Leaseable Area of the Leased Premises and, as its denominator, the
total Full Floor Leaseable Areas of all Rentable Premises from time to time in
the Building, provided that the denominator for determining Proportionate Share
may be adjusted depending upon allocations made by Lessor, acting reasonably,
for Operating Costs and Realty Taxes.
1.03 "Common Areas and Facilities" means those areas within or adjacent
to the Building as may be set aside by the Lessor from time to time for use in
common by such persons as may be permitted use thereof by the Lessor, including
the Lessees of the Building, their agents, employees, invitees, licensees,
customers, and persons having business with them, and all others now of
hereafter entitled thereto and without limiting the generality of the forgoing,
shall include the parking areas, roadways, sidewalks, landscaped areas, truck
courts, loading areas, driveways, if any, communal refuse areas, electrical,
heating/ventilating, air-conditioning, plumbing and drainage equipment,
facilities, services and installations, and any enclosures constructed therefor,
public washrooms, fountains, customer and service stairways, elevators, general
signs, including entrances, exits, directional and any exterior Lessees'
identification signs, if any and all other areas, facilities, equipment and
installations which are provided or designated (and which may be changed) from
time to time by the Lessor for the use by or benefit of the Lessee, its
employees, customers and in common with others entitled to their use or benefit
in the manner and for the purpose permitted by the Lease.
2.01 TAX ESCALATION
The Lessee covenants and agrees to and with the Lessor that if and
whenever during the Term, the municipal and other real property taxes including
but not limiting to school and local improvement rates payable by the Lessor
upon the lands and premises of which the demised premises form a part, shall in
the calendar year exceed the amount of tax payable during the year 1998, the
Lessee shall pay to the Lessor upon demand as Additional Rent a Proportionate
Share of such increase or the Lessor may choose to charge the Lessee on the
increase in realty taxes based on the difference between Lessee's assessed value
over the assessed value of the leased premises during the base year of 1998.
This provision shall apply each year during the term of this lease. In the
event the Lessee fails to pay such increase within 20 days of demand, the Lessor
shall have the same remedies and may take the same steps for the recovery of
rent in arrears under this lease.
2.02 ADDITIONAL TAXES & GST
The Lessee further covenants and agrees to and with the Lessor that
if and whenever during the lease term, any business transfer tax, value added
tax, sales tax, goods and services tax (GST) is imposed on the Lessor on any
rent payable under the leases in the Building, the Lessee shall pay to the
Lessor upon demand as Additional Rent, the Lessee's Proportionate Share of such
tax. This provision shall apply each year during the term of this Lease. In
the event the Lessee fails to pay such increase forthwith, within 20 days of
demand, the Lessor shall have the same remedies and may take the same steps for
the recovery of rent in arrears under this Lease.
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3.01 HEAT & OPERATING COST ESCALATION
The Lessee covenants and agrees to and with the Lessor that if during
the term of the demised premises the Annual Heating Costs or the Annual
Operating Costs, for the building in which the demised premises are located,
exceed the amount of costs payable during the Heating Season of 1998 and/or the
Operating Cost as the case may be during the operating year 1998, the Lessee
shall pay to the Lessor, within 20 days of demand as additional rent, its
Proportionate Share of such increase. This provision shall apply each year
during the term of the lease.
4.00 ADDITIONAL RENTS AND OBLIGATIONS
4.01 The Lease shall be semi-gross to the Lessor notwithstanding which
however it is agreed and understood that throughout the Term save and except for
the "abatement period", the Lessee shall still be responsible for and shall pay:
(a) All obligations and costs whatsoever in respect of the
Premises including without limiting the generality of the foregoing:
(i) in respect of all hydro supplied to or consumed in the
Premises, cost of consumption determined by a separate hydro meter and such cost
to be divided in a proportionate manner, to be shared with the Lessee's for that
particular floor area whereby the hydro is being consumed;
(ii) business expenses that the Lessee shall contract for specific
to its business or Leased Premises including phone lines, internet services,
office cleaning, etc.;
(iii) all goods and service taxes, sales taxes, value added taxes,
business transfer taxes and all other similar taxes imposed upon the Lessee with
respect to the Rent payable by the Lessee to the Lessor under the Lease;
4.02 OPERATING COST
Lessee further covenants and agrees to pay, its Proportionate Share
(as hereinafter defined) of the costs, over the operating base year of 1998,
incurred for repairing, replacing, operating, maintaining, managing and insuring
the Building including, without limiting the generality of the foregoing:
(i) heating, ventilating, air-conditioning and humidity control of
the Building, and fire sprinkler maintenance and monitoring, if any, of the
Building;
(ii) cleaning, common area janitorial services, window cleaning and
waste removal;
(iii) maintenance of all outside areas, including snow and ice
clearing and removal, and salting of driveways, parking areas and sidewalks
adjacent to the Building;
(iv) all insurance which the Lessor obtains and the cost of any
deductible amounts payable by the Lessor in respect of any insured risk or
claim;
(v) maintenance, repairs and replacements in respect of the
Building, including structural repairs but excluding inherent structural defects
or weaknesses, with capital items to be depreciated or amortized over a
reasonable period of time in accordance with generally accepted accounting
principles;
(vi) all capital taxes;
(vii) all costs in the nature of operating costs in respect of
services and facilities shared by users of the Building, to the extent the
Lessor performs or contributes to the same as a result of its ownership of the
Building;
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(viii) engineering, accounting, legal and other consulting and
professional services relating to the Building and the common areas and
facilities;
(ix) business taxes on common areas and facilities, if any;
(x) the fair rental value of space occupied by the Lessor for
management, supervisory or administrative purposes relating to the Building;
(xi) depreciation or amortization over a reasonable period of time
in accordance with generally accepted accounting principles of all improvements,
furnishings, fixtures, equipment, machinery, systems and facilities constructed
or installed in or used in connection with the Building which by their nature
require periodic or substantial repair or replacement, or which are constructed,
installed or used primarily to reduce the costs of other items included in
operating costs, whether or not such costs are in fact reduced;
(xii) a management fee of four and one-half (4.5%) percent of gross
amounts received or receivable by the Lessor in respect of the Building for all
items included in the Lease as rent; and
(xiii) the foregoing cost shall exclude building financing costs,
insurance recoveries, and leasing costs.
The Lessor shall provide reasonably detailed operating cost
statements within a reasonable period following expiry of each lease year, as
more fully described below. The Lessor shall upon request make available for
review of the Lessee, copies of invoices and other supporting documentation for
any items as reasonably requested by the Lessee for review.
4.03 The amounts payable under tax, heating and operating cost escalations
and GST, as Additional Rent, may be estimated by the Lessor for 12 months in
advance and the Lessee agrees to pay to the Lessor its Proportionate Share of
such amounts in equal monthly installments in advance during such period.
4.04 Notwithstanding the foregoing as soon as bills for all or any portion
of the amounts so estimated are received the Lessor may bill the Lessee for the
Lessee's Proportionate Share thereof and the Lessee shall pay the Lessor the
amounts as billed less all amounts previously paid by the Lessee on the basis of
the Lessor's estimates, within 20 days of demand. In the event the Lessee fails
to pay such amounts within 20 days of demand, the Lessor shall have the same
remedies and may take the same steps for recovery of rent in arrears under this
lease.
4.05 Within a reasonable period of time after the end of the period for
which such estimated payments have been made, the Lessor shall deliver to the
Lessee a statement, certified by an officer of the Lessor showing, in reasonable
detail, the Taxes, Additional Taxes, Heating and Operating Cost escalations for
the period together with the Lessee's Proportionate Share of the costs and
expenses payable pursuant to Sections 2.01, 2.02, 3.01, 4.00 and 5.01 and an
adjustment (if required) shall be made between the parties within Twenty (20)
days after delivery of such statement. The obligation herein shall survive the
expiration of the Term or earlier Termination of this Lease.
5.01 HYDRO ELECTRIC CHARGES
The Lessee covenants to pay his share of charges for electricity
consumed in the Premises. The amount shall be estimated by the Lessor and is
to be paid monthly in addition to the rent. In the event the Lessee fails to
pay such electrical charges forthwith, the Lessor shall have the same remedies
and may take the same steps for the recovery of rent in arrears under the terms
of this Lease.
6.01 INSURANCE
The Lessee shall take out and keep in force during the Term hereof
all risk insurance for Lessee's equipment and fixtures. The Lessee shall take
out and keep in force during the Term hereof property damage insurance and
public liability insurance for a minimum amount of $2,000,000.00 for claims
arising out of the negligence of the Lessee, its
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employees, agents and invitees, all in amounts and with policies in form
satisfactory from time to time to the Lessor and all with recognized insurance
companies, and shall furnish certificates thereof to the Lessor. The Lessee
agrees that if the Lessee fails to take out or to keep in force such insurance
that the Lessor will have the right to do so and to pay the premium therefor and
in such event the Lessee shall repay to the Lessor the amount paid as premium,
which repayment shall be deemed to be additional rent payable on the first day
of the next month following the said payment by the Lessor.
7.00 INDEMNITY
7.01 The Lessee covenants that the Lessor shall not be held liable for
and the Lessee covenants to indemnify and keep indemnified and to save harmless
the Lessor against and from any and all claims and demands for personal
injury or property damage asserted by or on behalf of the Lessee or any employee
of the Lessee, howsoever the said injury or damage may be occasioned, and to
indemnify and to keep indemnified and to save harmless the Lessor against and
from all costs, legal fees, expenses and liabilities incurred in or about any
such claim or demand or any action, suit or proceeding brought thereon.
7.02 To indemnify and save harmless the Lessor against and from any and
all claims, including without limiting the generality of the foregoing all
claims for personal injury or property damage, arising from the conduct of any
work or by or through any act or omission of the Lessee or any assignee,
sub-Lessee, agent, contractor, servant, employee, invitee or licensee of the
Lessee, and against and from all costs, counsel fees, expenses and liabilities
incurred in or about any such claim or any action or proceeding brought thereon.
7.03 Notwithstanding the above the Lessor agrees to be responsible for all
claims and liabilities arising from the negligence of the Lessor or any person
for whose conduct the Lessor is responsible and for any cost incurred by the
Tenant in connection with any action pertaining thereto, save and except for
claims and liabilities for which the Lessee, under the terms of this Lease
Agreement, is responsible to insure for.
8.00 ACKNOWLEDGMENT OF TENANCY, ATTORNMENT AND SUBORDINATION
8.01 Within ten (10) days after request therefor by the Lessor, the
Lessee agrees to deliver a certificate to any proposed mortgagee or purchaser,
or to the Lessor, certifying (if such be the case) that this Lease is in full
force and effect, that rent is paid currently without any defenses or offsets
thereto, that the Lessee is in possession, that there are no incurred defaults
by the Lessor or stating those claimed by the Lessee, and such other matters as
the Lessor may reasonably require.
8.02 It is a condition of the Lease and the Lessee's rights granted
hereunder, that this Lease and all of the rights of the Lessee hereunder are
subordinate to any and all mortgages, trust deeds or other instruments of
financing, refinancing or collateral financing, from time to time in existence
against the Building. Upon request, the Lessee will subordinate this Lease and
all of its right hereunder in such form or forms as the Lessor may require to
any and all mortgages, trust deeds or other instruments of financing,
refinancing or collateral financing, as aforesaid, and will, if requested,
attorn to the holder thereof or to the registered owners of the Building, as the
case may be, provided that the same does not in any way infringe or prejudice
the Lessee's right of quiet enjoyment. The Lessee further covenants and agrees
that it will, upon request, provide the Lessor with such information as to the
Lessee's financial standing and corporate organization as the Lessor its
mortgagees or a trustee for any bondholders may reasonably require.
9.01 DISCHARGE OF LIENS
The Lessee shall promptly pay all Lessee's contractors, suppliers and
material men and shall do any and all things necessary to minimize the
possibility of a lien attaching to the Leased Premises and/or Building and
should any such lien be made or filed, the Lessee shall discharge the same
forthwith (after notice thereof is given to the Lessee) at the Lessee's
expense. In the event the Lessee shall fail to cause any such lien to be
discharged, as aforesaid, then, in addition to any other right or remedy of the
Lessor, the Lessor may, but it shall not be so obligated, discharge same by
paying the amount claimed to be due into Court and the amount so paid by the
Lessor and all costs and expenses
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including solicitors' fees (on a solicitor and client basis) incurred herein for
the discharge of such lien shall be due and payable by the Lessee to the Lessor
as additional rent on demand.
10.00 GARBAGE
10.01 The Lessee shall not allow any refuse, garbage or other loose or
objectionable material to accumulate in or about the Building or the Common
Areas and Facilities and will at all times keep the Leased Premises in a clean
and wholesome condition consistent with the purposes for which the same were
let; and that the Common Area Facilities, including the plumbing facilities
shall be used for any purpose other than that for which they were built and no
foreign substance, refuse or garbage of any kind shall be thrown therein.
10.02 The Lessee at its sole expense, shall provide a proper area for the
deposit of debris, garbage, trash and refuse of a perishable nature and for
removal of the same on a regular basis. No debris, garbage, trash or refuse
shall be placed or left, or be permitted to be placed or left in, on or upon any
part of the Building outside of the Leased Premises.
10.03 If the Lessor shall cause the debris , garbage, trash and refuse
deposited in the areas referred to herein to be removed from the Real Property,
in the event that the Lessor incurs any costs or expenses with respect to such
removal, and in the event that the Lessee uses such removal services, the Lessee
shall be charged, without duplication, however, with its Proportionate Share of
such costs or expenses and an amount equal to fifteen percent (15%) of its
Proportionate Share of such costs for administration expenses, which charges
shall be deemed Rent payable to the Lessor upon demand.
11.01 OVERLOADING
The Lessee will not bring upon the Leased Premises or any part
thereof, any machinery, equipment, article or thing that by reason of its
weight, size, or use might, in the opinion of the Lessor, damage the Leased
Premises and will not at any time overload the floors of the Leased Premises,
and that if any damage is caused to the Leased Premises by any machinery,
equipment, article or thing or by overloading, or by any act, neglect or misuse
on the part of the Lessee, or any of its servants, agents or employees, or by
any person having business with the Lessee, the Lessee shall forthwith repair
the same or pay to the Lessor the cost of making good the same.
12.01 LESSEE NOT TO OVERLOAD FACILITIES
The Lessee will not install any equipment which would exceed or
overload the capacity of the utility facilities in the Leased Premises and
agrees that if any equipment installed by the Lessee shall require additional
utility facilities, the same shall be installed, if available, and subject to
the Lessor's prior written approval thereto (which approval may be unreasonably
withheld), at the Lessee's sole cost and expense in accordance with plans and
specifications to be approved in advance by the Lessor, in writing.
13.01 REGISTRATION
Neither the Lessee or anyone on the Lessee's behalf or claiming under
the Lessee shall register this Lease or any assignment or sublease of this Lease
or any document evidencing any interest of the Lessee in the Lease or the Leased
Premises, or against the lands or any part thereof comprising the Building. If
either party intends to register a document for the purpose only of giving
notice of this Lease or of any assignment or sublease of this Lease, then upon
request of such party, both parties shall join in the execution of a short form
or notice of this Lease ("Short Form") solely for the purpose of supporting an
application for registration of notice of this Lease or of any assignment or
sublease against the interest of the Lessor, or any part thereof in the Real
Property. The form of the Short Form and of the application to register notice
of this Lease or of any assignment of sublease shall (i) be prepared by the
Lessor or its solicitors or, at the Lessee's option, by the lessee (subject to
the Lessor's prior approval) but in any event, at the Lessee's expense; (ii)
include therein a provision for, and require consent to, such registration by or
on behalf of the Lessor; and (iii) only describe the parties, the Leased
Premises and the Commencement Date and the expiration date of the Term.
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14.01 SUBLETTING OR ASSIGNMENT
Notwithstanding Lessor at its sole option may grant consent for
subletting or assignment of the whole or part of the demised premises, and such
consent shall not be unreasonably withheld, provided that the following are made
a condition to giving consent:
a) The Lessee is not in breach or default of its obligations
under the lease.
b) Every request for consent may be in writing accompanied by an
executed copy of the assignment or subletting agreement entered into between the
Lessee and the proposed assignee(s) or sub-Lessee(s) and shall include such
information as the nature of the business which the proposed assignee or
sub-Lessee carries on, financial, corporate, banking and any other information
on the same as required by Lessor, and shall include a covenant of the
assignee's or sub-Lessee's to perform all Lessees' obligations under this Lease
in a form to be approved by the solicitor for the Lessor.
d) No assignment or sublease shall in any manner release the
Lessee from obligations of this Lease.
e) The Lessee shall pay to the Lessor the Lessor's reasonable
legal and/or administrative fees in connection with the proposed assignment or
sublease.
f) The Lessor shall be entitled as additional rent to any excess
of rent paid by assignee or sub-Lessee over the rent specified to be paid by the
Lessee or Lessee in this Lease.
The Lessor shall further be entitled as additional rent to any consideration
received by the Lessee from the assignee or sub-Lessee for the assignment or
sublease.
15.01 NAME OF BUSINESS
The Lessee covenants that the business to be conducted on the leased
premises shall be known by the name " ISN INTERNET SPORTS NETWORK INC." and by
no other name whatsoever without the prior written consent of the Lessor, and
such consent shall not unreasonably be withheld.
16.01 STRUCTURAL REPAIRS
The Lessor shall be responsible for structural repairs to the
building including walls, floors and roof deck and to include its services to
the building not resulting from the Lessee's negligence or default. The Lessor
shall undertake any such repairs promptly upon receipt of notice from the
Lessee.
17.00 LESSEE'S COVENANTS AND AGREES
17.01 That during the term granted, at its own expense to repair,
maintain and keep the demised premises and every part thereof in good order and
in a clean and sanitary condition and in accordance with the laws, bylaws,
directions, order, rules and regulations of all governmental agencies having
jurisdiction and to the requirements of the Lessor's insurers, and will perform
promptly the necessary maintenance, repairs and replacements in, on, to and
about the demised premises without limiting the foregoing, the plumbing
facilities, air-conditioning system, electrical lighting and fixtures, windows
and the Lessee shall keep the demised premises well painted, clean and
presentable and shall maintain the demised premises in the same condition as a
prudent owner would do.
17.02 To permit the Lessor at all reasonable times, on reasonable notice,
to enter upon and view the state of repair and maintenance of the Premises and
to comply with all reasonable requirements of the Lessor with respect to the
care and maintenance and repair thereof, reasonable wear and tear not
inconsistent with the maintenance of the Leased Premises suitable as a first
class office/industrial building only excepted and to permit the Lessor to carry
out and make
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repair and replacements which are the Lessor's responsibility at such time and
in such manner as will not reasonably interfere with the use by the Lessee of
the Leased Premises or the conduct of the Lessee's business thereon.
17.03 That it will not at any time paint, mark or deface the exposed wood
ceiling or the columns within the Leased premises or the common areas of the
Building.
18.01 NO REPRESENTATION
It is understood and agreed that there are no covenants,
representations, agreements, warranties or conditions in any way relating to the
subject matter of this Lease whether expressed or implied, either oral or
written, except those set forth in this Lease. Except as herein otherwise
provided, no subsequent alteration, amendment, change or addition to this Lease
shall be binding upon the Lessor or the Lessee unless reduced to writing and
signed by each of them. This Lease shall be governed by and construed in
accordance with the laws of the Province of Ontario.
19.00 DEFAULT BY THE LESSEE AND REMEDIES
19.01 In any of the following shall occur:
(i) Lessee shall fail, for any reason, to make any payment of Rent
as and when the same is due to be paid hereunder and such default shall continue
for five (5) days after such payment was due and after notice is given to
Lessee;
(ii) Lessee shall fail, for any reason, to perform any other
covenant, condition, agreement or other obligation on the part of Lessee to be
observed or performed pursuant to this Lease (other than the payment of any
Rent) and such default shall continue for fifteen (15) days after written notice
thereof or such shorter period as expressly provided herein.
(iii) any of Lessor's policies of insurance on the Premises or any
part or contents thereof shall be actually or threatened to be cancelled or
adversely changed as a result of any use of occupancy or contents in the
Premises.
(iv) Lessee shall purport to make a Transfer affecting the
Premises, or the Premises shall be used by any person or for any purpose, other
than in compliance with and as expressly authorized by this Lease.
(v) Lessee or any other person occupying any portion of the
Premises shall make an assignment for the benefit of creditors or become
bankrupt or insolvent or take the benefit of any statue for bankrupt or
insolvent debtors or make any proposal, assignment, arrangement or compromise
with its creditors or, of any steps are taken or action or proceedings commenced
by any person for the dissolution, winding up or other termination of Tenant's
existence or liquidation of its assets.
(vi) a trustee, receiver, receiver manager, agent or other like
person shall be appointed in respect of the assets or business of Lessee or any
other occupant of the Premises.
(vii) Lessee attempts to or does abandon the Premises or remove or
dispose of any goods and chattels from the Premises to that there would not, in
the event of such removal or disposal, be sufficient goods of Lessee on the
Premises subject to distress to satisfy all arrears of Rent payable under this
Lease and all Rent payable hereunder for a further period of at least six (6)
months, or it the Premises shall be vacant or unoccupied for a period of five
(5) consecutive days or more without the prior written consent of Lessor.
(viii) Lessee makes any sale in bulk affecting any property on the
Premises (other than in conjunction with a Transfer approved in writing by the
Lessor and made pursuant to all applicable legislation).
(ix) this Lease or any goods or other property of Lessee shall at
any time be seized or taken in execution or attachment which remains unsatisfied
for a period of five (5) days or more; and
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(x) termination or re-entry by Lessor is permitted under any
provision of this Lease or at law.
then without prejudice to and in addition to any other rights and remedies to
which Lessor is entitled pursuant hereto or at law, then current and the next
three (3) months' Rent shall be forthwith due and payable and Lessor shall have
the following rights and remedies, all of which are cumulative and not
alternative, to:
(i) terminate this Lease in respect of the whole or any part of
the Premises by written notice to Lessee; if this lease is terminated in respect
of part of the Premises, this Lease shall be deemed to be amended by the
appropriate amendments, and proportionate adjustments in respect of Rent and any
other appropriate adjustments shall be made in such manner as shall be
determined by Lessor.
(ii) enter the Premises as agent of Lessee and as such agent to
relet them for whatever term (which may be for a term extending beyond the Term)
and on whatever terms and conditions as Lessor in its sole discretion may
determine and to receive the rent therefor and, as the agent of Lessee, to take
possession of any furniture, fixtures, equipment, stock or other property
thereon and, upon giving written notice to Lessee, to store the same at the
expense and risk of Lessee or to sell or otherwise dispose of the same at public
or private sale without further notice and to make such alterations to the
Premises in order to facilitate their re-letting as Lessor shall determine, and
to apply the net proceeds of the sale of any furniture, fixtures, equipment,
stock or other property or from the re-letting of the Premises, less all
reasonable expenses incurred by Lessor in making the Premises ready for
re-letting and in re-letting the Premises, on account of the due and to become
due under the Lease and Lessee shall be liable to Lessor for any deficiency and
for all such reasonable expenses incurred by Lessor as aforesaid, no entry or
taking possession of or performing alterations to or re-letting of the Premises
by Lessor shall be construed as an election on Lessor's part to terminate this
lease unless a written notice of such intention or termination is given by
Lessor to Lessee.
(iii) remedy or attempt to remedy any default of Lessee in
performing any repairs, work or other covenants of Lessee hereunder and, in so
doing, to make any payments due or claimed to be due by Lessee to third parties
and to enter upon the Premises, without any liability to Lessee therefor or for
any damages resulting thereby, and without constituting a re-entry of the
Premises or termination of this Lease and without being in breach of any of the
Lessor's covenants hereunder and without thereby being deemed to infringe upon
any of Lessee's rights pursuant hereto, and, in such case, Lessee shall pay to
third parties in respect of such default and all reasonable costs of Lessor in
remedying or attempting to remedy any such default plus ten (10%) percent of the
amount of such costs of Lessor's inspection and supervision plus a further ten
(10%) percent for overhead and profit.
(iv) obtain damages from Lessee including, without limitation, if
this Lease is terminated by Lessor, all deficiencies between all amounts which
would have been payable by Lessee for what would have been the balance of the
Term, but for such termination, and all net amounts actually received by Lessor
for such period of time; and
(v) suspend or cease to supply an utilities, services, heating,
ventilation, air-conditioning and humidity control to the Premises, all without
liability of Lessor for any damages, including indirect or consequential
damages, caused thereby.
19.02 PROVIDED, and it is hereby expressly agreed, that if and whenever the
taxes, rates or Additional Rent charges which the Lessee has herein covenanted
to pay and which shall constitute a lien or charge upon the demised premises,
shall be unpaid and overdue for fifteen (15) days, although no formal demand
thereof shall have been made, shall be unpaid and overdue for five (5) days
after written demand thereof shall have been made, may pay all or any of the
same and all of such payments so made shall constitute additional rent forthwith
payable with interest at the rate of four per cent (4%) over the prime rate
charged by the Canadian Imperial Bank of Canada to its best commercial customers
per annum from the date of each such payment is due, until fully paid.
Notwithstanding, any such non-payment shall constitute a breach of said Lease
Agreement allowing the Lessor to proceed with the Lessor's full rights to
remedies without further delay or notice.
20.00 OPTION TO RENEW
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Upon written notice by the Lessee to the Lessor at least three (3)
months and not more than six (6) months prior to the expiry of the Term, and
provided that the Lessee is not in default under the terms of this Offer to
Lease and the Lease, the Lessee shall have the option to renew the Lease for a
further term ("Renewal Term") of two (2) years on the same terms and conditions
as the Lease save and except there shall be no period whereby Minimum Rent is
not paid, the Lessee accepts the Premises on an "as is" basis, there shall be no
further option to renew and the Minimum Rent shall be negotiated and agreed upon
between the parties which shall be at the then current rate for similar premises
in a similar area, but in no event to be less than the Rental Rate for the last
year of the Lease Term.
21.00 LESSOR'S RESPONSIBILITY
The Lessor, in the same manner and to the same extent as a prudent and reputable
owner and operator of a building similar in size, age and location, shall:
(a) keep or cause the Building to be kept in good repair and in a
clean, orderly and safe condition, both inside and out, including the
contracting of a pest control program for the Building, if deemed required;
(b) provide and maintain the common areas and common washroom
facilities for use during normal business hours for the Building to be used by
the Lessee and all others entitled thereto; and
(c) effect as expeditiously as reasonably possible all repairs
which it is required to make.
22.00 POST-DATED CHEQUES
The Lessee shall deliver at its sole cost, to the Lessor's designated
place of address, rent cheques in advance of the first day of each month being
the due date for rent to be paid. Should the Lessee's rent cheques not be
received by the Lessor prior to the rent due date on two separate occasions,
then the Lessee, upon the request from the Lessor, shall deliver to the Lessor
post-dated rent cheques for the next twelve (12) consecutive months and on each
anniversary date of the lease or a lessor number of post-dated rent cheques as
requested by the Lessor.
23.00 NOISE AND ODOURS
The Lessee shall conduct its business on the Premises in keeping with
a first-class building. To that end, the Lessee covenants and agrees that it
shall not cause, suffer or permit any fumes, odours, noise or other element any
of which is determined by the Lessor to be a nuisance or disturbance to the
Lessor or any other occupant of the Building to emanate from the Premises. If
the Lessor determines that any such fumes, odours, noise or other element is
emanating from the Premises in such a manner as to cause any nuisance, the
Lessee shall forthwith, upon notice from the Lessor, cause same to be rectified,
failing which same shall be an event of default under the Lease.
24.00 ZONING
Prior to the Lessee's commencement of installing leasehold
improvements or occupying the Premises, the Lessee shall provide evidence
satisfactory to the Lessor that the Lessee has obtained, at its expense, all
necessary consents, permits and licenses for its occupancy of the Leased
Premises, for its work to be done in the Leased Premises as set out in this
Lease Agreement hereof complies with all relevant zoning by-laws from all
appropriate governmental and regulatory authorities. It is understood and
agreed and the Lessee covenants that any zoning applications for the Leased
Premises shall be made only by the Lessor at the expense of the Lessee and no
application for zoning shall be made by the Lessee. However the Lessee shall be
responsible for at its own expense building permits and all other permits and
approvals required.
25.00 EXCEPTION TO QUIET ENJOYMENT
The Lessee acknowledges that the tenant occupying the space on the
first floor of the Building contains a clause within its lease agreement which
may infringe on the Lessee's right to Quiet Enjoyment as provided by standard
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commercial lease agreements. Specifically, the first floor tenant operates a
licensed club which is permitted to operate and play its music at levels it
deems necessary to conduct business after 8:00 PM on any given day. During
normal business hours, the first floor tenant may not increase the volume of its
sound system above normal and customary levels of that of an office building.
The Lessee also acknowledges that there are two other night clubs on the lower
level of this building that do not have such restrictions in their lease
agreements. As such, the Lessee acknowledges and agrees that there shall be no
offset or abatement as it has received full disclosure of this arrangement prior
to entering into this Lease or any subsequent Lease Agreement.
26.00 LESSEE'S WORK
26.01 The Lessee agrees to accept the premises in an "as is" condition,
save and except the Premises shall be in a vacant, broom swept condition, and
that at the time of possession, all existing mechanical systems are in a working
condition. However, the Lessor does not provide any warranty or guarantee on
the equipment after the date of possession. The Lessee shall have five (5) days
after taking possession to notify the Lessor in writing should it find that
there is a deficiency in any of the mechanical systems, failing which the Lessee
has acknowledged that it has accepted the premises "as is".
The Lessee may retain its own contractors to perform alterations in
the Premises, subject to the restrictions for use of Lessor's contractors as
noted below. Prior to the Lessee performing any work in the Premises, the
Lessee shall provide to the Lessor a full set of plans of the work it intends to
do in the Leased Premises for approval by the Lessor, which approval shall not
be unreasonably withheld. The Lessee shall be responsible for obtaining all
municipal and governmental approvals necessary to perform its work and shall
bear the cost of all such approvals and work. The Lessee shall forthwith pay as
Additional Rent all fines, costs and expenses incurred by the Lessor, in
connection with the Lessee's failure to obtain all requisite permits.
The Lessee will further covenant and agree that it will not, at any
time, paint, mark or deface the existing exposed sandblasted wood beams,
columns, ceilings or sandblasted exposed brick in the Demised Premises.
If the Lessee proposes to make any structural changes to the
premises, the Lessee shall pay for the cost of the Lessor having its structural
engineer examine the plans prepared by the Lessee or Lessee's engineer, and the
Lessee shall pay the cost to have the Lessor's Engineer review the work once
completed to insure the work was completed in accordance to the drawings. No
structural work shall be started without first obtaining the Lessor's prior
written approval.
The Lessee must use the Lessor's contractors for any work required on
the building in relation to the Electrical System, Fire Alarm Systems, Sprinkler
Systems and Mechanical Systems provided costs of such contractors shall not
exceed competitive rates.
27.00 RESTORATION
The Lessor shall not be required to remove any leasehold improvements
in the Leased Premises or restore the Premises to its original condition
provided the leasehold improvements will be completed in accordance with the
building permit and approved plans submitted by the Lessee to the Lessor. Upon
expiry of the Leased Term or a final Renewal Term, the Lessee shall leave the
Premises in a vacant, and clean broom-swept condition.
28.00 SIGNAGE
The Lessee shall be entitled to install its own signage adjacent to
its entrance door subject to the Lessor's approval, which approval shall not be
unreasonably withheld. The Lessee shall also be entitled to building standard
signage on the building directory at the Lessee's cost.
29.00 SPECIAL COVENANTS
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The Lessee acknowledges that the air conditioning unit for the
Premises supplies cooling to both the Lessee's Premises as well as the adjacent
premises. The Lessee acknowledges the controls to the air conditioning unit, if
located in their Premises, will use their best efforts to control the system to
a comfortable level of cooling for both premises. The Lessor shall make repairs
to the air conditioning unit as required and each the Lessee and adjacent tenant
shall pay, as additional rent, its proportionate share of such costs.
31.00 REASONABLENESS
Notwithstanding anything in this Lease to the contrary;
i) any allocation of any costs, charge or expense which is to be
determined by Lessor under this Lease shall be done on a reasonable and
equitable basis;
ii) whenever in this Lease, Lessee's or Lessor's consent,
permission or approval is required, such consent, permission or approval shall
not be unreasonably withheld and delayed;
iii) in exercising any of its rights under this Lease, the Lessor
shall act reasonably and as a prudent owner of a similar building having regard
to size, age and location.
32.00 LESSOR'S INSURANCE
The Lessor covenants and agrees to insure the Building against damage
by standard extended perils in such amount as a prudent owner of the Lands and
the Building would carry.
33.00 ACCESS
The Lessor covenants to provide unrestricted access to the building
for the Lessee during the normal business hours of 9:00 AM to 6:00 PM Monday
through Friday, and by key/card access after business hours and on weekends.
Refundable deposits are required on the access cards.
34.00 REPAIRS AND MAINTENANCE
The Lessee shall repair, maintain and replace the Leased Premises,
save and except for reasonable wear and tear, damage by fire, lightning, tempest
or act of God and repairs to any structural components of the Building. In the
event repairs to the structural components of the Building or mechanical systems
are caused by the negligence or lack of due care by the Lessee, the Lessor shall
effect such repairs at the sole cost and expense of the Lessee, which costs plus
fifteen percent (15%) shall be recoverable as Additional Rent.
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EXHIBIT 10.2
VANCOUVER OFFICE LEASE AGREEMENT
<PAGE>
L E A S E
GREAT LUMBERMEN'S VENTURE INC.
(LANDLORD)
TO
ISN INTERNET SPORTS NETWORK (CANADA) LTD.
(TENANT)
ROGER EARLE
(INDEMNIFIER)
SUITE #700 - 509 RICHARDS STREET
VANCOUVER, BRITISH COLUMBIA
DATED JULY 22, 1997
<PAGE>
L E A S E S U M M A R Y
THIS LEASE dated the 22nd day of July, 1997
LANDLORD: GREAT LUMBERMEN'S VENTURE INC.
c/o PCI Realty Corp.
#400 - 576 Seymour Street
Vancouver, British Columbia V6B 3K1
TENANT: ISN INTERNET SPORTS NETWORK INC.
7th Floor, 509 Richards Street
Vancouver, B.C.
INDEMNIFIER: ROGER EARLE
1449 Chartwell Drive,
West Vancouver, B.C.
TERM: Three (3) years
COMMENCEMENT DATE: October 1, 1997
EXPIRY DATE: September 30, 2000
AREA OF PREMISES: 3,155 square feet
LEGAL DESCRIPTION: Parcel "A" (see 414418-L) of Lots 8, 9 and 10, Block
34, District Lot 541, Plan 210 (see Schedule C)
BASE RENTAL: $24,451.20 per annum ($2,037.60 per month) for the
first year; and $25,239.96 per annum ($2,103.33 per
month) for the second year; and $26,028.72 per annum
($2,169.06 per month) for the third year.
USE: A business office only.
CASH
ALLOWANCE: Ten Thousand Two Hundred ($10,200.00) Dollars payable
upon signing of this lease and the Tenant occupying the
Premises.
DEPOSIT: $8,355.22 to be applied to the first month's gross
rent, the balance to be held as a non-interest bearing,
refundable security deposit.
OPTION TO RENEW: Two (2) options to renew, the first for three (3) years
and the second for five (5) years.
FIXTURING PERIOD: From the signing of this Lease until the Commencement
Date, gross rent free.
LANDLORD'S ADDRESS #400 - 576 Seymour Street
FOR RENTAL Vancouver, B.C.
PAYMENTS: V6B 3K1
2
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SCHEDULES: "A" - Rules and Regulations
"B" - Site Plan
"C" - Legal Description
UNIT # 700
3
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I N D E X
ARTICLE 1 - CONSTRUCTION AND FIXTURING OF LEASED PREMISES
1.01 Cash Allowance
1.02 Tenant's Trade Fixtures
ARTICLE 2 - DEMISE AND TERM
2.01 Demise and Term
ARTICLE 3 - RENTAL
3.01 Rental
3.02 Tenant's Portion
3.03 Payment of Rental
3.04 Reporting of Costs
3.05 Interest on Overdue Rent
ARTICLE 4 - CONDUCT OF BUSINESS
4.01 Use of Leased Premises
ARTICLE 5 - REPAIRS
5.01 Tenant's Repairs
5.02 Landlord's Obligation to Repair
5.03(a) Damage or Destruction
5.03(b) Termination
5.03(c) Tenant's Obligation to Rebuild
5.03(d) Landlord's Election
5.03(e) Insurable Hazard Defined
ARTICLE 6 - ASSIGNMENT, SUB-LETTING
ARTICLE 7 - TENANT'S INSURANCE
ARTICLE 8 - LANDLORD'S INSURANCE
ARTICLE 9 - TENANT ALTERATIONS
9.01 Painting and Decorations
9.02 No Liens
ARTICLE 10 - PUBLIC UTILITIES, TAXES, ETC.
10.01 Public Utilities, Business Tax and Machinery
10.02 Payment of Taxes
ARTICLE 11 - EXCLUSION OF LIABILITY AND INDEMNITY
11.01 Exclusion of Landlord's Liability
11.02 Indemnification
4
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ARTICLE 12 - LANDLORD'S RIGHTS AND REMEDIES
12.01 Default
12.02 Bankruptcy
12.03 Payment of Landlord's Expenses
12.04 Landlord's Right to Re-let
12.05 Right of Landlord to Perform Tenant's Covenants
12.06 Right of Landlord to Seize
12.07 Non-Waiver
12.08 Remedies Cumulative
ARTICLE 13 - MORTGAGES AND ASSIGNMENT BY LANDLORD
13.01 Sale or Financing of Building
13.02 Subordination
13.03 Offset Statement
13.04 Registration
13.05 Assignment by Landlord
13.06 Re-Survey
ARTICLE 14 - LANDLORD'S COVENANTS
14.01 Quiet Enjoyment
ARTICLE 15 - LEGAL RELATIONSHIP
15.01 No Partnership
15.02 Several Tenants
15.03 Successors, etc.
ARTICLE 16 - NOTICE
ARTICLE 17 - GENERAL CONDITIONS
17.01 Garbage, Debris
17.02 Rules and Regulations
17.03 Tenant's Work
17.04 Apportionment of Rent
17.05 Overholding Tenant
ARTICLE 18 - OBLIGATIONS OF THE COVENANTOR
18.01 Application
18.02 Agreements
ARTICLE 19 - MISCELLANEOUS
19.01 Showing of Leased Premises
19.02 Time of the Essence
19.03 Captions
19.04 Governing Law
19.05 Entire Agreement
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ARTICLE 20 - RIGHT OF RENEWAL
20.01 Renewal
20.02 Minimum Rental During Renewal
ARTICLE 21 - DEFINITIONS
(a) Area of the Leased Premises
(b) Building
(c) Common Area
(d) Common Facilities
(e) Cost of Insurance
(f) Municipal Tax Cost/Municipal Taxes
(g) Municipality
(h) Property
(i) Building
(j) Operating Costs
(k) Service Areas
SCHEDULES
A Rules and Regulations
B Site Plan of Building
C Legal Description of Building
6
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THIS LEASE made as at the 22nd day of July, 1997
BETWEEN:
GREAT LUMBERMEN'S VENTURE INC.
C/O PCI REALTY CORP.
Suite 400
576 Seymour Street
Vancouver, British Columbia
V6B 3K1
(hereinafter called the "Landlord")
OF THE FIRST PART
AND: ISN INTERNET SPORTS NETWORK INC.
7th Floor, 509 Richards Street
Vancouver, British Columbia
(hereinafter called the "Tenant")
OF THE SECOND PART
AND:
ROGER EARLE
1449 Chartwell Drive
West Vancouver, British Columbia
(hereinafter called the "Indemnifier")
OF THE THIRD PART
NOW THIS LEASE WITNESSETH:
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ARTICLE 1
CONSTRUCTION AND FIXTURING OF LEASED PREMISES
Cash Allowance
1.01 The Tenant accepts the Premises in an "as is" condition. The Landlord
agrees to provide the Tenant with a cash allowance of Ten Thousand Two Hundred
Dollars ($10,200.00) payable within two (2) weeks of the Tenant Signing and
delivering the Lease to the Landlord and occupying the Premises.
Tenant's Trade Fixtures
1.02 The Tenant agrees that any alterations, additions, improvements and
fixtures made to or installed upon or in the Leased Premises at the expense of
the Tenant other than unattached moveable trade fixtures shall remain upon and
be surrendered to the Landlord with the Leased Premises as part thereof upon the
expiration or earlier termination of this Lease and shall become the absolute
property of the Landlord, unless the Landlord shall by notice in writing require
the Tenant to remove the same, in which event the Tenant covenants and agrees to
restore the Leased Premises to the state in which they were prior to commencing
any of the Tenant's Work and shall make good any damage or injury caused to the
Leased Premises resulting from such installation and removal, reasonable wear
and tear and damage by Insurable Hazards only excepted.
ARTICLE 2
DEMISE AND TERM
Demise and Term
2.01 In consideration of rents, covenants and agreements reserved and
contained in this Lease (which rents, covenants and agreements are to be paid,
observed and performed by the Tenant) the Landlord does hereby demise and lease
unto the Tenant the Leased Premises (being those premises outlined in heavy
black on the attached Schedule "B") being approximately 3155 square feet, more
or less, on the 7th floor of the building located at 509 Richards Street,
Vancouver, British Columbia, and more particularly described on Schedule "B"
hereto TO HAVE AND TO HOLD for and during the term of three (3) years from the
Commencement Date of Term of October 1, 1997, unless sooner terminated as
hereinafter provided. In addition, the Tenant shall be entitled, for the
benefit of the Leased Premises, to enjoy upon the terms and conditions set out
in this Lease the use in common with others entitled thereto of the Common Area
and Common Facilities.
ARTICLE 3
RENTAL
Rent
3.01 The Tenant covenants and agrees to pay to the Landlord, or as the
Landlord may in writing direct, in lawful money of Canada, without any set off,
compensation or deduction whatsoever on the days and at the times hereinafter
specified, rental which shall be the aggregate of the sums required to be paid
by clauses (a), (b) and (c) below:
(a) Base Rental of:
(i) TWENTY-FOUR THOUSAND FOUR HUNDRED FIFTY-ONE AND 25/100
DOLLARS ($24,451.25) per annum during year one of the Term payable
in equal consecutive monthly instalments on the first day of each
month in advance of TWO THOUSAND THIRTY-SEVEN AND 60/100 DOLLARS
($2,037.60) commencing on the first day of October, 1997; and
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(ii) TWENTY-FIVE THOUSAND TWO HUNDRED FORTY DOLLARS ($25,240.00)
per annum during year two of the Term payable in equal consecutive
monthly instalments on the first day of each month in advance of
TWO THOUSAND ONE HUNDRED THREE AND 33/100 DOLLARS ($2,103.33)
commencing on the first day of October , 1998;
(iii) TWENTY-SIX THOUSAND TWENTY-EIGHT DOLLARS ($26,028.00) per
annum during year three of the Term payable in equal consecutive
monthly instalments on the first day of each month in advance of
TWO THOUSAND ONE HUNDRED SIXTY-NINE DOLLARS ($2,169.00) commencing
on the first day of October, 1999;
The Landlord acknowledges the receipt of $8,355.22 being a deposit
to be applied to the payment of Gross Rental plus GST for the first month of the
Term and the balance to be held as a security deposit for any other monies due
to the Landlord hereunder.
(b) Together with the Tenant's portion of the following:
(i) Common Area Maintenance cost;
(ii) Cost of Insurance; and
(iii) Municipal Tax Cost.
(c) Together with the cost, charge or expense for water, garbage
collection and any other like service rendered to the Leased Premises for the
benefit of the Tenant and paid by the Landlord.
Tenant's Portion
3.02 The Tenant's portion of the costs described in Articles 3.01(b) shall be
that sum which is equal to the aggregate of each of the said costs (or portion
thereof) multiplied by a fraction, the numerator of which is in each instance
the Area of the Leased Premises and the denominator of which is the appropriate
Gross Leasable Area. The Tenant's Area of the Leased Premises in the case of
this Lease shall be 3,155 square feet.
"Area of the Leased Premises" in the case of a whole floor of the
Building shall include all area within the window glass line and shall be
computed by measuring to the outside surface of the window glass line without
deduction for columns and projections necessary to the building, and shall
include the Service Areas within and exclusively serving the floor, but shall
not include the stairs supplied by the Landlord for use in common with other
tenants, and flues, stacks, pipe shafts, elevator shafts or vertical ducts
within their enclosing walls.
"Area of Leased Premises" in the case of part of a floor of the Building
shall be computed by measuring from the outside surface of the window glass line
to the office side of corridors or other permanent partitions and to the centre
of partitions which separate the area occupied from adjoining rentable areas
without deduction for columns and projections necessary to the building and
shall include a portion of the Service Areas within and exclusively serving only
the floor, but shall not include stairs supplied by the Landlord for use in
common with other tenants, and flues, stacks, pipe shafts and vertical ducts
within their enclosing walls within the area occupied.
"Gross Leasable Area" means (where the Tenant participates in the
relevant cost) the aggregate floor area in square feet of the building located
on the Property from time to time excluding the aggregate of that portion of the
floor area of the said buildings involved in Common Areas and Common Facilities.
For the purposes of this definition floor area shall be measured from the
exterior of the window glass line and from the centre line of partition walls.
If there is a dispute as to the calculation of any area in this definition it is
agreed that such dispute shall be resolved by a British Columbia land surveyor
named by the Landlord whose decision shall bind the parties hereto.
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Payment of Rental
3.03 The rental provided for in this Article 3 shall be paid by the Tenant as
follows:
Minimum Rental Payments
(a) The first monthly instalment of Minimum Rental (or PRO RATA
portion thereof if the Commencement Date of Term is other than the first day of
a month) shall be paid by the Tenant on the Commencement Date of Term and
thereafter subsequent monthly instalments shall each be in advance on the first
day of each ensuing calendar month during the Term.
Additional Rental Payments
(b) The amount of Additional Rental as set out in Article 3.01(b) and
(c) which the Tenant is to pay shall be estimated by the Landlord for such
period (not to exceed one year) as the Landlord may determine. The Tenant
agrees to pay to the Landlord such amount in equal monthly instalments in
advance during such period on the dates and at the times for payment of Minimum
Rental provided for in this Lease.
Payment of Municipal Tax Cost
(c) The Tenant's portion of the Municipal Tax Cost shall be paid by
the Tenant within fifteen (15) days of demand.
Reporting of Costs
3.04 Within ninety (90) days after the end of the period for which Additional
Rental payments are made pursuant to Article 3.03(b), the Landlord shall, at the
request of the Tenant, provide to the Tenant a statement setting out the actual
cost during such Lease Year of those items comprised in Additional Rental as set
out in Article 3.01(b) and (c), and the Tenant's portion thereof determined
pursuant to this Article, showing in reasonable detail the information relevant
and necessary to the exact calculation of those amounts. The Tenant shall have
the right to inspect the books and records of the Landlord pertaining to such
costs upon reasonable notice at reasonable times. If the amount payable by the
Tenant as shown on such statement is greater or less than the Additional Rental
paid by the Tenant to the Landlord pursuant to this Article the proper
adjustment shall be made within five days after delivery of such statement.
Interest on Overdue Rent
3.05 All payments to be made by the Tenant to the Landlord in this Article 3
shall be made by the Tenant within the time provided. Any such payment if
overdue shall, together with any costs incurred by the Landlord, including
without limitation legal costs as between solicitor and client, bear interest at
a rate equal to four percent (4%) per annum above the prevailing prime rate then
being charged by the Landlord's bankers. The Tenant covenants to pay the same
forthwith on demand by the Landlord and the same shall be treated as rent due
and payable to the Landlord hereunder and the Landlord shall have the same
rights and remedies and may take the same steps for the recovery thereof as for
the recovery of rent in arrears.
ARTICLE 4
CONDUCT OF BUSINESS
Use of Leased Premises
4.01 The Tenant covenants with the Landlord that:
(a) The Tenant will not use or occupy the Leased Premises or any part
thereof for any purpose other than
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the operation of a business office.
(b) The Tenant will not erect any signs whatsoever either on the
exterior walls of the Leased Premises or elsewhere in the Building without first
obtaining the Landlord's written consent.
Not to Affect Landlord's Insurance
(c) The Tenant will not upon the Leased Premises do or permit to be
done, or omit to do, or store anything which shall cause or have the effect of
causing the rate of insurance upon the Building or any part thereof to be
increased and if the insurance rate shall be thereby increased the Tenant shall
pay to the Landlord as Additional Rental the amount by which the insurance
premiums shall be so increased. It is agreed that if any insurance policy upon
the Leased Premises shall be cancelled by the insurer by reason of the use and
occupation of the Leased Premises or any part thereof by the Tenant or by any
assignee, sub-tenant, concessionaire or licensee of the Tenant, or by anyone
permitted by the Tenant to be upon the Leased Premises, the Landlord may at its
option terminate this Lease by notice in writing.
Damaged Glass
(d) The Tenant shall promptly make whole at its sole cost and expense
all damaged glass in the Leased Premises unless such damage is caused by
construction defect or negligence of the Landlord or agent.
ARTICLE 5
REPAIRS
Tenant's Repairs
5.01 The Tenant covenants with the Landlord that:
(a) the Tenant shall at all times during the Term hereof at its own
cost and expense repair, maintain and keep the Leased Premises, all equipment
and fixtures within the Leased Premises, (or elsewhere if such equipment and
fixtures situate other than in the Leased Premises are provided exclusively for
the benefit of the Leased Premises) and any improvements now or hereafter made
to the Leased Premises in good order and repair, as a careful owner would do,
reasonable wear and tear, repairs for which the Landlord is responsible under
Article 5.02 and damage by Insurable Hazards only excepted (save as provided for
in Article 5.03 following) and the Tenant covenants to perform such maintenance,
to effect such repairs and replacements and to decorate at its own cost and
expense as and when necessary or reasonably required so to do by the Landlord.
Landlord's Examination of Leased Premises
(b) the Landlord and any employee or agent of the Landlord shall be
entitled, at any reasonable time during normal business hours and during any
emergency, from time to time, to enter and examine the state of maintenance,
repair, decoration and order of the Leased Premises and the Landlord may give
notice to the Tenant requiring that the Tenant perform such maintenance or
effect such repairs or replacements as may be found necessary from such
Examination.
Repairs by Designated Tradesmen
(c) the Tenant shall, when necessary, and whether upon receipt of
notice from the Landlord or not, effect and pay for such maintenance and repairs
as may be the responsibility of the Tenant under Article 5.01(a) and in so doing
shall use contractors or other workmen designated or approved by the Landlord,
such approval not to be unreasonably withheld or delayed.
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Repairs at End of Term
(d) at the end of the Term (unless the Term is terminated earlier as
provided by this Article 5) the Tenant will deliver to the Landlord vacant
possession of the Leased Premises in the condition in which the Tenant is
required to maintain the Leased Premises.
Landlord's Obligation to Repair
5.02 The Landlord covenants with the Tenant:
Repair
(a) to repair, normal wear and tear only excepted, the roof,
foundations, sub-floors and outer walls of the Building and the mechanical and
electrical works included in Landlord's Work.
Common Areas and Common Facilities
(b) to maintain in good order and repair the Common Areas and Common
Facilities, normal wear and tear only excepted.
Structural Defects
(c) that the Landlord shall be responsible to make good and repair any
damage caused to the Leased Premises by reason of a structural defect in the
building in which the Leased Premises are located, or damage caused by the
negligence of the Landlord, and its servants or agents.
The Landlord shall make reasonable efforts to carry out such repairs so
as to minimize disruption to the Tenant.
Damage or Destruction
5.03 (a) In the event that the Leased Premises or any part thereof shall at
any time during the Term of this Lease be destroyed or damaged by Insurable
Hazards, or in the event of the substantial destruction of the Building whether
or not the Leased Premises are damaged, and in any of such cases the Leased
Premises being rendered unfit either in whole or in part for the business of the
Tenant, then the rental hereby reserved, or a proportionate part thereof
according to the nature and extent of the destruction or damage sustained, shall
be suspended and abated until the Landlord shall have rebuilt, repaired or made
fit the Leased Premises or the Building for the purpose of the Tenant, provided
that the Landlord shall in any such event at its option, to be exercised within
forty-five days (45) after the occurrence of such damage or destruction by
notice in writing to the Tenant, have the right to terminate this Lease, and
upon the giving of such notice the term shall forthwith cease and terminate, and
the Tenant after receipt of such notice shall forthwith make payment of the
rental apportioned to the date of such termination and deliver up possession of
the Leased Premises to the Landlord; provided that such termination shall not
affect the obligation of any Covenantor to the Landlord arising from obligations
of the Tenant existing prior to the date of such notice of termination.
The terms "Building" and "Leased Premises" for the purposes of this
Article 5.03 shall not be deemed to include the improvements installed in the
Leased Premises under the provisions respecting Tenant's Work.
Termination
(b) If the Landlord shall fail to give notice of termination within
the forty-five (45) days mentioned in Article 5.03 hereof and (subject as
hereinafter provided) shall fail to complete the work of repair or
reconstruction within a period of six (6) months after the occurrence of such
damage to or destruction of the Leased Premises or the Building, then the Tenant
shall have the right to give unto the Landlord notice of termination of this
Lease, and thereupon, subject to payment of any monies then due by the Tenant to
the Landlord hereunder, this Lease shall forthwith cease and
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determine; provided that if the Landlord's failure to complete the work of
repair or reconstruction within the said period of six (6) months is due solely
to some event, cause of circumstance beyond the reasonable control of the
Landlord, then such period of six (6) months shall be delayed by such event,
cause of circumstance.
Tenant's Obligation to Rebuild
(c) It is understood and agreed that in the event of damage or
destruction as contemplated by this Article, upon repair and replacement of the
Building and the completion of the Leased Premises to a shell with an
unfinished floor and services to the perimeter of the Leased Premises by the
Landlord, the Tenant shall, at the request of the Landlord, repair or rebuild
the leasehold improvements of the Leased Premises to at least the same level of
quality as the existing leasehold premises in the Leased Premises in accordance
with the provisions of the Tenant's Work with all due diligence.
Landlord's Election
(d) Nothing contained in this Article shall obligate the Landlord to
rebuild the Building or any part thereof; and if the Landlord shall elect to
rebuild, then it may make such changes, alterations, modifications, adaptations
or extensions, in to or of the original building as it shall see fit.
Insurable Hazard Defined
(e) "Insurable Hazards" means fire and such other perils for which
insurance is available and which in the opinion of the Landlord shall be
protected by insurance.
ARTICLE 6
ASSIGNMENT, SUB-LETTING
6.01 The Tenant covenants with the Landlord that:
The rights of the Tenant under this Lease shall not be transferred,
assigned or sold and the Tenant shall not sub-let the whole or any part of the
Leased Premises nor grant any concession or licence within or with respect to
the Leased Premises (hereinafter collectively referred to as a "Disposition"),
to any party without in either case the prior written consent of the Landlord,
which consent shall not be unreasonably withheld.
If the Landlord grants its consent to an assignment or transfer in
accordance with the terms of this section, then:
(a) the Tenant shall cause the proposed assignee or purchaser to enter
into an agreement prepared at the Tenant's expense by and in favour of the
Landlord covenanting directly with the Landlord to be bound by all the terms of
this Lease to which the Tenant is bound;
(b) notwithstanding the Disposition, the Tenant shall continue to
remain liable under the terms of this Lease.
ARTICLE 7
TENANT'S INSURANCE
7.01 The Tenant covenants with the Landlord that it will at its own expense
take out, and keep in force during the Term of this Lease insurance in type,
amount and in form satisfactory to the Landlord and with insurers acceptable to
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the Landlord. The Tenant will deliver certified copies of such policy or
policies to the Landlord for the Landlord's approval prior to the Commencement
Date of Term. The cost or premium for such policy shall be paid by the Tenant.
Thereafter, the Tenant agrees to provide the Landlord with written evidence of
the existence of insurance policies as approved.
ARTICLE 8
LANDLORD'S INSURANCE
8.01 The Landlord covenants and agrees with the Tenant that throughout the
term of this Lease and any renewal, it will carry fire insurance with normal
extended coverage endorsements in respect of the buildings and improvements
forming part of the Building, in an amount not less than its full insurable
value less the cost of foundations and excavations.
ARTICLE 9
TENANT ALTERATIONS
Painting and decorations
9.01 The Tenant may at any time and from time to time at its expense, paint
and decorate the interior of the Leased Premises and make such changes,
alterations and improvements in and to the Leased Premises as will in the
judgement of the Tenant better adapt the Leased Premises for the purpose of its
business; provided, however, that no changes, alterations, additions or
improvements to the structure, any perimeter wall, the front entrance, the
heating, ventilating, air conditioning, plumbing, electrical or mechanical
equipment or the concrete floor or the roof shall be made without the prior
written consent of the Landlord, such consent not to be unreasonably withheld,
and without the use of contractors of other qualified workmen. All changes,
alterations, additions and improvements, whether structural or otherwise, shall
comply with all applicable statutes, regulations or by-laws of any pertinent
authority.
No Liens
9.02 The Tenant covenants with the Landlord that it will not permit, do, or
cause anything to be done to the Leased Premises during the period of
construction and fixturing of the Leased Premises or at any other time which
would allow any lien, lis pendens, judgement or certificate of any court, or any
mortgage, charge or encumbrance of any nature whatsoever, to be imposed or to
remain upon the Leased Premises of the Building. In the event of the
registration of any lien or other encumbrance, the Tenant shall at its own
expense immediately cause the same to be discharged.
ARTICLE 10
PUBLIC UTILITIES, TAXES, ETC.
Public Utilities, Business Tax and Machinery
10.01 The Tenant covenants with the Landlord that the Tenant will pay promptly
for its gas, other fuel and electricity and water consumed on the Leased
Premises, for its telephone, for all business taxes, license fees, rates,
charges, garbage and other like services and levies of any nature or kind levied
or assessed upon or in respect of or in relation to the Tenant, the business
carried on by the Tenant, and/or the properties, fixtures, machinery, equipment
or apparatus of the Tenant installed in the Leased Premises or elsewhere in the
Building.
Payment of Taxes
10.02 The Landlord covenants with the Tenant to pay out of funds collected from
the Tenant all Municipal Taxes except those covenanted to be paid by the Tenant
hereunder.
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ARTICLE 11
EXCLUSION OF LIABILITY AND INDEMNITY
Exclusion of Landlord's Liability
11.01 It is agreed between the Landlord and Tenant that the Landlord, its
agents, servants and employees, shall not be liable nor responsible in any way
for any personal or consequential injury of any nature whatsoever that may be
suffered or sustained by the Tenant or any employee, agent, customer, invitee or
licensee of the Tenant or any other person who may be upon the Leased Premises
or for any loss of or damage or injury to any property belonging to the Tenant
or to its employees or to any other person while such property is on the Leased
Premises except where such loss, damage or injury has been caused by the willful
actions or negligence of the Landlord and any of its agents, servants and
employees.
Indemnification
11.02 The Tenant covenants with the Landlord to indemnify and save harmless the
Landlord against and from any and all claims, including without limitation all
claims for personal injury or property damage arising from any act or omission
of the Tenant or any employee, agent, customer, invitee or licensee of the
Tenant, and against and from all costs, counsel fees (as between solicitor and
own client), expenses and liabilities incurred in or about any such claim or any
action or proceeding brought thereon.
ARTICLE 12
LANDLORD'S RIGHTS AND REMEDIES
Default
12.01 If and whenever the rent hereby reserved, or any part thereof, shall not
be paid on the day appointed for payment thereof, whether lawfully demanded or
not, or in case of breach or non-observance of nonperformance of any of the
covenants, agreements, provisos, conditions or rules and regulations on the part
of the Tenant to be kept, observed or performed, or in case the Leased Premises
shall be vacated or remain unoccupied for five days or if, without the written
consent of the Landlord, the Leased Premises shall be used by any person other
than the Tenant, the Tenant's permitted assigns or permitted sub-lessee, or for
any purpose other than that for which the same were let or in case the Term
hereof shall be taken in execution or attachment for any cause whatever, then
and in every such case, it shall be lawful for the Landlord, after delivering to
the Tenant notice of any of the above defaults and allowing the Tenant seven
days from delivery of such notice to cure the stated default or defaults, at any
time thereafter to enter into and upon the Leased Premises or any part thereof
in the name of the whole and the same to have again, repossess and enjoy as of
its former estate, anything in this Lease contained to the contrary
notwithstanding.
Bankruptcy
12.02 If the Term hereof or any of the goods and chattels of the Tenant shall
be at any time seized in execution or attachment by any creditor of the Tenant
or the Tenant shall make any assignment for the benefit of creditors or shall
make any bulk sale or become bankrupt or insolvent or take the benefit of any
act now or hereafter in force for bankrupt or insolvent debtors of, if the
Tenant is a corporation and any order shall be made for the winding-up of the
Tenant, or other termination of the corporate existence of the Tenant, then in
any such case this Lease shall, at the option of the Landlord, cease and
determine and the Term shall immediately become forfeited and void and the then
current month's rent and the next ensuing three months Minimum Rental shall
immediately claim the same together with any arrears then unpaid and any other
amounts owing to the Landlord by the Tenant and the Landlord may without notice
or any form of legal process forthwith re-enter upon and take possession of the
Leased Premises and become the owner of and
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remove the Tenant's effects therefrom, any statute or law to the contrary
notwithstanding, the whole without prejudice to and under reserve of, all other
rights, remedies and recourses of the Landlord.
Payment of Landlord's Expenses
12.03 If at any time an action is brought for recovery of possession of the
Leased Premises, for the recovery of rental or any other amount due under the
provisions of this Lease, or because of a breach by act or omission of any
covenant herein contained on the part of the Tenant, and a breach is
established, the Tenant shall pay to the Landlord all expenses incurred by the
Landlord in the enforcement of its rights and remedies hereunder.
Landlord's Right to Re-let
12.04 In case of vacancy and in case the Leased Premises shall be deserted or
vacated the Landlord shall have the right if it thinks fit to enter the same as
the agent of the Tenant either by force or otherwise without being liable to any
prosecution therefor and to re-let the said premises as the agent of and at the
risk of the said Tenant and to receive the rent therefor.
Right of Landlord to Perform Tenant's Covenants
12.05 It is hereby expressly understood and agreed that if at any time and so
often as the same shall happen the Tenant shall make default in the observance
or performance of any covenant herein contained on its part to be observed or
performed or shall have failed to make payment of any money hereby undertaken by
it to be paid other than as rent to the Landlord, then the Landlord, after
delivering to the Tenant notice of any of the above defaults and allowing the
Tenant seven (7) days from delivery of such notice to cure the stated default or
defaults, may, but shall not be obligated so to do, without waiving or releasing
the Tenant from its obligations under this Lease, itself observe and perform the
covenant or covenants in respect of which the Tenant has made default or make
payment of the monies the Tenant has failed to pay; and all costs and expenses
incurred by the Landlord in the observance or performance of such covenant or
covenants including without limitation legal costs as between solicitor and
client and any monies so paid by the Landlord will, with interest thereon from
the date of the incurring of such costs or expenses or payments of monies at a
rate equal to 2% per annum above the prevailing prime rate then being charged by
the Landlord's bankers, be a charge on the then Leased Premises in favour of the
Landlord in priority to the interest of the Tenant hereunder and of any person
claiming through or under the Tenant, and all such costs, expenses and monies
and interest thereon shall be payable forthwith by the Tenant to the Landlord
and the Tenant covenants to pay the same forthwith on demand by the Landlord and
the same shall be treated as rent due and payable to the Landlord hereunder and
the Landlord shall have the same rights and remedies and may take the same steps
for the recovery thereof as for the recovery of rent in arrears; PROVIDED, and
it is expressly understood and agree that if the Tenant shall fail to make
payment of any money demanded of the Tenant and if the Tenant shall in good
faith dispute the amount or propriety of any such claim made upon him and if
forfeiture of or the registration of a lien against the Property will not result
from non-payment, then the Landlord shall not pay the same until such dispute
has been resolved either by agreement of the Tenant or by the decision of a
competent authority, and then only in the event that the Tenant has failed for a
space of (10) ten days or more to make payment of the same.
Right of Landlord to Seize
12.06 The Tenant acknowledges and agrees that, as permitted by law, the
Landlord may seize and sell all the Tenant's goods and property within the
Leased Premises and apply the proceeds of such sale upon rental and all other
amounts outstanding and upon the costs of the seizure and sale .
Non-Waiver
12.07 No condoning, excusing or overlooking by the Landlord or Tenant of any
default, breach or non-observance by the Tenant or the Landlord at any time or
times in respect of any covenant, proviso or condition herein contained shall
operate as a waiver of the Landlord's or the Tenant's rights hereunder in
respect of any continuing or subsequent
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default, breach or non-observance, or so as to defeat or affect in any way the
rights of the Landlord or the Tenant herein in respect of any such continuing or
subsequent default or breach, and no waiver shall be inferred from or implied by
anything done or omitted by the Landlord or the Tenant save only express waiver
in writing.
Remedies Cumulative
12.08 All rights and remedies of the Landlord in this Lease contained shall be
cumulative and not alternative.
ARTICLE 13
MORTGAGES AND ASSIGNMENT BY LANDLORD
Sale or Financing of Building
13.01 The rights of the Landlord under this Lease may be mortgaged, charged,
transferred or assigned to a purchaser or to a mortgagee or trustee for bond
holders and in the event of a sale or of default by the Landlord under any
mortgage, trust deed or trust indenture and the purchaser, mortgagee or trustee,
as the case may be, duly entering into possession of the Building or the Leased
Premises, the Tenant agrees to attorn to and become the Tenant of such
purchaser, mortgagee or trustee under the terms of this Lease.
Subordination
13.02 This Lease is subject and subordinate to all mortgages, trust deeds or
trust indentures which may now or at any time hereafter affect in whole or in
part the Leased Premises or the Building and whether or not any such mortgage,
trust deed or trust indenture shall affect only the Leased Premises or the
Building or shall be a blanket mortgage, trust deed or trust indenture affecting
other premises as well. This Lease shall also be subject and subordinate to all
renewals, modifications, consolidations, replacements and extensions of any such
mortgage, trust deed or trust indenture. In confirmation of such subordination
and agreement to attorn, the Tenant shall execute promptly upon request by the
Landlord any certificate, instruments or postponement or attornment or other
instruments which may from time to time be requested to give effect hereto.
Offset Statement
13.03 Within ten days after request therefor by the Landlord in the event that
upon any sale, assignment, hypothecation or mortgaging of the leased Premises
and/or the Building by the Landlord an offset statement shall be required from
the Tenant, the Tenant covenants and agrees with the Landlord to deliver in
recordable form a certificate to any proposed mortgagee or purchaser, or to the
Landlord, certifying that this Lease is in full force and effect and advising of
any offsets or prepayments thereto.
Registration
13.04 Notwithstanding any provision in the Property Law Act or other relevant
statute, the parties agree that this Lease shall not be registered without the
Landlord's written consent and only then at the sole cost and expense of the
Tenant (including the cost of any relevant surveys and plans), provided further
however that the Tenant covenants and agrees with the Landlord that upon written
request of the Landlord and at the Landlord's cost and expense (including the
cost of preparation of any necessary plans), the Tenant will cause this Lease to
be registered in the appropriate Land Title Office in the Province of British
Columbia.
Assignment by Landlord
13.05 In the event of the sale or lease by the Landlord of the Building or a
portion thereof containing the Leased Premises or the assignment by the Landlord
of this Lease or any interest of the Landlord hereunder, and to the extent
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that such purchaser, lessee under such lease or assignee has assumed the
covenants and obligations of the Landlord hereunder, the Landlord shall, without
further written agreement, be freed and relieved of liability upon such
covenants and obligations. The Tenant shall, from time to time at the request of
the Landlord, certify or acknowledge to any mortgagee, purchaser, lessee or
assignee, the status and validity of this Lease, and the state of the Landlord's
and Tenant's account hereunder.
ARTICLE 14
LANDLORD'S COVENANTS
Quiet Enjoyment
14.01 The Landlord covenants with the tenant that if the Tenant pays the rent
hereby reserved and performs the covenants herein on its part contained, it
shall and may peaceably possess and enjoy the Leased Premises for the term
hereby granted without any interruption or disturbance from the Landlord or any
other person or persons lawfully claiming by, from or under it.
ARTICLE 15
LEGAL RELATIONSHIP
No Partnership
15.01 It is understood and agreed that nothing contained in this Lease nor in
any acts of the parties hereto shall be deemed to create any relationship
between the parties hereto other than the relationship of Landlord and Tenant.
Several Tenants
15.02 Should the Tenant comprise two or more persons, each of them, and not one
for the other or others, shall be jointly and severally bound with the other or
others for the due performance of the obligations of the Tenant hereunder.
Where required by the context hereof the singular shall include the plural, and
the masculine gender shall include either the feminine or neuter genders, as the
case may be, and vice-versa.
Successors, etc.
15.03 Subject to the provisions of this Lease respecting assignment by the
Tenant, this Lease shall enure to the benefit of and be binding upon the
Landlord, its successors and assigns and the heirs, executors, administrators
and other personal legal representatives, successors and permitted assigns of
the Tenant.
ARTICLE 16
NOTICE
Notice
16.01 Any notice, demand, request, consent or objection required or
contemplated to be given or made by any provision of this Lease shall be given
or made in writing and either delivered personally or sent by registered mail,
postage prepaid, addressed to the Landlord:
C/O PCI Realty Corp.
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#400 - 576 Seymour Street
Vancouver, British Columbia V6B 3K1
or addressed to the Tenant at:
The Leased Premises
or to such other address of which any party may from time to time notify the
other in writing. The time of giving or making such notice, demand, request,
consent or objection shall be, if delivered, when delivered, and if mailed, then
on the fourth business day after the day of the mailing thereof. If in this
Lease two or more persons are named as Tenant, such notice, demand, request,
consent or objection shall be sufficiently given or made if and when the same
shall be given to any one of such persons. All payments required to be made by
this Lease shall be addressed as provided for in this Article unless otherwise
directed by the Landlord.
ARTICLE 17
GENERAL CONDITIONS
Garbage, Debris
17.01 No debris, garbage, trash or refuse shall be placed or left, or be
permitted to be placed or left in, on or upon any part of the Building outside
of the Leased Premises, but shall be deposited by the Tenant in areas and at
times and in a manner specifically designated by the Landlord from time to time.
Rules and Regulations
17.02 The Tenant covenants that it will abide by any and all reasonable rules
and regulations which may, from time to time, be established by the Landlord for
the Building. The rules and regulations set forth in Schedule "A" annexed
hereto shall be the rules and regulations in force until amended by the
Landlord. The Landlord shall communicate any amendments or changes in such
rules and regulations to the Tenant in writing, and after such communication
such changed or amended rules and regulations shall be those in force until
further amendment and notice thereof.
Tenant's Work
17.03 The Tenant will promptly and efficiently carry out the Tenant's Work and
comply with the provisions of Article 10.
Apportionment of rent
17.04 If pursuant to the provisions of this Lease this Lease is terminated
prior to the end of the term hereof then the rental and any other payments for
which the Tenant is liable under this Lease shall be apportioned and paid in
full to the date of such termination, and the Tenant shall immediately deliver
up vacant possession of the Leased Premises to the Landlord.
Overholding Tenant
17.05 In the event the Tenant remains in possession of the Leased Premises
after the end of the Term hereof and without the execution and delivery of a new
lease, there shall be no tacit renewal of this Lease or the Term hereby granted,
and the Tenant shall be deemed to be occupying the Leased Premises as a tenant
from month to month upon the same terms, conditions and provisions as are set
forth in this Lease insofar as the same are applicable to a monthly tenancy
except for Rental, which shall be decided upon by the Landlord, but shall not in
any event be less than that paid by the Tenant during the last month of the
Term.
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ARTICLE 18
OBLIGATIONS OF THE INDEMNIFIER
Application
18.01 The provisions of this Article shall apply in the event the Lease is
executed by a Indemnifier.
Agreements
18.02 In consideration of the Landlord entering into the Lease with the Tenant
and in further consideration of the sum of One Dollar ($1.00) now paid by the
Landlord to the Indemnifier and other good and valuable consideration (the
receipt of all of which is hereby acknowledged by the Indemnifier), the
Indemnifier agrees under seal with the Landlord as follows:
Joint and Several Liability
(a) The Indemnifier shall be jointly and severally liable with the
Tenant as principal debtor, and not as guarantor or surety, for due payment of
all rent of other monies payable at the times and in the manner provided in the
Lease.
Performance of Agreements
(b) The Indemnifier unconditionally agrees and covenants with the
Landlord to cause the Tenant to duly observe, perform and keep each and every of
the other covenants, agreements, stipulations, obligations, conditions and other
provisions of the Lease to be observed, performed and kept by the Tenant at the
times and in the manner provided in the Lease and, in the event of default by
the Tenant, to duly observe, perform and keep such covenants, agreements,
stipulations, obligations and conditions himself.
Indemnity
(c) The Indemnifier will indemnify and save harmless the Landlord
against and from all loses, damages, costs and expenses which the Landlord may
sustain, incur or become liable for by reason of:
(i) the failure, for any reason whatsoever, of the Tenant or
the Indemnifier to pay all rent or other monies payable at the times and in the
manner provided in the Lease;
(ii) the failure, for any reason whatsoever, of the Tenant, or
the Indemnifier on behalf of the Tenant, to observe, perform and keep each and
every of the other covenants, agreements, stipulations, obligations, conditions
and other provisions of the Lease to be observed, performed and kept by the
Tenant; or
(iii) any act, action or proceeding of or by the Landlord for or
in connection with the enforcement of the Lease including without limitation the
provisions of this Article 20.
Survival of Covenants
(d) With respect to the Covenant's joint and severable liability with
the Tenant as principal debtor in accordance with Article 20.2(a), such
obligations shall survive any act, omission, actions or proceeding which might
release or diminish the liability of any guarantor or surety of the due payment
of any rent or other monies payable pursuant to the Lease.
Waiver
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(e) With respect to the Indemnifier's obligations pursuant to Article
18.02(b):
(i) the Indemnifier's hereby renounces and waives the benefit
of discussion and compensation and any right to require the Landlord to first
proceed against the Tenant or to pursue any other remedy whatsoever which may be
available to the Landlord before proceeding against the Indemnifier;
(ii) the Indemnifier acknowledges that any act or failure to act
of or by the Landlord against or in respect of the Tenant or the Leased Premises
pursuant to the terms of the Lease, and, without limiting the generality of the
foregoing, any neglect or forbearance or delay by the Landlord in taking any
steps to enforce the observance, performance and keeping of the covenants,
agreements, stipulations, obligations and other provisions of the Lease, any
extension of time which may be given by the Landlord from time to time to the
Tenant and any release which may be given by the Landlord from time to time to
the Tenant shall not release or diminish the liability of the Indemnifier
pursuant to Article 18.02(b);
(iii) the Indemnifier agrees that any alterations of the terms of
the Lease agreed to by the Landlord and the Tenant from time to time, whether
material or not, or any assignment of the Lease by the Landlord or the tenant or
by any trustee, receiver or liquidator of the Tenant shall not release or
diminish the liability of the Indemnifier pursuant to Article 18.02(b).
Further Assurances
(f) The Indemnifier shall execute and deliver such further assurances
as the Landlord may reasonably require including, should the Landlord so elect
upon the occurrence of any event described in Articles 12.01 and 12.02 or upon
re-entry or termination of the Lease in accordance with Article 12, a lease of
the Leased Premises for a term equal in duration to the residue remaining
unexpired of the Term, on the same terms and conditions as the Lease.
Multiple Indemnifiers
(g) In the event of more than one Indemnifier to the Lease, then the
term "Indemnifier" shall be taken to apply to all such Indemnifiers, who shall
be jointly and severally liable to the Landlord.
Covenants to Survive Term
(h) The obligations of the Indemnifier shall survive the expiration of
the Term to the extent that there is then any default under the Lease and,
further, shall service any earlier termination of the Term and the Indemnifier
shall remain liable on any renewal notwithstanding any variation in the terms of
any such renewal lease.
Continued Liability of Indemnifier
(i) The liability of the Indemnifier shall continue notwithstanding
any release or discharge of the Tenant in any receivership, bankruptcy,
winding-up, or other creditors' proceedings or the rejection, disaffirmation or
disclaimer of the Lease in any proceeding or the repossession of the Leased
Premises by the Landlord.
ARTICLE 19
MISCELLANEOUS
Showing Leased Premises
19.01 The Landlord may at any time within ninety days (90) days before the end
of the Term hereof enter the Leased Premises and bring others at all reasonable
hours for the purpose of offering the same for rent.
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Time of the Essence
19.02 Time shall be of the essence of this Lease.
Captions
19.03 The captions preceding articles of this Lease have been inserted as a
matter of convenience and for reference only and in no way define, limit or
enlarge the scope or meaning of this Lease or any provision hereof.
Governing Law
19.04 The Lease shall be construed and governed by the laws of the Province of
British Columbia. Should any provision or provisions of this Lease and/or
conditions be illegal or not enforceable, it or they shall be considered
separate and severable from the Lease and its remaining provisions and
conditions shall remain in force and be binding upon the parties hereto as
though the said provisions or provisions or conditions had never been included.
Entire Agreement
19.05 The Tenant acknowledges that there have been no representations made by
the Landlord which are not set out in this Lease and the Offer to Lease, that
the plan attached as Schedule "B" hereto set forth the general layout of the
Building and the adjoining lands and the adjoining lands and buildings and shall
not be deemed to be a representation or agreement of the Landlord that the
Building and the adjoining lands and buildings will be exactly as indicated on
such plans, and that nothing contained in this Lease shall be construed so as to
prevent the Landlord from altering the location of parking areas, driveways and
sidewalks from time to time or from erecting additional buildings or extending
buildings after the Commencement Date of Term and the Landlord may make such
changes or additions to the Building as in its sole discretion the Landlord may
consider necessary or desirable, subject however to the provisions of Article 6
and the further provision that such work will not adversely affect the Tenant's
Leased Premises. The Tenant further acknowledges that this Lease constitutes
the entire agreement between the Landlord and the Tenant and may not be modified
except as herein explicitly provided or except by subsequent agreement in
writing duly signed by the Landlord and the Tenant. The parties covenant and
agree that the terms of the Offer to Lease will not be merged by the execution
and delivery of this Lease and in the event of any conflict between the terms of
this Lease and the Offer to Lease, the terms of the Offer to Lease shall govern.
ARTICLE 20
RIGHT TO RENEW
Renewal
20.01 If the Tenant is current with the Tenant's obligations to the Landlord
under this Lease, the Landlord shall grant to the Tenant two (2) renewal leases
for terms of three (3) years and five (5) years respectively, upon the same
terms and conditions contained herein, save as to the rental, free rent, and/or
any other inducement granted to the Tenant, plus G.S.T. and this option to renew
clause. Rent for the first and second renewal terms shall be agreed upon
between the parties and shall be based on the fair market rental for premises of
similar size, quality and location at the time of the renewal. The Landlord and
Tenant shall attempt to agree on the fair market rental for the second renewal
term during the three (3) month period immediately preceding the expiry of the
first renewal term. Failing agreement as to the rental rate, the rate shall be
determined by a single arbitrator under the Commercial Arbitration Act of
British Columbia.
Minimum Rental during Renewal
20.02 The Minimum Rental for such renewal term shall be determined by mutual
agreement. Each party shall obtain an opinion of a licensed appraiser who shall
attempt to agree, on behalf of each party, to the fair market rent, and failing
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such agreement, the two appraisers shall select a third licensed appraiser to
determine the fair market rent based on the two opinions of the parties'
appraisers, and the third appraiser's opinion of fair market rent shall be final
and binding on both parties and this paragraph shall constitute a submission to
arbitration within the meaning of the COMMERCIAL ARBITRATION ACT (British
Columbia). In no event shall the Minimum Rental determined by arbitration be
less than the Minimum Rental payable under the last year of the preceding term.
ARTICLE 21
DEFINITIONS
21.01 In this Lease (including this Article) unless there is something in the
context inconsistent therewith, the parties hereto agree that:
Area of Leased Premises
(a) "Area of Leased Premises" means the square foot area of the Leased
Premises measured in the manner set out in Article 3.02.
Building
(b) "Building" means the building, improvements and facilities located
on the property.
Common Area
(c) "Common Area" means those areas that are designated (which
designation may be changed from time to time) by the Landlord as common areas
set aside by the Landlord for the common or joint use or benefit of the Tenant,
its employees, customers and other invitees in common with others entitled to
the use and benefit of such areas in the manner and for the purposes permitted
by this Lease, including without limitation entrance foyer, lobbies, corridors,
lavatories, stairways, elevators, hallways, mechanical rooms, parking areas,
roadways, sidewalks, landscaped areas, truck courts, common loading areas and
driveways.
Common Facilities
(d) "Common Facilities" means the electrical, heating, ventilating,
air-conditioning, plumbing and drainage equipment and installations and any
enclosures constructed therefor, fountains, signs, lamp standards, public
washroom facilities and parking deck and all other facilities which are provided
or designated (and which may be changed from time to time) by the Landlord for
the common or joint use and benefit of the occupants of the Building.
Cost of Insurance
(e) "Cost of Insurance" means the annual cost to the Landlord to
insure the completed improvements comprising the Building against damage from
Insurable Hazards to such limits as the Landlord may from time to time determine
but not in excess of the replacement cost of the buildings comprising the
Building together with rental-loss insurance.
Municipal Tax Cost and Municipal Taxes
(f) "Municipal Tax Cost" and Municipal Taxes" mean the aggregate of
all taxes, local improvement of similar rates, duties, assessments and/or
changes, municipal realty taxes, water taxes, school taxes, or any other taxes,
rates, duties, assessments both general or special levied or imposed upon or in
respect of the Building by any Taxing Authority, including business taxes, if
any, charged on the Common Area, but not business taxes charged on the Leased
Premises in the Building.
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Municipality
(g) "Municipality" means the District or city within which the
property is located.
Property
(h) "Property" means the lands situate in the City of Vancouver, in
the Province of British Columbia and more particularly described in Schedule "C"
hereto.
Building
(i) "Building" means the Property together with the buildings,
improvements and facilities from time to time located thereon.
Operating Costs
(j) "Operating Costs" means the total amounts paid or payable whether
by the Landlord or others on behalf of the Landlord for climate control and
maintaining, operating and repairing the Building, including without limiting
the generality of the foregoing, the aggregate of the amount paid for all fuel
used in heating or other purposes, the amount paid or payable for all
electricity furnished by the Landlord to the building other than electricity
furnished to and paid for by tenants; the amount paid or payable for all hot and
cold water other than that chargeable to tenants by reason of their
extraordinary consumption of water; the amount paid or payable for all labour
and/or wages and other payments made to or for the benefit of janitors,
caretakers, and other employees of the Landlord involved in the maintenance of
the Building, the total charges of any independent contractors employed in the
repair, care, maintenance and cleaning of the Building, the amount paid or
payable for all supplies (including all supplies and necessities which are
occasioned by everyday wear and tear); the costs of window cleaning, utility
costs, the cost of operating; the cost of guards and other protection services;
payments for general maintenance and repairs to the plant and equipment
supplying climate control; lights, tubes, bulbs, ballasts; landscaping; snow
removal; removal of garbage and waste; sewer rates and charges; rental of signs
supplied by the Landlord; and an administrative fee equal to five (5%) percent
of the total rental payable to the Landlord under Article 3.01(a), (b) and (c).
Operating Costs shall not include depreciation except:
(i) depreciation of costs incurred for repairing and replacing
fixtures, equipment and facilities serving or comprising the Building (including
the heating, ventilating, air conditioning and climate control systems serving
the Building) which by their nature require periodic repair or replacement and
which are not charged fully in the year in which they are incurred, at rates
determined from time to time by the Landlord in accordance with sound accounting
principles, and
(ii) improvements properly charged to the Capital Account which
substantially reduce Operating Costs as herein defined amortized over their
useful life as determined by the Landlord in accordance with sound accounting
principles.
Operating costs shall not include interest on debt, capital retirement of
debt, or other costs properly chargeable to capital account, or costs directly
chargeable by the landlord to any tenant or tenants of the building or costs for
which the Landlord is reimbursed by the proceeds of insurance claims to the
extent of such reimbursement.
Service Areas
(k) "Service Areas" shall mean the area of corridors, elevator
lobbies, service elevator lobbies, refuse area, washrooms, air-cooling
rooms, fan rooms, janitor's closets, telephone and electrical closets and
other closets on the floor serving the Leased Premises and other premises
on such floor should the floor be a multiple tenancy floor.
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IN WITNESS WHEREOF the Landlord and Tenant have duly executed this
agreement as of the day and year first above written.
The Corporate Seal of )
GREAT LUMBERMEN'S )
VENTURE INC. )
was hereunto affixed in the )
presence of: )
) C/S
) OR:
----------------------------------
) Witness
- ----------------------------------
Authorized Signatory )
Signed, Sealed and Delivered )
by ISN INTERNET SPORTS NETWORK )
INC. in the presence of: )
) C/S
) OR:
----------------------------------
) Witness
- ----------------------------------
Authorized Signatory )
Signed, Sealed and Delivered by )
THE INDEMNIFIER in the presence of:)
)
)
----------------------------------
) Roger Earle
- -----------------------------------
Witness )
Except in the case of corporations signing under seal, all signatures must be
witnessed.
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SCHEDULE "A"
RULES AND REGULATIONS
1. The Tenant shall not perform any acts or carry on any practice which may
injure the Common Area and Common Facilities or be a nuisance to any other
tenants or premises situate in the Building. No animals shall be allowed on the
Leased Premises at any time unless specifically allowed by the provisions of
this Lease.
2. The Tenant shall not burn any trash or garbage in or about the Leased
Premises or anywhere within the confines of the Building.
3. The Tenant shall not overload any floor of the Leased Premises.
4. Deleted
5. The Tenant agrees that the Tenant will not carry on or permit to be
carried on any business in the Leased Premises under a name or style other than
the name of the Tenant or call or permit the Leased Premises or any business
carried on therein to be called any name other than the name of the Tenant
without the prior written consent of the Landlord.
<PAGE>
SCHEDULE "B"
SITE PLAN OF PROPERTY TO BE INSERTED HERE
<PAGE>
SCHEDULE "C"
LEGAL DESCRIPTION OF THE PREMISES
Parcel "A" (see 414418-L)
of Lots 8, 9 and 10
Block 34
District Lot 541
Plan 210
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT FOR
BILL GIBSON
<PAGE>
SCHEDULE "A"
EMPLOYMENT AGREEMENT
SPORTSMARK INC.
633 - 10201 Southport Road S.W.
Calgary, Alberta, T2W 4X9
/ /, 1999
To: / /
Re: EMPLOYMENT AGREEMENT
This Agreement contains the terms and conditions of your employment with
SportsMark Inc. (the "Company").
You will be employed for a term (the "Term") of three years commencing on / /
1999 and ending on / / 2002, unless your employment is terminated or the Term is
extended in accordance with the provisions of this Agreement.
1. DEFINITIONS
In this Agreement:
(a) "AFFILIATE" has the same meaning as in the Alberta BUSINESS
CORPORATIONS ACT or any successor legislation, as amended from time to
time.
(b) "AGREEMENT" means this letter agreement and schedules attached to this
letter agreement, as amended or supplemented from time to time.
(c) "BOARD" means the board of directors of the Company.
(d) "BUSINESS OF THE COMPANY" means the business carried on by the Company
from time to time, and includes without limitation the provision of
entertainment services including the distribution of sports related
information and the operation of contests involving the predicted
outcome of sporting events.
(e) "CAUSE" includes:
(i) any wilful failure by you in the performance of any of your duties
under this Agreement;
(ii) your conviction of a crime (indictable level or penalized by
incarceration or a lesser crime involving moral turpitude), or any act
involving money or other property involving the Company or any other
member of the Group that would constitute a crime in the jurisdiction
involved;
(iii) any act of fraud, misappropriation, dishonesty, embezzlement or
similar conduct against the Company or an Affiliate or customer of the
Company;
(iv) the use of illegal drugs or the habitual and disabling use of alcohol
or drugs;
(v) any material breach of any of the terms of this Agreement which
remains uncured after the expiration of ten days following the
delivery of written notice of such breach to you by the Company;
(vi) any threatened or actual attempt by you to secure any personal profit
in connection with the Business of the Company or the corporate
opportunities of any member of the Group;
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(vii) any act which is materially injurious to the Business of the Company;
and
(viii) your failure to devote adequate time to the Business of the Company,
or conduct by you amounting to insubordination or inattention to, or
substandard performance of, your duties and responsibilities under
this Agreement.
(f) "COMPANY" means SportsMark Inc., a company formed under the laws of
Alberta.
(g) "COMPETITIVE BUSINESS" means any business or enterprise that competes
or intends to compete with the Business of the Company.
(h) "CONFIDENTIAL INFORMATION" means all confidential or proprietary
facts, data, techniques and other information relating to the Business
of the Company which may before or after the date of this Agreement be
disclosed to you by the Company or by any other member of the Group or
which may otherwise come within your knowledge or which may be
developed by you in the course of your employment under this Agreement
or from any other Confidential Information.
(i) "GROUP" means the Company and its Affiliates.
(j) "INTELLECTUAL PROPERTY RIGHTS" means all rights in respect of
intellectual property including, without limitation, all patent,
industrial design, integrated circuit topography, know-how, trade
secret, privacy and trade-mark rights and copyright, to the extent
those rights may subsist anywhere in the universe.
(k) "PERSON" means any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with
or without share capital, unincorporated association, trust, trustee,
executor, administrator or other legal personal representative,
regulatory body or agency, government or governmental agency or entity
however designated or constituted.
2. EMPLOYMENT
The terms of your employment will be as follows:
(a) POSITION AND RESPONSIBILITIES: You will be employed by the Company in
the position set out on Schedule "A" to this Agreement, and you will
fulfil the duties and responsibilities set out on Schedule "A" to this
Agreement, subject to changes that may be prescribed by the Board from
time to time.
(b) SCOPE OF DUTIES: During your employment, you will devote the whole of
your time, attention and abilities during normal business hours to the
duties hereby granted and accepted and you will give the Company the
full benefit of your knowledge, expertise, technical skill and
ingenuity.
(c) SALARY: You will receive an annual salary (the "Salary") in the amount
set out on Schedule "A" to this Agreement, subject to changes by
mutual agreement, payable in accordance with the Company's standard
salary payment schedule. Payment of your Salary will be subject to
income tax source deductions and other deductions required by
applicable law.
(d) STOCK OPTIONS: You will be entitled to participate in any stock option
plans as are now or may hereafter be established and offered by the
Company for the benefit of its employees generally.
(e) MEDICAL, INSURANCE AND OTHER BENEFITS: You will be entitled to
participate in any medical, dental, health, life and accident
insurance programs as are now or may hereafter be established and
offered by the Company for the benefit of its employees generally. If
you serve as a director of the Company or any of its affiliates, then
you will be entitled to director's liability insurance coverage as may
be established and offered by the Company for the benefit of its
directors generally.
2
<PAGE>
(f) REIMBURSEMENT OF EXPENSES: You will be entitled to reimbursement of
reasonable expenses incurred in the course of fulfilling your
employment duties and responsibilities to the Company, as may be
specifically approved by the Board in advance or expressly permitted
in accordance with the Company's expense policies in effect from time
to time.
(g) VACATION ENTITLEMENT: You will receive the period of paid vacation set
out on Schedule "A" to this Agreement. Your vacation must be taken in
accordance with the Company's vacation policies in effect from time to
time.
(h) EXTENSION OF TERM: If the Company does not prior to expiry of the Term
or any extension of the Term provide you with written notice that the
Company does not wish to extend the Term, and if you do not prior to
expiry of the Term or any extension of the Term provide the Company
with written notice that you do not wish to extend the Term, then upon
expiry of the Term and every extension of the Term, the Term of this
Agreement will be deemed to be extended for an additional one year
period on the same terms and conditions as provided for under this
Agreement, unless otherwise agreed in writing.
3. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
As consideration for your employment with the Company, you covenant and agree as
follows:
(a) DISCLOSURE: You will make prompt and full disclosure to the Company of
any discovery, invention, development, production, process,
improvement or other work product conceived, made, improved upon or
participated in by you, solely or jointly, in the course of, arising
from or relating to any Intellectual Property Rights of or your
employment with the Company or any other member of the Group (the
"Work Products").
(b) ASSIGNMENT: The Company will hold all Intellectual Property Rights in
respect of the Work Products for the exclusive benefit of the Company
and you agree not to claim or apply for registration or challenge the
Company's registration of, any such Intellectual Property Rights. Your
acceptance of the terms of this Agreement constitutes your absolute,
unconditional and irrevocable assignment, transfer and conveyance of
all past, present and future right, title, benefit and interest in and
to all Intellectual Property Rights in respect of the Work Products.
You hereby waive in favour of the Company all claims of any nature
whatsoever that you now or hereafter may have for infringement of any
Intellectual Property Rights for the Work Products so assigned to the
Company. To the extent that copyright may subsist in the Work
Products, you hereby waive all past, present and future moral rights
you may have.
(c) INTELLECTUAL PROPERTY PROTECTION: The Work Products and all related
Intellectual Property Rights will be the absolute and exclusive
property of the Company. The Company may apply for patent, copyright
or other intellectual property protection in the Company's name or,
where such procedure is proper, in your name, anywhere in the world.
You will, at the Company's request and sole expense, execute all
documents and do all such acts and things considered necessary by the
Company to obtain, confirm or enforce any Intellectual Property Rights
in respect of the Inventions. In case the Company requires but is
unable to secure your signature for any such purpose in a timely
manner, you hereby irrevocably designate and appoint the Company and
any duly authorized officer or agent of the Company as your agent and
attorney, to act for you and in your behalf and stead to execute any
such documents and to do all other lawfully permitted acts to carry
out the intent of this provision, with the same legal force and effect
as if executed or done by you.
3
<PAGE>
4. OBLIGATIONS OF EMPLOYMENT
You further covenant and agree as follows:
(a) PERFORMANCE AND DUTY TO THE COMPANY: Throughout your employment you
will well and faithfully serve the Company and use all reasonable
endeavours to promote the interests of the Company. You will act
honestly, in good faith and in the best interests of the Company. You
will adhere to all applicable policies of the Company.
(b) BUSINESS OF THE COMPANY: You will not, during your employment with the
Company, engage in any business, enterprise or activity that is
contrary to or detracts from the Business of the Company or the proper
fulfilment of your duties and responsibilities to the Company.
(c) CONFIDENTIALITY: You will retain all Confidential Information
developed, utilised or received by the Company and each other member
of the Group in the strictest confidence and will not disclose or
permit the disclosure of Confidential Information in any manner other
than in the course of your employment with and for the benefit of the
Company or as required by law or a regulatory authority having
jurisdiction. You will not use Confidential Information for your own
personal benefit or permit it to be used for the benefit of any Person
other than the Company, either during your employment with the Company
or thereafter. You will take all reasonable precautions to prevent any
Person from having unauthorized access to Confidential Information or
use of it. In particular, you will not record, copy, modify or part
with any Confidential Information, in whole or in part, except solely
in accordance with the written approval of the Company or only as may
be required to carry out your duties under this Agreement. All copies
of Confidential Information, and all documents and electronic or other
records which now or hereafter may contain Confidential Information,
are and will remain the exclusive and absolute property of the
Company.
(d) EXCEPTIONS: Any obligations specified in subsection 4(c) will not
apply to the following:
(i) any information which is presently in the public domain; or
(ii) any information that subsequently becomes part of the public domain
through no fault of your own.
(e) RESTRICTIONS: You will comply with all of the restrictions set forth
below at all times during your employment and for a period of one year
after the termination of your employment:
(i) you will not, either individually or in conjunction with any Person,
as principal, agent, director, officer, employee, investor or in any
other manner whatsoever, directly or indirectly, engage in or become
financially interested in any Competitive Business within North
America;
(ii) you will not, either directly or indirectly, on your own behalf or on
behalf of others, solicit, divert or appropriate or attempt to
solicit, divert or appropriate to any Competitive Business, any
Business or actively sought prospective Business of the Company or any
customers with whom the Company or any other member of the Group has
current agreements relating to the Business of the Company, or with
whom you have dealt, or with whom you have supervised negotiations or
business relations, or about whom you have acquired Confidential
Information in the course of your employment;
(iii) you will not, either directly or indirectly, on your own behalf or on
behalf of others, solicit, divert or hire away, or attempt to solicit,
divert, or hire away, any independent contractor or any person
employed by the Company or any other member of the Group or persuade
or attempt to persuade any such individual to terminate his or her
employment with the Company; and
(iv) you will not directly or indirectly impair or seek to impair the
reputation of the Company or any other member of the Group, nor any
relationships that the Company or any other member of the Group has
4
<PAGE>
with its employees, customers, suppliers, agents or other parties with
which the Company or any other member of the Group does business or
has contractual relations.
(f) NO PERSONAL BENEFIT: You will not receive or accept for your own
benefit, either directly or indirectly, any commission, rebate,
discount, gratuity or profit from any Person having or proposing to
have one or more business transactions with the Company or any other
member of the Group, without the prior approval of the Board, which
may be withheld.
(g) CUSTOMER CONTACTS: During your employment you will communicate and
channel to the Company all knowledge, business and customer contacts
and any other information that could concern or be in any way
beneficial to the Business of the Company. Any such information
communicated to the Company as aforesaid will be and remain the
property of the Company notwithstanding any subsequent termination of
your employment.
(h) RETURN OF COMPANY PROPERTY: Upon termination of your employment, you
will promptly return to the Company all Company property including all
written or other fixed information including, without limitation,
documents, tapes, discs, memory devices and copies thereof, and any
other material on any medium in your possession or control pertaining
to the Business of the Company, without retaining any copies or
records of any Confidential Information whatsoever. You will also
return any keys, pass cards, identification cards or other property
belonging to the Company.
5. TERMINATION
(a) MUTUAL AGREEMENT: Your employment may be terminated at any time upon the
mutual written agreement by the parties.
(b) RESIGNATION: You will not resign from the Company during the first year of
your employment, and if for any reason you should wish to leave the Company
after that time you will provide the Company at least six months' prior
written notice of your intention.
(c) WITH CAUSE: The Company may terminate your employment at any time for
Cause, immediately upon delivery by the Company to you of a notice of
termination of your employment for Cause, in which case you will not be
entitled to receive any further compensation, severance pay, notice,
payment in lieu of notice or damages of any kind, except only any
compensation accrued and owing under this Agreement but unpaid at the date
of termination of your employment.
(d) WITHOUT CAUSE: The Company may terminate your employment without Cause at
any time after the first year of your employment by providing you with the
greater of the following:
(i) six months' written notice or payment in lieu of notice; or
(ii) the minimum notice or payment in lieu of notice prescribed by the
EMPLOYMENT STANDARDS ACT (Alberta) or any successor legislation,
as amended from time to time.
You will not be entitled to receive any further severance pay, notice,
payment in lieu of notice or damages of any kind and you will not be
entitled to receive any further compensation, except only any compensation
accrued and owing under this Agreement but unpaid at the date of
termination of your employment. Payments in lieu of notice will be subject
to all income tax source deductions and other deductions required by law.
6. AGREEMENT VOLUNTARY AND EQUITABLE
You acknowledge that you have carefully considered and understand the terms
of employment contained in this Agreement, that you have had the opportunity
to obtain independent legal advice regarding this Agreement, that you
5
<PAGE>
consider the terms of this Agreement to be mutually fair and equitable, and
that you have executed this Agreement voluntarily and of your own free will.
7. IRREPARABLE HARM
You acknowledge and agree that any breach of section 3, subsection 4(c) or
subsection 4(e) of this Agreement by you will cause irreparable harm to the
Company and in addition to all of the remedies available to the Company by law,
the Company will be entitled to equitable relief including without limitation,
injunctive relief to ensure your compliance with section 3 and subsections 4(c)
and 4(e) of this Agreement.
8. ASSIGNMENT AND ENUREMENT
You may not assign this Agreement, any part of this Agreement or any of your
rights under this Agreement without the prior written consent of the Company.
This Agreement enures to the benefit of and is binding upon you and the Company
and your respective heirs, executors, administrators, successors and permitted
assigns.
9. SEVERABILITY
If any provision or portion of this Agreement is determined to be invalid or
unenforceable for any reason, then that provision or portion will be severed
from this Agreement, and the rest of this Agreement will remain in full force
and effect.
10. ENTIRE AGREEMENT
This Agreement contains the whole agreement between you and the Company with
respect to your employment by the Company, and there are no representations,
warranties, collateral terms or conditions, express or implied, other than as
set forth in this Agreement. This Agreement supersedes any written or oral
agreement or understanding between you and the Company. No change or
modification of this Agreement will be valid unless it is in writing and
initialled by both parties.
11. NOTICE
Any notice required or permitted to be given hereunder must be in writing and
will be sufficiently given or made if delivered or sent by registered mail to
the address of the parties set out on page 1 hereof. Any notice so given will
be deemed to have been given and to have been received on the day of delivery if
it is a business day and otherwise on the next succeeding business day or, if
mailed, on the third business day following the mailing thereof (excluding each
day during which there exists any interruption of postal services due to strike,
lockout or other cause). Addresses for notice may be changed by giving notice
in accordance with this section.
12. NON-WAIVER
No failure or delay by you or the Company in exercising any power or right under
this Agreement will operate as a waiver of such power or right. Any consent or
waiver by you or by the Company to any breach or default under this Agreement
will be effective only in the specific instance and for the specific purpose for
which it was given.
13. SURVIVAL OF TERMS
The provisions of sections 1, 3, 5 and 7 and of subsections 4(c), 4(e), 4(g) and
4(h) of this Agreement will survive the termination of your employment.
14. FURTHER ASSISTANCE
The parties will execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
6
<PAGE>
15. TIME
Time is of the essence of this Agreement.
16. GOVERNING LAWS
This Agreement will be construed in accordance with and governed by the laws of
Alberta and the laws of Canada applicable in Alberta.
17. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which will
be deemed to be an original and all of which will constitute one Agreement.
SPORTSMARK INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
I acknowledge and accept the terms and conditions of my employment with the
Company as set out above.
DATED this ________ day of ____________, 1999.
- ---------------------------------------
7
<PAGE>
SCHEDULE "A"
Employee's Name William Gibson
Commencement Date and Term: February 5, 1999, three years
Position: Executive Vice-President of
SportsMark Inc. and SportsMark
Promotions Inc., President of
Classroom 2000 Inc.
Duties & Responsibilities Research and Development, Contest
Design and Corporate Planning for
SportsMark Inc., SportsMark
Promotions Inc. and Classroom 2000
Inc.
Salary: $110,000.00/year
Paid Vacation: Four weeks each year
SPORTSMARK INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
I acknowledge and accept the terms and conditions of my employment with the
Company as set out above.
DATED this ________ day of ______________, 1999.
- -----------------------------------------
WILLIAM GIBSON
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT FOR
GEOFF FORD
<PAGE>
SCHEDULE "A"
EMPLOYMENT AGREEMENT
SPORTSMARK INC.
633 - 10201 Southport Road S.W.
Calgary, Alberta, T2W 4X9
/ /, 1999
To: / /
Re: EMPLOYMENT AGREEMENT
This Agreement contains the terms and conditions of your employment with
SportsMark Inc. (the "Company").
You will be employed for a term (the "Term") of three years commencing on / /
1999 and ending on / / 2002, unless your employment is terminated or the Term is
extended in accordance with the provisions of this Agreement.
1. DEFINITIONS
In this Agreement:
(a) "AFFILIATE" has the same meaning as in the Alberta BUSINESS
CORPORATIONS ACT or any successor legislation, as amended from time to
time.
(b) "AGREEMENT" means this letter agreement and schedules attached to this
letter agreement, as amended or supplemented from time to time.
(c) "BOARD" means the board of directors of the Company.
(d) "BUSINESS OF THE COMPANY" means the business carried on by the Company
from time to time, and includes without limitation the provision of
entertainment services including the distribution of sports related
information and the operation of contests involving the predicted
outcome of sporting events.
(e) "CAUSE" includes:
(i) any wilful failure by you in the performance of any of your duties
under this Agreement;
(ii) your conviction of a crime (indictable level or penalized by
incarceration or a lesser crime involving moral turpitude), or any act
involving money or other property involving the Company or any other
member of the Group that would constitute a crime in the jurisdiction
involved;
(iii) any act of fraud, misappropriation, dishonesty, embezzlement or
similar conduct against the Company or an Affiliate or customer of the
Company;
(iv) the use of illegal drugs or the habitual and disabling use of alcohol
or drugs;
(v) any material breach of any of the terms of this Agreement which
remains uncured after the expiration of ten days following the
delivery of written notice of such breach to you by the Company;
(vi) any threatened or actual attempt by you to secure any personal profit
in connection with the Business of the Company or the corporate
opportunities of any member of the Group;
1
<PAGE>
(vii) any act which is materially injurious to the Business of the Company;
and
(viii) your failure to devote adequate time to the Business of the Company,
or conduct by you amounting to insubordination or inattention to, or
substandard performance of, your duties and responsibilities under
this Agreement.
(f) "COMPANY" means SportsMark Inc., a company formed under the laws of
Alberta.
(g) "COMPETITIVE BUSINESS" means any business or enterprise that competes
or intends to compete with the Business of the Company.
(h) "CONFIDENTIAL INFORMATION" means all confidential or proprietary
facts, data, techniques and other information relating to the Business
of the Company which may before or after the date of this Agreement be
disclosed to you by the Company or by any other member of the Group or
which may otherwise come within your knowledge or which may be
developed by you in the course of your employment under this Agreement
or from any other Confidential Information.
(i) "GROUP" means the Company and its Affiliates.
(j) "INTELLECTUAL PROPERTY RIGHTS" means all rights in respect of
intellectual property including, without limitation, all patent,
industrial design, integrated circuit topography, know-how, trade
secret, privacy and trade-mark rights and copyright, to the extent
those rights may subsist anywhere in the universe.
(k) "PERSON" means any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with
or without share capital, unincorporated association, trust, trustee,
executor, administrator or other legal personal representative,
regulatory body or agency, government or governmental agency or entity
however designated or constituted.
2. EMPLOYMENT
The terms of your employment will be as follows:
(a) POSITION AND RESPONSIBILITIES: You will be employed by the Company in
the position set out on Schedule "A" to this Agreement, and you will
fulfil the duties and responsibilities set out on Schedule "A" to this
Agreement, subject to changes that may be prescribed by the Board from
time to time.
(b) SCOPE OF DUTIES: During your employment, you will devote the whole of
your time, attention and abilities during normal business hours to the
duties hereby granted and accepted and you will give the Company the
full benefit of your knowledge, expertise, technical skill and
ingenuity.
(c) SALARY: You will receive an annual salary (the "Salary") in the amount
set out on Schedule "A" to this Agreement, subject to changes by
mutual agreement, payable in accordance with the Company's standard
salary payment schedule. Payment of your Salary will be subject to
income tax source deductions and other deductions required by
applicable law.
(d) STOCK OPTIONS: You will be entitled to participate in any stock option
plans as are now or may hereafter be established and offered by the
Company for the benefit of its employees generally.
(e) MEDICAL, INSURANCE AND OTHER BENEFITS: You will be entitled to
participate in any medical, dental, health, life and accident
insurance programs as are now or may hereafter be established and
offered by the Company for the benefit of its employees generally. If
you serve as a director of the Company or any of its affiliates, then
you will be entitled to director's liability insurance coverage as may
be established and offered by the Company for the benefit of its
directors generally.
2
<PAGE>
(f) REIMBURSEMENT OF EXPENSES: You will be entitled to reimbursement of
reasonable expenses incurred in the course of fulfilling your
employment duties and responsibilities to the Company, as may be
specifically approved by the Board in advance or expressly permitted
in accordance with the Company's expense policies in effect from time
to time.
(g) VACATION ENTITLEMENT: You will receive the period of paid vacation set
out on Schedule "A" to this Agreement. Your vacation must be taken in
accordance with the Company's vacation policies in effect from time to
time.
(h) EXTENSION OF TERM: If the Company does not prior to expiry of the Term
or any extension of the Term provide you with written notice that the
Company does not wish to extend the Term, and if you do not prior to
expiry of the Term or any extension of the Term provide the Company
with written notice that you do not wish to extend the Term, then upon
expiry of the Term and every extension of the Term, the Term of this
Agreement will be deemed to be extended for an additional one year
period on the same terms and conditions as provided for under this
Agreement, unless otherwise agreed in writing.
3. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
As consideration for your employment with the Company, you covenant and agree as
follows:
(a) DISCLOSURE: You will make prompt and full disclosure to the Company of
any discovery, invention, development, production, process,
improvement or other work product conceived, made, improved upon or
participated in by you, solely or jointly, in the course of, arising
from or relating to any Intellectual Property Rights of or your
employment with the Company or any other member of the Group (the
"Work Products").
(b) ASSIGNMENT: The Company will hold all Intellectual Property Rights in
respect of the Work Products for the exclusive benefit of the Company
and you agree not to claim or apply for registration or challenge the
Company's registration of, any such Intellectual Property Rights. Your
acceptance of the terms of this Agreement constitutes your absolute,
unconditional and irrevocable assignment, transfer and conveyance of
all past, present and future right, title, benefit and interest in and
to all Intellectual Property Rights in respect of the Work Products.
You hereby waive in favour of the Company all claims of any nature
whatsoever that you now or hereafter may have for infringement of any
Intellectual Property Rights for the Work Products so assigned to the
Company. To the extent that copyright may subsist in the Work
Products, you hereby waive all past, present and future moral rights
you may have.
(c) INTELLECTUAL PROPERTY PROTECTION: The Work Products and all related
Intellectual Property Rights will be the absolute and exclusive
property of the Company. The Company may apply for patent, copyright
or other intellectual property protection in the Company's name or,
where such procedure is proper, in your name, anywhere in the world.
You will, at the Company's request and sole expense, execute all
documents and do all such acts and things considered necessary by the
Company to obtain, confirm or enforce any Intellectual Property Rights
in respect of the Inventions. In case the Company requires but is
unable to secure your signature for any such purpose in a timely
manner, you hereby irrevocably designate and appoint the Company and
any duly authorized officer or agent of the Company as your agent and
attorney, to act for you and in your behalf and stead to execute any
such documents and to do all other lawfully permitted acts to carry
out the intent of this provision, with the same legal force and effect
as if executed or done by you.
3
<PAGE>
4. OBLIGATIONS OF EMPLOYMENT
You further covenant and agree as follows:
(a) PERFORMANCE AND DUTY TO THE COMPANY: Throughout your employment you
will well and faithfully serve the Company and use all reasonable
endeavours to promote the interests of the Company. You will act
honestly, in good faith and in the best interests of the Company. You
will adhere to all applicable policies of the Company.
(b) BUSINESS OF THE COMPANY: You will not, during your employment with the
Company, engage in any business, enterprise or activity that is
contrary to or detracts from the Business of the Company or the proper
fulfilment of your duties and responsibilities to the Company.
(c) CONFIDENTIALITY: You will retain all Confidential Information
developed, utilised or received by the Company and each other member
of the Group in the strictest confidence and will not disclose or
permit the disclosure of Confidential Information in any manner other
than in the course of your employment with and for the benefit of the
Company or as required by law or a regulatory authority having
jurisdiction. You will not use Confidential Information for your own
personal benefit or permit it to be used for the benefit of any Person
other than the Company, either during your employment with the Company
or thereafter. You will take all reasonable precautions to prevent any
Person from having unauthorized access to Confidential Information or
use of it. In particular, you will not record, copy, modify or part
with any Confidential Information, in whole or in part, except solely
in accordance with the written approval of the Company or only as may
be required to carry out your duties under this Agreement. All copies
of Confidential Information, and all documents and electronic or other
records which now or hereafter may contain Confidential Information,
are and will remain the exclusive and absolute property of the
Company.
(d) EXCEPTIONS: Any obligations specified in subsection 4(c) will not
apply to the following:
(i) any information which is presently in the public domain; or
(ii) any information that subsequently becomes part of the public domain
through no fault of your own.
(e) RESTRICTIONS: You will comply with all of the restrictions set forth
below at all times during your employment and for a period of one year
after the termination of your employment:
(i) you will not, either individually or in conjunction with any Person,
as principal, agent, director, officer, employee, investor or in any
other manner whatsoever, directly or indirectly, engage in or become
financially interested in any Competitive Business within North
America;
(ii) you will not, either directly or indirectly, on your own behalf or on
behalf of others, solicit, divert or appropriate or attempt to
solicit, divert or appropriate to any Competitive Business, any
Business or actively sought prospective Business of the Company or any
customers with whom the Company or any other member of the Group has
current agreements relating to the Business of the Company, or with
whom you have dealt, or with whom you have supervised negotiations or
business relations, or about whom you have acquired Confidential
Information in the course of your employment;
(iii) you will not, either directly or indirectly, on your own behalf or on
behalf of others, solicit, divert or hire away, or attempt to solicit,
divert, or hire away, any independent contractor or any person
employed by the Company or any other member of the Group or persuade
or attempt to persuade any such individual to terminate his or her
employment with the Company; and
(iv) you will not directly or indirectly impair or seek to impair the
reputation of the Company or any other member of the Group, nor any
relationships that the Company or any other member of the Group has
4
<PAGE>
with its employees, customers, suppliers, agents or other parties with
which the Company or any other member of the Group does business or
has contractual relations.
(f) NO PERSONAL BENEFIT: You will not receive or accept for your own
benefit, either directly or indirectly, any commission, rebate,
discount, gratuity or profit from any Person having or proposing to
have one or more business transactions with the Company or any other
member of the Group, without the prior approval of the Board, which
may be withheld.
(g) CUSTOMER CONTACTS: During your employment you will communicate and
channel to the Company all knowledge, business and customer contacts
and any other information that could concern or be in any way
beneficial to the Business of the Company. Any such information
communicated to the Company as aforesaid will be and remain the
property of the Company notwithstanding any subsequent termination of
your employment.
(h) RETURN OF COMPANY PROPERTY: Upon termination of your employment, you
will promptly return to the Company all Company property including all
written or other fixed information including, without limitation,
documents, tapes, discs, memory devices and copies thereof, and any
other material on any medium in your possession or control pertaining
to the Business of the Company, without retaining any copies or
records of any Confidential Information whatsoever. You will also
return any keys, pass cards, identification cards or other property
belonging to the Company.
5. TERMINATION
(a) MUTUAL AGREEMENT: Your employment may be terminated at any time upon
the mutual written agreement by the parties.
(b) RESIGNATION: You will not resign from the Company during the first
year of your employment, and if for any reason you should wish to
leave the Company after that time you will provide the Company at
least six months' prior written notice of your intention.
(c) WITH CAUSE: The Company may terminate your employment at any time for
Cause, immediately upon delivery by the Company to you of a notice of
termination of your employment for Cause, in which case you will not
be entitled to receive any further compensation, severance pay,
notice, payment in lieu of notice or damages of any kind, except only
any compensation accrued and owing under this Agreement but unpaid at
the date of termination of your employment.
(d) WITHOUT CAUSE: The Company may terminate your employment without Cause
at any time after the first year of your employment by providing you
with the greater of the following:
(i) six months' written notice or payment in lieu of notice; or
(ii) the minimum notice or payment in lieu of notice prescribed by the
EMPLOYMENT STANDARDS ACT (Alberta) or any successor legislation,
as amended from time to time.
You will not be entitled to receive any further severance pay, notice,
payment in lieu of notice or damages of any kind and you will not be
entitled to receive any further compensation, except only any
compensation accrued and owing under this Agreement but unpaid at the
date of termination of your employment. Payments in lieu of notice
will be subject to all income tax source deductions and other
deductions required by law.
6. AGREEMENT VOLUNTARY AND EQUITABLE
You acknowledge that you have carefully considered and understand the terms of
employment contained in this Agreement, that you have had the opportunity to
obtain independent legal advice regarding this Agreement, that you
5
<PAGE>
consider the terms of this Agreement to be mutually fair and equitable, and that
you have executed this Agreement voluntarily and of your own free will.
7. IRREPARABLE HARM
You acknowledge and agree that any breach of section 3, subsection 4(c) or
subsection 4(e) of this Agreement by you will cause irreparable harm to the
Company and in addition to all of the remedies available to the Company by law,
the Company will be entitled to equitable relief including without limitation,
injunctive relief to ensure your compliance with section 3 and subsections 4(c)
and 4(e) of this Agreement.
8. ASSIGNMENT AND ENUREMENT
You may not assign this Agreement, any part of this Agreement or any of your
rights under this Agreement without the prior written consent of the Company.
This Agreement enures to the benefit of and is binding upon you and the Company
and your respective heirs, executors, administrators, successors and permitted
assigns.
9. SEVERABILITY
If any provision or portion of this Agreement is determined to be invalid or
unenforceable for any reason, then that provision or portion will be severed
from this Agreement, and the rest of this Agreement will remain in full force
and effect.
10. ENTIRE AGREEMENT
This Agreement contains the whole agreement between you and the Company with
respect to your employment by the Company, and there are no representations,
warranties, collateral terms or conditions, express or implied, other than as
set forth in this Agreement. This Agreement supersedes any written or oral
agreement or understanding between you and the Company. No change or
modification of this Agreement will be valid unless it is in writing and
initialled by both parties.
11. NOTICE
Any notice required or permitted to be given hereunder must be in writing and
will be sufficiently given or made if delivered or sent by registered mail to
the address of the parties set out on page 1 hereof. Any notice so given will be
deemed to have been given and to have been received on the day of delivery if it
is a business day and otherwise on the next succeeding business day or, if
mailed, on the third business day following the mailing thereof (excluding each
day during which there exists any interruption of postal services due to strike,
lockout or other cause). Addresses for notice may be changed by giving notice in
accordance with this section.
12. NON-WAIVER
No failure or delay by you or the Company in exercising any power or right under
this Agreement will operate as a waiver of such power or right. Any consent or
waiver by you or by the Company to any breach or default under this Agreement
will be effective only in the specific instance and for the specific purpose for
which it was given.
13. SURVIVAL OF TERMS
The provisions of sections 1, 3, 5 and 7 and of subsections 4(c), 4(e), 4(g) and
4(h) of this Agreement will survive the termination of your employment.
14. FURTHER ASSISTANCE
The parties will execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
6
<PAGE>
15. TIME
Time is of the essence of this Agreement.
16. GOVERNING LAWS
This Agreement will be construed in accordance with and governed by the laws of
Alberta and the laws of Canada applicable in Alberta.
17. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which will
be deemed to be an original and all of which will constitute one Agreement.
SPORTSMARK INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
I acknowledge and accept the terms and conditions of my employment with the
Company as set out above.
DATED this ________ day of ____________, 1999.
- ------------------------------------
7
<PAGE>
SCHEDULE "A"
Employee's Name Geoffrey M. Ford
Commencement Date and Term: February 5, 1999, three years
Position: President of SportsMark Inc and
SportsMark Promotions Inc.,
Executive Vice-President of
Classroom 2000 Inc.
Duties & Responsibilities Marketing, Administration, Systems
Design and Corporate Planning for
SportsMark Inc., SportsMark
Promotions Inc. and Classroom 2000
Inc.
Salary: $110,000.00/year
Paid Vacation: Four weeks each year
SPORTSMARK INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
I acknowledge and accept the terms and conditions of my employment with the
Company as set out above.
DATED this ________ day of ______________, 1999.
- ------------------------------------
GEOFFREY M. FORD
<PAGE>
EXHIBIT 10.5
SETTLEMENT AGREEMENT WITH
DIGITAL DATA NETWORKS, INC.
<PAGE>
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Agreement (the "Agreement") is made as of February 1, 1999, by and
between Internet Sports Network, Inc., a Nevada Corporation ("ISN"), Digital
Data Networks, Inc., a Washington corporation ("DDN"), Robert Hussey, an
individual ("Hussey"), and Lauderdale Capital Limited ("Lauderdale") (ISN, DDN,
Hussey and Lauderdale sometimes collectively referred to herein as the
"Parties".)
RECITALS
A. Whereas, ISN and DDN previously entered into an Agreement and Plan
of Merger ( the "Merger Agreement").
B. Whereas, as part of the Merger Agreement, DDN was obligated to
invest two hundred fifty thousand dollars ($250,000) into ISN in exchange for
six hundred twenty-five thousand (650,000) shares of common stock.
C. Whereas, as part of the participation of DDN in the Merger
Agreement, Hussey and Lauderdale invested ten thousand dollars ($10,000) each in
ISN in exchange for twenty-five thousand (25,000) shares of common stock each.
D. Whereas, a condition of the Merger Agreement is the approval of a
majority of the shareholders of ISN. ISN believes that there are not sufficient
numbers of shareholders willing to approve the Merger Agreement. Accordingly,
ISN has informed DDN of the futility of continuing with the registration
statement under Form S-4 with the SEC and incurring the costs of this
registration and a solicitation of consents by both ISN and DDN.
E. Whereas, a condition of the Merger Agreement is the completion of
the approval process by no later than March 15, 1999. As ISN and DDN have not
filed the form S-4 with the SEC, it is highly unlikely that the Merger Agreement
will be completed by the March 15, 1999 deadline.
F. Whereas, DDN has incurred costs associated with Merger Agreement.
G. Whereas, a dispute has arisen between ISN and DDN regarding the
outstanding obligations of the Parties under the Merger Agreement (the
"dispute"). The parties wish to finally and fully resolve this dispute
according to the agreements contained herein and to fully and completely release
each other from any and all continuing obligations or responsibilities arising
therefrom as is memorialized in this Agreement.
AGREEMENT
NOW, THEREFORE, for valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the Parties hereby agree as follows:
1. INCORPORATION OF RECITALS. The recitals are hereby incorporated herein as
if set forth in full.
2. DELIVERY OBLIGATIONS. In exchange for a full and complete release
contained herein and as a full and complete settlement of any claims the Parties
may have against each other, known and unknown, from the beginning of time
through the date this Agreement is fully executed, the parties hereby agree to
accomplish the following:
a. ISN:
i. Return the investment of two hundred fifty thousand dollars
($250,000) plus interest at the rate of ten percent (10%) per annum payable from
the October 20, 1998 investment date through the execution date (the "investment
amount"), to DDN within thirty days of the full execution and delivery of this
Agreement (the "execution date").
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ii. Pay the amount of seventy thousand dollars ($70,000) to DDN by
no later than 5:00 P.M. Pacific Standard Time on February 15, 1999 as full and
complete compensation of the costs and expenses incurred by DDN in connection
with the Merger Agreement.
iii. Execute and deliver this Agreement to DDN, Hussey and
Lauderdale.
iv. Permit DDN to retain one hundred fifty thousand (150,000)
shares of ISN.
b. DDN:
i. Execute and deliver this Agreement to ISN.
ii. Deliver within forty eight hours of the receipt of the
investment amount, the certificates representing the common stock of ISN issued
to DDN to ISN marked canceled. ISN will deliver a new certificate representing
150,000 shares of common stock of DDN.
c. HUSSEY:
i. Execute and deliver this Agreement to ISN.
ii. Retain the stock certificate representing Hussey's investment
in ISN.
d. LAUDERDALE.
i. Execute and deliver this Agreement to ISN.
ii. Retain the stock certificate representing Lauderdale's
investment in ISN.
3. MUTUAL GENERAL RELEASE.
Expressly conditioned upon timely completion of the delivery requirements
set forth under Section 2 above the Parties, each for themselves, their
respective Boards of Directors, officers, shareholders, assigns, employees,
agents, predecessors, heirs, executors, and administrators, successors,
subsidiary entities, former entities, attorneys, and any others claiming under
or through them, both past and present, do hereby release and forever discharge
each other, and each of the others' Boards of Directors, officers, shareholders,
assigns, employees, agents, predecessors, successors, heirs, executors, and
administrators, subsidiary entities, former entities, attorneys, and all others
acting by, through, under, or in concert with the other, and each of them, from
any and all manner of action or actions, cause or causes of action, in law or in
equity, suits, debts, liens, contracts (express, implied in fact, or implied by
law), agreements, promises, liabilities, claims, set offs, rights and claims for
indemnity and/or contribution, refunds, overpayments, demands, damages, losses,
costs, or expenses, of any nature whatsoever, known or unknown, suspected or
unsuspected, fixed or contingent, which each now has or may hereafter have by
reason of any matter, cause, or thing whatsoever from the beginning of time to
the date hereof, including, without limiting the generality of the foregoing,
any matters that or might have been in any way raised, by complaint,
cross-complaint or otherwise, as a result of the Merger Agreement and the
Parties investment in ISN, including but not limited to any rights or claims to
any profits or losses related to the investment in ISN stock, all as if
expressly set forth and described with particularity in this Agreement.
Notwithstanding the above, or any other provisions of this instrument, this
Agreement shall not affect, discharge, or release any claims, known or unknown,
which arise from or relate to the rights or obligations of the parties hereto,
whether presently existing or subsequently accruing, with respect to the
obligations created by or arising out of the provisions of this Agreement.
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<PAGE>
4. WAIVER OF RIGHTS UNDER CALIFORNIA CIVIL CODE SECTION 1542.
Except as set forth in herein, the Parties hereto further agree, covenant,
represent and warrant that they intend to and do hereby waive and relinquish any
and all rights and benefits conferred on them by any statutory or decisional
authorities which would otherwise preclude release of unknown claims, including
without limitation, those conferred by the provisions of Section 1542 of the
California Civil Code.
EACH PARTY ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY LEGAL COUNSEL WITH
RESPECT TO, AND IS FAMILIAR WITH, THE PROVISIONS OF CALIFORNIA CIVIL CODE
SECTION 1542, WHICH PROVIDES AS FOLLOWS:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR.
EACH PARTY BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY
RIGHT THE PARTY MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR
COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
In waiving the provisions above, the Parties hereto hereby acknowledge that
they may hereafter discover facts in addition to or different from those they
now believe to be true with respect to the subject matter of the Action and
other matters herein released, and may incur damages as a consequence of or
suffer from claims that were unknown or unanticipated at the time this Agreement
was executed but agree that they have taken that possibility into account in
determining the amount of consideration to be given under this Agreement and
that the general releases herein given shall be and remain in effect as full and
complete general releases notwithstanding the discovery or existence of any such
additional or different facts, or incurring of damages or suffering from claims,
of which the Parties expressly assume the risk. Each party acknowledges that he
is assuming the risk of such unknown and unanticipated claims and agrees that
this Agreement applies to unknown claims.
5. REPRESENTATIONS.
a. Each Party represents and warrants to the other that it has not
sold, assigned or transferred in any manner, either in whole or in part, to any
person or entity, any interest, right, duty, obligation, or other interest in
any claim it may have against such other party to this Agreement, which is the
subject of this Agreement and agrees to indemnify and hold the other harmless
from any liabilities, claims, demands, damages, expenses, and attorneys' fees
incurred as a result of any person asserting such assignment or transfer of any
right or claim.
b. Each Party represents and warrants to the other that no
representation, warranty or promise not expressly contained in this Agreement
has been made to them; that they are not entering into this Agreement on the
basis of any representation, warranty or promise, either express or implied, not
contained in this Agreement; that they are entering into this Agreement with
full knowledge of any and all rights which they may have; and that they assume
the risks of any mistake of facts or law with respect to the true facts or law
which are now unknown to them.
c. The Parties each acknowledge that the execution of this Agreement is
not an admission of any liability in any sense by any of the parties to this
Agreement, and agree that this Agreement may not be used by anyone as evidence
of an admission of liability or in any other manner except to the extent
necessary to enforce the terms of this Agreement.
d. The Parties each represent and warrant to each other and agree that
this Agreement is a good-faith settlement of the claims each party has against
the other, and only becomes effective upon the execution of this Agreement by
all parties hereto and the payment of the sums due under the terms hereof.
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<PAGE>
e. Each Party represents and warrants that the individuals signing this
Agreement are authorized to sign on behalf of the Party and that the execution
and performance under this Agreement has been authorized by the requisite action
of the Board of Directors of ISN and DDN.
6. GENERAL PROVISIONS.
a Entire Agreement. The Parties each agree that this Agreement sets
forth and constitutes the entire Agreement between them with respect to its
subject matter and that this Agreement supersedes any and all prior agreements,
understandings, promises, warranties and representations made by each to the
other concerning its subject matter.
b. Attorney's Fees. The Parties each agree that in the event of any
controversy, claim or dispute based upon, arising out of, or relating to this
Agreement, the prevailing party in such controversy, claim or dispute shall be
entitled to recover their, his, or its actual attorneys' fees, court costs and
expenses which are reasonably incurred from the losing party.
c. Amendment. The Parties each agree that this Agreement shall not be
supplemented, amended or modified in any manner whatsoever except by an
instrument in writing signed by the Parties.
d. Applicable Law. The Parties each agree that this Agreement shall be
deemed to have been entered into in the State of California and shall be
construed and interpreted in accordance with the laws of the State of California
existing as of the date the Agreement is duly executed without giving effect to
its principles of conflict of laws. Each party hereby irrevocably consents to
the jurisdiction of the courts of the state of California, county of Orange as
to any and all claims arising out of or in any way related to this Agreement.
e. Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
necessary to account for only one such counterpart in proving this instrument.
f. Waiver. Any delay or omission by either party to exercise any right
or remedy under this Agreement shall not be construed to be a waiver of such
right or remedy or any other right or remedy hereunder. All the rights of
either party in the Agreement shall be cumulative and may be exercised
separately.
g. Further Assurances. Each of the parties hereto, without further
consideration, agrees to execute and deliver such other documents and take such
other action as may be necessary to consummate more effectively the subject
matter hereof.
h. Severability. Should any provision of this Agreement be declared or
determined by any court of competent jurisdiction to be illegal, invalid or
void, the validity of the remaining parts, terms or provisions shall not be
affected thereby, and said illegal, void or invalid part, term or provision
shall be deemed not to be a part of this Agreement.
i. Time. Time is of the essence in performance of all covenants and
conditions of this Agreement.
j. Acknowledgment. The Parties hereby acknowledge and represent that
they (a) have fully and carefully read this Agreement prior to its execution;
(b) have been fully apprised by their respective counsel of the legal effect and
meaning of this document and all terms and conditions hereof; (c) have had the
opportunity to make whatever investigation or inquiry they deemed necessary or
appropriate in connection with the subject matter of this Agreement prior to the
execution hereof and the delivery and acceptance of the consideration specified
herein; (d) have been afforded the opportunity to negotiate as to any and all
terms hereof; and (e) are executing this Agreement as free and voluntary acts,
without any duress, menace or undue influence of any kind or nature.
4
<PAGE>
By signing my name below, I represent that I have read the above Agreement,
that I understand the legal ramifications of agreeing to the terms herein and
hereby accept its terms.
Dated: , 1999 INTERNET SPORTS NETWORK, INC.
----------------
By: /s/ Patrick S. Earle
------------------------------
Patrick S. Earle
Its: President
Dated: , 1999 DIGITAL DATA NETWORKS, INC.
----------------
By:
-------------------------------
Its:
-------------------------------
Dated: , 1999 HUSSEY
--------------
By: /s/ Robert F. Hussey
------------------------------
Robert F. Hussey
Dated: , 1999 LAUDERDALE CAPITAL LIMITED
--------------
By:
-------------------------------
Its:
-------------------------------
5
<PAGE>
EXHIBIT 10.6
SETTLEMENT AGREEMENT WITH
PATRICK S. EARLE
<PAGE>
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Agreement (the "Agreement") is made as of July 20, 1999, by and
between Internet Sports Network, Inc., a Florida Corporation ("ISN") and Patrick
S. Earle, an individual ("Earle") (ISN and Earle sometimes collectively referred
to herein as the "Parties".)
RECITALS
A. Whereas, ISN and Earle are parties to an employment agreement by and
between ISN and Earle (the "Employment Agreement").
B. Whereas, ISN and Earle wish to terminate the Employment Agreement
pursuant to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, for valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the Parties hereby agree as follows:
1. INCORPORATION OF RECITALS. The recitals are hereby incorporated herein as
if set forth in full.
2. DELIVERY OBLIGATIONS. In exchange for a full and complete release
contained herein and as a full and complete settlement of any claims the Parties
may have against each other, known and unknown, from the beginning of time
through the date this Agreement is fully executed, the parties hereby shall:
a. ISN:
i. Pay a total of U.S. sixty thousand dollars ($60,000) to Earle
concurrently with the execution of this Agreement.
ii. Shall deliver an executed original of this Agreement to Earle
immediately upon execution.
b. EARLE:
i. Shall deliver an executed original of this Agreement to ISN
immediately upon execution.
ii. Shall tender resignation of his position on the Board of
Directors of the Company and as President of the Company, in written form
immediately upon execution of this Agreement and delivery of the first payment.
3. MUTUAL GENERAL RELEASE.
Expressly conditioned upon timely completion of the delivery requirements
set forth under Section 2 above the Parties, each for themselves, their
respective Boards of Directors, officers, shareholders, assigns, employees,
agents, predecessors, heirs, executors, and administrators, successors,
subsidiary entities, former entities, attorneys, and any others claiming under
or through them, both past and present, do hereby release and forever discharge
each other, and each of the others' Boards of Directors, officers, shareholders,
assigns, employees, agents, predecessors, successors, heirs, executors, and
administrators, subsidiary entities, former entities, attorneys, and all others
acting by, through, under, or in concert with the other, and each of them, from
any and all manner of action or actions, cause or causes of action, in law or in
equity, suits, debts, liens, contracts (express, implied in fact, or implied by
law), agreements, promises, liabilities, claims, set offs, rights and claims for
indemnity and/or contribution, refunds, overpayments, demands, damages, losses,
costs, or expenses, of any nature whatsoever, known or unknown, suspected or
unsuspected, fixed or contingent, which each now has or may hereafter have by
reason of any matter, cause, or thing whatsoever from the beginning of time to
the date hereof, including, without limiting the generality of the foregoing,
any matters that or
1
<PAGE>
might have been in any way raised, by complaint, cross-complaint or otherwise,
as a result of the Employment Agreement and the services of Earle to ISN during
and prior to the term of the Employment Agreement. Notwithstanding the above,
or any other provisions of this instrument, this Agreement shall not affect,
discharge, or release any claims, known or unknown, which arise from or relate
to the rights or obligations of the parties hereto, whether presently existing
or subsequently accruing, with respect to the obligations created by or arising
out of the provisions of this Agreement.
4. WAIVER OF RIGHTS.
The Parties hereto further agree, covenant, represent and warrant that they
intend to and do hereby waive and relinquish any and all rights and benefits
conferred on them by any statutory or decisional authorities which would
otherwise preclude release of unknown claims and each party acknowledges that it
has been advised by legal counsel with respect to, and understands that under
many code provisions a general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which if known by him, must have materially affected his settlement
with the debtor. Each Party hereby expressly waives any right the party may
have under such code sections, as well as under any other statutes or common law
principles of similar effect.
In waiving the provisions above, the Parties hereto hereby acknowledge that
they may hereafter discover facts in addition to or different from those they
now believe to be true with respect to the subject matter of the Action and
other matters herein released, and may incur damages as a consequence of or
suffer from claims that were unknown or unanticipated at the time this Agreement
was executed but agree that they have taken that possibility into account in
determining the amount of consideration to be given under this Agreement and
that the general releases herein given shall be and remain in effect as full and
complete general releases notwithstanding the discovery or existence of any such
additional or different facts, or incurring of damages or suffering from claims,
of which the Parties expressly assume the risk. Each party acknowledges that he
is assuming the risk of such unknown and unanticipated claims and agrees that
this Agreement applies to unknown claims.
5. REPRESENTATIONS.
a. Each Party represents and warrants to the other that it has not
sold, assigned or transferred in any manner, either in whole or in part, to any
person or entity, any interest, right, duty, obligation, or other interest in
any claim it may have against such other party to this Agreement, which is the
subject of this Agreement and agrees to indemnify and hold the other harmless
from any liabilities, claims, demands, damages, expenses, and attorneys' fees
incurred as a result of any person asserting such assignment or transfer of any
right or claim.
b. Each Party represents and warrants to the other that no
representation, warranty or promise not expressly contained in this Agreement
has been made to them; that they are not entering into this Agreement on the
basis of any representation, warranty or promise, either express or implied, not
contained in this Agreement; that they are entering into this Agreement with
full knowledge of any and all rights which they may have; and that they assume
the risks of any mistake of facts or law with respect to the true facts or law
which are now unknown to them.
c. The Parties each acknowledge that the execution of this Agreement is
not an admission of any liability in any sense by any of the parties to this
Agreement, and agree that this Agreement may not be used by anyone as evidence
of an admission of liability or in any other manner except to the extent
necessary to enforce the terms of this Agreement.
d. The Parties each represent and warrant to each other and agree that
this Agreement is a good-faith settlement of the claims each party has against
the other, and only becomes effective upon the execution of this Agreement by
all parties hereto and the payment of the sums due under the terms hereof.
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<PAGE>
e. Each Party represents and warrants that the individuals signing this
Agreement are authorized to sign on behalf of the Party and that the execution
and performance under this Agreement has been authorized by the requisite action
of the Board of Directors of ISN.
6. GENERAL PROVISIONS.
a Entire Agreement. The Parties each agree that this Agreement sets
forth and constitutes the entire Agreement between them with respect to its
subject matter and that this Agreement supersedes any and all prior agreements,
understandings, promises, warranties and representations made by each to the
other concerning its subject matter.
b. Attorney's Fees. The Parties each agree that in the event of any
controversy, claim or dispute based upon, arising out of, or relating to this
Agreement, the prevailing party in such controversy, claim or dispute shall be
entitled to recover their, his, or its actual attorneys' fees, court costs and
expenses which are reasonably incurred from the losing party.
c. Amendment. The Parties each agree that this Agreement shall not be
supplemented, amended or modified in any manner whatsoever except by an
instrument in writing signed by the Parties.
d. Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall be necessary to
account for only one such counterpart in proving this instrument.
e. Waiver. Any delay or omission by either party to exercise any right or
remedy under this Agreement shall not be construed to be a waiver of such right
or remedy or any other right or remedy hereunder. All the rights of either
party in the Agreement shall be cumulative and may be exercised separately.
f. Further Assurances. Each of the parties hereto, without further
consideration, agrees to execute and deliver such other documents and take such
other action as may be necessary to consummate more effectively the subject
matter hereof.
g. Severability. Should any provision of this Agreement be declared or
determined by any court of competent jurisdiction to be illegal, invalid or
void, the validity of the remaining parts, terms or provisions shall not be
affected thereby, and said illegal, void or invalid part, term or provision
shall be deemed not to be a part of this Agreement.
h. Time. Time is of the essence in performance of all covenants and
conditions of this Agreement.
i. Acknowledgment. The Parties hereby acknowledge and represent that they
(a) have fully and carefully read this Agreement prior to its execution; (b)
have been fully apprised by their respective counsel of the legal effect and
meaning of this document and all terms and conditions hereof; (c) have had the
opportunity to make whatever investigation or inquiry they deemed necessary or
appropriate in connection with the subject matter of this Agreement prior to the
execution hereof and the delivery and acceptance of the consideration specified
herein; (d) have been afforded the opportunity to negotiate as to any and all
terms hereof; and (e) are executing this Agreement as free and voluntary acts,
without any duress, menace or undue influence of any kind or nature.
3
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By signing my name below, I represent that I have read the above Agreement,
that I understand the legal ramifications of agreeing to the terms herein and
hereby accept its terms.
Dated: July 22, 1999 INTERNET SPORTS NETWORK, INC.
By: /s/ Ken Crema
----------------------------------
Its: Chief Executive Officer
Dated: July 22, 1999 By: /s/ Patrick S. Earle
----------------------------------
Patrick S. Earle
4
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EXHIBIT 21
LIST OF SUBSIDIARIES OF COMPANY
<PAGE>
LIST OF SUBSIDIARIES OF COMPANY
ISN California, Inc.
ISN Wisconsin, Inc.
SportsMark Promotions, Inc.
