<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
Reward Enterprises Inc.
(Exact name of registrant as specific in its charter)
Nevada Applied For
(State of Incorporation) (I.R.S. Employer
Identification No.)
5000 Miller Road
Richmond, British Columbia, Canada V7B 1Y3
(Address of executive offices, including postal code)
Registrant's telephone number: (604) 275-6519
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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<PAGE> 2
ITEM 1. DESCRIPTION OF BUSINESS.
History
Reward Enterprises Inc. (the "Company") was incorporated under the
laws of the State of Nevada on December 12, 1997, as Sports
Entertainment Productions, Inc. to engage in the business of Internet
entertainment including gaming. In July 1998, the Company changed its
name to Reward Enterprises Inc.
Operations
The Company's is a start-up business and has not commenced
operations as of the date hereof other than an undertaking of a market
analysis and development of a virtual casino website. As such, the
following reflects the Company's proposed plan of operation. There is
no assurance however, that the Company will ultimately be able to
implement its plan of Internet Gaming.
Internet Gaming
The Company plans to offer on the Internet, casino-style gaming
opportunities including baccarat, blackjack and poker through a wholly
owned subsidiary corporation called the Margarita Company. The Company
intends to incorporate the Margarita Company on the island of Margarita
in the Venezuelan state of Nueva Esparata. As of the date hereof, the
Company has not incorporated the Margarita Company and has not
established its web-site on the Internet. The Company intends to
establish its web-site under the name of "CasinoReward," however, there
is no assurance that Margarita Company will ever be incorporated; that
the CasinoReward Gambling name will be available for the Company's
gaming operation; or, that the Company will begin operations as
planned.
Software
In order to initiate its gaming operations, the Company has
entered into a non-exclusive software license agreement with Chartwell
Technologies Inc. ("Chartwell") of Laguna Hills, California to acquire
and develop all software necessary to conduct the Internet gaming
activity and to handle all Internet cash transactions connected
therewith. The software is customized and is a full service gaming
system which includes twelve casino games, a back-end administrative
utility with remote access, I.P. Tracking, e-Commerce software and
technical support. The software is currently licensed to others at a
number of other Internet sites such as: www.casino.com;
<PAGE> 3
www.777casino.net; www.truebet.com; www.oldvegas.com; and,
www.instacash.com. The Company does not intend to undertake any
software development or research, but intends to rely entirely on the
efforts of Chartwell. The Company may not license the software to
anyone other than wholly owned subsidiary corporations of the Company.
Pursuant to the terms of the license agreement with Chartwell, the
Company paid Chartwell $20,000 upon the execution of the agreement and
will make three additional payments of $10,000 each at three month
intervals. In addition, the Company will pay Chartwell $8,000 for the
purchase of a server and associated software. Chartwell will also
receive 30% of the Company's gross revenues from its gaming operations
up to a maximum of $100,000; 20% thereafter, up to a maximum of
$1,000,000; and 15% of the Company's gross revenues from gaming
thereafter. Upon the execution of the agreement, the Company paid
Chartwell $5,000 for its website design and development and will pay
Chartwell an additional $5,000 upon completion of the website. The
initial agreement is for a period of two years and is renewable
thereafter at the Company's option, provided that the Company makes a
written election to renew the same at least 90 days prior to the
termination date.
In the event that Chartwell ceases operations for any reasons or
refuses to renew its agreement with the Company, the Company will have
to cease operations.
The Website
The Company's website will be accessible to customers with a
minimum hardware configuration consisting of a 486 personal computer
with Windows 95 or greater, with 16 MB RAM, 20 MB free hard disk space,
a 14,400 modem and a direct PPP Internet connection. All games will be
provided in a Windows-based, menu driven format with "point and click"
interactivity.
Persons who wish to gamble will be able to subscribe for
membership over the Internet by completing an application form
appearing at the website. Part of the application process requires
that the subscriber open an account and make a minimum deposit into
such account. The account will be located in the Margarita Island and
all moneys will deposited there and winnings will be paid from there to
the customer.
<PAGE> 4
The website will be controlled by the Company and will be designed
to invite customers to sign up and apply for a membership. After a
membership application is reviewed, it is either accepted or rejected
based on criteria including, but not limited to, age and geographic
location of the customer. The Company's policy will be to accept
subscriptions only from persons of the legal age of majority and
believed to reside in jurisdictions that are not known to expressly
prohibit Internet gaming. Upon acceptance, the approved customer is
then given a username and password and is thereby able to access the
Company's gaming server over the Internet through their Internet service
provider.
The Company's website will allow customers to review all terms,
rules and conditions applicable to gaming and other uses at the site.
All gaming winnings and losses are debited and credited to the
customer's account on a real-time basis. All games are conducted
pursuant to house rules and advantages that are published at the
website and which are as favorable or more favorable than those used by
major land based casinos.
The gaming opportunities offered at the proposed website have been
designed similar to that of a land based style casino and include among
the gaming menu items various games including blackjack, video poker,
slots and roulette. Customers use the Windows format of commands to
carry out gaming activities. The website will initially be written in
English.
The Margarita Company
The Company intends to incorporate a wholly owned subsidiary which
will be registered in Venezuela and operate from the island of
Margarita. As of the date hereof, the Margarita Company has not been
incorporated and there is no assurance that the Margarita Company will
ever be incorporated.
Margarita Island is located 24 miles off the northeast coast of
Venezuela, has a surface area of 1071 square kilometers and has a
population of 350,000.
Combined with the nearby islands of Coche and Cubaque, they form
the Nueve Esparta State in Venezuela. The official language is Spanish
and the primary economic activities are tourism, duty free shopping,
and fishing. Originally discovered in 1498 by the Spanish, the island
became a free province in 1811.
<PAGE> 5
The communication system of the island is fiber optic based, thus
providing a significant advantage as compared to systems of other
Caribbean countries which are typically copper wire based.
All of the Company's Internet gaming and related banking operations
will be carried out by the Margarita Company pursuant to the
nonexclusive Software License Agreement entered into with Chartwell.
The hardware and software platforms on which the Company's Internet
gaming operations will be conducted, including all computer servers,
will be located and operated by Company staff in Margarita. The
Company may maintain a redundant server located in North America in
order to monitor gaming operations.
The Margarita Company's operations will be sanctioned by the
government of Venezuela pursuant to a license from the Venezuela
government permitting the Margarita Company to conduct a virtual casino
service on the Internet. The government license will be for a period
of years, subject to the Margarita Company's right to renew for
extensions subject to payment of annual license renewal fees. As of
the date hereof, the Company has not obtained its gambling license on
the island of Margarita and there is no assurance that the Company will
ever be able to obtain such a license.
Principal Markets
Use of the Company's gaming website is available to any person of
legal majority age residing in a jurisdiction in which Internet gaming
is legal. Those persons visiting the site that do not wish to gamble
may play the games free of charge in the free game area.
The Company intends to advertise and promote its gaming business
in all available advertsining mediums, subject to compliance with
applicable laws. As of the date hereof, the Company has not initiated
any research to determine the parameters in which it may advertise.
Competition
The Company will compete with other companies marketing gaming
related entertainment products and services. Industry information
indicates that there are currently in excess of 280 Internet gaming
websites, each of which is actively seeking to increase its user base
of gamblers. Many of the Internet gaming sites utilize software
developed for their own purposes. There are at least four other firms
<PAGE> 6
such as Chartwell that are in the business of licensing their
proprietary gaming software systems. Each of these, including
Chartwell, are actively seeking to increase the number of their
licensed sites.
The Company expects to encounter significant competition from
existing providers of Internet gaming operations and expects to
encounter increasing competition as additional Internet gaming service
providers come on-line. Many of the Company's potential competitors
have or may have, as the case may be, greater capital and other
resources than the Company and may choose to adopt a marketing plan
similar to that proposed by the Company. There can be no assurance
that the Company will be able to generate meaningful revenues or
earnings from its proposed Internet gaming operations or otherwise
successfully compete in the future.
The Company believes that its ability to compete favorably is
enhanced by the fact that the Chartwell software is Java based, thus
allowing users to log on to the Company's site and begin play
immediately after completion of financial arrangements. Many existing
Internet gaming sites utilize software written in languages other than
Java, which require users to obtain a disk or CD-ROM in order to play,
or are required to spend lengthy periods of time downloading software
programs. In addition, the communication infrastructure in Margarita
Island is fiber optic based, thus allowing more traffic to access the
site at any one time as compared to standard copper wire lines. Copper
line telephone systems are prevalent throughout most of the Caribbean
Islands.
The Company may have difficulty in attracting users to its site if
it is unable to construct its virtual casino in such a fashion as to
provide a unique and enjoyable gaming experience for players. In
addition, the Company recognizes the need to spend funds on advertising
and promotion of its site through a host of Internet sites that
management believes are visited by potential gaming customers.
Testing
The Company estimates that the Margarita Company facility and
website will be fully developed and commercialized prior to the end of
fourth quarter 1999. Standard beta testing of the site will take place
but is not anticipated to be onerous since the Software has been proven
to successfully operate with a number of other online gaming sites.
<PAGE> 7
Government Regulation
Gaming activities are stringently regulated in the United States
and most developed countries and are based upon policies that are
concerned with, among other things, (i) the prevention of unsavory or
unsuitable persons from having a direct or indirect involvement with
gaming; (ii) the establishment and maintenance of responsible
accounting practices and procedures; (iii) the maintenance of effective
controls over the financial practices of licensees, including the
establishment of minimum procedures for internal fiscal affairs and the
safeguarding of assets and revenues, providing reliable record keeping
and requiring the filing of periodic reports with the governing
jurisdictions; (iv) the prevention of cheating and fraudulent
practices; and (v) the provision of a source of government revenue
through taxation and licensing fees.
At the present time, the Company believes that a number of
developed countries, including Australia and several countries in
Europe, the Caribbean, Latin America, the Middle East, Asia, and Africa
do not prohibited Internet gaming activities. However, gaming over the
Internet is a new industry and some or all of these foreign
jurisdictions may take action to more severely regulate or even
prohibit Internet gaming operations in their jurisdictions.
The Company believes that as of the date of this registration
statement, many federal and state prosecutorial agencies in the United
States have taken the position that the provision of Internet gaming
services to residents of the United States is subject to existing
federal and state laws which generally prohibit the provision of gaming
opportunities, except where licensed or subject to exemption. It is
the Company's understanding that many providers of Internet gaming
services to citizens and residents of the United States have taken the
position that existing federal and state laws pertaining to the
provision of gaming opportunities do not apply to Internet gaming
services. In 1997, legislation was introduced to the United States
Senate and House of Representatives (the Kyle bill) which, if enacted,
would effectively amend the Federal Wire Statute, codified at 18 U.S.C.
1084, to prohibit Internet gaming operations to residents of the United
States. (Internet Gambling Prohibition Act of 1997; S. 474 and H.R.
2380). The Company's policy will be to not offer its Internet gaming
services to citizens or residents of any jurisdiction that prohibits
such activities, and to otherwise endeavor to comply with laws
pertaining to gaming.
<PAGE> 8
Since all aspects of the Company's operations will take place on
the island of Margarita in Venezuela and the Margarita Company will be
licensed to conduct Internet wagering by the sovereign state of
Venezuela, the Company's operations at that location are not expected
to be affected by passage of legislation in other jurisdictions.
The Company also believes that the lack of financial security on
the Internet is hindering economic activity thereon. To ensure the
security of transactions occurring over the Internet, U.S. federal
regulations require that any computer software used within the United
States contain a 128-bit encoding encryption, while any computer
software exported to a foreign country contain a 40-bit encoding
encryption. There is uncertainty as to whether the 128-bit encoding
encryption required by the U.S. is sufficient security for transactions
occurring over the Internet. Accordingly, there is a danger that any
financial (credit card) transaction via the Internet will not be a
secure transaction. Accordingly, risks such as the loss of data or loss
of service on the Internet from technical failure or criminal acts are
now being considered in the system specifications and in the security
precautions in the development of the website. There is no assurance
that such security precautions will be successful.
Year 2000
The Year 2000 issue is the result of computer programs written
using two digits rather than four to define the applicable year. As a
result, date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions of operations,
including among others, temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Since the Company has yet to acquire any technology in support of
its services, the planned acquisitions will most likely involve
hardware and software which is relatively new and therefore management
does not anticipate that it will incur significant operating expenses
or be required to invest heavily in computer systems improvements to be
Year 2000 compliant. As the Company makes arrangements with significant
hardware and software suppliers, the Company intends to determine the
extent to which the Company's systems may be vulnerable should those
third parties fail to address and correct their own Year 2000 issues
and take measures to reduce the Company's exposure, such as, finding
alternative suppliers or requiring the suppliers to correct Year 2000
compliance issues prior to the Company acquiring the product. The
Company anticipates that this will be an ongoing process as the Company
<PAGE> 9
begins to implement its plan of operation through 1999. There can be no
assurances that the systems of suppliers or other companies on which
the Company may rely on will be converted in a timely manner and will
not have a materially adverse effect on the Company's systems.
Additionally there can be no assurances that the computer systems
necessary to maintain the viability of the Internet will be Year 2000
compliant. The Company believes that it is taking the steps necessary
regarding Year 2000 compliance issues with respect to matters within
its control. However, no assurance can be given that the Company's
systems will be made Year 2000 compliant in a timely manner or that
the Year 2000 problem will not have a material adverse effect on the
Company's business, financial condition and results of operations.
Company's Office
The Company's headquarters are located 409 Granville Street, Suite
1003, Vancouver, British Columbia, Canada V6C 1T1 and its telephone
number (604) 644-5139.
Employees
The Company is a development stage company and currently has no
employees other than its Officers and Directors. The Company intends
to hire additional employees as needed.
Risk Factors
1. Company No History of Earnings. The Company has no operating
history and is subject to all of the risks inherent in a developing
business enterprise including lack of cash flow and service acceptance.
2. Development and Market Acceptance of Services. The Company's
success and growth will depend upon the Company's ability to market its
services. The Company's success will depend in part upon the market's
acceptance of, and the Company's ability to deliver and support its
gaming services.
3. Dependence on Technology Supplier. The Company is dependent
upon an outside technology supplier for the preparation and creation of
its web site and gaming activity. The unavailability of such services
will result in the Company ceasing operations.
<PAGE> 10
4. Liquidity; Need for Additional Financing. The Company
believes that it does not have the cash it needs for at least the next
twelve months based upon its internally prepared budget. Further, the
Company's cash requirements are not easily predictable and there is a
possibility that its budget estimates will prove to be inaccurate. If
the Company is unable to generate a positive cash flow, it will be
required to curtail operations substantially and seek additional
capital. There is no assurance that the Company will be able to obtain
additional capital if required, or if capital is available, to obtain
it on terms favorable to the Company. The Company may suffer from a
lack of liquidity in the future which could impair its short-term
marketing and sales efforts and adversely affect its results of
operations.
5. Foreign Operations Risks. The Company's principal business
operations will be located on the island of Margarita in the Venezuelan
state of Nueva Esparta. Venezuelan laws relating to gaming, taxation,
business licensing and other areas may be different from those
typically encountered in the United States. Currently, there are a
number of Internet related websites operating from Margarita. Although
management intends to ensure that all agreements, permits, licenses
and/or regulatory approvals are adequately addressed and followed,
there can be no assurance that the regulatory climate in the future in
Margarita will not change in a materially negative way for the Company.
6. Potential Liabilities. The Company could potentially
encounter liabilities with respect to operation of its Internet gaming
website. Prior to any user commencing play on the Company's site, the
user must read and acknowledge by point and click, the respective
conditions of play. Such conditions have been developed by Chartwell
and form part of the standard user registration format at Chartwell's
other licensed sites. The conditions specifically include the fact
that the player fully understands, agrees to, becomes a party to and
shall abide by all rules, regulations, terms and conditions, contained
in the user play agreement.
7. Competition. Most of the Company's competitors have
substantially greater financial, technical and marketing resources than
the Company. In addition, the Company's services compete indirectly
with all other forms of gambling.
8. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its Officers and Directors, who exercise control over the day to day
affairs of the Company.
<PAGE> 11
9. Issuance of Additional Shares. 197,285,000 shares of Common
Stock or 98.6425% of the 200,000,000 authorized shares of Common Stock
of the Company are unissued. The Board of Directors has the power to
issue such shares, subject to shareholder approval, in some instances.
Although the Company presently has no commitments or contracts to issue
any additional shares to other persons. The Company may in the future
attempt to issue shares to acquire products, equipment or properties,
or for other corporate purposes. Any additional issuance by the
Company, from its authorized but unissued shares, would have the effect
of diluting the interest of existing shareholders.
10. Indemnification of Officers and Directors for Securities
Liabilities. The laws of the State of Nevada provide that the Company
could indemnify any Director, Officer, agent and/or employee as to
those liabilities and on those terms and conditions as are specified in
the Corporation Act of the State of Nevada. Further, the Company may
purchase and maintain insurance on behalf of any such persons whether
or not the corporation would have the power to indemnify such person
against the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from
such Officers, Directors, agents and employees for losses incurred by
the Company as a result of their actions. Further, the Company has
been advised that in the opinion of the Securities and Exchange
Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
11. Cumulative Voting, Preemptive Rights and Control. There are
no preemptive rights in connection with the Company's Common Stock.
Shareholders may be further diluted in their percentage ownership of
the Company in the event additional shares are issued by the Company in
the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all
of the Company's Board of Directors.
12. No Dividends Anticipated. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors.
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company has inadequate cash to maintain operations during the
next twelve months. In order to meet its cash requirements the Company
will have to raise additional capital through the sale of securities or
loans. As of the date hereof, the Company has not made sales of
additional securities and there is no assurance that it will be able to
raise additional capital through the sale of securities in the future.
Further, the Company has not initiated any negotiations for loans to
the Company and there is no assurance that the Company will be able to
raise additional capital in the future through loans. In the event
that the Company is unable to raise additional capital, it may have to
suspend or cease operations.
The Company does not intend to conduct any research or development
of its services during the next twelve months other than as described
herein. See "Business."
The Company does not intend to purchase a plant or significant
equipment.
The Company will hire employees on an as needed basis, however,
the Company does not expect any significant changes in the number of
employees.
The Company expects to earn revenues in the fourth quarter of
1999. There is no assurance, however, that the Company will earn said
revenues as planned.
ITEM 3. DESCRIPTION OF PROPERTIES.
The Company does not own any real or personal property. The
Company's only asset is cash.
The Company's headquarters are located P. O. Box 24140 APO, 5000
Miller Road, Richmond, British Columbia, Canada V7B 1Y3 and its
telephone number is (604) 275-6519. The Company current uses office
space provided by one of the directors. There is no formal lease
agreement for the Company's offices.
<PAGE> 13
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock, each director individually and
all officers and directors of the Company as a group. Each person has
sole voting and investment power with respect to the shares of Common
Stock shown, unless otherwise noted, and all ownership is of record and
beneficial.
Name and Number of Percent of
address of owner Shares Position Class
Gerald Williams 0 President and Director 0%
5728-125 A. Street
Surrey, British Columbia
Canada V3X 3G8
Brian Doutaz 0 Secretary and Director 0%
5000 Miller Road
Richmond, British Columbia
Canada V7B 1Y3
Robert Dinning 0 Treasurer and Director 0%
3910 Indian River Dr.
North Vancouver, B.C.
Canada V7G 2G7
All officers and 0 0%
directors as a
group (3 persons)
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
Name Age Position
Gerald Williams 50 President and Director
Brian Doutaz 53 Secretary and Director
Robert Dinning 53 Treasurer and Director
<PAGE> 14
Each director serves for a term of one year and the directors are
elected at the annual meeting of shareholders. The Company's officers
are appointed by the Board of Directors and hold office at the
discretion of the Board.
Gerald Williams - President and member of the Board of Directors.
Since March, 1999, Mr. Williams has been the President and a
member of the Board of Directors of the Company. Since 1980, Mr.
Williams has been the President of Sylco Investments Ltd., located in
Surrey, British Columbia which is engaged in the business of providing
management consulting services and raising venture capital for start-up
and developing businesses.
Brian Doutaz - Secretary and a member of the Board of Directors.
Since May 1999, Mr. Doutaz has been Secretary and a member of the
Board of Directors of the Company. Since April 1993, Mr. Doutaz has
been President of Anina Capital Corp., located in Richmond, British
Columbia which is engaged in the business of providing consulting
services to start-up and development stage corporations.
Robert Dinning - Treasurer and member of the Board of Directors.
Since July 1998, Mr. Dinning has been Treasurer and a member of
the Board of Directors of the Company. Since April 5, 1996, Mr.
Dinning has been Chief Financial Officer and Secretary of First
American Scientific Corp., a Nevada Corporation. Since 1977, Mr.
Dinning has been a business consultant providing management and
financial advice to a wide range of clients, including those engaged in
mining and forestry, and the hospitality and leisure industry. Prior
to 1977, Mr. Dinning was Vice President of Finance and Secretary of
Western Broadcasting Ltd., one of the largest public broadcasting
companies of Canada. Mr. Dinning is a Chartered Accountant.
ITEM 6. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the
Company from inception through December 31, 1998, for each officer and
director of the Company. This information includes the dollar value of
base salaries, bonus awards and number of stock options granted, and
certain other compensation, if any.
<PAGE> 15
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Securities
Names Other Under Restricted Other
Executive Annual Options/ Shares or Annual
Officer and Compen- SARs[1] Restricted LTIP[2] Compen-
Principal Year Salary Bonus sation Granted Share Payouts sation
Position Ended (US$) (US$) (US$) (#) Units (US$) (US$) (US$)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald 1998 0 0 0 0 0 0 0
Williams 1997 0 0 0 0 0 0 0
President 1996 0 0 0 0 0 0 0
Brian 1998 0 0 0 0 0 0 0
Doutaz 1997 0 0 0 0 0 0 0
Secretary 1996 0 0 0 0 0 0 0
Robert 1998 0 0 0 0 0 0 0
Dinning 1997 0 0 0 0 0 0 0
Treasurer 1996 0 0 0 0 0 0 0
</TABLE>
The Company anticipates paying the following salaries in 1999,
subject to the Company beginning profitable operations and generating
sufficient revenues to pay the same:
Gerald Williams President 1999 $60,000
Brian Doutaz Secretary 1999 $30,000
Robert Dinning Treasurer 1999 $ -0-
The Company has adopted a non-qualified incentive stock option
plan, however, no options have granted as of the date hereof. There
are no other stock option plans, retirement, pension, or profit sharing
plans for the benefit of the Company's officers and directors other
than as described herein.
Option/SAR Grants.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have been
made to officers and/or directors:
<PAGE> 16
<TABLE>
<CAPTION>
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months[1] Price ($/Sh) Exercised Date
<S> <C> <C> <C> <C> <C>
Gerald Williams 500,000 500,000 $0.10 -0- 04/30/2004
500,000 500,000 $0.25 -0- 04/30/2004
Brian Doutaz 250,000 250,000 $0.10 -0- 04/30/2004
250,000 250,000 $0.25 -0- 04/30/2004
</TABLE>
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance.
Compensation of Directors.
Directors do not receive any compensation for serving as members
of the Board of Directors. The Board has not implemented a plan to
award options to any Directors. There are no contractual arrangements
with any member of the Board of Directors other than Messrs. Williams
and Doutaz. See "Certain Relationships and Related Transaction."
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On March 15, 1999, the Company entered into a consultant agreement
with Gerald Williams, President and a Director of the Company, wherein
the Company has agreed to pay Mr. Williams $5,000 per month for a
period of five years. The Company also granted Mr. Williams options to
acquire 500,000 shares of common stock at an exercise price of $0.10
per share and 500,000 shares of common stock at an exercise price of
$0.25 per share.
On May 1, 1999, the Company entered into a consultant agreement
with Brian Doutaz, a Director of the Company, wherein the Company has
agreed to pay Mr. Doutaz $2,500 per month for a period of five years.
The Company also granted Mr. Doutaz options to acquire 250,000 shares
of common stock at an exercise price of $0.10 per share and 250,000
shares of common stock at an exercise price of $0.25 per share.
<PAGE> 17
On May 1, 1999, the Company entered into a consultant agreement
with Frank Rigney, wherein the Company has agreed to pay Mr. Rigney
$5,000 per month for a period of five years. The Company also
granted Mr. Rigney options to acquire 500,000 shares of common stock
at an exercise price of $0.10 per share and 500,000 shares of common
stock at an exercise price of $0.25 per share. Mr. Rigney may be
deemed a promoter of the Company.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party to any pending or threatened litigation
and to its knowledge, no action, suit or proceedings has been
threatened against its officers and its directors.
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
No market exists for the Company's securities and there is no
assurance that a regular trading market will develop, or if developed,
that it will be sustainable. A shareholder in all likelihood, there
fore, will be unable to resell the securities referred to herein should
he or she desire to do so. Furthermore, it is unlikely that a lending
institution will accept the Company's securities as pledged collateral
for loans unless a regular trading market develops.
There are no plans, proposals, arrangements or understandings with
any person with regard to the development of a trading market in any of
the Company's securities. On January 4, 1999, the NASD amended its
rules regarding listing of securities for trading on the Bulletin Board
which it operates. Effective January 4, 1999, securities of
corporations will not be listed for trading on the Bulletin Board
unless the corporation files reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. Accordingly, the Company's common
stock will not be listed for trading on the Bulletin Board until such
time as this registration is declared effective by operation of law and
the Company has satisfied all outstanding comments issued by the
Securities and Exchange Commission.
As of August 31, 1999, the Company has 32 holders of record of its
Common Stock.
The Company has not paid any dividends since its inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
<PAGE> 18
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has 2,715,000 shares of Common Stock issued and
outstanding as of August 31, 1999. Of the 2,715,000 shares of the
Company's Common Stock outstanding all shares are freely tradeable.
In 1997, the Company sold 10,000,000 shares of its common stock to
14 investors in consideration of $10,000. Shares were sold pursuant to
Reg. 504 of the Securities Act of 1933 (the "Act").
In 1999, the Company reverse split its shares of common stock on
a 1 for 10 basis, reducing the total outstanding shares from 10,000,000
to 1,000,000.
On April 5th and 6th, 1999, the Company sold 1,715,000 shares of its
common stock to 18 investors in consideration of $171,500. The shares
were sold pursuant to Reg. 504 of the Act. A commission of $17,500 was
paid to F.J.R. Resources Inc. All sales were made outside the United
States of America.
In March and May 1999, the Company issued options to Gerald
Williams, Brian Doutaz and Frank J. Rigney to acquire up to 2,500,000
shares of common stock. The options were granted pursuant to Reg. 701
of the Act. As of the date hereof, no options have been exercise.
ITEM 11. DESCRIPTION OF SECURITIES.
Common Stock
The authorized Common Stock of the Company consists of 200,000,000
shares, $0.0001 par value per share. All shares have equal voting
rights, are non-assessable and have one vote per share. Voting rights
are not cumulative and, therefore, the holders of more than 50% of the
Common Stock could, if they choose to do so, elect all of the directors
of the Company.
Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be
distributed pro rata to the holders of the Common Stock. The holders
of the Common Stock do not have preemptive rights to subscribe for any
securities of the Company and have no right to require the Company to
redeem or purchase their shares. The shares of Common Stock presently
outstanding are fully paid and non-assessable.
<PAGE> 19
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has
been paid on the Common Stock since inception, and none is contemplated
in the foreseeable future.
Transfer Agent
The Company's transfer agent is Pacific Stock Transfer Company,
5844 South Pecos Road, Suite D, Las Vegas, Nevada 89120 and its
telephone number is (702) 361-3033.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the state of Nevada under certain circumstances
provide for indemnification of the Company's Officers, Directors and
controlling persons against liabilities which they may incur in such
capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this
description is qualified in its entirety by reference to the Company's
Articles of Incorporation and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising
in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such
actions, indemnification is granted only with respect to expenses
actually incurred in connection with the defense or settlement of the
action. In such actions, the person to be indemnified must have acted
in good faith and in a manner believed to have been in the Company's
best interest, and have not been adjudged liable for negligence or
misconduct.
<PAGE> 20
ITEM 13. FINANCIAL STATEMENTS.
REWARD ENTERPRISES INC.
(A Development Stage Company)
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Operations and Comprehensive Loss F-3
Statement of Stockholders' Equity F-4
Statements of Cash Flows F-5
NOTES TO FINANCIAL STATEMENTS F-6
<PAGE>
<PAGE> 21
WILLIAMS & WEBSTER P.S.
Certified Public Accountants
Seafirst Financial Center
601 W. Riverside, Suite 1970, Spokane, WA 99201-0611
Phone (509) 838-5111 Fax (509) 624-5001
Board of Directors
Reward Enterprises, Inc.
Richmond, British Columbia CANADA
Independent Auditor's Report
We have audited the accompanying balance sheets of Reward Enterprises,
Inc. (a development stage company) as of June 30, 1999 and 1998 and the
related statements of operations and comprehensive loss, cash flows,
and stockholders' equity for the years then ended and for the period
from December 12, 1997 (inception) to June 30, 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 audits in accordance with generally accepted auditing
standards. 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 Reward
Enterprises, Inc. as of June 30, 1999, and 1998, and the results of its
operations and its cash flows for the period from December 12, 1997
(inception) to June 30, 1999, in conformity with generally accepted
accounting principles.
As discussed in Note 2, the Company has been in the development stage
since its inception on December 12, 1997. Realization of a major
portion of the assets is dependent upon the Company's ability to meet
its future financing requirements, and the success of future
operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding
those matters are described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
August 24, 1999
F-1
<PAGE> 22
REWARD ENTERPRISES, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 102,614 $ -
--------- ---------
TOTAL CURRENT ASSETS 102,614 -
PROPERTY AND EQUIPMENT
Computer hardware 8,665 -
Website 10,000 -
Software license 50,000 -
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 68,665 -
--------- ---------
TOTAL ASSETS $ 171,279 $ -
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 72,500 $ 10,000
--------- ---------
TOTAL CURRENT LIABILITIES 72,500 10,000
--------- ---------
TOTAL LIABILITIES 72,500 10,000
--------- ---------
COMMITMENTS AND CONTINGENCIES - -
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 200,000,000 shares
authorized, $.01 par value;
2,715,000 and 1,000,000 shares issued
and outstanding, respectively 27,150 10,000
Additional paid-in capital 154,350 -
Subscriptions receivable (10,000) (10,000)
Accumulated deficit during
developmental stage (72,506) (10,000)
Accumulated other comprehensive
income (215) -
--------- ---------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) 98,779 (10,000)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 171,279 $ -
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 23
REWARD ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
Year Year Dec 12, 1997
Ended Ended (Inception)
June 30, June 30, Through
1999 1998 June 30, 1999
<S> <C> <C> <C>
REVENUES $ - $ - $ -
--------- --------- ---------
EXPENSES
Consulting fees 47,500 9,000 56,500
Commissions - 1,000 1,000
Legal and professional fees 10,000 - 10,000
Travel and entertainment 4,791 - 4,791
Office and administration 215 - 215
--------- --------- ---------
TOTAL OPERATING EXPENSES 62,506 10,000 72,506
--------- --------- ---------
NET LOSS FROM OPERATIONS (62,506) (10,000) (72,506)
OTHER COMPREHENSIVE INCOME
Foreign currency translation
loss (215) - (215)
--------- --------- ---------
COMPREHENSIVE LOSS $ (62,721) $ (10,000) $ (72,721)
========= ========= =========
NET LOSS PER COMMON SHARE $ (0.0437) $ (0.0100) $ (0.0299)
========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 1,428,750 1,000,000 2,428,750
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 24
REWARD ENTERPRISES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
Number Paid-in Subscriptions
of Shares Amount Capital Receivable
<S> <C> <C> <C> <C>
Issuance of common stock
in April, 1998: for
valued at $.01 per share 1,000,000 $ 10,000 $ - $ (10,000)
Loss for year ending
June 30, 1998 - - - -
--------- -------- ---------- ---------
Balance, June 30, 1998 1,000,000 10,000 - (10,000)
Issuance of common stock in
May, 1999 for cash at $0.01
per share 1,400,000 14,000 - -
Issuance of common stock
May, 1999 for cash at
$0.50 per share 315,000 3,150 154,350 -
Loss for year ending
June 30, 1999 - - - -
Foreign translation gain
(loss) - - - -
--------- -------- ---------- ---------
Balance, June 30, 1999 2,715,000 $ 27,150 $ 154,350 $ (10,000)
========= ======== ========== =========
The accompanying notes are an integral part of these financial
statements.
F-4a
<PAGE> 25
REWARD ENTERPRISES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated
Other Total
Accumulated Comprehensive Stockholders'
Deficit Income Equity
<S> <C> <C> <C>
Issuance of common stock
in April, 1998: for
valued at $.01 per share $ - $ - $ -
Loss for year ending
June 30, 1998 (10,000) - (10,000)
--------- ------ ---------
Balance, June 30, 1998 (10,000) - (10,000)
Issuance of common stock in
May, 1999 for cash at $0.01
per share - - 14,000
Issuance of common stock
May, 1999 for cash at
$0.50 per share - - 157,500
Loss for year ending
June 30, 1999 (62,500) - (62,506)
Foreign translation gain
(loss) - (215) (215)
--------- ------ ---------
Balance, June 30, 1999 $ (72,506) $ (215) $ 98,779
========= ====== =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4b
<PAGE> 26
REWARD ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Year Dec 12, 1997
Ended Ended (Inception)
June 30, June 30, Through
1999 1998 June 30, 1999
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (62,506) $ (10,000) $ (72,506)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Increase in:
Other assets (60,000) - (60,000)
Accounts payable 62,500 10,000 72,500
--------- --------- ---------
Net cash (used) in operating
activities (60,006) - (60,006)
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and
equipment (8,665) - (8,665)
--------- --------- ---------
Net cash used in investing
activities (8,665) - (8,665)
Cash flows from financing activities:
Issuance of stock 171,500 - 171,500
--------- --------- ---------
Net increase in cash 102,829 - 102,829
Foreign translation gain (215) - (215)
Cash, beginning of period - - -
--------- --------- ---------
Cash, end of period $ 102,614 $ - $ 102,614
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest $ - $ - $ -
========= ========= =========
Income taxes $ - $ - $ -
========= ========= =========
NON-CASH INVESTING AND FINANCING
Stock subscribed in exchange
for payables $ - $ 10,000 $ 10,000
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE> 27
REWARD ENTERPRISES INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ending June 30, 1999 and 1998
NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS
Reward Enterprises Inc., formerly Sports Entertainment (hereinafter
"the Company"), was incorporated in December 1997 under the laws of the
State of Nevada primarily for the purpose of offering interactive
online Internet entertainment and game playing. The name change to
Reward Enterprises Inc. was effective on July 28, 1998
The Company is in the development stage and as of June 30, 1999 had not
realized any significant revenues from its planned operations.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Reward Enterprises
Inc. is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of
the Company's management which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the
preparation of the financial statements.
Development Stage Activities
The Company has been in the development stage since its formation on
December 12, 1997. It is primarily engaged in internet entertainment
and game playing.
Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern.
As shown in the accompanying financial statements, the Company incurred
a comprehensive net loss of $62,721 and $10,000 for the years ended
June 30, 1999 and June 30, 1998, respectively. The Company, being a
developmental stage enterprise, is currently putting technology in
place which will, if successful, mitigate these factors which raise
substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets,
or the amounts and classification of liabilities that might be
necessary in the event the Company cannot continue in existence.
Management has established plans designed to increase the sales of the
Company's products. Management intends to seek new capital from new
equity securities issuances that will provide funds needed to increase
liquidity, fund internal growth and fully implement its business plan.
Accounting Method
The Company's financial statements are prepared using the accrual method
of accounting, with a year-end of June 30.
F-6
<PAGE> 28
REWARD ENTERPRISES INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ending June 30, 1999 and 1998
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Per share
Loss per share was computed by dividing the net loss by the weighted
average number of shares outstanding during the period. The weighted
average number of shares was calculated by taking the number of shares
outstanding and weighting them by the amount of time that they were
outstanding. Stock options, which would be antidilutive, were not used
in the calculation of loss per share.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months
or less to be cash equivalents.
Provision for Taxes
At June 30, 1999, the Company had a net operating loss of approximately
$72,000. No provision for taxes or tax benefit has been reported in
the financial statements, as there is not a measurable means of
assessing future profits or losses.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates
and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.
Impaired Asset Policy
The Company evaluates the recoverability of property and equipment and
intangible assets when events and circumstances indicate that such
assets might be impaired. The Company determines impairment by
comparing the undiscounted future cash flows estimated to be generated
by these assets to their respective carrying amounts.
Year 2000
The Company, like other firms, could be adversely affected if the
computer systems used by it, its suppliers or customers do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as
the "Year 2000" issue. Additionally, this issue could impact non-
computer systems and devices such as production equipment. At this
time, because of the complexities involved in the issue, management
cannot provide assurances that the Year 2000 issue will not have an
impact on the Company's operations.
The Company has reviewed its technology, including software and
hardware, and has determined that there will be no adverse effects to
the Company's operation regarding Year 2000 issues. Management also
believes that Year 2000 issues should not adversely affect the ability
of its clients and customers to conduct business with the Company. Any
costs associated with Year 2000 compliance are expensed when incurred.
<PAGE> 29
REWARD ENTERPRISES INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ending June 30, 1999 and 1998
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and
amortization are provided using the straight line method over the
estimated useful lives of the assets. The useful lives of property,
plant and equipment for purposes of computing depreciation and
amortization are five to seven years. The following is a summary of
property and equipment.
Cost
Computers $ 8,665
Website 10,000
Software license 50,000
---------
$ 68,665
=========
No depreciation or amortization expense has been recognized for the
years ended June 30, 1999 and 1998 because the assets were not placed
in service until after June 30, 1999.
NOTE 4 INTANGIBLE ASSETS
The Company has capitalized $60,000 which is the contractual cost of
the website and software license purchased from an independent
supplier. No portion of this software acquired at June 30, 1999 was
internally developed and, accordingly, there are no internal costs
associated with this software which were charged to research and
development. Consistent with SOP 98-1, the costs of this
software which was purchased solely for internal use and will not be
marketed externally have been capitalized.
NOTE 5 COMMON STOCK
Upon incorporation, subscriptions for 10,000,000 shares of common stock
were issued at $.001 per share for $10,000. In July 1999, the Board
of Directors authorized a 1 for 10 reverse stock split. This decreased
the number of issued and outstanding shares to 1,000,000 and increased
the par value of the stock to $0.01 per share. A second share issuance
Under Regulation D, Rule 504, was for 1,400,000 common shares at $.01
and 315,000 common shares at $0.50 per share for total proceeds of
$171,500.
At June 30, 1999 and 1998, $10,000 in stock subscriptions were
receivable and subsequently this amount was received by July 7, 1999.
NOTE 6 STOCK OPTIONS
In September 1998, the Company adopted the Reward Enterprises Inc. 1999
Directors and Officers Stock Option Plan, a non-qualified plan. This
plan allows the Company to distribute up to 2,000,000 shares of common
stock to officers, directors, employees and consultants through the
authorization of the Company's Board of Directors.
F-8
<PAGE> 30
REWARD ENTERPRISES INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ending June 30, 1999 and 1998
NOTE 6 STOCK OPTIONS (CONTINUED)
During 1999, under Rule 701, the Company issued 2,500,000 common stock
options for the services of consultants. The options issued include
negotiation rights and begin vesting in June 1999, with 25% of the
eligible shares vesting each year until the recipients are fully vested
in their shares. The Company entered into consulting agreements with
three directors of the Company. Two of the consultants will receive
$5,000 per month and 500,000 common stock options exercisable at $0.10
per share and 500,000 common stock options exercisable at $0.25 per
share. One director will receive $2,500 per month and 250,000 common
stock options exercisable at $.10 per share and 250,000 common stock
options exercisable at 0.25 per share. All options related to these
agreements expire June 30, 2010. See Note 7.
The fair value of each option granted is estimated on the grant date
using the Black-Scholes Option Price Calculation. The following
assumptions were made in estimating fair value: Risk-free interest
rate of 5% and expected life of ten years.
Following is a summary of the stock options during 1998 and 1999:
Weighted
Number Average
Of Exercise
Shares Price
Outstanding at 6-30-98 - -
========= =======
Granted 1,250,000 $ 0.10
Granted 1,250,000 $ 0.25
Exercised - $ -
Forfeited - $ -
--------- -------
Outstanding at 6-30-99 2,500,000 $ 0.18
Options exercisable at 6-30-99 2,500,000 $ 0.18
========= =======
Weighted average fair value of
options granted during 1999 $0.18
=====
NOTE 7 RELATED PARTIES
Certain consultants who received common stock options under the
Company's non-qualified stock option plan are the Company's directors
and stockholders. (See Note 6). An associate of a director of the
Company provides office space to the Company at no charge. The value
of this space is not considered significant.
F-9
<PAGE> 31
REWARD ENTERPRISES INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ending June 30, 1999 and 1998
NOTE 8 COMMITMENTS AND CONTINGENCIES
Database Development
The Company's purchase commitment for services to develop a website at
June 30, 1999 totaled $10,000, of which $5,000 was paid in 1999. As
of June 30, 1999 the Company considered that the majority of the
services contracted for were payable and accrued the balance owing of
$5,000 as part of accounts payable.
Software License Agreement
The Company's purchase commitment for a software license agreement at
June 30, 1999 totaled $50,000 of which $20,000 was paid in 1999. As
of June 30, 1999 the Company considered the contract payable and
accrued the balance of $30,000 as part of accounts payable.
As further consideration for the rights granted under the software
license, the licensee, Reward Enterprises, Inc., will pay a royalty
calculated at 30% of gross revenue until aggregate royalty payments of
$100,000 have been paid. After the $100,000 has been paid, the royalty
rate will be reduced to 20% of gross revenue until an aggregate
$1,000,000 has been paid and, thereafter, royalty payments will be 15%
of gross revenue for the balance of the term of the agreement. The
term of the agreement is two years with an option to renew for another
two years. Royalty payments begin at the end of the first month after
the Company is no longer considered to be in the development stage.
NOTE 9 - CONCENTRATIONS
The Company maintains all of its cash accounts at a single financial
institution located in Delta, British Columbia, Canada.
NOTE 10 TRANSLATION OF FOREIGN CURRENCY
The Company has adopted Financial Accounting Standard No. 52. Foreign
currency translation resulted in an aggregate exchange loss of $215 for
the year ended June 30, 1999. The Company recorded this transaction
in the Statement of Stockholders' Equity.
NOTE 11 - SUBSEQUENT EVENTS
On July 22, 1999, the Company incorporated a subsidiary in Nevis,
Eastern Caribbean under the name Reward Nevis Group, Inc. The shares
are held by another subsidiary, Reward International Group Ltd,, a
Bermudian company, which was incorporated August 6, 1999. Reward
International Group Ltd. is wholly owned by Reward Enterprises, Inc.
F-10
<PAGE> 32
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through the date of this
Registration Statement.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) List of Financial Statements
Independent Auditors' Report
Balance Sheet
Statement of Income
Statement of Cash Flows
Statement of Shareholders' Equity
Notes to Financial Statements
b) List of Exhibits.
Exhibit No. Description
3.1 Articles of Incorporation.
3.2 Bylaws.
3.3 Amendment to the Articles of Incorporation.
4.1 Specimen Stock Certificate.
10.1 Contract with Chartwell Technologies, Inc.
27 Financial Data Schedule
99.1 Consulting Agreement - Gerald Williams
99.2 Consulting Agreement - Brian Doutaz
99.3 Consulting Agreement - Frank J. Rigney
99.4 Stock Option Plan
<PAGE> 33
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.
Reward Enterprises Inc.
BY: /s/ Gerald Williams
Gerald Williams, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this Form 10-SB Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ Gerald Williams
Gerald Williams President and a member September 3, 1999
of the Board of Director
/s/ Brian Doutaz
Brian Doutaz Director September 3, 1999
/s/ Robert Dinning
Robert Dinning Secretary/Treasurer, September 3, 1999
Chief Financial Officer
and Director
<PAGE> 34
EXHIBIT 3-1
FILED THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
DEC 12 1997
C27994-97
Don Heller Secretary of State
ARTICLES OF INCORPORATION
OF
SPORTS ENTERTAINMENT PRODUCTIONS INC.
KNOW ALL MEN BY THESE PRESENTS:
That we the undersigned, have this day voluntarily associated
ourselves together for the purpose of forming a corporation under the
laws of the State of Nevada and do hereby certify:
ONE
The name of this corporation is SPORTS ENTERTAINMENT PRODUCTIONS
INC.
TWO
The resident agent of said corporation shall be Pacific Corporate
Services Inc., 7631 Bermuda Road, Las Vegas, NV., 89123 and such other
offices as may be determined by the By-Laws in and outside the State of
Nevada.
THREE
The objects to be transacted, business and pursuit and nature of
the business, promoted or carried on by this corporation are and shall
continue to be engaged in any lawful activity.
FOUR
The members of the governing board shall be styled Directors and
the first Board of Directors shall consist of one (1). The number of
stockholders of said corporation shall consist of one (1). The number
of directors and shareholders of this corporation may, from time to
time, be increased or decreased by an amendment to the By-laws of this
corporation in that regard, and without the necessity of amending these
Articles of Incorporation. The name and address of the first Board of
Directors and of the Incorporator signing these Articles as follows:
Douglas J. McClean Suite 309409 Granville Street
Vancouver, B.C., Canada,
V6C IT2
<PAGE>
<PAGE> 35
FIVE
The Corporation is to have perpetual existence.
SIX
The total authorized capitalization of this Corporation shall be
and is the sum of 200,000,000 shares of Common Stock at $0.001 par
value, said stock to carry full voting power and the said shares shall
be issued fully paid at such time as the Board of Directors may
designate in exchange for cash, property, or services, the stock of
other corporations or other values, rights, or things, and the
judgement of the Board of Directors as to the value thereof shall be
conclusive.
SEVEN
The capital stock shall be and remain non-assessable. The private
property of the stockholders shall not be liable for the debts or
liabilities of the Corporation.
IN WITNESS WHEREOF I have set my hand this 10 December, 1997.
Province of British Columbia )
)
Canada )
On this 10th day of December, 1997 before me, a Notary Public in
and for said, Province of British Columbia, Canada,. Personally
appeared, Douglas J. McClean known to me to be the person whose name is
subscribed to the, foregoing instrument, and he duly acknowledged to me
that he executed the same for the purpose therein mentioned.
IN WITNESS WHEREOF, I have set my hand and offered by official
seal in, The City of Langley, Province of British Columbia, Canada, the
day and year in this Certificate first above written.
/s/ eligible
Notary Public
<PAGE> 36
EXHIBIT 3.2
BYLAWS
OF
SPORTS ENTERTAINMENT PRODUCTIONS INC.
A Nevada Corporation
ARTICLE 1
Offices
Section 1. The registered office of this corporation shall be in
the County of Clark, State of Nevada.
Section 2. The corporation may also have offices at such other
places both within and without the State of Nevada as the Board of
Directors may from time to time determine or the business of the
corporation may require.
ARTICLE 2
Meetings of Stockholders
Section 1. All annual meetings of the stockholders shall be held
at the registered office of the corporation or at such other place
within or without the State of Nevada as the Directors shall determine.
Special meetings of the stockholders may be held at such time and place
within or without the State of Nevada as shall be stated in the notice
of the meeting, or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of the stockholders, commencing with
the year 1997 shall be held on the each year if not a legal holiday
and, if a legal holiday, then on the next secular day following, or at
such other time as may be set by the Board of Directors from time to
time, at which the stockholders shall elect by vote a Board of
Directors and transact such other business as may properly be brought
before the meeting
Section 3. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the Articles
of Incorporation, may be called by the President or the Secretary by
resolution of the Board of Directors or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of
the corporation issued and outstanding and entitled to vote. Such
request shall state
the purpose of the proposed meeting.
Section 4. Notices of meetings shall be in writing and signed by
the President or Vice President or the Secretary or an Assistant
Secretary or by such other person or persons as the Directors shall
designate. Such notice shall state the purpose or purposes for which
the meeting is called and the time and the place, which may be within
or without this State, where it is to be held. A copy of such notice
shall be either delivered personally to or shall be mailed, postage
prepaid, to each stockholder of record entitled to vote at such meeting
<PAGE> 37
not less than ten nor more than sixty days before such meeting. If
mailed, it shall be directed to a stockholder at his address as it
appears upon the records of the corporation and upon such mailing of
any such notice, the service thereof shall be complete and the time of
the notice shall begin to run from the date upon which such notice is
deposited in the mail for transmission to such stockholder. Personal
delivery of any such notice to any officer of a corporation or
association, or to any member of a partnership shall constitute
delivery of such notice to such corporation, association or
partnership. In the event of the transfer of stock after delivery of
such notice of and prior to the holding of the meeting it shall not be
necessary to deliver or mail notice of the meeting to the transferee.
Section 5. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 6. The holders of a 10% of the stock issued and
outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise
provided by statute or by the Articles of Incorporation. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote there at, present in
person or represented by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the
meeting as originally notified.
Section 7. When a quorum is present or represented at any
meeting, the vote of the holders of a 10% of the stock having voting
power present in person or represented by proxy shall be sufficient to
elect directors or to decide any question brought before such meeting,
unless the question is one upon which by express provision of the
statutes or of the Articles of Incorporation, a different vote shall
govern and control the decision of such question.
Section 8. Each stockholder of record of the corporation shall be
entitled at each meeting of stockholders to one vote for each share of
stock standing in his name of the books of the corporation. Upon the
demand of any stockholder, the vote for Directors and the vote upon any
question before the meeting shall be by ballot.
Section 9. At any meeting of the stockholders any stockholder may
be represented and vote by a proxy or proxies appointed by an
instrument in writing. In the event that any such instrument in writing
shall designate two or more persons to act as proxies, a majority of
such persons present at the meeting, or, if only one shall be present,
then that one shall have and may exercise all of the powers conferred
by such written instrument upon all of the persons so designated unless
the instrument shall otherwise provide. No proxy or power of attorney
to vote shall be used to vote at a meeting of the stockholders unless
it shall have been filed with the secretary of the meeting when
required by the inspectors of election. All questions regarding the
qualifications of voters, the validity of proxies and the acceptance of
<PAGE> 38
or rejection of votes shall be decided by the inspectors of election
who shall be appointed by the Board of Directors, or if not so
appointed, then by the presiding officer of the meeting.
Section 10. Any action which may be taken by the vote of the
stockholders at a meeting may be taken without a meeting if authorized
by the written consent of stockholders holding at least a majority of
the voting power, unless the provisions of the statutes or of the
Articles of Incorporation require a greater proportion of voting power
to authorize such action in which case such greater proportion of
written consents shall be required.
ARTICLE 3
Directors
Section 1. The business of the corporation shall be managed by
its Board of Directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these Bylaws directed
or required to be exercised or done by the stockholders.
Section 2. The number of Directors which shall constitute the
whole board shall be One. The number of Directors may from time to
time be increased or decreased to not less than one nor more than
fifteen by action of the Board of Directors. The Directors shall. be
elected at the annual meeting of the stockholders and except as
provided in section 2 of this Article, each Director elected shall hold
office until his successor is elected and qualified. Directors need not
be stockholders.
Section 3. Vacancies in the Board of Directors including those
caused by an increase in the number of directors, may be filled by a
majority of the remaining Directors, though less than a quorum or by
a sole remaining Director, and each Director so elected shall hold
office until his successor is elected at an annual or a special meeting
of the stockholders. The holders of a two-fluids of the outstanding
shares of stock entitled to vote may at any time peremptorily terminate
the term of office of all or any of the Directors by vote at a meeting
called for such purpose or by a written statement filed with the
secretary or in his absence, with any other officer Such removal shall
be effective immediately, even if successors are not elected
simultaneously and the vacancies on the Board of Directors resulting
therefrom shall only be filled from the stockholders.
A vacancy or vacancies in the Board of Directors shall be deemed
to exist in case of the death, resignation or removal of any Directors,
or if the authorized number of Directors be increased, or if the
stockholders fail at any annual or special meeting of stockholders at
which any Director or Directors are elected to elect the full
authorized number of Directors to be voted for at that meeting.
<PAGE> 39
The stockholders may elect a Director or Directors at any time to
fill any vacancy or vacancies not filled by the Directors. If the Board
of Directors accepts the resignation of a Director tendered to take
effect at a future time, the Board or the stockholders shall have power
to elect a successor to take office when the resignation is to become
effective.
No reduction of the authorized number of Directors shall have the
effect of removing any Director prior to the expiration of his term of
office.
ARTICLE 4
Meetings of the Board of Directors
Section 1. Regular meetings of the Board of Directors shall be
held at any place within or without the State which has been designated
from time to time by resolution of the Board or by written consent of
all members of the Board. In the absence of such designation regular
meeting shall be held at the registered office of the corporation.
Special meetings of the Board may be held either at a place so
designated or at the registered office.
Section 2. The first meeting of each newly elected Board of
Directors shall be held immediately following the adjournment of the
meeting of stockholders and at the place thereof No notice of such
meeting shall be necessary to the directors in order legally to
constitute the meeting, provided a quorum be present. In the event
such meeting is not so held, the meeting may be held at such time and
place as shall be specified in a notice given hereinafter provided for
special meetings of the Board of Directors.
Section 3. Regular meetings of the Board of Directors may be held
without call or notice at such time and at such place as shall from
time to time be fixed and determined by the Board of Directors.
Section 4. Special meetings of the Board of Directors may be
called by the Chairman or the President or by the Vice-President or by
any two directors.
Written notice of the time and place of special meetings shall be
delivered personally to each director, or sent to each director by mad
or by other form of written communication, charges prepaid, addressed
to him at his address as it is shown upon the records or if not readily
ascertainable, at the place in which the meetings of the directors are
regularly held. In case such notice is mailed or telegraphed, it shall
be deposited in the United States mad or delivered to the telegraph
company at least forty-eight (48) hours prior to the time of the
holding of the meeting. In case such notice is delivered as above
provided, it shall be so delivered at least twenty-four (24) hours
prior to the time of the holding of the meeting. Such mailing,
telegraphing or delivery as above provided shall be due, legal and
personal notice to such director
<PAGE> 40
Section 5. Notice of the time and place of holding an adjourned
meeting need not be given to the absent directors if the time and place
be fixed at the meeting adjourned
Section 6. The transaction of any meeting of the Board of
Directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and
notice, if a quorum be present, and if either before or after the
meeting, each of the directors not present signs a written waiver of
notice, or a consent to holding such meeting, or approvals of the
minutes thereof . All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes of the
meeting.
Section 7. A majority of the authorized number of directors shall
be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided- Every act or decision done
or made by a majority of the directors present at a meeting duly held
at which a quorum is present shall be regarded as the act of the Board
of Directors, unless a greater number be required by law or by the
Articles of Incorporation. Any action of a majority, although not at
a regularly called meeting, and the record thereof if assented to in
writing by all of the other members of the Board shall be as valid and
effective in all respects as if passed by the Board in regular meeting
Section 8. A quorum of the directors may adjourn any directors
meeting to meet again at stated day and hour, provided, however, that
in the absence of a quorum, a majority of the directors present at any
directors meeting, either regular or special, may adjourn from time to
time until the time fixed for the next regular meeting of the Board.
ARTICLE 5
Committees of Directors
Section 1. The Board of Directors may, by resolution adopted by
a majority of the whole Board, designate one or more committees of the
Board of Directors, each committee to consist of two or more of the
directors of the corporation which, to the extent provided in the
resolution, shall and may exercise the power of the Board of Directors
in the management of the business and affairs of the corporation and
may have power to authorize the seal of the corporation to be affixed
to an papers which my require it. Such committee or committees shall
have such name or names as may be determined from time to time by the
Board of Directors. The members of any such committee present at any
meeting and not disqualified from voting may, whether or not they
constitute a quorum, unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or
disqualified member At meetings of such committees, a majority of the
members or alternate members at any meeting at which there is a quorum
shall be the act of the committee.
Section 2. The committee shall keep regular minutes of their
proceedings and report the same to the Board of Directors.
<PAGE> 41
Section 3. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may
be, and such written consent is filed with the minutes of proceedings
of the Board or committee.
ARTICLE 6
Compensation of Directors
SECTION 1. The directors may be paid their expenses of attendance
at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated
salary as director No such payment shall preclude any director from
serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like reimbursement and compensation for attending committee
meetings.
ARTICLE 7
Notices
Section 1. Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or
stockholders at their addresses appearing on the books of the
corporation. Notice by mad shall be deemed to be given at the time when
the same shall be mailed. Notice to directors may also be given by
telegram.
Section 2. Whenever all parties entitled to vote at any meeting,
whether of directors or stockholders, consent, either by a writing on
the records of the meeting or filed with the secretary, or by presence
at such meeting and oral consent entered on the minutes, or by taking
part in the deliberations at such meeting without objection, the doings
of such meeting shall be as valid as if had at a meeting regularly
called and noticed, and at such meeting any business may be transacted
which is not excepted from the written consent to the consideration of
which no object for want of notice is made at the time, and if any
meeting be irregular for want of notice or of such consent provided a
quorum was present at such meeting, the proceedings of said meeting may
be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all
parties having the right to vote at such meeting; and such consent or
approval of stockholders may be by proxy or attorney, but all such
proxies and powers of attorney must be in writing.
Section 3. Whenever any notice whatever is required to be given
under the provisions of the statutes, of the Articles of Incorporation
or of these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after die time
stated therein, shall be deemed equivalent thereto.
<PAGE> 42
ARTICLE 8
Officers
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a President a Secretary and a
Treasurer. Any person may hold two or more officers.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a Chairman of the Board who
shall be a director, and shall choose a President a Secretary and a
Treasurer, none of whom need be directors.
Section 3. The Board of Directors may appoint a Vice-Chairman of
the Board, Vice Presidents and one or more Assistant Secretaries and
Assistant Treasurers and such other officers and agents as it shall
deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 4. The salaries and compensation of all officers of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office at
the pleasure of the Board of Directors. Any officer elected or
appointed by the Board of Directors may be removed any time by the
Board of Directors. Any vacancy occurring in any office of the
corporation by death resignation, removal or otherwise shall be filled
by the Board of Directors.
Section 6. The Chairman of the Board shall, preside at meetings
of the stockholders and the Board of Directors, and shall see that all
orders and resolutions of the Board of Directors are carried into
effect.
Section 7. The Vice-Chairman shall, in the absence or disability
of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform other such duties
as the Board of Directors may from time to time prescribe.
Section 8. The President shall be the chief executive officer of
the corporation and shall have active management of the business of the
corporation. He shall execute on behalf of the corporation all
instruments requiring such execution except to the extent the signing
and execution thereof shall be expressly designated by the Board of
Directors to some other officer or agent of the corporation.
Section 9. The Vice-President shall act under the direction of
the President and in the absence or disability of the President shall
perform the duties and exercise the powers of the President. They shall
perform such other duties and have such other powers as the President
or the Board of Directors may from time to time prescribe. The Board of
Directors may designate one or more Executive Vice-Presidents or may
otherwise specify the order of seniority of the Vice-Presidents. The
duties and powers of the President shall descend to the Vice-Presidents
in such specified order of seniority.
<PAGE> 43
Section 10. The Secretary shall act under the direction of the
President. Subject to the direction of the President he shall attend
all meetings of the Board of Directors and all meetings of the
stockholders and record the proceedings. He shall perform like duties
for the standing committees when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and will perform other such duties
as may be prescribed by the President or the Board of Directors.
Section 11. The Assistant Secretaries shall act under the
direction of the President. In order of their seniority, unless
otherwise determined by the President or the Board of Directors, they
shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary. They shall perform
other such duties and have such other powers as the President or the
Board of Directors may from time to time prescribe.
Section 12. The Treasurer shall act under the direction of the
President. Subject to the direction of the President he shall have
custody of the corporate finds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to
the corporation and shall deposit all monies and other valuable effects
in the name and to the credit of the corporation in such depositories
as may be designated by the Board of Directors. He shall disburse the
funds of the corporation as may be ordered by the President or the
Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial
condition of the corporation,
Section 13. If required by the Board of Directors, he shall give
the corporation a bond in such sum and with such surety as shall be
satisfactory to the Board of Directors for the faithful performance of
the duties of Ins office and for the restoration to the corporation, in
case of his death, resignation, retirement or removal from office of
all books, papers, vouchers, money and other property of whatever land
in his possession or under his control belonging to the corporation.
Section 14. The Assistant Treasurer in the order of their
seniority, unless other wise determined by the President or the Board
of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer They shall
perform such other duties and have such other powers as the President
or the Board of Directors may from tune to time prescribe.
ARTICLE 9
Certificates of Stock
Section 1. Every stockholder shall be entitled to have a
certificate signed by the President or a Vice-President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares owned by
him in the corporation. If the corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the
<PAGE> 44
designations, preferences and relative, participating, optional or
other special rights of the various classes of stock or series thereof
and the qualifications, limitations or restrictions of such rights,
shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such stock
Section 2. If a certificate is signed (a) by a transfer agent
other than the corporation or its employees or (b) by a registrar other
than the corporation or its employees, the signatures of the officers
of the corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate
shall cease to be such officer before such certificate is issued, such
certificate may be issued with the same effect as though the person had
not ceased to be such officer. The seal of the corporation, or a
facsimile thereof, may, but need not be, affixed to certificates of
stock.
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or
destroyed upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board
of Directors may, in its discretion and as a condition precedent to the
issuance thereof require the owner of such lost or destroyed
certificate or certificates, or Ins legal representative, to advertise
the same in such manner as it shall require and/or give the corporation
a bond in such sum as it may direct as indemnity against any claim that
may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority
to transfer, it shall be the duty of the corporation, if it is
satisfied that all provisions of the laws and regulations applicable to
the corporation regarding transfer and ownership of shares have been
complied with, to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its
books.
Section 5. The Board of Directors may fix in advance a date not
exceeding sixty (60) days nor less than ten (10) days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect
or a date in connection with obtaining the consent of stockholders for
any purpose, as a record date for the termination of the stockholders
entitled to notice of and to vote at any such meeting, and any
adjournment thereof or entitled to receive payment of any such
dividend, or to give such consent, and in such case, such stockholders,
and only such stockholders as shall be stockholders of record on the
date so fixed, shall be entitled to notice of and to vote at such
meeting or any adjournment thereof or to receive such payment of
<PAGE> 45
dividend, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding
any transfer of any stock on the books of the corporation after any
such record date fixed as aforesaid.
Section 6. The corporation shall be entitled to recognize the
person registered on its books as the owner of shares to be the
exclusive owner for all purposes including voting and dividends, and
the corporation shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Nevada.
ARTICLE 10
General Provisions
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Articles of Incorporation, if any, may
be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cask in property or
in shares of the capital stock, subject to the provisions of the
Articles of Incorporation.
Section 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion,
dunk proper as a reserve or reserves to meet contingencies, or for
equalizing dividends or for repairing or maintaining any property of
the corporation or for such other purpose as the directors shall dunk
conducive to the interest of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was
created.
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time
designate.
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
Section 5. The corporation may or may not have a corporate seal,
as may be from time to time be determined by resolution of the Board of
Directors. If a corporate sea] is adopted, it shall have inscribed
thereon the name of the corporation and the words "Corporate Seal" and
"Nevada" The seal may, be used by causing it or a facsimile thereof to
be impressed or affixed or in any manner reproduced.
<PAGE> 46
ARTICLE 11
Indemnification
Every person who was or is a party or is a threatened to be made
a party to or is involved in any action, suit or proceeding, whether
civil, criminal administrative or investigative, by reason of the fact
that he or a person of whom he is the legal representative is or was a
director or officer of the corporation or is or was serving at the
request of the corporation or for its benefit as a director or officer
of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, shall be indemnified and held
harmless to the fullest extent legally permissible under General
Corporation Law of the State of Nevada time to time against all
expenses, liability and loss (including attorney's fees, judgements
fines and amounts paid or to be paid in settlement) reasonably incurred
or suffered by him in connection therewith. The expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the
corporation. Such right of indemnification shall be a contract right
which may be enforced in arty manner desired by such person. Such right
of indemnification shall not be exclusive of any other right which such
directors, officers or representatives may have or hereafter acquire
and, without hunting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any bylaw,
agreement vote of stockholders, provision of law or otherwise, as well
as their rights under this Article.
The Board of Directors may cause the corporation to purchase and
maintain insurance on behalf of any person who is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other
enterprise against any liability asserted against such person and
incurred in any such capacity or arising out of such status, whether or
not the corporation would have the power to indemnify such person
The Board of Directors may from time to time adopt further Bylaws
with respect to indemnification and amend these and such Bylaws to
provide at all times the fullest indemnification permitted by the
General Corporation Law of the State of Nevada
ARTICLE 12
Amendments
Section 1. The Bylaws may be amended by a majority vote of all
the stock issued and outstanding and entitled to vote at any annual or
special meeting of the stockholders, provided notice of intention to
amend shall have been contained in the notice of the meeting.
<PAGE> 47
Section 2. The Board of Directors by a majority vote of the
whole Board at any meeting may amend these Bylaws, including Bylaws
adopted by the stockholders, but the stockholders may from time to time
specify particular provisions of the Bylaws which shall not be amended
by the Board of Directors.
APPROVED AND ADOPTED this December 22, 1997.
CERTIFICATE OF SECRETARY
I, Douglas I McClean hereby certify that I am the Secretary of
Sports Entertainment Productions Inc., and the foregoing Bylaws,
consisting of 9 pages, constitute the code of Bylaws of Sports
Entertainment Productions Inc, as duly adopted at a regular meeting of
the Board of Directors of the corporation held December 22, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name this
December 22, 1997.
/s/ Douglas J. McClean
Seal
<PAGE> 48
EXHIBIT 3.3
SEAL - STATE OF NEVADA
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(after Issuance of stock)
SPORT ENTERTAINMENT PRODUCTIONS INC.
Name of Corporation
We the undersigned BYRON COX and ROBERT DINNING, President and
Secretary, of SPORTS ENTERTAINMENT PRODUCTIONS do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 12th day of December, 1997, adopted a resolution
to amend the original articles as follows:
Article One is hereby amended to read as follows:
The name of the Corporation is:
REWARD ENTERPRISES INC.
The number of shares of the corporation outstanding and entitled
to vote on an amendment to the Articles of Incorporation is _________;
that the said change(s) and amendment have been consented to and
approved by a majority vote of the stockholders holding at least a
majority of each class of stock outstanding and entitled to vote
thereon.
/s/ Byron Cox
President
/s/ Robert Dinning
Secretary
Province of British Columbia )
) ss.
Canada )
On July 20, 1998, personally appeared before me, a Notary Public
Byron Cox and Robert Dinning who acknowledged that they executed the
above instrument.
/s/ eligible
(Notary stamp or seal)
<PAGE> 49
EXHIBIT 4.1
REWARD ENTERPRISES, INC.
INCORPORATION UNDER THE LAWS OF THE STATE OF NEVADA
AUTHORIZED SHARES $0.01 PAR VALUE
NUMBER SHARES
CUSIP
See Reverse
For Certain Definitions
THIS CERTIFIES THAT
Is The Owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF $0.01 PAR VALUE COMMON
STOCK OF
REWARD ETNERPRISES, INC.
Transferable only on the books of the Company in person or by
duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate is not valid unless
countersigned by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the said Company has caused this
Certificate to be executed by the facsimile signatures of its
duly authorized officers and to be sealed with the facsimile seal
of the Company.
Dated:
_______________________ _________________________
Secretary SEAL President
<PAGE> 50
EXHAUST TECHNOLOGIES, INC.
TRANSFER FEE: $_____ PER NEW CERTIFICATE ISSUED
The following abbreviations when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable law or
regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - __________ Custodian ___________ (Minor)
under Uniform Gifts to Minors Act ____________ (State)
Additional abbreviations may also be used though not in the above
list.
For Value Received, _________________ hereby sell, assign and
transfer unto _______________ (Please insert Social Security or
other identifying number of Assignee).
_________________________________________________________________
Please print or typewrite name and address, including zip code of
Assignee)
_________________________________________________________________
_________________________________________________________________
__________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint _______________________
attorney-in-fact to transfer the said stock on the books of the
within-named Corporation, with full power of substitution in the
premises.
Dated: _________________
_____________________________________________
Notice: The signatures to this Assignment
must correspond with the name(s) as written
upon the face of the certificate in every
particular, without alteration or enlargement
or any change whatsoever.
<PAGE> 51
Signature(s) Guaranteed:
___________________________
The signature(s) must be guaranteed by an eligible guarantor
institution (Banks, Stockbrokers, Savings and Loan Associations
and Credit Unions with membership in an approved signature
guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15.
<PAGE> 52
EXHIBIT 10.1
SOFTWARE LICENSE AGREEMENT
This Agreement made as of the 15th day of June, 1999, by Reward
Nevis Group Inc. (the "Licensee") and Chartwell Technology Inc.
("Chartwell").
BACKGROUND:
Chartwell is in the communication technology business. Chartwell,
owns certain interactive game, software and the Licensee desires to
license the object code for such software and Chartwell is willing to
grant the Licensee a non exclusive license to the object code for such
software subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises, covenants
and obligations contained herein, the parties agree as follows:
1. INTERPRETATION
1. 1. Words and phrases used herein have the following meaning:
1.1.1. "Agreement" means this Software License Agreement,
including Schedules "A", "B" and "C" attached hereto.
1.1.2 "Business" means the operation and management of an
online Internet entertainment and game playing website.
1.1.3. "Client Software" means the user interface portion of
the Software.
1.1.4. "Dollar" or "$" means United States dollars.
1.1.5. "Electronic Distribution" means the electronic
delivery of computer software using on-line services, the Internet,
phone lines, cable systems, servers, satellite or other public or
private access network or electronic communication mediums.
1.1.6. "End User" means an individual who has established an
account with the Licensee that permits such individual to access and
utilize, but not to further distribute, the Software.
1.1.7. "Gross Revenues" means gross income which is received
or should have been received by the Licensee or any affiliate of the
Licensee in connection with the Business utilizing the Software, which
shall be calculated as the total dollars wagered on all games less all
payoffs, but before any operating, administrative or other expenses,
federal, provincial, or foreign sales, excises or other taxes or
tariffs imposed on the use of the Software. For the purposes of this
Agreement Gross Revenues shall not include any negative amount. Where
Gross Revenues result in a negative number Gross Revenues shall be
deemed to be zero.
1.1.8. "Software" means the object code versions of the
computer software described in Schedule
<PAGE> 53
1.1.8. "Software" means the object code versions of the
computer software described in Schedule "A" herein,
2. GRANT OF LICENSE
2.1. Sub-License: Subject to the terms and conditions hereof
Chartwell hereby grants to the Licensee and the Licensee accepts from
Chartwell: (i) a worldwide, non-exclusive license to use the Software
only in connection with the Business and to transmit the Client
Software only in object code form to End Users by means of Electronic
Distribution; and (ii) a worldwide, non-exclusive license to use and to
grant to End Users the right to use the Client Software in object code
form, only while connected to a server on which the server component of
the Software is installed.
2.2. End User License Agreement: The Licensee shall display to End
Users an End User license Agreement ("EULA") prior to download of the
Client Software by End User. Such EULA shall contain provisions which
exclude Chartwell from all liabilities related to the End Users use of
the Client Software, and in any event shall contain provisions
substantially similar to those contained in Schedule "B" 71 hereto. The
EULA shall be provided in a format that the End User may download onto
End User's hard disk. The Licensee shall require all End Users to
either accept or reject the terms and conditions of the EULA by means
of a point and click mechanism or other mechanism acceptable to
Chartwell prior to the download of the Client Software and, in the
event End User rejects the EULA, End User shall not be permitted to
download the Client Software. The licensee agrees that the mechanism
used by the Licensee to require End Users to accept or reject the FULA
shall be in a form which will record and store all End Users acceptance
of the EULA for future reference.
2.3. Restrictions: The Licensee shall not, and shall not authorize
any third party to, reverse engineer, decompile or disassemble the
Software.
2.4. No Further Sub-License: The Licensee shall have no right to
sublicense or otherwise make available the rights granted to the
Licensee in Paragraph 2.1 to any third party and such rights shall only
be used by the licensee in connection with its operation of the
Business which shall be comprised of one website only.
3. GOVERNMENT APPROVALS
3.1. The Licensee warrants and represents that it has obtained all
required government approvals and permits as of the date of this
Agreement in order to use the Software in its Business and to operate
its Business and that it will maintain such approval and permits
throughout the term of this Agreement and obtain any government
approvals and permits that subsequently become required during the term
of this Agreement.
<PAGE> 54
4. OWNERSHIP
4.1. Software: Except for the limited distribution and license
rights granted to the Licensee hereunder, Chartwell retains all right,
title and interest, including intellectual property rights, in and to
the Software, as between Chartwell I and the Licensee.
4.2, Proprietary Rights Notices, The Licensee shall not remove any
copyright or other proprietary rights notices contained within the
Software,
5. PAYMENT
5.1. License Fee: In consideration of the rights granted by
Chartwell to the Licensee hereunder, the Licensee shall pay Chartwell
the sum of $20,000 upon execution of this Agreement and three
additional $10,000 payments, the first within three (3) months. the
second within six (6) months and the third within nine (9) months from
the date of this Agreement and shall pay Chartwell a percentage of the
licensee's Gross Revenue as set forth in paragraph 5.2. Upon execution
of this Agreement, Licensee shall pay to Chartwell the sum of $8,000
with which Chartwell will acquire and configure a server for the
Licensee to be shipped to the address of the Licensee and shall acquire
for the licensee, for installation by Chartwell, the following third
party software:
! Crystal Reports 7.0
! PC Anywhere
! MSSQL 6.5 or 7.0
! Microsoft NT Server with SP4
5.2. Royalties. As further consideration of the fights granted by
Chartwell to the Licensee hereunder, the Licensee shall pay to
Chartwell a royalty calculated as 30% of the Gross Revenue in
accordance with the terms of this Section 5 until aggregate Royalty
payments of $100,000 have been paid to Chartwell following which the
Royalty rate shall be reduced to 20% until an aggregate $1,000,000 in
Royalties has been paid to Chartwell and thereafter the Royalty payable
will be set at the rate of 15% for the balance of the term of this
Agreement..
5.3. Payment: The Licensee shall pay royalties to Chartwell under
Paragraph 5.2 on a monthly basis commencing at the end of the first
month after the Licensee commences the Business as determined by
Chartwell. Royalties shall be calculated monthly and paid within
fifteen (15) days of the end of each month and the Licensee shall
include, with each payment of royalties, a report specifying the Gross
Revenue earned during the period. Any net loss or negative revenues in
a particular month shall be treated as zero Gross Revenues for the
month and there is no carry forward of such amounts.
5.4. Website: upon execution of this Agreement Licensee shall pay
to Chartwell the amount of $5,000 for website design and development in
accordance with Chartwell's standard specifications. Licensee shall pay
to Chartwell a further $5,000 on completion of the Licensee's website,
<PAGE> 55
5.5. Records: The Licensee will maintain, in accordance with
generally accepted accounting principles complete and accurate books
and records in respect of its operation of the Business and the Gross
Revenue and other amounts received in connection therewith and all
royalties due or paid to Chartwell.
5.6. Audit: Chartwell shall have the right, on reasonable notice
to the Licensee, no more often than once in any twelve (12) month
period, to appoint an independent third party to examine the Licensee's
books and records, during regular business hours, in order to verify
the Licensee's compliance with the terms of this Agreement. Any such
audit shall be at the expense of Chartwell unless the audit reveals an
underpayment by the Licensee of greater then five (5%) percent in which
case the audit shall be at the expense of the Licensee. The Licensee
shall forthwith pay to Chartwell the amount of any deficiency
identified by the audit.
5.7. Taxes: The Licensee shall be responsible for paying all use,
sales or value added taxes, duties or governmental charges, whether
presently in force or which come into force in the future, related to
the deliveries and payments hereunder.
6. SUPPORT
6.2. Upgrades: Provided that the licensee is not then in default
hereunder, during the term of this Agreement Chartwell shall provide
certain upgrades to the Software, designated as such by Chartwell, to
the Licensee at no cost. All upgrades to the Software shall be
considered Software for the purposes of this Agreement, Upgrades to the
Software shall I consist of new games and language localization, as
designated as such from time to time by Chartwell
7. CHARTWELL WARRANTIES, REPRESENTATIONS AND COVENANTS
Chartwell warrants, represents and covenants to the Licensee that:
7.1. Capacity. it has the necessary capacity to enter into this
Agreement.
7.2. The sub-license of the Software to the Licensee as
contemplated herein will not infringe upon any patents or copyrights of
any third party.
7.3. Chartwell warrants that if program errors (defects in the
Software which prevent substantial conformance to the Software
Specifications set out in Schedule "C" hereto) occur during the term of
this Agreement then, provided that
iii. the Licensee provides prompt notice to Chartwell
of such program error,
iv. the Licensee provides a full and complete
disclosure of the program error and any input or output necessary to
assess the same,
<PAGE> 56
v. this sublicense remains in effect and the Licensee
is not then in default hereunder;
vi. the Licensee allows Chartwell continuous access to
the Software via the Internet at any and all times and from such place
as Chartwell may designate reasonably from time to time;
vii. the Software or the server on which the Software
was originally installed by Chartwell has not been modified by the
Licensee or any third party; and
viii. provided the program error can be reproduced on
Chartwell's current Software.
Chartwell will use reasonable efforts to correct such errors
within 60 days following receipt of notice from the Licensee of such
defects. If the parties hereto disagree as to whether a program error
is Chartwell's responsibility hereunder, it shall be the Licensee's
obligation to demonstrate and document the program error in the
Software. The Licensee acknowledges that its only remedy available in
relation to the occurrence of a program error shall be to require
Chartwell to use reasonable efforts to correct the same and that
Chartwell shall not be liable for any damages resulting from the
occurrence of a program error however caused, subject to Section 10.
7.4. During the term of this Agreement Chartwell shall provide the
Licensee with upgrades as provided in Paragraph 6.2. As a result,
Chartwell's warranty obligations hereunder are contingent on the
Licensee being able to reproduce the error conditions on Chartwell's
current Software. If the error conditions shall not be so reproduced,
the error conditions shall not be considered to be errors within the
Software and therefore Chartwell shall not be required to perform
further services in relation to the error conditions stated in
Paragraph 7.3.
7.5. The Licensee agrees to maintain a current backup copy of the
Software and to make the same available to Chartwell at Chartwell's
request.
7.6. Examples of service not covered by Chartwell's warranty
include, but are not limited to:
i. service required due to failure of hardware;
ii. service required due to unauthorized modification
to the Software;
iii. service required due to improper installation of
Software, if the Software has not been installed by Chartwell;
iv. failure of software other than the Software as
defined hereunder;
v. force majure;
vi. default or negligence of the Li Licensee;
vii. improper use or misuse of the Software or the
hardware; and
viii. providing operating services, accessories or
supplies.
<PAGE> 57
7.7. Limitation: EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT THE
SOFTWARE 19 PROVIDED AND LICENSED "AS IS" AND THERE ARE NO WARRANTIES,
REPRESENTATIONS OR CONDITIONS, EXPRESSED OR IMPLIED, WRITTEN OR ORAL,
ARISING BY STATUTE, OPERATION OF LAW, COURSE OF DEALING, USAGE OF
TRADE, COURSE OF PERFORMANCE OR SERVICE PROVIDED ]HEREUNDER OR IN
CONNECTION HEREWITH BY CHARTWELL. EXCEPT AS EXPRESSLY PROVIDED HEREIN
CHARTWELL DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABLE
QUALITY, NON-INFRINGEMENT, MERCHANTABILITY, DURABILITY OR FITNESS FOR
A PARTICULAR PURPOSE. NO REPRESENTATION OR OTHER AFFIRMATION OF FACT,
INCLUDING BUT NOT LIMITED TO STATEMENTS REGARDING PERFORMANCE OF THE
SOFTWARE, WHICH IS NOT CONTAINED IN THIS AGREEMENT, SHALL BE DEEMED TO
BE A WARRANTY BY CHARTWELL.
7.8. No Variation: NO AGREEMENTS VARYING OR EXTENDING THE ABOVE
WARRANTY OR LIMITATIONS WILL BE BINDING ON CHARTWELL UNLESS IN WRITING
AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF CHARTWELL.
8. THE LICENSEE'S WARRANTIES, REPRESENTATIONS AND COVENANTS
The Licensee warrants, represents and covenants to Chartwell as follows
and acknowledges that Chartwell is relying on such warranties,
representations and covenants this Agreement and the transactions
contemplated in this Agreement:
8.1. Capacity: The Licensee has the necessary capacity to enter
into this Agreement and shall use the Software only in accordance with
in compliance with the laws of the jurisdiction in which the Business
in conducted and in accordance with generally accepted gaming industry
standards and practices.
8.2. Configuration: The server on which the Software is installed
shall be solely used for the operation of the casino, No other software
programs or files will be installed on the server without the approval
of Chartwell:
8.3. Access: The Licensee shall provide Chartwell with continuous
access to the Software via the Internet using such software for such
purposes as Chartwell may determine.
8.4. Bandwidth: Licensee will supply an adequate amount of
bandwidth to ensure remote access by Chartwell for the purpose of
maintenance, upgrades, configurations, etc.
9. INFRINGEMENT
9.1. Defense and Settlement, If notified promptly and in writing
of any action (and all prior related claims) brought against the
Licensee alleging that the Licensee's use of the Software under this
Agreement infringes any valid Canadian or United States patent or
copyright Chartwell may, subject as provided below, defend and settle
that action at its expense and may, subject as provided below, pay the
costs and damages of any type finally awarded against the Licensee in
the action, but is not obligated to do so, provided that (i) Chartwell
shall have sole control of the defense of any such action and all I
negotiations for its settlement or compromise; and (ii) the Licensee
and where applicable those for whom the Licensee is responsible,
<PAGE> 58
cooperates fully with Chartwell in its defense of the action. If the
Licensee receives notice of a valid claim or demand regarding
infringement, or if the use of the Software shall be prevented by
injunction, Chartwell shall, at its option and expense either (i)
procure for the Licensee the right to continued use of the Software as
provided hereunder, (ii) modify the Software so that it is no longer
infringing, (iii) replace the Software with computer software of equal
capability, or (iv) terminate this Agreement as to the infringing
Software; provided that Chartwell agrees that it will exercise any of
the options (i) to (iii) prior to exercising option (iv) if, in
Chartwell's opinion, such options are commercially feasible to
Chartwell. The foregoing indemnification does not extend to any claim
arising out of a modification to the Software by any party other than
Chartwell to the extent such claim would not have arisen had such
modification not been made, any combination of the Software with any
other software or hardware to the extent such claim would not have
arisen had such combination not been made, or the use or distribution
of the Software other than as permitted under this Agreement and the
Licensee shall indemnify and hold Chartwell harmless from any
infringement arising therefrom. THE FOREGOING STATES THE ENTIRE
LIABILITY AND OBLIGATIONS OF CHARTWELL AND THE EXCLUSIVE REMEDY OF THE
LICENSEE WITH RESPECT TO ANY ALLEGED INTELLECTUAL PROPERTY
INFRINGEMENT.
10. LIMITATION OF LIABILITY
10.1. Limitation of Liability: IN NO EVENT WILL CHARTWELL, BE
LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, OR
ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR PROFITS,
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE USE OR
PERFORMANCE OF THE SOFTWARE, OR OTHER CHARTWELL PROVIDED MATERIAL
WHETHER IN AN ACTION IN CONTRACT OR TORT INCLUDING BUT NOT LIMITED TO
NEGLIGENCE AND WHETHER OR NOT CHARTWELL HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES,
10.2. Aggregate Liability: Chartwell's aggregate liability to the
Licensee whether for negligence, breach of contact, misrepresentation
or otherwise shall in respect of a single occurrence or a series of
occurrences shall in no circumstances exceed the $50,000 aggregate cash
payments actually made to Chartwell as the initial license fee under
Paragraph 5.1 of this Agreement.
11. THE LICENSEE INDEMNIFICATION
11.1. Indemnification: Except as set in Section 9, the Licensee
agrees to indemnity and save. Chartwell harmless from and against any
and all claims, demands, costs and liabilities (including all
reasonable legal and attorney fees and expenses) of any kind
whatsoever, arising directly or indirectly out of claims brought by End
Users or any third party, and/or brought under any law, including
without limitation any government department or agency as a result of
(i) the Licensee's combination or use of the Software with any other
software, hardware or other material, (ii) the Licensee's transmission
of the Client Software or the use of the Client Software by an End
<PAGE> 59
User, (iii) breach of Section 8 warranties; (iv) the Licensee's
operation and management of the Business; or (v) any act or omission by
the Licensee regarding the use of the Software except in accordance
with Section 2.
12. CONFIDENTIALITY
12.1. Proprietary Information, Documentation and information
(including electronically, orally or visually disclosed information)
are confidential and "Proprietary Information" for the purposes of this
Section 12 if (a) it is designated as confidential or proprietary, by
letter, stamp or legend (b) it would be apparent to a reasonable
person, familiar with the disclosing party's business or the industry
in which it operates, that such information is of a confidential or
proprietary nature, or the disclosing party, within ten (10) days of a
disclosure, indicates to the receiving party that such disclosure is
confidential. Proprietary Information shall not include information
defined as Proprietary Information above which the receiving party can
conclusively establish (i) was in the possession of the receiving party
at the time of disclosure; (ii) prior to or after the time of
disclosure becomes part of the public domain without the act or
omission of the party to whom it was disclosed; (iii) is disclosed to
the receiving party by a third party under no legal obligation to
maintain the confidentiality of such information; or (iv) was
independently developed by the receiving party. All such Proprietary
Information shall be treated confidentially by the receiving party and
its employees, contractors and agents and shall not be disclosed by the
receiving party without the disclosing party's prior written consent.
However, the receiving party may disclose Proprietary Information of
the disclosing party in accordance with judicial or other governmental
order, provided that receiving party shall give the disclosing party
reasonable notice prior to such disclosure and shall comply with any
applicable protective order or equivalent,
12.2. Treatment of Proprietary Information: Neither party shall
in anyway duplicate all nor any part of the other party's Proprietary
Information, except in accordance with the terms and conditions of this
Agreement. Each party shall have an appropriate agreement with each of
its employees, contractors and agents having access to the other
party's Proprietary Information sufficient to enable that party to
comply with all the terms of this Agreement. Each party agrees to
protect the other's Proprietary Information with the same standard of
care and procedures which it use's to protect its own trade secrets and
confidential or proprietary information of like importance and, in any
event, shall adopt or maintain procedures reasonably calculated to
protect such Proprietary Information.
12.3. Further Treatment of Proprietary Information: Each party
agrees to hold the other party's Proprietary Information in trust and
confidence for such party and not to use the same other than as
expressly authorized under this Agreement, Each party agrees not to
disclose any such Proprietary Information without the prior written
consent of the other, to anyone other than that party's employees,
contractors and agents who have a need to know same to carry out the
rights granted hereunder.
<PAGE> 60
12.4. Action to Protect: Each party shall promptly report to the
other any actual or suspected violation of the terms of this Section
12, and shall take all reasonable steps to prevent,. control or remedy
such violation.
12.5. Equitable Relief: In recognition of the unique and
proprietary nature of the information disclosed by the parties, it is
agreed that each party's remedies for a breach by the other of its
obligations under this Section 12 shall be inadequate and the
disclosing party shall, in the event of such breach be entitled to
equitable relief, including without limitation, injunctive relief and
specific performance, in addition to any other remedies provided
hereunder or available at law.
12.6. Proprietary Information: For the purposes of this
Agreement the Software, and all upgrades or modifications and all
materials related thereto shall be treated as Proprietary Information
of Chartwell disclosed to the Licensee.
13. TERMINATION
13.1. Term: The initial term of this Agreement will be for a
period of two (2) years, The Licensee will have the option of renewing
this Agreement 90 days prior to the end of the initial term, for an
additional two (2) additional two (2) year terms on the same terms
provided herein except for the payment obligations under Paragraph 5.1
and this Paragraph 13.1 shall not be applicable to the renewal terms.
This Agreement may be terminated by either party in the event of any
material breach by the other party hereto which continues after thirty
(30) days written notice of said breach (which notice shall, in
reasonable detail, specify the nature of the breach) by the non-
defaulting party to the defaulting party. A material breach shall
include, without limitation, any breach of Sections 2, 3, 4, 5, 8 and
12.
13.2. Effect of Termination: Upon the termination of this
Agreement the rights and licenses granted to the Licensee by Chartwell
hereunder shall terminate immediately and the Licensee shall cease all
use of the Software and shall, at the option of Chartwell, return to
Chartwell or destroy all copies of the Software in the possession of
the Licensee and Chartwell shall be entitled to take any and all steps
or actions they may deem necessary to enforce this Paragraph 13.2.
13.3. Royalties: No termination of this Agreement shall release
the Licensee from its obligations to pay Chartwell any royalties which
accrued prior to such termination or which shall acme to Chartwell
after the effective date of such termination as a result of the
Licensee's use of the Software after the termination of this Agreement,
nor shall any termination have the effect of releasing the Licensee
from the provisions of Section 12 which provisions shall survive the
termination of this Agreement.
<PAGE> 61
14. NOTICES
14.1. Notices: Any notice required or permitted to be given under
the terms of this Agreement shall be in writing and given by personal
delivery or sent by registered mail, postage prepaid, or by fax, to
Chartwell Technology Inc. at Suite 700, Canada Place, 407 - 2nd Street
SW, Calgary, Canada, T2P 2Y3 and in the case of the Licensee at the
following address TO BE INSERTED. Either party may change its address
for notice by notice to the other party in the manner prescribed above.
Any notice given pursuant to this Section shall be deemed to have been
received an the date actually received.
15. GENERAL
15.1. Applicable Law: This Agreement shall be governed by and
construed in accordance with the laws of the Province of Alberta,
Canada excluding that body of law applicable to choice of law and
excluding the United Nations Convention on Contracts for the
International Sale of Goods and any legislation implementing such
Convention, if otherwise applicable.
15.2. Survival: The provisions of Sections 4, 7, 8, 9, 10, 11,
12, 13, 14, and IS shall survive any termination of this Agreement
until expressly waived in writing by the party for whom they are of
benefit or terminated by a further written agreement of the parties.
15.3. Enforceability: If any provision of this Agreement is
declared by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision or part thereof which is necessary to
tender the provision valid, legal and enforceable, shall be severed
from the agreement and the other provisions and the remaining part
thereof of that provision shall remain in full force and effect,
15.4. Further Assurances: The parties agree to do all such things
and to execute such further documents as may reasonably be required to
give full effect to this Agreement.
15.5. Entire Agreement: This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and
cancels and supersedes any prior understandings and agreements between
the parties hereto with respect thereto. There are no representations,
warranties, terms, conditions, undertakings or collateral agreements,
expressed, implied or statutory, between the parties other than as
expressly set forth in this Agreement.
15.6. Remedies: The remedies expressly stated in this Agreement
shall be in addition to and not in substitution for those generally
available at law or in equity.
15.7. Waiver: No waiver or any provision of this agreement by a
party shall be enforceable against that party unless it is in writing
and signed by an authorized officer of that party.
<PAGE> 62
15.8. Assignment: Neither party may assign this Agreement nor the
rights granted hereunder without the prior written consent of the other
which consent shall not be unreasonably withheld; provided that either
party may assign this Agreement to a successor corporation in the event
of a merger or other reorganization in which it is not the surviving
entity,, and provided further that Chartwell may assign all or any part
of its rights under this Agreement to a parent, affiliate or wholly-
owned subsidiary; provided that any such organization is able to
perform under this Agreement and agrees to be bound by the terms
hereof.
15.9. Counterparts: This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed to be an
original and all of which together shall constitute one and the same
instrument.
15.10. Publicity: Licensee shall not refer to Chartwell nor to
this Agreement in public releases or advertising without securing the
prior written approval of Chartwell.
15.11. Independent Contractors: The parties to this Agreement are
independent contractors. No relationships of principal to an agent,
master to a servant, employer to employee, franchiser to franchisee,
partner or joint venturers is established hereby between the parties.
Neither party has the authority to bind the other nor incur any
obligation on its behalf Chartwell shall not take part in, have any
control over or participate in the Business, it being the express
intention of the parties that the Licensee conduct the Business and
that Chartwell supply the Software only as described herein.
15.12. Force Majeure: Notwithstanding anything to the contrary
contained in this Agreement, the failure or delay in performance by
either Chartwell or the Licensee, other than the performance of payment
obligations, shall be excused to the extent it is caused by an event
beyond the party's control, provided that the party prevented from or
delayed in rendering performance notifies the other party immediately
and in detail of the commencement and nature of such cause, and
provided further that such party uses its best efforts to render
performance in a timely manner, utilizing to such ends all resources
reasonably required in the circumstances. If such event continues
beyond sixty (60) days, either party may terminate this Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
as of the date first above written.
CHARTWELL TECHNOLOGY INC.
By: /s/ Darold H. Parken
Darold H. Parken, President
/s/ Barry H. Foster
BARRY H. FOSTER, Vice President
Operations and CFO
REWARD NEVIS GROUP INC,.
By: /s/ G Williams
G. Williams, President
<PAGE> 63
SCHEDULE "A"
The software is a Java based virtual casino identified as a package
called CasinoCasino which resides on a Chartwell Technology Inc,
server.
SCHEDULE "B"
End User License Agreement
A. ELIGIBILITY:
1. The casino is restricted to individuals of legal age of
majority only. You cannot play under any circumstances if you are not
at least eighteen years of age. Minors may not play, Participation in
the activities and games of the Internet casino is open only to the
residents of those jurisdictions where such participation is legal and
not prohibited. Participation in the activities and the games of the
Internet casino is void wherever prohibited by law.
2. Player understands that the game is for entertainment value
only, Player understands and acknowledges that no purchase is necessary
or required to play the games. If a player wishes to play without
betting money, he/she may do so, on the free site only.
3. Employees of the Internet casino, the company, its licensees,
distributors, wholesalers, affiliates, subsidiaries, advertising
promotion or other agencies, media partners, retailers and members of
the immediate families of each are not eligible to participate in the
games,
B. OTHER CONDITIONS
Player is not required to participate in the Game and such
participation, if elected by Player, is at Players sole option,
discretion and risk. Materials of the game (whether electronically
obtained or obtained by other means) are automatically void if
counterfeited, mutilated, forged, altered or tampered with in any way,
if illegal, mechanically or electronically reproduced, obtained outside
authorized legitimate channels or if they contain printing, production,
typographical, mechanical, electronic or any other errors. Any and all
materials submitted for prize claims become the property of the company
and will not be returned. The company is not responsible for lost,
late, illegal, incomplete, damaged, mutilated, misdirected, or postage
due mail, requests, prize claims or entries. liability for materials of
the game containing any error is limited to replacement. Errors due to
the computer hardware and software is the sole responsibility of the of
the end user, not the company. No refunds shall be given, Taxes, if
any, on any prize is players sole responsibility, By accepting prize
and/or winnings, Player consents to use his/her name for advertising
and promotional purposes without additional compensation except where
prohibited by law. Player, by acceptance of prize, acknowledges
compliance with all rules herein, The company makes no representations
or warranties, implicit or explicit, as to the legal right for player
to participate in the game nor shall any of the companies employees,
licensees, distributors, wholesalers, affiliates, subsidiaries,
<PAGE> 64
advertising, promotion or other agencies, media partners, agents or
retailers have the authority to make any such representations or
warranties. The company shall not be required to maintain user names or
passwords and if player misplaces, forgets, loses, or is otherwise
unable to enter the Internet casino because of anything other than
company error, if a player should give away, tell, share or lose their
amount number and password, the Internet casino will not be responsible
and will not be held liable for any claims regarding that account. The
terms and conditions contained herein may be modified and/or amended
only by the company posting such modification and/or amendments in the
Terms and Conditions section of the website, The company shall not be
liable for computer malfunctions nor attempts by player to participate
in the game by methods, means or ways not intended by the company. The
company reserves the right to cancel players account for any reason and
issue any balance in players account at the time of such cancellation.
The terms and conditions contained herein represents the complete,
final and exclusive agreement between the player and the company.
C. PLAYER AGREES AND BECOMES A PARTY TO THE RULES
By entering the website, opening an account at the website,
playing the casino, use and reuse of such an account, participation in
the game, or acceptance of any prize, player hereby represents,
warrants and certifies all of the following:
1. Player fully understands, agrees to, becomes a party to and
shall abide by all rules, regulations. terms and conditions contained
herein and as such rules, regulations, terms and conditions may change
from time to time,
2. Player is over the age of legal majority, i.e. player is an
"adult" as that term is legally defined in player's jurisdiction
3. Player shall not allow any other person or third party
including, without limitation, any minor, to use or reuse players
account, access and/or use any materials or information from the
website, accept any prize, or participate in any games.
4. Player has the full, complete and unrestricted legal right to
participate in the game and players participation in the game is not
prohibited in the players jurisdiction.
5. Player does not find the game or the website to be offensive,
objectionable, unfair, nor indecent.
6. Player understands that the game is for entertainment value
only. Player understands and acknowledges that no purchase is necessary
or required to play the game. If a player wishes to play without
betting money, he/she may do so, on the free site only
7. Player shall hold the company, its employees, officers,
director, licensees, distributors, wholesalers, affiliates,
subsidiaries, advertising, promotion or other agencies, media partners,
agents and retailers harmless and shall indemnify the same form any and
all cost, expenses, liabilities and damages whatsoever that may arise
as a result of the players:
<PAGE> 65
(i) entry, use, or reuse of the website
(ii) use of any materials at the website
(iii) entry, use or reuse of the casino server
(iv) participation in the Same, or
(v) the acceptance of any prize
8. Player understands that the terms Internet casino are the
trademarks, service marks, and trade names of the companies and player
obtains no fights to such terms, nor any other terms, graphics, text,
concepts or methodologies, using the website and the material contained
therein.
9. Players interest in the game and the website is personal, and
not professional. Players entering the casino is solely for the players
own personal entertainment and any other entrance, access, use or reuse
of the casino or the website is strictly prohibited.
10. Player shall periodically review at a rate not less than one
monthly these terms and conditions of the Internet casino posted tit
the website.
11. Players shall not participate in the games, open, use or reuse
an account, enter the website, or the casino, nor accept any prize if
player does not fully understand, agree to, become a party to, and
shall abide by, without exception, all rules, regulations, terms and
conditions contained herein and as such rules, regulations, terms and
conditions may change from time to time.
SCHEDULE "C"
Description of Casino Casino Software
Casino Casino is a JAVA based Internet casino software package
that allows customers to set up .and operate an Internet based casino
site subject to proper licensing, hardware and bandwidth to be supplied
by the customer. Casino Casino offers the following games: Blackjack,
Caribbean Poker, Slots (4 different types), Roulette, Craps, and Video
Poker (4 different types). Casino Casino was designed to operate over
the Internet with no requirement for downloading of any software in
advance. This is made possible by using the JAVA development platform,
which will operate on any personal computer that is connected to the
Internet. The Casino Casino software consists of three main daemons or
servers, namely Games, Commerce and Bank. Further descriptions of each
are contained herein. All three daemons are thread based, any now
requests start a new thread, Once the service is finished the thread is
terminated. Since the lifetime of the thread is minimal the overhead of
a large number of players is minimal. The JAVA code compiled is most
compatible with IE4.O's jre (JAVA Run time Environment) native to each
browser,
1. The gaming engine is responsible for running the random number
generator (RGN) used in all the games. The advantage of this central
engine is that as new games are developed they can be plugged into this
central engine, with out the need for a complete rewrite. The number
generator is based on the "lagged Fibonacci method". The initial seed
is also randomly generated using .standard Java calls to obtain a
<PAGE> 66
number between 0 and 2^32 (~4 billion). This action occurs on the
server side to which the player has no access. If a player disconnects
during a game, i.e.: blackjack, then the player is awarded a loss.
2. The database engine keeps track of all the players and gaming
transactions and adheres to the RDBMS & object orientated computing
environment. All transactions are tracked by administrative software
that is based on Microsoft SQL. Player information is available to the
casino operator, online using a loaded java applet, that operates in
the Microsoft Internet Browser. Operators can generate certain reports
on the status of players, actual bank transactions with flags and the
status of the games, Ile operator is provided access to this database
by entering a username and password to ensure security. Multiple on-
line reports can be generated simultaneously because each query will
launch a new Internet window. Operators can be on-line and monitor any
or all players in real time by refreshing their view windows as often
as required and some of the reports that are required to be monitored
continuously are set to auto-refresh every one minute.
Operators can also add or remove players fro, the site, issue
credits or debits and check the overall performance of all the games
and players per game by date or historically.
3. The commerce engine is responsible for interfacing to the
credit card processor. The player must fill out an on-line application
provided by the Casino Casino software package that includes all
relevant address and contact information. The player is instructed to
select a password. After the form is completed the player is issued a
username by the Commerce software which forwards the details to the
auto-email engine which sends out a "welcome to casino!" e-mail I
message with username and password. The player logs in through the
browser using the username and password. The player is now presented
with the option to register a credit card from which funds will be
debited to play the casino games. The credit card number and expiry
date as well as the customer information are stored together on the
Commerce server in a SQL database format. The player then can deposit
funds into his/her account to use at any or all of the games offered by
the Casino Casino software. At this point the software will forward the
customer information and the credit card information to an online
credit card processing facility (for example Secure Bank.com) This
third party is responsible for validating the credit card and customer
information through a "scrubbing' process. If the customer is in good
standing a message will be sent back to the Commerce server and the
customer will be notified that the funds are available and can begin
gaming immediately. If the customer does not pass the credit test he is
notified that the transaction has failed and he is unable to proceed.
We require the client to ship the server to our office and we can
perform the initial set up. Once the server is returned and is on-line
our technical staff need to have continuous access through PC Anywhere
to remotely log onto the server to perform any maintenance, repairs or
upgrades as determined necessary. Adequate bandwidth or connection
speed is required for proper operation and maintenance of the Casino
Casino Software,
The operating parameters for each Same are as follows:
<PAGE> 67
Blackjack: There are 8 decks in the dealing shoe, The shoe is
reshuffled approximately 3/4 of the way through
but not always at the same place. The RNG will
generate the shuffle location as the deck
approaches the 3/4 mark. Also if the player leaves
the game and re-enters a re-shuffle will occur.
This adheres to standard Us Vegas rules including,
double down on any hand, split any same cards,
double down on splits and insurance, There is no
surrender,
Carribean Poker: This is a single deck shoe and is reshuffled after
every hand. Ile games uses the standard Las Vegas
rules for payout.
Slots: The payout of the slots is governed by the number
of graphic icons on the wheels and the use of the
RNG. There are three wheels and the RNG is used to
stop each of the wheels at different locations,
Adjustment of the odds is hardcoded.
Video Poker: Video poker is a single deck deal and is
reshuffled after every play. The games use the
standard Las Vegas rules for payout, as posted on
each of the machines. Players may throw away the
whole hand if they wish.
Roulette: The roulette uses the RNG for each wheel spin. As
long as the player stays on the game the game will
list, on the left side of the display window, a
history of the numbers that have been generated by
the game. The list is 15 numbers long. The 16'
number will be displayed at the top of the list
and the ? number will be dropped from the list.
The minimum bet is 5 dollars and the max bet is
100 dollars.
Crops: The RNG is used for each roll of the dice. The
payout is set as per the rules of Craps, Las
Vegas.
It should be noted that a great deal of work and expertise was
utilized to create the graphics on the games, The graphics must took
full and rich and yet be optimized in size to allow quick loading in
the Java runtime environment, If an operator is interested in changing
the look of any of the games, such as card backs on blackjack, faces on
the slot machines, table top graphics, etc., or if the operator
requires customization of the administration back end, reports or
commerce engine, Chartwell is willing to discuss this matter and
negotiate a fair and reasonable fee structure, to facilitate such
changes. Chartwell can only assume responsibility for the software
elements that we provide, as outlined in this document. Any adjustments
to the home page, graphics, etc, are the responsibility of the casino
operator and Chartwell is willing to perform them for a fair and
reasonable fee.
<PAGE> 68
Chartwell's warranty shall only be applicable where the Licensee
has not altered the system on which the Licensee's casino is operating
(both hardware and software), from the configuration originally
installed by Chartwell. Any software installed by the casino operator
must be approved by Chartwell.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at June 30, 1999 and the Statement of
Income for the year ended June 30, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 102,614
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 102,614
<PP&E> 68,665
<DEPRECIATION> 0
<TOTAL-ASSETS> 171,279
<CURRENT-LIABILITIES> 72,500
<BONDS> 0
0
0
<COMMON> 27,150
<OTHER-SE> 71,629
<TOTAL-LIABILITY-AND-EQUITY> 171,279
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 62,506
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (62,506)
<INCOME-TAX> 0
<INCOME-CONTINUING> (62,506)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (62,506)
<EPS-BASIC> (0.043)
<EPS-DILUTED> 0
</TABLE>
<PAGE> 69
EXHIBIT 99.1
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement") dated as of the First day
of May, 1999 between Reward Enterprises, Inc. (the "Company"), a Nevada
corporation, and Gerald W. Williams (Consultant), a British Columbia
resident.
WHEREAS, the Company desires to retain Consultant to render
consulting and advisory services for the Company on the terms and
conditions set forth in this Agreement, and Consultant desires to be
retained by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the premises, the mutual
agreements herein set forth and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties
agree as follows:
1. Engagement of Consultant; Services to be Performed.
1.1. The Company hereby retains Consultant to render such
consulting and advisory services as the Company may request.
Consultant hereby accepts such engagement and agrees to perform such
services for the Company upon the terms and conditions set forth in
this Agreement.
1.2. During the Term (as defined in Section 2), Consultant shall
devote such time, attention, skill and energy to the business of the
Company as may be reasonably required to perform the services required
by this Agreement up to a maximum time commitment of 140 hours in any
calendar month, and shall assume and perform to the best of his ability
such reasonable responsibilities and duties as the Company shall assign
to Consultant from time to time.
1.3. Consultant shall perform the services hereunder primarily at
the Company's principal office but he shall, at the Company's expense,
also be required to render the services at such other locations as the
Company may specify from time to time.
1.4. In rendering services hereunder, Consultant shall be acting
as an independent contractor and not as a employee or agent of the
Company. As an independent contractor, Consultant shall have no
authority, express or implied, to commit or obligate the Company in any
manner whatsoever, except as specifically authorized from time to time
in writing by an authorized representative of the Company, which
authorization may be general or specific. Nothing contained in this
Agreement shall be construed or applied to create a partnership.
Consultant shall be responsible for the payment of all federal, state,
provincial or local taxes payable with respect to all amounts paid to
Consultant under this Agreement; provided, however, that if the Company
is determined to be liable for collection and/or remittance of any such
taxes, Consultant shall immediately reimburse the Company for all such
payments made by the Company.
<PAGE> 70
2. Term. Unless terminated at an earlier date in accordance with
Section 4, this Agreement shall commence as of the date first written
above and shall continue for a continuous period of sixty (60) months
(the "Term").
3. Compensation.
3.1 Compensation As compensation in full for Consultant's
services hereunder, the Company shall pay to Consultant a consulting
fee at the rate of $5,000 per month. Should Consultant incur greater
than 160 hours per month providing consulting services to the Company
under this Agreement, the Company shall pay Consultant at the rate of
$100 per hour plus applicable taxes in excess of 160 hours upon receipt
of a satisfactory invoice therefor. The consulting fee shall be
payable to Consultant in arrears at the end of each calendar month
during the Term and a prorated portion of such fee shall be payable
upon termination of this Agreement if such termination occurs other
than at the end of a month.
3.2 Stock Options. The Company also agrees to offer to the
Consultant the option to purchase, upon the terms and conditions set
forth in this Section 3, one (1,000,000) common shares (the "Options").
3.3. Exercise Price. The exercise price of the Options shall be
as follows:
Number of Options Exercise Price
500,000 $0.10
500,000 $0.25
3.4. Vesting. The Options shall be fully vested and exercisable
as of the date of this Agreement.
3.5. Options not Transferable. Unless otherwise specified in this
Agreement or by the Board of Directors of the Company (the "Board"),
this Option and the rights and privileges conferred by this Agreement
may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by
applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar process. Upon any attempt to
transfer, pledge, hypothecate or otherwise dispose of any Option or of
any right or privilege conferred by this Agreement contrary to the
provisions hereof, or upon the sale, levy or attachment or similar
process upon the rights and privileges conferred by this Agreement,
such Option shall thereupon terminate and become null and void.
3.6. Expiration and Termination: Options shall expire on the
earlier of:
(a) May 15, 2005.
<PAGE> 71
(b) Termination of Service as Consultant: The expiration of
thirty (30) days from the date of the Consultant's removal (with or
without cause) pursuant to Section 4 of this Agreement, resignation or
other termination as consultant.
(c) Termination Due to Death or Disability: The expiration
of one (1) year from the date of the death or Disability (as defined
below) of the Consultant, assuming that Consultant was serving as
consultant at the time of such death or Disability.
Notwithstanding the occurrence of one of the above events, the
exercise period may be extended in the sole discretion of the Board
until a date not later than the expiration date of the Options. If
Consultant's term as advisory member is terminated by death, any
Options held by the Consultant shall be exercisable only by the person
or persons to whom such Consultant's rights under such Options shall
pass by the Consultant's will or by the laws of descent and
distribution of the state or county of the Consultant's domicile at the
time of death.
3.7. Distributions, Reorganization or Liquidation. In the case of
any share distribution, share split, liquidation or like change in the
nature of common shares covered by this Agreement, the number of common
shares and exercise price shall be proportionately adjusted as set
forth below.
(a) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor
provision) or any "corporate transaction" described in the regulations
thereunder; (ii) the Company shall declare a distribution payable in,
or shall subdivide or combine, its common shares or (iii) any other
event with substantially the same effect shall occur, the Board shall,
with respect to each outstanding Option, proportionately adjust the
number of shares of common shares and/or the exercise price per common
shares so as to preserve the rights of the Consultant substantially
proportionate to the rights of the Consultant prior to such event, and
to the extent such action shall include an increase or decrease in the
number of common shares subject to outstanding options, the number of
Common Shares available under this Agreement shall automatically be
increased or decreased, as the case may be, proportionately, without
further action on the part of the Board, the Company or the Company's
shareholders.
(b) If the Company is liquidated or dissolved, the Options
may be exercised prior to the effective date of such liquidation or
dissolution. If the Consultant does not exercise his Options prior to
such effective date, each outstanding option shall terminate as of the
effective date of the liquidation or dissolution.
3.8. Exercise of Options. The Options shall be exercisable, in
whole or in part, until termination; provided, however, if the
Consultant is subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
with respect to the common shares, he shall be precluded from selling
or transferring any common shares or other security underlying an
Option during the six (6) months immediately following the grant of
<PAGE> 72
that Option. If less than all of the Common Shares included in the
Options are purchased, the remainder may be purchased at any subsequent
time prior to the expiration of the Option term. Only whole Common
Shares may be issued pursuant to the Options, and to the extent that
the Options cover less than one (1) Common Share, they are
unexercisable.
Each exercise of the Option shall be by means of delivery of a
notice of election to exercise (which may be in the form attached
hereto as Exhibit A) to the Company at its principal executive office,
specifying the number of common shares to be purchased and accompanied
by payment in cash by certified check or cashier's check in the amount
of the full exercise price for the Common Shares to be purchased.
During the lifetime of the Consultant, the Options are exercisable only
by the Consultant.
3.9. Professional Advice. The acceptance of the Options and the
sale of Common Shares issued pursuant to the exercise of Options may
have consequences under federal and state tax and securities laws,
which may vary depending upon the individual circumstances of the
Consultant. Accordingly, the Consultant acknowledges that he has been
advised to consult his personal legal and tax advisor in connection
with this Agreement and his dealings with respect to the Options for
the Common Shares. Without limiting other matters to be considered,
the Consultant should consider whether upon the exercise of Options,
the Consultant will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
4. Termination By the Company.
4.1 For Cause. Company will have the right to immediately
terminate Consultant's services and this Agreement for cause. "Cause"
means: any material breach of this Agreement by Consultant, including,
without limitation, breach of Consultant's covenants in Sections 6 and
7; any failure to perform assigned job responsibilities that continues
unremedied for a period of ten (10) days after written notice to
Consultant by Company; conviction of a felony or failure to contest
prosecution for a felony; violation of any statute, rule or regulation,
any of which in the judgment of Company is harmful to the business of
the Company or to Company's reputation; unethical practices;
dishonesty; disloyalty; or any reason that would constitute cause under
the laws of Nevada. Upon termination of Consultant's engagement
hereunder for cause or upon the death or disability of Consultant,
Consultant will have no rights to any unvested benefits or any other
compensation or payments after the termination date or the last day of
the month in which Consultant's death or disability occurred.
For purposes of this Agreement, "disability" means the incapacity
or inability of Consultant, whether due to accident, sickness or
otherwise, as determined by a medical doctor acceptable to the
Board of Directors of Company and confirmed in writing by such
doctor, to perform the essential functions of Consultant's
position under this Agreement, with or without reasonable
accommodation (provided that no accommodation that imposes undue
hardship on Company will be required) for an aggregate of ninety
(90) days during any period of one hundred eighty (180)
consecutive days.
<PAGE> 73
4.2 Without Cause. Company may terminate Consultant's engagement
under this Agreement without cause and without advance notice;
provided, however, that Company will continue to pay, as severance pay,
Consultant's Base Salary at the rate in effect on the termination date
for a period of six (6) months; provided, further, that Company will be
entitled to offset any severance pay otherwise payable to Consultant by
the amount of any compensation or consulting fees being paid to
Consultant by another party while severance pay would otherwise be
payable. Such payments will be at usual and customary pay intervals of
Company and will be subject to all appropriate deductions and
withholdings. Upon termination, Consultant will have no rights to any
unvested benefits or any other compensation or payments except as
stated in this paragraph.
4.3 Termination By Consultant. Consultant may terminate
Consultant's engagement under this Agreement for any reason provided
that Consultant gives Company at least thirty (30) days' notice in
writing. Company may, at its option, accelerate such termination date
to any date at least two weeks after Consultant's notice of
termination. Company may, at its option, relieve Consultant of all
duties and authority after notice of termination has been provided.
All compensation, payments and unvested benefits will cease on the
termination date.
5. Expenses. In addition to the payment of consulting fees set forth
above, the Company shall reimburse Consultant all actual out-of-pocket
costs for long-distance telephone services, facsimile transmissions,
photocopying, courier services and postage, and all reasonable travel,
lodging and per diem expenses, that he shall incur in connection with
the rendering of Consultant's services; provided that the Company shall
have no obligation to reimburse any of such expenses except upon
provision by Consultant of adequate documentation thereof in such form
as the Company shall reasonably request; and provided further, that the
Company shall have no such obligation in respect of any travel, lodging
or per diem expenses unless the travel to which such expenses relate
shall have been authorized in advance by the Company.
6. Ownership of Intellectual Property.
6.1 Background Technology. Exhibit B hereto lists any and all
technology that (i) Consultant intends to use in performing the
services hereunder, (ii) is either owned solely by Consultant or
licensed to Consultant with a right to sublicense and (iii) is in
existence in the form of a writing or working prototype prior to the
date of this Agreement ("Background Technology").
6.2 Notification and Disclosure. Consultant shall promptly
notify the Company in writing of the existence and nature of, and shall
promptly and fully disclose to the Company, any and all ideas, designs,
practices, processes, apparatus, improvements and inventions (all of
which are hereinafter referred to as "Inventions") that Consultant has
conceived or first actually reduced to practice and/or may conceive or
first actually reduce to practice during the Term or which Consultant
may conceive or reduce to practice within six months after the Term, if
such inventions relate to a product or process upon which Consultant
worked during the Term or during the period of his/her engagement.
<PAGE> 74
6.3 Ownership of Inventions. All such inventions shall be the
sole and exclusive property of the Company or its nominee during the
Term and thereafter, and, except for Consultant's rights in any
Background Technology, Consultant hereby assigns to the Company all its
right, title and interest in and to any and all such inventions.
Whenever the Company so requests, Consultant shall execute and
assign any and all applications, assignments and other instruments that
the Company shall deem necessary or convenient in order to apply for
and obtain Letters Patent of the United States and/or of any foreign
countries for such inventions and in order to assign and convey to the
Company or its nominee the sole and exclusive right, title and interest
in and to all such inventions.
Consultant shall aid and assist the Company in any interference or
litigation pertaining to such inventions, and the Company shall bear
all expenses reasonably incurred by Consultant at the request of the
Company. In this connection, if any such aid or assistance requires
any expenditure of Consultant's time after the Term, Consultant shall
be entitled to compensation for the time requested by the Company at a
rate equal to the pro rata rate at which Consultant was being paid for
a normal pay period immediately prior to the end of the Term.
6.4 Limitation. Sections 6.2 and 6.3shall not apply to any
invention meeting the following conditions:
(i) such invention was developed entirely on Consultant's
own time;
(ii) such invention was made without the use of any of the
equipment, supplies, facility or trade secret information of the
Company;
(iii) such invention does not relate (i) directly to the
business of the Company or (ii) to the Company's actual or demonstrably
anticipated research or development; and
(iv) such invention does not result from any service
performed by Consultant for the Company.
6.5 Copyrightable Material. All right, title, and interest in
all copyrightable material which Consultant shall conceive or
originate, either individually or jointly with others, and which arise
out of the performance of this Agreement, will be the property of the
Company and are hereby assigned to the Company along with ownership of
any and all copyrights in the copyrightable material. Consultant
agrees to execute all papers and perform all other acts necessary to
assist the Company to obtain and register copyrights on such materials
in any and all countries. Where applicable, works of authorship
created by Consultant for the Company in performing the services
hereunder shall be considered "works made for hire" as defined in the
U.S. Copyright Act.
6.6 Survival. This Section 6 shall survive the Term.
<PAGE> 75
7. Protection of Trade Secrets, Know-How and/or Other Confidential
Information of the Company.
7.1 Confidential Information. Except as permitted or directed by
the Company, during the Term or at any time thereafter Consultant shall
not divulge, furnish or make accessible to anyone or use in any way
(other than in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the Company that
Consultant has acquired or become acquainted with or will acquire or
become acquainted with during the Term or during engagement by the
Company prior to the Term, whether developed by Consultant or by
others, concerning any trade secrets, confidential or secret designs,
processes, formulae, products or future products, plans, devices or
material (whether or not patented or patentable) directly or indirectly
useful in any aspect of the business of the Company, any customer or
supplier lists of the Company, any confidential or secret development
or research work of the Company, or any other confidential information
or secret aspects of the business of the Company. Consultant
acknowledges that the above-described knowledge or information
constitutes a unique and valuable asset of the Company acquired at
great time and expense by the Company and its predecessors, and that
any disclosure or other use of such knowledge or information other than
for the sole benefit of the Company would be wrongful and would cause
irreparable harm to the Company. Both during and after the Term,
Consultant will refrain from any acts or omissions that would reduce
the value of such knowledge or information to the Company. The
foregoing obligations of confidentiality, however, shall not apply to
any knowledge or information which is now published or which
subsequently becomes generally publicly known in the form in which it
was obtained from the Company, other than as a direct or indirect
result of the breach of this Agreement by Consultant.
7.2 Know-How and Trade Secrets. All know-how and trade secret
information conceived or originated by Consultant which arises out of
the performance of the services hereunder or any related material or
information shall be the property of the Company, and all rights
therein are hereby assigned to the Company.
7.3 Return of Records. Upon termination of this Agreement,
Consultant shall deliver to the Company all property that is in his
possession and that is the Company's property or relates to the
Company's business, including, but not limited to records, notes, data,
memoranda, software, electronic information, models, equipment, and any
copies of the same.
8. Miscellaneous.
8.1. Entire Agreement. This Agreement (including any exhibits,
schedules and other documents referred to herein) contains the entire
understanding between the parties hereto with respect to the subject
matter hereof and supersedes any prior understandings, agreements or
representations, written or oral, relating to the subject matter
hereof.
<PAGE> 76
8.2. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken
together shall constitute one and the same agreement, and any party
hereto may execute this Agreement by signing any such counterpart.
8.3. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law but if any provision of this Agreement is
held to be invalid, illegal or unenforceable under any applicable law
or rule, the validity, legality and enforceability of the other
provision of this Agreement will not be affected or impaired thereby.
8.4. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
heirs, personal representatives and, to the extent permitted by
subsection (e), successors and assigns.
8.5. Assignment. This Agreement and the rights and obligations of
the parties hereunder shall not be assignable, in whole or in part, by
either party without the prior written consent of the other party.
8.6. Modification, Amendment, Waiver or Termination. No provision
of this Agreement may be modified, amended, waived or terminated except
by an instrument in writing signed by the parties to this Agreement.
No course of dealing between the parties will modify, amend, waive or
terminate any provision of this Agreement or any rights or obligations
of any party under or by reason of this Agreement.
8.7. Notices. All notices, consents, requests, instructions,
approvals or other communications provided for herein shall be in
writing and delivered by personal delivery, overnight courier, mail,
electronic facsimile or e-mail addressed to the receiving party at the
address set forth herein. All such communications shall be effective
when received.
Gerald W. Williams
5728 - 125A Street,
Surrey, B.C. V3X 3G8
Any party may change the address set forth above by notice to each
other party given as provided herein.
8.8. Headings. The headings and any table of contents contained
in this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
8.9. Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEVADA, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.
8.10. Third-Party Benefit. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights,
remedies, obligations or liabilities of any nature whatsoever.
<PAGE> 77
8.11. No Waiver. No delay on the part of the Company in
exercising any right hereunder shall operate as a waiver of such right.
No waiver, express or implied, by the Company of any right or any
breach by Consultant shall constitute a waiver of any other right or
breach by Consultant.
8.12. Jurisdiction and Venue. THIS AGREEMENT MAY BE ENFORCED IN
ANY FEDERAL COURT OR STATE COURT SITTING IN NEVADA, AND EACH PARTY
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUM IS NOT CONVENIENT. IF ANY PARTY
COMMENCES ANY ACTION UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY
OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT IN
ANOTHER JURISDICTION OR VENUE, ANY OTHER PARTY TO THIS AGREEMENT SHALL
HAVE THE OPTION OF TRANSFERRING THE CASE TO THE ABOVE-DESCRIBED VENUE
OR JURISDICTION OR, IF SUCH TRANSFER CANNOT BE ACCOMPLISHED, TO HAVE
SUCH CASE DISMISSED WITHOUT PREJUDICE.
8.13. Remedies. The parties agree that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement
and that any party may, in its discretion, apply to any court of law or
equity of competent jurisdiction for specific performance and
injunctive relief in order to enforce or prevent any violations this
Agreement, and any party against whom such proceeding is brought hereby
waives the claim or defense that such party has an adequate remedy at
law and agrees not to raise the defense that the other party has an
adequate remedy at law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date set forth in the first paragraph.
Reward Enterprises, Inc.
By:____________________________________
Its:________________________________
CONSULTANT
By:____________________________________
Gerald W. Williams
Its
CONSULTANT
By
Gerald W. Williams
<PAGE> 78
EXHIBIT 99.2
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement") dated as of the First day
of May, 1999 between Reward Enterprises, Inc. (the "Company"), a Nevada
corporation, and Brian C. Doutaz (Consultant), a British Columbia
resident.
WHEREAS, the Company desires to retain Consultant to render
consulting and advisory services for the Company on the terms and
conditions set forth in this Agreement, and Consultant desires to be
retained by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the premises, the mutual
agreements herein set forth and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties
agree as follows:
1. Engagement of Consultant; Services to be Performed.
1.1. The Company hereby retains Consultant to render such
consulting and advisory services as the Company may request.
Consultant hereby accepts such engagement and agrees to perform such
services for the Company upon the terms and conditions set forth in
this Agreement.
1.2. During the Term (as defined in Section 2), Consultant shall
devote such time, attention, skill and energy to the business of the
Company as may be reasonably required to perform the services required
by this Agreement up to a maximum time commitment of 80 hours in any
calendar month, and shall assume and perform to the best of his ability
such reasonable responsibilities and duties as the Company shall assign
to Consultant from time to time.
1.3. Consultant shall perform the services hereunder primarily at
the Company's principal office but he shall, at the Company's expense,
also be required to render the services at such other locations as the
Company may specify from time to time.
1.4. In rendering services hereunder, Consultant shall be acting
as an independent contractor and not as a employee or agent of the
Company. As an independent contractor, Consultant shall have no
authority, express or implied, to commit or obligate the Company in any
manner whatsoever, except as specifically authorized from time to time
in writing by an authorized representative of the Company, which
authorization may be general or specific. Nothing contained in this
Agreement shall be construed or applied to create a partnership.
Consultant shall be responsible for the payment of all federal, state,
provincial or local taxes payable with respect to all amounts paid to
Consultant under this Agreement; provided, however, that if the Company
is determined to be liable for collection and/or remittance of any such
taxes, Consultant shall immediately reimburse the Company for all such
payments made by the Company.
<PAGE> 79
2. Term. Unless terminated at an earlier date in accordance with
Section 4, this Agreement shall commence as of the date first written
above and shall continue for a continuous period of sixty (60) months
(the "Term").
3. Compensation.
3.1 Compensation As compensation in full for Consultant's
services hereunder, the Company shall pay to Consultant a consulting
fee at the rate of $2,500 per month. Should Consultant incur greater
than 80 hours per month providing consulting services to the Company
under this Agreement, the Company shall pay Consultant at the rate of
$100 per hour plus applicable taxes in excess of 80 hours upon receipt
of a satisfactory invoice therefor. The consulting fee shall be
payable to Consultant in arrears at the end of each calendar month
during the Term and a prorated portion of such fee shall be payable
upon termination of this Agreement if such termination occurs other
than at the end of a month.
3.2 Stock Options. The Company also agrees to offer to the
Consultant the option to purchase, upon the terms and conditions set
forth in this Section 3, five hundred thousand (500,000) common shares
(the "Options").
3.3. Exercise Price. The exercise price of the Options shall be
as follows:
Number of Options Exercise Price
250,000 $0.10
250,000 $0.25
3.4. Vesting. The Options shall be fully vested and exercisable
as of the date of this Agreement.
3.5. Options not Transferable. Unless otherwise specified in this
Agreement or by the Board of Directors of the Company (the "Board"),
this Option and the rights and privileges conferred by this Agreement
may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by
applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar process. Upon any attempt to
transfer, pledge, hypothecate or otherwise dispose of any Option or of
any right or privilege conferred by this Agreement contrary to the
provisions hereof, or upon the sale, levy or attachment or similar
process upon the rights and privileges conferred by this Agreement,
such Option shall thereupon terminate and become null and void.
3.6. Expiration and Termination: Options shall expire on the
earlier of:
(a) April 30 2009.
<PAGE> 80
(b) Termination of Service as Consultant: The expiration of
thirty (30) days from the date of the Consultant's removal (with or
without cause) pursuant to Section 4 of this Agreement, resignation or
other termination as consultant.
(c) Termination Due to Death or Disability: The expiration
of one (1) year from the date of the death or Disability (as defined
below) of the Consultant, assuming that Consultant was serving as
consultant at the time of such death or Disability.
Notwithstanding the occurrence of one of the above events, the
exercise period may be extended in the sole discretion of the Board
until a date not later than the expiration date of the Options. If
Consultant's term as advisory member is terminated by death, any
Options held by the Consultant shall be exercisable only by the person
or persons to whom such Consultant's rights under such Options shall
pass by the Consultant's will or by the laws of descent and
distribution of the state or county of the Consultant's domicile at the
time of death.
3.7. Distributions, Reorganization or Liquidation. In the case of
any share distribution, share split, liquidation or like change in the
nature of common shares covered by this Agreement, the number of common
shares and exercise price shall be proportionately adjusted as set
forth below.
(a) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor
provision) or any "corporate transaction" described in the regulations
thereunder; (ii) the Company shall declare a distribution payable in,
or shall subdivide or combine, its common shares or (iii) any other
event with substantially the same effect shall occur, the Board shall,
with respect to each outstanding Option, proportionately adjust the
number of shares of common shares and/or the exercise price per common
shares so as to preserve the rights of the Consultant substantially
proportionate to the rights of the Consultant prior to such event, and
to the extent such action shall include an increase or decrease in the
number of common shares subject to outstanding options, the number of
Common Shares available under this Agreement shall automatically be
increased or decreased, as the case may be, proportionately, without
further action on the part of the Board, the Company or the Company's
shareholders.
(b) If the Company is liquidated or dissolved, the Options
may be exercised prior to the effective date of such liquidation or
dissolution. If the Consultant does not exercise his Options prior to
such effective date, each outstanding option shall terminate as of the
effective date of the liquidation or dissolution.
3.8. Exercise of Options. The Options shall be exercisable, in
whole or in part, until termination; provided, however, if the
Consultant is subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
with respect to the common shares, he shall be precluded from selling
or transferring any common shares or other security underlying an
Option during the six (6) months immediately following the grant of
<PAGE> 81
that Option. If less than all of the Common Shares included in the
Options are purchased, the remainder may be purchased at any subsequent
time prior to the expiration of the Option term. Only whole Common
Shares may be issued pursuant to the Options, and to the extent that
the Options cover less than one (1) Common Share, they are
unexercisable.
Each exercise of the Option shall be by means of delivery of a
notice of election to exercise (which may be in the form attached
hereto as Exhibit A) to the Company at its principal executive office,
specifying the number of common shares to be purchased and accompanied
by payment in cash by certified check or cashier's check in the amount
of the full exercise price for the Common Shares to be purchased.
During the lifetime of the Consultant, the Options are exercisable only
by the Consultant.
3.9. Professional Advice. The acceptance of the Options and the
sale of Common Shares issued pursuant to the exercise of Options may
have consequences under federal and state tax and securities laws,
which may vary depending upon the individual circumstances of the
Consultant. Accordingly, the Consultant acknowledges that he has been
advised to consult his personal legal and tax advisor in connection
with this Agreement and his dealings with respect to the Options for
the Common Shares. Without limiting other matters to be considered,
the Consultant should consider whether upon the exercise of Options,
the Consultant will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
4. Termination By the Company.
4.1 For Cause. Company will have the right to immediately
terminate Consultant's services and this Agreement for cause. "Cause"
means: any material breach of this Agreement by Consultant, including,
without limitation, breach of Consultant's covenants in Sections 6 and
7; any failure to perform assigned job responsibilities that continues
unremedied for a period of ten (10) days after written notice to
Consultant by Company; conviction of a felony or failure to contest
prosecution for a felony; violation of any statute, rule or regulation,
any of which in the judgment of Company is harmful to the business of
the Company or to Company's reputation; unethical practices;
dishonesty; disloyalty; or any reason that would constitute cause under
the laws of Nevada. Upon termination of Consultant's engagement
hereunder for cause or upon the death or disability of Consultant,
Consultant will have no rights to any unvested benefits or any other
compensation or payments after the termination date or the last day of
the month in which Consultant's death or disability occurred.
For purposes of this Agreement, "disability" means the incapacity
or inability of Consultant, whether due to accident, sickness or
otherwise, as determined by a medical doctor acceptable to the Board of
Directors of Company and confirmed in writing by such doctor, to
perform the essential functions of Consultant's position under this
Agreement, with or without reasonable accommodation (provided that no
accommodation that imposes undue hardship on Company will be required)
for an aggregate of ninety (90) days during any period of one hundred
eighty (180) consecutive days.
<PAGE> 82
4.2 Without Cause. Company may terminate Consultant's engagement
under this Agreement without cause and without advance notice;
provided, however, that Company will continue to pay, as severance pay,
Consultant's Base Salary at the rate in effect on the termination date
for a period of six (6) months; provided, further, that Company will be
entitled to offset any severance pay otherwise payable to Consultant by
the amount of any compensation or consulting fees being paid to
Consultant by another party while severance pay would otherwise be
payable. Such payments will be at usual and customary pay intervals of
Company and will be subject to all appropriate deductions and
withholdings. Upon termination, Consultant will have no rights to any
unvested benefits or any other compensation or payments except as
stated in this paragraph.
4.3 Termination By Consultant. Consultant may terminate
Consultant's engagement under this Agreement for any reason provided
that Consultant gives Company at least thirty (30) days' notice in
writing. Company may, at its option, accelerate such termination date
to any date at least two weeks after Consultant's notice of
termination. Company may, at its option, relieve Consultant of all
duties and authority after notice of termination has been provided.
All compensation, payments and unvested benefits will cease on the
termination date.
5. Expenses. In addition to the payment of consulting fees set
forth above, the Company shall reimburse Consultant all actual out-
of-pocket costs for long-distance telephone services, facsimile
transmissions, photocopying, courier services and postage, and all
reasonable travel, lodging and per diem expenses, that he shall incur
in connection with the rendering of Consultant's services; provided
that the Company shall have no obligation to reimburse any of such
expenses except upon provision by Consultant of adequate documentation
thereof in such form as the Company shall reasonably request; and
provided further, that the Company shall have no such obligation in
respect of any travel, lodging or per diem expenses unless the travel
to which such expenses relate shall have been authorized in advance by
the Company.
6. Ownership of Intellectual Property.
6.1 Background Technology. Exhibit B hereto lists any and all
technology that (i) Consultant intends to use in performing the
services hereunder, (ii) is either owned solely by Consultant or
licensed to Consultant with a right to sublicense and (iii) is in
existence in the form of a writing or working prototype prior to the
date of this Agreement ("Background Technology").
6.2 Notification and Disclosure. Consultant shall promptly
notify the Company in writing of the existence and nature of, and shall
promptly and fully disclose to the Company, any and all ideas, designs,
practices, processes, apparatus, improvements and inventions (all of
which are hereinafter referred to as "Inventions") that Consultant has
conceived or first actually reduced to practice and/or may conceive or
first actually reduce to practice during the Term or which Consultant
may conceive or reduce to practice within six months after the Term, if
<PAGE> 83
such inventions relate to a product or process upon which Consultant
worked during the Term or during the period of his/her engagement.
6.3 Ownership of Inventions. All such inventions shall be the
sole and exclusive property of the Company or its nominee during the
Term and thereafter, and, except for Consultant's rights in any
Background Technology, Consultant hereby assigns to the Company all its
right, title and interest in and to any and all such inventions.
Whenever the Company so requests, Consultant shall execute and
assign any and all applications, assignments and other instruments that
the Company shall deem necessary or convenient in order to apply for
and obtain Letters Patent of the United States and/or of any foreign
countries for such inventions and in order to assign and convey to the
Company or its nominee the sole and exclusive right, title and interest
in and to all such inventions.
Consultant shall aid and assist the Company in any interference or
litigation pertaining to such inventions, and the Company shall bear
all expenses reasonably incurred by Consultant at the request of the
Company. In this connection, if any such aid or assistance requires
any expenditure of Consultant's time after the Term, Consultant shall
be entitled to compensation for the time requested by the Company at a
rate equal to the pro rata rate at which Consultant was being paid for
a normal pay period immediately prior to the end of the Term.
6.4 Limitation. Sections 6.2 and 6.3shall not apply to any
invention meeting the following conditions:
(i) such invention was developed entirely on Consultant's
own time;
(ii) such invention was made without the use of any of the
equipment, supplies, facility or trade secret information of the
Company;
(iii) such invention does not relate (i) directly to the
business of the Company or (ii) to the Company's actual or demonstrably
anticipated research or development; and
(iv) such invention does not result from any service
performed by Consultant for the Company.
6.5 Copyrightable Material. All right, title, and interest in
all copyrightable material which Consultant shall conceive or
originate, either individually or jointly with others, and which arise
out of the performance of this Agreement, will be the property of the
Company and are hereby assigned to the Company along with ownership of
any and all copyrights in the copyrightable material. Consultant
agrees to execute all papers and perform all other acts necessary to
assist the Company to obtain and register copyrights on such materials
in any and all countries. Where applicable, works of authorship
created by Consultant for the Company in performing the services
hereunder shall be considered "works made for hire" as defined in the
U.S. Copyright Act.
<PAGE> 84
6.6 Survival. This Section 6 shall survive the Term.
7. Protection of Trade Secrets, Know-How and/or Other Confidential
Information of the Company.
7.1 Confidential Information. Except as permitted or directed by
the Company, during the Term or at any time thereafter Consultant shall
not divulge, furnish or make accessible to anyone or use in any way
(other than in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the Company that
Consultant has acquired or become acquainted with or will acquire or
become acquainted with during the Term or during engagement by the
Company prior to the Term, whether developed by Consultant or by
others, concerning any trade secrets, confidential or secret designs,
processes, formulae, products or future products, plans, devices or
material (whether or not patented or patentable) directly or indirectly
useful in any aspect of the business of the Company, any customer or
supplier lists of the Company, any confidential or secret development
or research work of the Company, or any other confidential information
or secret aspects of the business of the Company. Consultant
acknowledges that the above-described knowledge or information
constitutes a unique and valuable asset of the Company acquired at
great time and expense by the Company and its predecessors, and that
any disclosure or other use of such knowledge or information other than
for the sole benefit of the Company would be wrongful and would cause
irreparable harm to the Company. Both during and after the Term,
Consultant will refrain from any acts or omissions that would reduce
the value of such knowledge or information to the Company. The
foregoing obligations of confidentiality, however, shall not apply to
any knowledge or information which is now published or which
subsequently becomes generally publicly known in the form in which it
was obtained from the Company, other than as a direct or indirect
result of the breach of this Agreement by Consultant.
7.2 Know-How and Trade Secrets. All know-how and trade secret
information conceived or originated by Consultant which arises out of
the performance of the services hereunder or any related material or
information shall be the property of the Company, and all rights
therein are hereby assigned to the Company.
7.3 Return of Records. Upon termination of this Agreement,
Consultant shall deliver to the Company all property that is in his
possession and that is the Company's property or relates to the
Company's business, including, but not limited to records, notes, data,
memoranda, software, electronic information, models, equipment, and any
copies of the same.
8. Miscellaneous.
8.1. Entire Agreement. This Agreement (including any exhibits,
schedules and other documents referred to herein) contains the entire
understanding between the parties hereto with respect to the subject
matter hereof and supersedes any prior understandings, agreements or
representations, written or oral, relating to the subject matter
hereof.
<PAGE> 85
8.2. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken
together shall constitute one and the same agreement, and any party
hereto may execute this Agreement by signing any such counterpart.
8.3. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law but if any provision of this Agreement is
held to be invalid, illegal or unenforceable under any applicable law
or rule, the validity, legality and enforceability of the other
provision of this Agreement will not be affected or impaired thereby.
8.4. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
heirs, personal representatives and, to the extent permitted by
subsection (e), successors and assigns.
8.5. Assignment. This Agreement and the rights and obligations of
the parties hereunder shall not be assignable, in whole or in part, by
either party without the prior written consent of the other party.
8.6. Modification, Amendment, Waiver or Termination. No provision
of this Agreement may be modified, amended, waived or terminated except
by an instrument in writing signed by the parties to this Agreement.
No course of dealing between the parties will modify, amend, waive or
terminate any provision of this Agreement or any rights or obligations
of any party under or by reason of this Agreement.
8.7. Notices. All notices, consents, requests, instructions,
approvals or other communications provided for herein shall be in
writing and delivered by personal delivery, overnight courier, mail,
electronic facsimile or e-mail addressed to the receiving party at the
address set forth herein. All such communications shall be effective
when received.
Brian C. Doutaz
12880 Railway Avenue, Unit No. 35
Richmond, B.C. V7E 6G4
Any party may change the address set forth above by notice to each
other party given as provided herein.
8.8. Headings. The headings and any table of contents contained
in this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
8.9. Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEVADA, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.
8.10. Third-Party Benefit. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights,
remedies, obligations or liabilities of any nature whatsoever.
<PAGE> 86
8.11. No Waiver. No delay on the part of the Company in
exercising any right hereunder shall operate as a waiver of such right.
No waiver, express or implied, by the Company of any right or any
breach by Consultant shall constitute a waiver of any other right or
breach by Consultant.
8.12. Jurisdiction and Venue. THIS AGREEMENT MAY BE ENFORCED IN
ANY FEDERAL COURT OR STATE COURT SITTING IN NEVADA, AND EACH PARTY
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUM IS NOT CONVENIENT. IF ANY PARTY
COMMENCES ANY ACTION UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY
OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT IN
ANOTHER JURISDICTION OR VENUE, ANY OTHER PARTY TO THIS AGREEMENT SHALL
HAVE THE OPTION OF TRANSFERRING THE CASE TO THE ABOVE-DESCRIBED VENUE
OR JURISDICTION OR, IF SUCH TRANSFER CANNOT BE ACCOMPLISHED, TO HAVE
SUCH CASE DISMISSED WITHOUT PREJUDICE.
8.13. Remedies. The parties agree that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement
and that any party may, in its discretion, apply to any court of law or
equity of competent jurisdiction for specific performance and
injunctive relief in order to enforce or prevent any violations this
Agreement, and any party against whom such proceeding is brought hereby
waives the claim or defense that such party has an adequate remedy at
law and agrees not to raise the defense that the other party has an
adequate remedy at law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date set forth in the first paragraph.
Reward Enterprises, Inc.
By:____________________________________
Title:______________________________
CONSULTANT
By:____________________________________
Brian C. Doutaz
<PAGE> 87
EXHIBIT 99.3
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement") dated as of the First day
of May, 1999 between Reward Enterprises, Inc. (the "Company"), a Nevada
corporation, and Frank J. Rigney (Consultant), a British Columbia
resident.
WHEREAS, the Company desires to retain Consultant to render
consulting and advisory services for the Company on the terms and
conditions set forth in this Agreement, and Consultant desires to be
retained by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the premises, the mutual
agreements herein set forth and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties
agree as follows:
1. Engagement of Consultant; Services to be Performed.
1.1. The Company hereby retains Consultant to render such
consulting and advisory services as the Company may request.
Consultant hereby accepts such engagement and agrees to perform such
services for the Company upon the terms and conditions set forth in
this Agreement.
1.2. During the Term (as defined in Section 2), Consultant shall
devote such time, attention, skill and energy to the business of the
Company as may be reasonably required to perform the services required
by this Agreement up to a maximum time commitment of 160 hours in any
calendar month, and shall assume and perform to the best of his ability
such reasonable responsibilities and duties as the Company shall assign
to Consultant from time to time.
1.3. Consultant shall perform the services hereunder primarily at
the Company's principal office but he shall, at the Company's expense,
also be required to render the services at such other locations as the
Company may specify from time to time.
1.4. In rendering services hereunder, Consultant shall be acting
as an independent contractor and not as a employee or agent of the
Company. As an independent contractor, Consultant shall have no
authority, express or implied, to commit or obligate the Company in any
manner whatsoever, except as specifically authorized from time to time
in writing by an authorized representative of the Company, which
authorization may be general or specific. Nothing contained in this
Agreement shall be construed or applied to create a partnership.
Consultant shall be responsible for the payment of all federal, state,
provincial or local taxes payable with respect to all amounts paid to
Consultant under this Agreement; provided, however, that if the Company
is determined to be liable for collection and/or remittance of any such
taxes, Consultant shall immediately reimburse the Company for all such
payments made by the Company.
<PAGE> 88
2. Term. Unless terminated at an earlier date in accordance with
Section 4, this Agreement shall commence as of the date first written
above and shall continue for a continuous period of sixty (60) months
(the "Term").
3. Compensation.
3.1 Compensation As compensation in full for Consultant's
services hereunder, the Company shall pay to Consultant a consulting
fee at the rate of $5000 per month. Should Consultant incur greater
than 160 hours per month providing consulting services to the Company
under this Agreement, the Company shall pay Consultant at the rate of
$100 per hour plus applicable taxes in excess of 160 hours upon receipt
of a satisfactory invoice therefor. The consulting fee shall be
payable to Consultant in arrears at the end of each calendar month
during the Term and a prorated portion of such fee shall be payable
upon termination of this Agreement if such termination occurs other
than at the end of a month.
3.2 Stock Options. The Company also agrees to offer to the
Consultant the option to purchase, upon the terms and conditions set
forth in this Section 3, one million (1,000,000) common shares (the
"Options").
3.3. Exercise Price. The exercise price of the Options shall be
as follows:
Number of Options Exercise Price
500,000 $0.10
500,000 $0.25
3.4. Vesting. The Options shall be fully vested and exercisable
as of the date of this Agreement.
3.5. Options not Transferable. Unless otherwise specified in this
Agreement or by the Board of Directors of the Company (the "Board"),
this Option and the rights and privileges conferred by this Agreement
may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by
applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar process. Upon any attempt to
transfer, pledge, hypothecate or otherwise dispose of any Option or of
any right or privilege conferred by this Agreement contrary to the
provisions hereof, or upon the sale, levy or attachment or similar
process upon the rights and privileges conferred by this Agreement,
such Option shall thereupon terminate and become null and void.
3.6. Expiration and Termination: Options shall expire on the
earlier of:
(a) April 30, 2009.
<PAGE> 89
(b) Termination of Service as Consultant: The expiration of
thirty (30) days from the date of the Consultant's removal (with or
without cause) pursuant to Section 4 of this Agreement, resignation or
other termination as consultant.
(c) Termination Due to Death or Disability: The expiration
of one (1) year from the date of the death or Disability (as defined
below) of the Consultant, assuming that Consultant was serving as
consultant at the time of such death or Disability.
Notwithstanding the occurrence of one of the above events, the
exercise period may be extended in the sole discretion of the Board
until a date not later than the expiration date of the Options. If
Consultant's term as advisory member is terminated by death, any
Options held by the Consultant shall be exercisable only by the person
or persons to whom such Consultant's rights under such Options shall
pass by the Consultant's will or by the laws of descent and
distribution of the state or county of the Consultant's domicile at the
time of death.
3.7. Distributions, Reorganization or Liquidation. In the case of
any share distribution, share split, liquidation or like change in the
nature of common shares covered by this Agreement, the number of common
shares and exercise price shall be proportionately adjusted as set
forth below.
(a) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor
provision) or any "corporate transaction" described in the regulations
thereunder; (ii) the Company shall declare a distribution payable in,
or shall subdivide or combine, its common shares or (iii) any other
event with substantially the same effect shall occur, the Board shall,
with respect to each outstanding Option, proportionately adjust the
number of shares of common shares and/or the exercise price per common
shares so as to preserve the rights of the Consultant substantially
proportionate to the rights of the Consultant prior to such event, and
to the extent such action shall include an increase or decrease in the
number of common shares subject to outstanding options, the number of
Common Shares available under this Agreement shall automatically be
increased or decreased, as the case may be, proportionately, without
further action on the part of the Board, the Company or the Company's
shareholders.
(b) If the Company is liquidated or dissolved, the Options
may be exercised prior to the effective date of such liquidation or
dissolution. If the Consultant does not exercise his Options prior to
such effective date, each outstanding option shall terminate as of the
effective date of the liquidation or dissolution.
3.8. Exercise of Options. The Options shall be exercisable, in
whole or in part, until termination; provided, however, if the
Consultant is subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
with respect to the common shares, he shall be precluded from selling
or transferring any common shares or other security underlying an
Option during the six (6) months immediately following the grant of
<PAGE> 90
that Option. If less than all of the Common Shares included in the
Options are purchased, the remainder may be purchased at any subsequent
time prior to the expiration of the Option term. Only whole Common
Shares may be issued pursuant to the Options, and to the extent that
the Options cover less than one (1) Common Share, they are
unexercisable.
Each exercise of the Option shall be by means of delivery of a
notice of election to exercise (which may be in the form attached
hereto as Exhibit A) to the Company at its principal executive office,
specifying the number of common shares to be purchased and accompanied
by payment in cash by certified check or cashier's check in the amount
of the full exercise price for the Common Shares to be purchased.
During the lifetime of the Consultant, the Options are exercisable only
by the Consultant.
3.9. Professional Advice. The acceptance of the Options and the
sale of Common Shares issued pursuant to the exercise of Options may
have consequences under federal and state tax and securities laws,
which may vary depending upon the individual circumstances of the
Consultant. Accordingly, the Consultant acknowledges that he has been
advised to consult his personal legal and tax advisor in connection
with this Agreement and his dealings with respect to the Options for
the Common Shares. Without limiting other matters to be considered,
the Consultant should consider whether upon the exercise of Options,
the Consultant will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
4. Termination By the Company.
4.1 For Cause. Company will have the right to immediately
terminate Consultant's services and this Agreement for cause. "Cause"
means: any material breach of this Agreement by Consultant, including,
without limitation, breach of Consultant's covenants in Sections 6 and
7; any failure to perform assigned job responsibilities that continues
unremedied for a period of ten (10) days after written notice to
Consultant by Company; conviction of a felony or failure to contest
prosecution for a felony; violation of any statute, rule or regulation,
any of which in the judgment of Company is harmful to the business of
the Company or to Company's reputation; unethical practices;
dishonesty; disloyalty; or any reason that would constitute cause under
the laws of Nevada. Upon termination of Consultant's engagement
hereunder for cause or upon the death or disability of Consultant,
Consultant will have no rights to any unvested benefits or any other
compensation or payments after the termination date or the last day of
the month in which Consultant's death or disability occurred.
For purposes of this Agreement, "disability" means the incapacity
or inability of Consultant, whether due to accident, sickness or
otherwise, as determined by a medical doctor acceptable to the Board of
Directors of Company and confirmed in writing by such doctor, to
perform the essential functions of Consultant's position under this
Agreement, with or without reasonable accommodation (provided that no
accommodation that imposes undue hardship on Company will be required)
for an aggregate of ninety (90) days during any period of one hundred
eighty (180) consecutive days.
<PAGE> 91
4.2 Without Cause. Company may terminate Consultant's engagement
under this Agreement without cause and without advance notice;
provided, however, that Company will continue to pay, as severance pay,
Consultant's Base Salary at the rate in effect on the termination date
for a period of six (6) months provided, further, that Company will be
entitled to offset any severance pay otherwise payable to Consultant by
the amount of any compensation or consulting fees being paid to
Consultant by another party while severance pay would otherwise be
payable. Such payments will be at usual and customary pay intervals of
Company and will be subject to all appropriate deductions and
withholdings. Upon termination, Consultant will have no rights to any
unvested benefits or any other compensation or payments except as
stated in this paragraph.
4.3 Termination By Consultant. Consultant may terminate
Consultant's engagement under this Agreement for any reason provided
that Consultant gives Company at least thirty (30) days' notice in
writing. Company may, at its option, accelerate such termination date
to any date at least two weeks after Consultant's notice of
termination. Company may, at its option, relieve Consultant of all
duties and authority after notice of termination has been provided.
All compensation, payments and unvested benefits will cease on the
termination date.
5. Expenses. In addition to the payment of consulting fees set forth
above, the Company shall reimburse Consultant all actual out-of-pocket
costs for long-distance telephone services, facsimile transmissions,
photocopying, courier services and postage, and all reasonable travel,
lodging and per diem expenses, that he shall incur in connection with
the rendering of Consultant's services; provided that the Company shall
have no obligation to reimburse any of such expenses except upon
provision by Consultant of adequate documentation thereof in such form
as the Company shall reasonably request; and provided further, that the
Company shall have no such obligation in respect of any travel, lodging
or per diem expenses unless the travel to which such expenses relate
shall have been authorized in advance by the Company.
6. Ownership of Intellectual Property.
6.1 Background Technology. Exhibit B hereto lists any and all
technology that (i) Consultant intends to use in performing the
services hereunder, (ii) is either owned solely by Consultant or
licensed to Consultant with a right to sublicense and (iii) is in
existence in the form of a writing or working prototype prior to the
date of this Agreement ("Background Technology").
6.2 Notification and Disclosure. Consultant shall promptly
notify the Company in writing of the existence and nature of, and shall
promptly and fully disclose to the Company, any and all ideas, designs,
practices, processes, apparatus, improvements and inventions (all of
which are hereinafter referred to as "Inventions") that Consultant has
conceived or first actually reduced to practice and/or may conceive or
first actually reduce to practice during the Term or which Consultant
may conceive or reduce to practice within six months after the Term, if
such inventions relate to a product or process upon which Consultant
worked during the Term or during the period of his/her engagement.
<PAGE> 92
6.3 Ownership of Inventions. All such inventions shall be the
sole and exclusive property of the Company or its nominee during the
Term and thereafter, and, except for Consultant's rights in any
Background Technology, Consultant hereby assigns to the Company all its
right, title and interest in and to any and all such inventions.
Whenever the Company so requests, Consultant shall execute and
assign any and all applications, assignments and other instruments that
the Company shall deem necessary or convenient in order to apply for
and obtain Letters Patent of the United States and/or of any foreign
countries for such inventions and in order to assign and convey to the
Company or its nominee the sole and exclusive right, title and interest
in and to all such inventions.
Consultant shall aid and assist the Company in any interference or
litigation pertaining to such inventions, and the Company shall bear
all expenses reasonably incurred by Consultant at the request of the
Company. In this connection, if any such aid or assistance requires
any expenditure of Consultant's time after the Term, Consultant shall
be entitled to compensation for the time requested by the Company at a
rate equal to the pro rata rate at which Consultant was being paid for
a normal pay period immediately prior to the end of the Term.
6.4 Limitation. Sections 6.2 and 6.3shall not apply to any
invention meeting the following conditions:
(i) such invention was developed entirely on
Consultant's own time;
(ii) such invention was made without the use of any of
the equipment, supplies, facility or trade secret information of the
Company;
(iii) such invention does not relate (i) directly to
the business of the Company or (ii) to the Company's actual or
demonstrably anticipated research or development; and
(iv) such invention does not result from any service
performed by Consultant for the Company.
6.5 Copyrightable Material. All right, title, and interest in
all copyrightable material which Consultant shall conceive or
originate, either individually or jointly with others, and which arise
out of the performance of this Agreement, will be the property of the
Company and are hereby assigned to the Company along with ownership of
any and all copyrights in the copyrightable material. Consultant
agrees to execute all papers and perform all other acts necessary to
assist the Company to obtain and register copyrights on such materials
in any and all countries. Where applicable, works of authorship
created by Consultant for the Company in performing the services
hereunder shall be considered "works made for hire" as defined in the
U.S. Copyright Act.
6.6 Survival. This Section 6 shall survive the Term.
<PAGE> 93
7. Protection of Trade Secrets, Know-How and/or Other Confidential
Information of the Company.
7.1 Confidential Information. Except as permitted or directed by
the Company, during the Term or at any time thereafter Consultant shall
not divulge, furnish or make accessible to anyone or use in any way
(other than in the ordinary course of the business of the Company) any
confidential or secret knowledge or information of the Company that
Consultant has acquired or become acquainted with or will acquire or
become acquainted with during the Term or during engagement by the
Company prior to the Term, whether developed by Consultant or by
others, concerning any trade secrets, confidential or secret designs,
processes, formulae, products or future products, plans, devices or
material (whether or not patented or patentable) directly or indirectly
useful in any aspect of the business of the Company, any customer or
supplier lists of the Company, any confidential or secret development
or research work of the Company, or any other confidential information
or secret aspects of the business of the Company. Consultant
acknowledges that the above-described knowledge or information
constitutes a unique and valuable asset of the Company acquired at
great time and expense by the Company and its predecessors, and that
any disclosure or other use of such knowledge or information other than
for the sole benefit of the Company would be wrongful and would cause
irreparable harm to the Company. Both during and after the Term,
Consultant will refrain from any acts or omissions that would reduce
the value of such knowledge or information to the Company. The
foregoing obligations of confidentiality, however, shall not apply to
any knowledge or information which is now published or which
subsequently becomes generally publicly known in the form in which it
was obtained from the Company, other than as a direct or indirect
result of the breach of this Agreement by Consultant.
7.2 Know-How and Trade Secrets. All know-how and trade secret
information conceived or originated by Consultant which arises out of
the performance of the services hereunder or any related material or
information shall be the property of the Company, and all rights
therein are hereby assigned to the Company.
7.3 Return of Records. Upon termination of this Agreement,
Consultant shall deliver to the Company all property that is in his
possession and that is the Company's property or relates to the
Company's business, including, but not limited to records, notes, data,
memoranda, software, electronic information, models, equipment, and any
copies of the same.
8. Miscellaneous.
8.1. Entire Agreement. This Agreement (including any exhibits,
schedules and other documents referred to herein) contains the entire
understanding between the parties hereto with respect to the subject
matter hereof and supersedes any prior understandings, agreements or
representations, written or oral, relating to the subject matter
hereof.
<PAGE> 94
8.2. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken
together shall constitute one and the same agreement, and any party
hereto may execute this Agreement by signing any such counterpart.
8.3. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law but if any provision of this Agreement is
held to be invalid, illegal or unenforceable under any applicable law
or rule, the validity, legality and enforceability of the other
provision of this Agreement will not be affected or impaired thereby.
8.4. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
heirs, personal representatives and, to the extent permitted by
subsection (e), successors and assigns.
8.5. Assignment. This Agreement and the rights and obligations of
the parties hereunder shall not be assignable, in whole or in part, by
either party without the prior written consent of the other party.
8.6. Modification, Amendment, Waiver or Termination. No provision
of this Agreement may be modified, amended, waived or terminated except
by an instrument in writing signed by the parties to this Agreement.
No course of dealing between the parties will modify, amend, waive or
terminate any provision of this Agreement or any rights or obligations
of any party under or by reason of this Agreement.
8.7. Notices. All notices, consents, requests, instructions,
approvals or other communications provided for herein shall be in
writing and delivered by personal delivery, overnight courier, mail,
electronic facsimile or e-mail addressed to the receiving party at the
address set forth herein. All such communications shall be effective
when received.
Frank J. Rigney
356 Taylor Way,
West Vancouver, B.C. V7T 2Y2
Any party may change the address set forth above by notice to each
other party given as provided herein.
8.8. Headings. The headings and any table of contents contained
in this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
8.9. Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEVADA, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF.
8.10. Third-Party Benefit. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights,
remedies, obligations or liabilities of any nature whatsoever.
<PAGE> 95
8.11. No Waiver. No delay on the part of the Company in
exercising any right hereunder shall operate as a waiver of such right.
No waiver, express or implied, by the Company of any right or any
breach by Consultant shall constitute a waiver of any other right or
breach by Consultant.
8.12. Jurisdiction and Venue. THIS AGREEMENT MAY BE ENFORCED IN
ANY FEDERAL COURT OR STATE COURT SITTING IN NEVADA, AND EACH PARTY
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUM IS NOT CONVENIENT. IF ANY PARTY
COMMENCES ANY ACTION UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY
OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT IN
ANOTHER JURISDICTION OR VENUE, ANY OTHER PARTY TO THIS AGREEMENT SHALL
HAVE THE OPTION OF TRANSFERRING THE CASE TO THE ABOVE-DESCRIBED VENUE
OR JURISDICTION OR, IF SUCH TRANSFER CANNOT BE ACCOMPLISHED, TO HAVE
SUCH CASE DISMISSED WITHOUT PREJUDICE.
8.13. Remedies. The parties agree that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement
and that any party may, in its discretion, apply to any court of law or
equity of competent jurisdiction for specific performance and
injunctive relief in order to enforce or prevent any violations this
Agreement, and any party against whom such proceeding is brought hereby
waives the claim or defense that such party has an adequate remedy at
law and agrees not to raise the defense that the other party has an
adequate remedy at law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date set forth in the first paragraph.
Reward Enterprises, Inc.
By: ___________________________________
Its: ______________________________
CONSULTANT
By: ___________________________________
Frank J. Rigney
<PAGE> 96
EXHIBIT 99.4
REWARD ENTERPRISES INC.
1999 STOCK OPTION PLAN
This 1999 Stock Option Plan (the "Plan") provides for the grant of
options to acquire shares of common stock, (the "Common Stock"), of
REWARD ENTERPRISES INC., a Nevada corporation (the "Company"). Stock
options granted under this Plan that qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), are referred to
in this Plan as "Incentive Stock Options." Incentive Stock Options and
stock options that do not qualify under Section 422 of the Code ("Non-
Qualified Stock Options") granted under this Plan are referred to
collectively as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key
employees and consultants of the Company and such other persons as the
Plan Administrator shall select in accordance with Section 3 below, to
encourage such persons to acquire a greater proprietary interest in the
Company, thereby strengthening their incentive to achieve the
objectives of the shareholders of the Company, and to serve as an aid
and inducement in the hiring of new employees and to provide an equity
incentive to consultants and other persons selected by the Plan
Administrator.
2. ADMINISTRATION.
This Plan shall be administered initially by the Board of
Directors of the Company (the "Board"), except that the Board may, in
its discretion, establish a committee composed of two (2) or more
members of the Board or two (2) or more other persons to administer the
Plan, which committee (the "Committee") may be an executive,
compensation or other committee, including a separate committee
especially created for this purpose. The Committee shall have the
powers and authority vested in the Board hereunder (including the power
and authority to interpret any provision of the Plan or of any Option).
The members of any such Committee shall serve at the pleasure of the
Board. A majority of the members of the Committee shall constitute a
quorum, and all actions of the Committee shall be taken by a majority
of the members present. Any action may be taken by a written instrument
signed by all of the members of the Committee and any action so taken
shall be fully effective as if it had been taken at a meeting. The
Board or, if applicable, the Committee is referred to herein as the
"Plan Administrator."
If and when the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Plan Administrator will be either the full Board
of Directors or a committee composed of two (2) or more members of the
Board who are "Non-Employee Directors" as defined under Rule 16b-3 (as
amended from time to time) promulgated under the Exchange Act or any
successor rule or regulatory requirement. In addition, if the Board
decides to maintain eligibility for the benefits of Section 162(m) of
the Code, the Plan Administrator will be either the full Board of
Directors if each director is an "Outside Director," as defined under
Section 162(m) of the Code (as amended from time to time) and the
<PAGE> 97
regulations (or any successor regulations) promulgated thereunder
("Section 162(m) of the Code" or the Committee which win be composed of
two (2) or more members of the Board who are Outside Directors.
Subject to the provisions of this Plan, and with a view to
effecting its purpose, the Plan Administrator shall have sole
authority, in its absolute discretion, to (i) construe and interpret
this Plan; (ii) define the terms used in the Plan; (iii) prescribe,
amend and rescind the rules and regulations relating to this Plan; (iv)
correct any defect supply any omission or reconcile any inconsistency
in this Plan; (v) grant Options under this Plan; (vi) determine the
individuals to whom Options shall be granted under this Plan and
whether the Option is an Incentive Stock Option or a Non-Qualified
Stock Option; (vii) determine the time or times at which Options shall
be granted under this Plan; (viii) determine the number of shares of
Common Stock subject to each Option, the exercise price of each Option,
the duration of each Option and the times at which each Option shall
become exercisable; (ix) determine all other terms and conditions of
the Options; and (x) make all other determinations and interpretations
necessary and advisable for the administration of the Plan. All
decisions, determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants in
the Plan and on their legal representatives, heirs and beneficiaries.
The Board or, if applicable, the Committee may delegate to one or
more executive officers of the Company the authority to grant Options
under this Plan to employees of the Company who, on the Date of Grant,
are not subject to Section 16 of the Exchange Act with respect to the
Common Stock ("Insiders"), and are not "covered employees" as such term
is defined for purposes of Section 162(m) of the Code (" Employees"),
and in connection therewith the authority to determine: (i) the number
of shares of Common Stock subject to such Options; (ii) the duration of
the Option; (iii) the vesting schedule for determining the times at
which such Option shall become exercisable; and (iv) all other terms
and conditions of such Options. The exercise price for any Option
granted by action of an executive officer or officers pursuant to such
delegation of authority shall not be less than the fair market value
per share of the Common Stock on the Date of Grant. Unless expressly
approved in advance by the Board or the Committee, such delegation of
authority shall not include the authority to accelerate vesting, extend
the period for exercise or otherwise alter the terms of outstanding
Options. The term "Plan Administrator" when used in any provision of
this Plan other than Sections 2, 5(f), 5(m), and I I shall be deemed to
refer to the Board or the Committee, as the case may be, and an
executive officer who has been authorized to grant Options pursuant
thereto, insofar as such provisions may be applied to persons that are
not Insiders and not Covered Employees and Options granted to such
persons.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at
the time the Option is granted, is an employee of the Company or any
Related Corporation (as defined below) ("Employees"). Non-Qualified
Stock Options may be granted to Employees and to such other persons
other than directors who are not Employees as the Plan Administrator
<PAGE> 98
shall select. Options may be granted in substitution for outstanding
Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization
between such other corporation and the Company or any subsidiary of the
Company. Options also may be granted in exchange for outstanding
Options. No person shall be eligible to receive in any fiscal year
Options to purchase more than 500,000 shares of Common Stock (subject
to adjustment as set forth in Section 5(m) hereof). Any person to whom
an Option is granted under this Plan is referred to as an "Optionee."
Any person who is the owner of an Option is referred to as a "Holder."
As used in this Plan, the term "Related Corporations" shall mean
any corporation (other than the Company) that is a "Parent Corporation"
of the Company or "Subsidiary Corporation" of the Company, as those
terms are defined in Sections 424(e) and 424(f), respectively, of the
Code (or any successor provisions) and the regulations thereunder (as
amended from time to time).
4. STOCK
The Plan Administrator is authorized to grant Options to acquire
up to a total of 1,000,000 shares of the Company's authorized but
unissued, or reacquired, Common Stock. The number of shares with
respect to which Options may be granted hereunder is subject to
adjustment as set forth in Section 5(m) hereof. If any outstanding
Option expires or is terminated for any reason, the shares of Common
Stock allocable to the unexercised portion of such Option may again be
subject to an Option granted to the same Optionee or to a different
person eligible under Section 3 of this Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a
written agreement approved by the Plan Administrator (the "Agreement").
Agreements may contain such provisions, not inconsistent with this
Plan, as the Plan Administrator in its discretion may deem advisable.
All Options also shall comply with the following requirements:
(a) Number of Shares and Type of Option.
Each Agreement shall state the number of shares of Common
Stock to which it pertains and whether the Option is intended to be an
Incentive Stock Option or a Non-Qualified Stock Option. In the absence
of action to the contrary by the Plan Administrator in connection with
the grant of an Option, all Options shall be Non-Qualified Stock
Options. The aggregate fair market value (determined at the Date of
Grant as defined below) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by the Optionee during
any calendar year (granted under this Plan and all other Incentive
Stock Option plans of the Company, a Related Corporation or a
predecessor corporation) shall not exceed $ 100,000, or such other
limit as maybe prescribed by the Code as it may be amended from time to
time. Any portion of an Option which exceeds the annual limit shall not
be void but rather shall be a Non-Qualified Stock Option.
<PAGE> 99
(b) Date of Grant
Each Agreement shall state the date the Plan Administrator
has deemed to be the effective date of the Option for purposes of this
Plan (the "Date of Grant").
(c) Option Price.
Each Agreement shall state the price per share of Common
Stock at which it is exercisable. The exercise price shall be fixed by
the Plan Administrator at whatever price the Plan Administrator may
determine in the exercise of its sole discretion; provided that the per
share exercise price for an Incentive Stock Option or any Option
granted to a "covered employee" as such term is defined for purposes of
Section 162(m) of the Code ("Covered Employee") shall not be less than
the fair market value per share of the Common Stock at the Date of
Grant as determined by the Plan Administrator in good faith; provided
further, that with respect to Incentive Stock Options granted to
greater-than-ten percent (> 10%) shareholders of the Company (as
determined with reference to Section 424(d) of the Code), the exercise
price per share shall not be less than one hundred ten percent (I
(110%) of the fair market value per share of the Common Stock at the
Date of Grant as determined by the Plan Administrator in good faith;
and, provided further, that Options granted in substitution for
outstanding options of another corporation in connection with the
merger, consolidation, acquisition of property or stock or other
reorganization involving such other corporation and the Company or any
subsidiary of the Company may be granted with an exercise price equal
to the exercise price for the substituted option of the other
corporation, subject to any adjustment consistent with the terms of the
transaction pursuant to which the substitution is to occur.
(d) Duration of Options.
At the time of the grant of the Option, the Plan
Administrator shall designate, subject to paragraph 5(g) below, the
expiration date of the Option, which date shall not be later than ten
(10) years from the Date of Grant in the case of Incentive Stock
Options; provided, that the expiration date of any Incentive Stock
Option granted to a greater-than-ten percent ( > 10%) shareholder of
the Company (as determined with reference to Section 424(d) of the
Code) shall not be later than five (5) years from the Date of Grant. In
the absence of action to the contrary by the Plan Administrator in
connection with the grant of a particular Option, and except in the
case of Incentive Stock Options as described above, all Options granted
under this Section 5 shall expire ten (10) years from the Date of
Grant.
(e) Vesting Schedule.
No Option shall be exercisable until it has vested. The
vesting schedule for each Option shall be specified by the Plan
Administrator at the time of grant of the Option prior to the provision
of services with respect to which such Option is granted; provided,
that if no vesting schedule is specified at the time of grant, the
Option shall vest according to the following schedule:
<PAGE> 100
Number of Years Percentage of Total
Following Date of Grant Option Vested
One 25%
TWO 50%
Three 75%
Four 100%
The Plan Administrator may specify a vesting schedule for all
or any portion of an Option based on the achievement of performance
objectives established in advance of the commencement by the Optionee
of services related to the achievement of the performance objectives.
Performance objectives shall be expressed in terms of one or more of
the following: return on equity, return on assets, share price, market
share, sales, earnings per share, costs, net earnings net worth,
inventories, cash and cash equivalents, gross margin or the Company's
performance relative to its internal business plan. Performance
objectives may be in respect of the performance of the Company as a
whole (whether on a consolidated or unconsolidated basis), a Related
Corporation, or a subdivision, operating unit, product or product line
of either of the foregoing. Performance objectives may be absolute or
relative and may be expressed in terms of a progression or a range. An
Option that is exercisable (in full or in part) upon the achievement of
one or more performance objectives may be exercised only following
written notice to the Optionee and the Company by the Plan
Administrator that the performance objective has been achieved.
(f) Acceleration of Vesting.
The vesting of one or more outstanding Options may be
accelerated by the Plan Administrator at such times and in such amounts
as it shall determine in its sole discretion. The vesting of Options
also shall be accelerated under the circumstances described in Section
5(m) below.
(g) Term of Option.
Vested Options shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following events:
(i) the expiration of the Option, as designated by the Plan
Administrator in accordance with Section 5(d) above; (ii) the date of
an Optionee's termination of employment or contractual relationship
with the Company or any Related Corporation for cause (as determined in
the sole discretion of the Plan Administrator); (iii) the expiration of
three (3) months from the date of an Optionee's termination of
employment or contractual relationship with the Company or any Related
Corporation for any reason whatsoever other than cause, death or
Disability (as defined below) unless, in the case of a Non-Qualified
Stock Option, the exercise period is extended by the Plan Administrator
until a date not later than the expiration date of the Option; or (iv)
the expiration of one year from termination of an Optionee's employment
or contractual relationship by reason of death or Disability (as
defined below) unless, in the case of a Non-Qualified Stock Option, the
exercise period is extended by the Plan Administrator until a date not
later than the expiration date of the Option. Upon the death of an
Optionee, any vested Options held by the Optionee shall be exercisable
only by the person or persons to whom such Optionee's rights under such
<PAGE> 100
Option shall pass by the Optionee's will or by the laws of descent and
distribution of the state or county of the Optionee's domicile at the
time of death and only until such Options terminate as provided above.
For purposes of the Plan, unless otherwise defined in the Agreement,
"Disability" shall mean medically determinable physical or mental
impairment which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months or that can be expected to
result in death. The Plan Administrator shall determine whether an
Optionee has incurred a Disability on the basis of medical evidence
acceptable to the Plan Administrator. Upon making a determination of
Disability, the Plan Administrator shall, for purposes of the Plan,
determine the date of an Optionee's termination of employment or
contractual relationship.
Unless accelerated in accordance with Section 5(f) above,
unvested Options shall terminate immediately upon termination of
employment of the Optionee by the Company for any reason whatsoever,
including death or Disability. For purposes of this Plan, transfer of
employment between or among the Company and/or any Related Corporation
shall not be deemed to constitute a termination of employment with the
Company or any Related Corporation. For purposes of this subsection,
employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as
determined by the Plan Administrator). The foregoing notwithstanding,
employment shall not be deemed to continue beyond the first ninety (90)
days of such leave, unless the Optionee's re-employment rights are
guaranteed by statute or by contract
(h) Exercise of Options.
Options shall be exercisable, in full or in part, at any time
after vesting, until termination. If less than all of the shares
included in the vested portion of any Option are purchased, the
remainder may be purchased at any subsequent time prior to the
expiration of the Option term. No portion of any Option for less than
fifty (50) shares (as adjusted pursuant to Section 5(m) below) may be
exercised; provided, that if the vested portion of any Option is less
than fifty (50) shares, it may be exercised with respect to all shares
for which it is vested. Only whole shares may be issued pursuant to an
Option, and to the extent that an Option covers less than one (1)
share, it is unexercisable.
Options or portions thereof may be exercised by giving
written notice to the Company, which notice shall specify the number of
shares to be purchased, and be accompanied by payment in the amount of
the aggregate exercise price for the Common Stock so purchased, which
payment shall be in the form specified in Section 5(i) below. The
Company shall not be obligated to issue, transfer or deliver a
certificate of Common Stock to the Holder of any Option, until
provision has been made by the Holder, to the satisfaction of the
Company, for the payment of the aggregate exercise price for all shares
for which the Option shall have been exercised and for satisfaction of
any tax withholding obligations associated with such exercise. During
the lifetime of an Optionee, Options are exercisable only by the
Optionee or in the case of a Non-Qualified Stock Option, transferee who
<PAGE> 102
takes tide to such Option in the manner permitted by subsection 5(k)
hereof. It shall be a condition precedent to the exercise of any Option
granted hereunder that the Holder shall enter into a Stock Transfer
Agreement with the Company.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price
shall be paid to the Company in cash or by certified or cashier's
check. In addition, the Holder may pay for all or any portion of the
aggregate exercise price by complying with one or more of the following
alternatives:
(1) by delivering to the Company shares of Common Stock
previously held by such Holder, or by the Company withholding
shares of Common Stock otherwise deliverable pursuant to exercise
of the Option, which shares of Common Stock received or withheld
shall have a fair market value at the date of exercise (as
determined by the Plan Administrator) equal to the aggregate
exercise price to be paid by the Optionee upon such exercise;
(2) by delivering a properly executed exercise notice
together with in-evocable instructions to a broker promptly to
sell or margin a sufficient portion of the shares and deliver
directly to the Company the amount of sale or margin loan proceeds
to pay the exercise price; or
(3) by complying with any other payment mechanism
approved by the plan Administrator at the time of exercise.
(j) Rights as a Shareholder.
A Holder shall have no rights as a shareholder with respect
to any shares covered by an Option until such Holder becomes a record
holder of such shares, irrespective of whether such Holder has given
notice of exercise. Subject to the provisions of Section 5(m) hereof,
no rights shall accrue to a Holder and no adjustments shall be made on
account of dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights declared
on, or created in, the Common Stock for which the record date is prior
to the date the Holder becomes a record holder of the shares of Common
Stock covered by the Option, irrespective of whether such Holder has
given notice of exercise.
(k) Transfer of Option.
Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or
hypothecated in any manner (whether by operation of law or otherwise)
other than by will, by applicable laws of descent and distribution or
(except in the case of an Incentive Stock Option) pursuant to a
qualified domestic relations order, and shall not be subject to
execution, attachment or similar process; provided however, that any
Agreement may provide or be amended to provide that a Non-Qualified
Stock Option to which it relates is transferable without payment of
consideration to immediate family members of the Optionee or to trusts
<PAGE> 103
or partnerships or limited liability companies established exclusively
for the benefit of the Optionee and the Optionee's immediate family
members. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred
by this Plan contrary to the provisions hereof, or upon the sale, levy
or any attachment or similar process upon the rights and privileges
conferred by this Plan, such Option shall thereupon terminate and
become null and void.
(1) Securities Regulation and Tax Withholding.
(1) Shares shall not be issued with respect to an
Option unless the exercise of such Option and the issuance and
delivery of such shares shall comply with all relevant provisions
of law, including, without limitation, Section 162(m) of the Code,
any applicable state securities laws, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations thereunder
and the requirements of any stock exchange or automated inter-
dealer quotation system of a registered national securities
association upon which such shares may then be listed, and such
issuance shall be further subject to the approval of counsel for
the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance
and sale of such shares. The inability of the Company to obtain
from any regulatory body the authority deemed by the Company to be
necessary for the lawful issuance and sale of any shares under
this Plan, or the unavailability of an exemption from registration
for the issuance and sale of any shares under this Plan, shall
relieve the Company of any liability with respect to the non-
issuance or sale of such shares.
As a condition to the exercise of an Option, the Plan
Administrator may require the Holder to represent and warrant in
writing at the time of such exercise that the shares are being
purchased only for investment and without any then-present
intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may
be placed on the stock books and records of the Company, and a
legend indicating that the stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided
stating that such transfer is not in violation of any applicable
law or regulation, may be stamped on the certificates representing
such shares in order to assure an exemption from registration. The
Plan Administrator also may require such other documentation as
may from time to time be necessary to comply with federal and
state securities laws. THE COMPANY HAS NO OBLIGATION TO UNDERTAKE
REGISTRATION OF OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE
EXERCISE OF OPTIONS.
(2) The Holder must pay to the Company by certified or
cashier's check, promptly upon exercise of an Option or, if later,
the date that the amount of such obligations becomes determinable,
all applicable federal, state, local and foreign withholding taxes
that the Plan Administrator, in its discretion, determines to
result upon exercise of an Option or from a transfer or other
disposition of shares of Common Stock acquired upon exercise of an
<PAGE> 104
Option or otherwise related to an Option or shares of Common Stock
acquired in connection with an Option. Upon approval of the Plan
Administrator, a Holder may satisfy such obligation by complying
with one or more of the following alternatives selected by the
Plan Administrator:
(A) by delivering to the Company shares of Common
Stock previously held by such Holder or by the Company
withholding shares of Common Stock otherwise deliverable
pursuant to the exercise of the Option, which shares of
Common Stock received or withheld shall have a fair market
value at the date of exercise (as determined by the Plan
Administrator) equal to any withholding tax obligations
arising as a result of such exercise, transfer or other
disposition;
(B) by executing appropriate loan documents
approved by the Plan Administrator by which the Holder
borrows funds from the Company to pay any withholding taxes
due under this Paragraph 2, with such repayment terms as the
Plan Administrator shall select; or
(C) by complying with any other payment mechanism
approved by the Plan Administrator from time to time.
(3) The issuance, transfer or delivery of certificates
of Common Stock pursuant to the exercise of Options may be
delayed, at the discretion of the Plan Administrator, until the
Plan Administrator is satisfied that the applicable requirements
of the federal and state securities laws and the withholding
provisions of the Code have been met and that the Holder has paid
or otherwise satisfied any withholding tax obligation as described
in (2) above.
(m) Stock Dividend or Reorganization.
(1) If (i) the Company shall at any time be involved in
a transaction described in Section 424(a) of the Code (or any
successor provision) or any "corporate transaction" described in
the regulations thereunder; (ii) the Company shall declare a
dividend payable in, or shall subdivide or combine, its Common
Stock or (iii) any other event with substantially the same effect
shall occur, the Plan Administrator shall, subject to applicable
law, with respect to each outstanding Option, proportionately
adjust the number of shares of Common Stock subject to such Option
and/or the exercise price per share so as to preserve the rights
of the Holder substantially proportionate to the rights of the
Holder prior to such event and to the extent that such action
shall include an increase or decrease in the number of shares of
Common Stock subject to outstanding Options, the number of shares
available under Section 4 of this Plan shall automatically be
increased or decreased, as the case may be, proportionately,
without further action on the part of the Plan Administrator, the
Company, the Company's shareholders, or any Holder.
<PAGE> 105
(2) In the event that the presently authorized
capital stock of the Company is changed into the same number of
shares with a different par value, or without par value, the stock
resulting from any such change shall be deemed to be Common Stock
within the meaning of the Plan, and each Option shall apply to the
same number of shares of such new stock as it applied to old
shares immediately prior to such change.
(3) If the Company shall at any time declare an
extraordinary dividend with respect to the Common Stock, whether
payable in cash or other property, the Plan Administrator may,
subject to applicable law, in the exercise of its sole discretion
and with respect to each outstanding Option, proportionately
adjust the number of shares of Common Stock subject to such Option
and/or adjust the exercise price per share so as to preserve the
rights of the Holder substantially proportionate to the rights of
the Holder prior to such event and to the extent that such action
shall include an increase or decrease in the number of shares of
Common Stock subject to outstanding Options, the number of shares
available under Section 4 of this Plan shall automatically be
increased or decreased, as the case may be, proportionately,
without further action on the part of the Plan Administrator, the
Company, the Company's shareholders, or any Holder.
(4) The foregoing adjustments in the shares subject to
Options shall be made by the Plan Administrator, or by any
successor administrator of this Plan, or by the applicable terms
of any assumption or substitution document.
(5) The grant of an Option shall not affect in any way
the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure, to merge, consolidate or dissolve, to
liquidate or to sell or transfer all or any part of its business
or assets.
6. EFFECTIVE DATE; TERM.
Incentive Stock Options may be granted by the Plan Administrator
from time to time on or after the date on which this Plan is adopted
(the "Effective Date") through the day immediately preceding the tenth
anniversary of the Effective Date. Non-Quahfied Stock Options may be
granted by the Plan Administrator on or after the Effective Date and
until this Plan is terminated by the Board in its sole discretion.
Termination of this Plan shall not terminate any Option granted prior
to such termination. Any Incentive Stock Options granted by the Plan
Administrator prior to the approval of this Plan by the shareholders of
the Company in accordance with Section 422 of the Code shall be granted
subject to ratification of this Plan by the shareholders of the Company
within twelve (12) months before or after the Effective Date. If such
shareholder ratification is sought and not obtained, all Options
granted prior thereto and thereafter shall be considered Non-Qualified
Stock Options and any Options granted to Covered Employees will not be
eligible for the exclusion set forth in Section 162(m) of the Code with
respect to the deductibility by the Company of certain compensation.
<PAGE> 106
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the
Optionee to exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
The Plan Administrator will determine whether or not any Options
are to be granted under this Plan in its sole discretion, and nothing
contained in this Plan shall be construed as giving any person any
right to participate under this Plan. The grant of an Option shall in
no way constitute any form of agreement or understanding binding on the
Company or any Related Company, express or implied, that the Company or
any Related Company will employ or contract with an Optionee for any
length of time, nor shall it interfere in any way with the Company's
or, where applicable, a Related Company's right to terminate Optionee's
employment at any time, which right is hereby reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
issued upon the exercise of Options shall be used for general corporate
purposes, unless otherwise directed by the Board.
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have
as members of the Board, members of the Plan Administrator shall be
indemnified by the Company for all reasonable expenses and liabilities
of any type or nature, including attorneys' fees, incurred in
connection with any action, suit or proceeding to which they or any of
them are a party by reason of, or in connection with, this Plan or any
Option granted under this Plan, and against all amounts paid by them in
settlement thereof (provided that such settlement is approved by
independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged
that such Plan Administrator member is liable for willful misconduct;
provided, that within fifteen (15) days after the institution of any
such action, suit or proceeding, the Plan Administrator member involved
therein shall, in writing, notify the Company of such action, suit or
proceeding, so that the Company may have the opportunity to make
appropriate arrangements to prosecute or defend the same.
11. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or
terminate this Plan or modify or amend Options granted under this Plan,
including, without limitation, such modifications or amendments as are
necessary to maintain compliance with applicable statutes, rules or
regulations; provided however, no amendment with respect to an
outstanding Option which has the effect of reducing the benefits
afforded to the Holder thereof shall be made over the objection of such
Holder; further provided, that the events triggering acceleration of
vesting of outstanding Options may be modified, expanded or eliminated
without the consent of Holders. The Plan Administrator may condition
the effectiveness of any such amendment on the receipt of shareholder
<PAGE> 107
approval at such time and in such manner as the Plan Administrator may
consider necessary for the Company to comply with or to avail the
Company and/or the Optionees of the benefits of any securities, tax,
market listing or other administrative or regulatory requirement.
Without limiting the generality of the foregoing, the Plan
Administrator may modify grants to persons who are eligible to receive
Options under this Plan who are foreign nationals or employed outside
the United States to recognize differences in local law, tax policy or
custom.
Effective Date: January 01, 1999
