UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10
GENERAL FORM FOR REGISTRATION OF
SECURITIES Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
SportsPrize Entertainment Inc.
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(Exact name of registrant as specified in its charter)
Nevada 98-0207616
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13101 Washington Boulevard, Suite 131
Culver City, California 90066
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (310) 566-7140
Securities to be registered under Section 12(b) of the Act:
None None
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Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares, Par Value of $0.001 per Share
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(Title of Class)
Not Applicable
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(Title of Class)
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TABLE OF CONTENTS
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Item 1. Description of Business..............................................................................1
Item 2. Financial Information...............................................................................49
Item 3. Properties..........................................................................................55
Item 4. Security Ownership of Certain Beneficial Owners and Management......................................55
Item 5. Directors, Executive Officers, Promoters and Control Persons........................................57
Item 6. Compensation of Officers and Directors..............................................................60
Item 7. Certain Relationships and Related Transactions......................................................65
Item 8. Legal Proceedings...................................................................................67
Item 9. Market Price of and Dividends on Registrant's Common Equity and Related Stockholder Matters.........67
Item 10. Recent Sales of Unregistered Securities.............................................................68
Item 11. Descriptions of Registrant's Securities to be Registered............................................69
Item 12. Indemnification of Directors and Officers...........................................................70
Item 13. Financial Statements and Supplementary Data.........................................................70
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................70
Item 15. Financial Statements and Exhibits...................................................................71
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NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for statements of historical fact, certain information contained in this
Registration Statement constitutes "forward-looking statements," including
without limitation statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, as well as projections of
future results. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results or
achievements of the Registrant to be materially different from any future
results or achievements of the Registrant expressed or implied by such
forward-looking statements. Such factors include, but are not limited to, the
following: the Registrant's limited operating history; undercapitalization;
risks involving new product development; unpredictability of future revenues;
management of growth and integration; potential technological changes; the
Registrant's dependence on key personnel; marketing relationships and third
party suppliers; reliance on advertisers; potential new businesses, competition
and low barriers to entry; uncertain acceptance of the Internet as an
advertising medium; uncertain acceptance of the Registrant's SportsPrize
Tournament; limited experience in sales, marketing and advertising; dependence
on continued growth in use of the Internet; the Registrant's ability to protect
its intellectual property rights and uncertainty regarding infringing
intellectual property rights of others; potential capacity and systems
disruptions; liability for Internet content; government regulations; security
risks; year 2000 compliance risks and the other risks and uncertainties
described under "Description of Business - Risk Factors" in this Registration
Statement.
The Registrant's management has included projections and estimates in this
Registration Statement, which are based primarily on management's experience in
the industry, assessments of the Registrant's results of operations, discussions
and negotiations with third parties and a review of information filed by its
competitors with the Securities and Exchange Commission. Investors are cautioned
against attributing undue certainty to management's projections.
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Item 1. Description of Business.
General Overview
We, SportsPrize Entertainment Inc., intend to engage in the business of
offering, marketing and promoting sports-related content, entertainment,
merchandise and other products on the Internet through our Web site at
http://www.sportsprize.com.
Our mission is to establish a leading Internet sports-based entertainment,
merchandising and community destination Web site. We intend to build an online
sports, entertainment and e-commerce community that appeals to sports fans from
around the world by providing three primary components on our Web site: (i)
sports content, (ii) the SportsPrize Tournament and (iii) sports oriented
e-commerce.
Content: We plan to offer the following sports content:
o Sporting news feeds;
o Articles and sports commentary;
o Interviews with players, coaches and sports commentators;
o Player and team profiles;
o Team schedules and information;
o Ticket and sporting events information;
o Chat rooms and message boards; and
o Email.
The SportsPrize Tournament: We have developed a proprietary, interactive
game called the "SportsPrize Tournament," which offers participants the
opportunity to compete in a multi-sport, periodic tournament whereby
participants answer weekly questions and accumulate points to win a wide
variety of prizes and awards, as well as discounts on merchandise within
our SportsPrize e-commerce venues.
We expect that our SportsPrize Tournament will be the center-piece of the
SportsPrize.com(TM) Web site. The SportsPrize Tournament is designed to
integrate the excitement of sports content and information with the
communication and marketing capabilities of the Internet. We will offer our
SportsPrize Tournament as free entertainment to visitors on our Web site
who become Registered Members on the site.
E-Commerce: Visitors to our Web site have the opportunity to purchase a
broad range of sports-related merchandise in our SportsPrize stores. Once
our Web site is fully
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operational, visitors will be able to purchase and sell merchandise on our
SportsPrize Auction site.
Based on our research, we do not believe that currently there are any
sports-oriented Web sites that provide all three of these components
integrated into one comprehensive Web site. We believe that we will have a
competitive advantage in the marketplace by being first-to-the-market with
a unique, multi-faceted Web site offering compelling sports content, our
SportsPrize Tournament, and a comprehensive e-commerce program to our
visitors, all at one destination on the Internet. Our goal is to
differentiate our Web site from our competitors' Web sites through an
aggressive marketing strategy. See "Our Marketing Strategy."
We intend to generate revenue by:
o Selling advertising and sponsorships on our Web site;
o Selling merchandise through our virtual SportsPrize e-commerce
shopping venues;
o Receiving transaction fees through sales on our SportsPrize
Auction site; and
o Other marketing programs.
We are a development stage company, which means that we are in the process of
developing our business and we have no revenue from our operations. We have a
history of losses, and as of August 31, 1999, we had an accumulated deficit of
$3,509,581. We anticipate that we will continue to incur substantial losses for
the foreseeable future. Thus far, we have raised $3,500,000 through private
placements to finance our business, and we anticipate that we will close
additional private placements for a total of $1,500,000 in December 1999. In
addition, we estimate that we will require additional financing of approximately
$2,750,000 to meet our cash requirements through our fiscal year ending February
29, 2000. See "Note Regarding Forward Looking Statements." We cannot assure you
that we will obtain additional financing to implement our business plans on
acceptable terms, if at all.
We launched the initial version of our SportsPrize.com(TM) Web site on November
8, 1999. Visitors to our SportsPrize.com(TM) Web site can play our
SportsPrize.com(TM) Tournament, access sports related information and purchase
sports-related merchandise. We are currently in the process of refining our Web
site software and the technology related to our SportsPrize.com(TM) Web site. We
anticipate that our Web site will be fully operational by December 29, 1999. We
cannot guarantee that we will successfully complete our Web site as planned or
that we will earn any profits from our operations.
We currently have relationships with DBC Sports to provide our sports content
and statistical information, ShopSports.com to provide merchandise and related
order fulfillment services, and Dream Products, Inc. to provide sports-related
memorabilia and related order fulfillment services. We are currently in the
process of attempting to establish relationships with potential
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sports marketing groups, athletes and content providers to provide additional
content on our Web site, as well as potential advertisers and sponsors to
purchase advertising on our Web site. We cannot assure you that we will
successfully maintain our existing relationships with DBC Sports, ShopSports.com
or Dream Products, Inc or that we will enter into any new relationships with
vendors, athletes, content providers or advertisers.
We intend to compete in the highly competitive Internet commerce industry. Many
of our competitors have substantially greater financial, technical and other
resources than us. Several competitors already have established Web sites, brand
names, strategic relationships with advertisers and other Web sites, and user
loyalty, all of which create a competitive advantage over us. We have not begun
developing our brand name or promoting our Web site. We cannot guarantee that we
will be able to compete effectively or that we will ever generate sufficient
revenues from our operations to make our business commercially viable.
The SportsPrize.com(TM) Community
Our goal is to build a community of loyal repeat visitors to our Web site that
will allow us to generate revenue from advertising, sponsorships and the sale of
merchandise. We anticipate that visitors to our Web site will be able to enter
an Internet community that allows them to view sporting news feeds, check
up-to-date sporting results, communicate with other SportsPrize Registered
Members and sports enthusiasts in chat rooms, get personal e-mail, play our
SportsPrize Tournament and monitor SportsPrize Tournament rankings. We will not
charge visitors to enter the SportsPrize.com(TM) community or to play our
SportsPrize Tournament.
We anticipate that the SportsPrize community will be an online community focused
on sports-related news, events, e-commerce and interactive products designed for
people who love sports. We intend to develop strategic relationships with
content providers, fulfillment vendors, manufacturers and marketers of
sports-related products and services as well as other Web sites to meet the
needs of our users. Other than our contract to obtain sports news feeds through
DBC Corporation and our merchandise and product arrangements with ShopSports.com
and Dreams Products, Inc., we have not entered into any agreements to provide
other content or merchandise. However, we anticipate that we will establish
additional strategic relationships with other content providers and
merchandisers that will allow us to provide a wide variety of diversified
content and products on the SportsPrize Web site.
By becoming part of the SportsPrize community, we anticipate visitors to our Web
site will be able to share their sports interests in a variety of ways,
including playing in the SportsPrize Tournament, creating their own Tournament
groups, sharing online shopping discounts, exchanging news and views in chat
rooms, using interactive services for online access to experts such as athletes,
coaches and commentators, buying and selling merchandise with other Members
through the SportsPrize Auction, and keeping in touch with family and friends by
e-mail. We intend to have regular interaction with our Members and to encourage
them to provide feedback on improving our Web site. In this way, we hope that we
will be able to anticipate the needs and interests of our Membership and help
ensure that our overall content and merchandising strategies will be attractive
to our entire Membership.
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We intend to create a Sports Advisory Panel to help us create unique content
areas, prizes and special merchandising opportunities, such as discount
incentives and special instant coupon offers. We are also in the process of
negotiating with professional athletes to provide content such as player tips,
training techniques and commentary on events and to participate in our chat
rooms. As of November 30, 1999, we have not entered into any agreements with
athletes to provide content for our Web site or to participate in our chat
rooms.
The online interactivity of the SportsPrize.com(TM) community is expected to
connect Members with each other and our sponsors and strategic associates on
many levels: global, regional, state or provincial and local. We plan to bring
the world of sports to Members' homes and offices and to enrich our Members'
world of sports with the communication powers of the Internet. We believe that
the SportsPrize.com(TM) community will allow Members to expand and enrich their
love of sports.
Business Opportunities
We intend to generate revenues and profits from three primary sources: (i)
advertising and sponsorships, (ii) e-commerce and (iii) direct marketing.
Advertising and Sponsorships - The SportsPrize System
We intend to generate revenues by selling advertising and sponsorships to
merchandisers and manufacturers of goods, products and services. Although we
have not entered into any agreements to sell advertising or sponsorships, we are
in the process of building relationships with distributors, merchandisers,
manufacturers and other e-commerce companies. However, we cannot assure you that
we will successfully sell any advertising or sponsorships or enter into any
revenue generating relationships. Internet advertising is highly competitive and
many advertisers require statistical verification of the demographic profiles
and the number of visits, impressions or page views that a Web site is
delivering. Based on our lack of an operating history, this historical data is
not available, which may adversely affect our ability to sell advertising and
sponsorships or to enter into any revenue generating relationships. Our
inability to sell advertising or sponsorships may have a material adverse effect
on our business and results of operations.
We anticipate that our unique SportsPrize marketing system will allow us to
generate advertising revenues and the interest of advertisers. We intend to
offer a forum capable of generating multiple interactions between Members of the
SportsPrize.com(TM) community and our advertisers and sponsors. When Members
visit, whether for SportsPrize Tournament play, sports news, chat or online
shopping, they will be encouraged, through SportsPrize Tournament rewards and
other incentives, to view several advertiser pages.
The SportsPrize Tournament is designed to be an Internet marketing system with
built-in features and incentives to attract players, build user loyalty, and
induce them to encourage their friends to visit our Web site and play in the
Tournament. These features and incentives are expected to include:
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o An annual grand prize drawing for major prizes to be awarded to
winners selected from our weekly world pool winners, including an
annual grand prize of $1,000,000 in the form of a 15-20 year annuity.
Players are assigned to public groups or pools based on data provided
when registering with SportsPrize.com(TM);
o Flexibility that allows players to create their own private pools,
which may generate opportunities for permission based marketing, or
solicited advertising, as well as advertising or sponsorship
opportunities targeted at market segments in specific geographic
areas;
o Pop-up redemption notices that notify winners as they play and allow
them to continue playing and to claim their prizes later;
o A results and rankings system that informs players of their ranking in
a particular contest, which we believe will generate further marketing
and communications opportunities; and
o Rewards for logging on, such as being entered in "fantasy draws" for
tickets to the sporting events or experiences and immediate discounts
on merchandise.
These features are designed to create interest in the SportsPrize.com(TM) Web
site and attract visitors on a regular basis. Our Web site is designed to
incorporate the SportsPrize Tournament, sports news, chat rooms, online
shopping, rewards and other incentives that are designed to increase traffic on
our Web site. We intend to direct traffic to our advertisers' and sponsors'
pages by offering visitors SportsPrize Tournament points for visiting these
pages. We anticipate that the traffic generated will provide economic returns to
advertisers and sponsors, leading ultimately to increased advertising revenue
and commissions for us.
We also intend to develop the SportsPrize Sponsorship Program, which we hope
will be an additional revenue source. We anticipate that sponsors participating
in the SportsPrize Sponsorship Program will place informational and promotional
links, product and sports information, advertising and other sports-related
information on our SportsPrize.com(TM) Web site. The program is anticipated to
include endorsements from advertisers and sports-related merchandisers,
equipment manufacturers, news organizations and sports event promoters. We
intend to charge fees to these sponsors for participation in the program.
We cannot assure you that we will successfully sell any advertising or
sponsorships or enter into any revenue generating relationships. Our failure to
do so will have a material adverse effect on our business and results of
operations.
SportsPrize E-Commerce Sites
We intend to offer shopping venues on our SportsPrize.com(TM) Web site that will
allow our Members to purchase sports-related merchandise, goods and other
products from us or from sponsors who post product and service offerings in our
e-commerce shopping venues. Our visitors and Members will have the opportunity
to purchase a wide range of merchandise,
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consisting of nearly 14,000 individual products in three SportsPrize e-commerce
shopping venues.
o Our Winners Store will feature select sports equipment, sportswear and
accessories, and sports-related merchandise offered directly by us or
our posting sponsors. SportsPrize Members will be offered discounts on
merchandise in this Mall based on their success in the SportsPrize
Tournament;
o Our SportsPrize SuperStore is designed to be an online sports
department store with a full range of sporting goods and apparel
offered at competitive prices. This e-commerce site is designed to be
a one-stop, online shopping destination for sports lovers. The
SportsPrize SuperStore is expected to present merchandise from
e-commerce companies that already sell sports merchandise online,
including ShopSports.com. We anticipate that we will share revenue or
profit equitably based on the traffic directed through and sales
generated in the SportsPrize.com(TM) Web site; and
o Our Clearance Mall will offer quality sports-related merchandise at
clearance sale prices. This venue is expected to feature a limited
stock of sports related merchandise at close-out prices. Clearance
Mall merchandise is expected to change weekly to provide new and
interesting product selections with every visit.
We intend to allow SportsPrize Members and SportsPrize Tournament Winners to
redeem SportsPrize Tournament points for prizes and discounts on merchandise.
We anticipate that our inventory will be owned and held by outside
"merchandising and fulfillment vendors" and shipped directly from these vendors
to our customers. We entered into a merchandising, distribution and customer
service agreement with ShopSports.com, related to merchandising, order
fulfillment, packaging and distribution of sports-related products ordered by
our customers. Under our Agreement, we will share any profits equally with
ShopSports.com on merchandise sold through our e-commerce shopping venues. See
"Agreements Related to Our Business - ShopSports Merchandising, Fullfillment and
Customer Service Agreement." In 1999 and 2000, ShopSports.com is anticipated to
be our primary provider of sports-related merchandise, product fulfillment and
customer service.
We also have an agreement with Dreams Products, Inc. for order fulfillment of
sports-related memorabilia and sports collectibles. In 1999 and 2000, we
anticipate that we will obtain a substantial portion of our sports-related
memorabilia and sports collectibles as well as order fulfillment from Dreams
Products. See "Agreements Related to Our Business - Dreams Products, Inc.
Agreement."
We intend to update our site daily with inventory information received from our
vendors, which will enable our customers to check the availability of products
before ordering. We intend to electronically transmit orders to our outside
vendors at least once a day and anticipate that orders will be shipped by these
vendors within one day after an order is placed. A customer's credit card will
be charged at the time an order is shipped.
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We have no fulfillment operation or warehouse facility of our own and,
accordingly, we are dependent on maintaining existing fulfillment relationships.
We cannot assure you that we will maintain our relationships with ShopSports.com
and Dreams Products or any other distributor capable of meeting our order
fulfillment requirements beyond the term of our existing agreements.
Except for our relationship with ShopSports.com and Dream Products, Inc., we
have not entered into any other relationships with distributors, merchandisers,
manufacturers or other e-commerce companies related to offering and selling
products in any of our SportsPrize e-commerce shopping venues. We cannot assure
you that we will successfully be able to continue to secure merchandise that is
attractive to our target market on acceptable terms or be able to offer products
at competitive prices. If we are unable to offer a broad range of merchandise or
to attract a broad range of e-commerce retailers to offer merchandise and/or
services on our SportsPrize.com(TM) Web site, our business and results of
operations will be adversely affected.
The SportsPrize Auction
In January or February 2000, our Web site will feature the SportsPrize Auction.
Through our SportsPrize Auction, SportsPrize Members will be able to buy, sell
and trade goods, services and tickets with other SportsPrize.com(TM) community
Members through personal online trading.
We also anticipate the SportsPrize Auction will offer one-of-a-kind memorabilia
items selected and authenticated for us by firms specializing in these products,
such as Dreams Products. Memorabilia from most of the major sports is expected
to be offered. Such merchandise could include actual sports gear used in
competition ranging from baseballs and hockey pucks to uniforms and sports
artifacts. We also intend to sell collectibles autographed by professional
athletes and sold on the SportsPrize Auction, and we may arrange for athletes
and sports celebrities to be present at signing ceremonies to build awareness of
our Web site.
By providing authenticated sports memorabilia and a person-to-person trading
site for sports enthusiasts, we anticipate the SportsPrize Auction will be
positioned to become a leading e-commerce opportunity for online traders of
sports merchandise. We intend to generate revenues for facilitating the
SportsPrize Auction and providing related services by charging a transaction fee
to post ads and sell merchandise.
We will compete with several auction sites operating on the Internet, many of
which are well established and have greater resources than us and will offer a
broader line of merchandise goods and services than the SportsPrize Auction. We
believe that our particular focus on sports-related merchandise may provide us
with a competitive advantage for auctioning sports-related products and
services. We cannot assure you that we will be able attract buyers and sellers
as anticipated.
The SportsPrize Tournament
As part of our strategy to build and retain Membership in the
SportsPrize.com(TM) community, we have developed the SportsPrize Tournament, a
proprietary, interactive game that challenges and rewards players. The
SportsPrize Tournament allows sports enthusiasts and sports novices to
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compete head to head in sports contests and predictive information-oriented
games for chances to win prizes and receive discounts on merchandise featured on
our Web site. Each week, the SportsPrize Tournament participants will answer
brief questionnaires about upcoming sports events in a wide variety of sports.
Winners of the weekly SportsPrize Tournaments will qualify for prizes, including
discounts on sports-related-merchandise offered in our SportsPrize e-commerce
shopping venues. Our goal is to use competition and the rewards of the
SportsPrize Tournament to attract visitors to our Web site and to keep Members
returning on a regular basis. We anticipate the SportsPrize Tournament will
offer a continuous stream of new weekly competitions covering sports from around
the world.
Registration to play in the SportsPrize Tournament will require Members to
provide us with certain demographic and other information on an on-going basis,
including the following:
o Name;
o Gender;
o Age;
o E-mail address; and
o Zip code.
We may also gather other specific information that our advertisers and sponsors
may request.
A New Type of Online Competition
We believe the SportsPrize Tournament is a new type of online sports
entertainment experience. Our Members can play in the Tournament for free. We
designed the Tournament to incorporate a wide variety of sports information into
a game that challenges players with a series of questions related to various
sports from around the world. We believe this is a unique concept and one of the
primary features that distinguishes our SportsPrize Tournament from other games
and contests on the Internet.
Tournament Structure
SportsPrize Tournament participants are challenged to test their knowledge of
and insight into their favorite sports, teams and athletes against other
participants. Each player who registers as a Member will be required to complete
a registration form to become a SportsPrize Tournament participant. Each Member
will automatically be entered in a series of pre-selected, public competitions
based on their address. These competitions and games are structured as
"cascading competitions." For example, a player from Atlanta, Georgia will be
automatically entered into the World, USA, Georgia, and Atlanta competitions.
We will encourage Members to form private competitions and to play against their
friends or co-workers. Members also can structure private competitions for
associations with which they are
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affiliated, such as their school, social or sports club, or neighborhood. A
player must have at least five of his friends, co-workers or other Members in
order to register a private competition. We intend to track and report the
results of these competitions.
Tournament Game Play
The SportsPrize Tournament combines the excitement of predicting the outcome of
an activity in a major sports event with the excitement of wagering points to
win prizes. We have designed the Tournament to be simple and fun. Each Wednesday
morning a new weekly SportsPrize Tournament game will begin. Active players are
automatically entered into their public and private weekly competitions as well
as the ongoing monthly, quarterly and annual competitions.
We intend to give each player 100 credits at the start of each weekly
SportsPrize Tournament Game. Each week, we will create 20 to 30 questions
relating to upcoming sporting events for each of several different sports
categories. A Tournament participant plays the SportsPrize Tournament by
submitting entry tickets with one to five questions selected per entry ticket.
The more selections a Tournament participant makes on an entry ticket, the more
points the participant can accumulate. If a Tournament participant answers all
the questions correctly, they will earn the maximum number of points. For
example: A Member selects the upcoming NFL Football games for this Sunday. A
ticket to participate appears on the user's screen. A series of ten questions
will appear. A question may be: Which NFL defensive end will record the most
sacks this weekend?
The site will provide a list of four football players to choose from in a
"multiple choice" format. Players may gather statistical information about how
the individuals have performed by clicking on the "stats" button, which will
provide statistics about the individual player's performances in the NFL last
week, last month and year-to-date. This feature is designed to level the playing
field for all types of participants.
A Member may wager a portion or all of the 100 credits they receive in the
current week on any one question or allocate a portion of their 100 credits to
multiple questions regarding several sports events. Additionally, a Member is
able to increase the value of the points earned by answering more than one
question correctly on an entry ticket. Consequently, a player has the
opportunity to win points based upon several different strategies.
Players have the option of submitting entries from a single sport category or
from multiple sports categories. Players may play any categories they choose,
and may submit selections as long as they have weekly points in their account.
The SportsPrize Tournament configuration is designed to challenge players with
multiple layers of strategic choices, including selecting sports categories, the
number of questions to play within that entry and the number of points to wager.
Our goal is to create an interactive environment, which will test knowledge and
intuition, and provide a multi-level competition with numerous chances to win.
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We will track and report Members' results from every competition on the "My
Results" page, which will contain statistical and performance information.
Once our Web site is fully operational, Members may earn additional points to
use in the Tournament by clicking on advertisements on our Web site. These
incentives are designed to encourage Members to click on the SportsPrize Web
site advertisements more frequently, which may result in higher levels of page
views and advertising revenue.
Winning Prizes
Members who play in the SportsPrize Tournament will have a chance to win prizes
and to receive discounts on merchandise offered on our Web site. We anticipate
that we will award prizes to the winners of the SportsPrize Tournament
including:
o Tickets to sporting events;
o Sports memorabilia;
o Sportswear;
o Sporting goods such as balls, rackets, golf clubs, athletic shoes and
other merchandise that is available from our SportsPrize e-commerce
shopping venues;
o Gift certificates from our SportsPrize e-commerce shopping venues;
o SportsPrize t-shirts, caps, jackets and pennants; and
o Other prizes that may be offered by SportsPrize advertisers or
sponsors.
We also intend to offer major prizes, which may include automobiles, boats, as
well as trips to the Super Bowl, World Series, Stanley Cup, NBA championship or
other sporting events, and cash prizes for special promotions and our annual
grand prize drawing. We anticipate that we will make arrangements to obtain
these major prizes prior to announcing the special promotions and our grand
prize drawing.
We anticipate that there will be five different ways to win.
First, Tournament participants will earn discounts on merchandise offered
in the Winners Store based on their scores in the Tournament. Weekly
winners will receive a 5% to 35% discount on products available in the
Winners Store.
Second, there will be first, second and third place prizes awarded to the
top scorers in each weekly competition. Weekly competition prizes are
anticipated to include cash, merchandise, sporting event tickets and
SportsPrize t-shirts, caps, jackets and pennants.
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Third, the top 100 weekly scorers will be entered into the weekly drawing
for special prizes in each of their sponsored public or private
competitions as well as the ongoing monthly, quarterly and annual prize
drawings in those competitions. We anticipate that these special prizes
will consist of merchandise of sponsors.
Fourth, "instant" prizes will also be awarded randomly every week, to add
to the fun and excitement of the SportsPrize Tournament. We anticipate that
instant prizes will consist of cash, merchandise, sporting event tickets
and SportsPrize t-shirts, caps, jackets and pennants.
Fifth, there will be an annual grand prize drawing to win major prizes
including a $1,000,000 grand prize, payable as a 15-20 year annuity.
The more a player participates in the Tournament, the more chances the
Tournament participant will have to win and qualify for our annual grand prize
drawing. Our grand prize winner will be drawn from weekly public pool winners in
the world competition. No purchase will be necessary in order to qualify for
prizes and discounts.
We intend to motivate SportsPrize Members to encourage their friends to play the
SportsPrize Tournament by awarding Members Tournament points for their
referrals, and by qualifying them for a free trip to the Super Bowl in a drawing
from the Members who have referred friends to play in our Tournament.
Additionally, we will award a SportsPrize.com(TM) hat to each Member who gets
five friends to join the Tournament; a SportsPrize.com(TM) T-shirt to each
Member who gets ten friends to join the Tournament; and a SportsPrize.com(TM)
golf shirt to each Member who gets twenty-five friends to join the Tournament.
We will determine the specific prizes that will be awarded to winners for each
competition in advance of the competition. In the future, we anticipate we will
award products from the sponsors of our Web site as prizes. We currently do not
have any sponsors for our Web site, and we cannot assure you that we will
successfully secure any sponsorships for our Web site.
Our Marketing Strategy
We do not plan to compete directly with existing sports and entertainment Web
sites. Instead, we anticipate SportsPrize.com(TM) will fill a complementary
market niche that is designed to combine the entertainment value of interactive
games and the challenge of sports competition with online merchandising,
promotion and marketing in an innovative way. We intend to position
SportsPrize.com(TM) as a Web site for online sports enthusiasts and to replicate
the success of other online communities, such as those focused on women's needs,
health care, children's entertainment, music, and individual online trading.
Our marketing strategy will be to target the market of online sports enthusiasts
who are looking for both entertainment and sports-related content. We are in the
process of negotiating some agreements with potential content providers, sports
merchandisers, and other e-commerce companies to implement our marketing
strategy. However, we have not entered into all of the relationships that will
be necessary for us to promote our Web site, and we cannot assure you that
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we will successfully enter into agreements or relationships on acceptable terms,
if at all, that will allow us to market our SportsPrize Web site effectively. We
intend to implement the following marketing strategies to attract our targeted
niche to our SportsPrize.com(TM) Web site:
Content: We are designing our SportsPrize Web site to feature live sporting
news feeds, up-to-date sporting results, interviews with professional
athletes, articles from sports commentators, team schedules, league
information and standings, ticket and event information, and free services
such as email, community bulletin boards and chat rooms.
We anticipate the SportsPrize Chat Rooms will feature discussions of topics
related to sports that are currently in season. The Chat Rooms also will be
a venue for Members to exchange personal ideas about the sports that they
are interested in. Members can join public rooms, private chat or create
their own rooms to suit their interests.
The SportsPrize e-mail system will enable Members to have a local mail drop
on SportsPrize servers accessible through our Web based e-mail interface.
Members also will be able to access other e-mail accounts through the
SportsPrize Web site.
SportsPrize will provide a full array of sports-related services, including
live sporting news feeds, up-to-date sports results, communication with
other Members, personal e-mail, and monitoring of the SportsPrize
Tournament rankings.
Interactivity at the heart of the SportsPrize community will enable Members
to interact with each other as well as sponsors and strategic associates on
many levels including: global, national, regional, statewide and local. We
believe that SportsPrize.com(TM) will expand and enrich our Members' love
of sports.
SportsPrize Tournament: We designed our SportsPrize Tournament to encourage
players to return to our Web site on a regular basis and to visit other
areas of our Web site, including our SportsPrize e-commerce shopping
venues, our SportsPrize Auction site, and the postings of our advertisers
and sponsors. We also encourage Members to provide us with demographic
information that may allow us to design personalized promotional offers in
the future based on the Member's individual interests and preferences.
Direct Marketing Programs: We intend to use direct marketing to increase
purchases by existing customers of our SportsPrize e-commerce shopping
venues and encourage our customers to refer visitors to our Web site by
using email promotional techniques, including providing special discounts
for purchases, special promotional offers, gifts and other specialized
marketing programs. In the future, we intend to:
o Conduct direct e-mail marketing campaigns to promote our Web
site;
o Offer discounts on targeted selections based on prior purchases;
o Offer gifts for referring new customers to our Web site; and
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o Make additional purchases and reinforce our brand name.
Customer Service: Currently, our technical personnel provide customer
service assistance related to technical problems and ShopSports.com
provides customer service to our SportsPrize.com merchandise customers
under the terms of our ShopSports.com agreement. See "Agreements Related to
Our Business - ShopSports - Merchandising, Fulfillment and Customer Service
Agreement." Once our Web site is fully operational on December 29, 1999, we
anticipate we will hire 1 or 2 customer service representatives. We also
intend to license software that allows our customer service representatives
to initiate contact with users of our Web site or allows customers to
contact us while they are browsing our Web site. We believe this will
enable our customer service representatives to answer questions, suggest
product selections and assist customers in making buying decisions. We
intend to train our customer service representatives to assist customers in
their buying decisions and to provide superior customer service in a
virtual environment.
Advertising Campaigns: We intend to implement online marketing campaigns on
a number of high traffic Web sites such as America Online, MSN, Yahoo! and
USA Today. These campaigns are contemplated to use a variety of online
marketing techniques, including:
o Click-through advertisements that bring consumers directly to our
Web site;
o Advertising campaigns that collect the e-mail addresses of
visitors who wish to receive online promotions;
o Affiliate promotion campaigns; and
o Coupons, contests and other sponsorships.
We also will conduct special promotions at various times during the year,
such as the start of the baseball, football, basketball and hockey seasons
and during major sporting events. For example, we intend to create a
special contest on our Web site and special ticket give-aways for major
sporting events such as the Super Bowl, the College Final Four, the World
Series, the Stanley Cup, the Kentucky Derby, the NBA championships, the
U.S. Open and other major sporting events.
Strategic Marketing Relationships: We have entered into strategic
relationships with two consulting firms, Interactive Marketing, Inc. and
Kaleidoscope Sports and Entertainment, LLC, to assist us in developing a
comprehensive strategic and Web site development plan. Interactive
Marketing is a strategic marketing consulting firm that specializes in
assisting companies with developing Internet strategies. See "Agreements
Related to Our Business - Interactive Marketing Inc. - Strategic Marketing
and Consulting Agreement." Kaleidoscope, a division of the Interpublic
Group of Companies, specializes in developing marketing and advertising
strategies for companies in the sports and
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entertainment industries. See "Agreements Related to Our Business -
Kaleidoscope -Consulting Agreement."
Affiliate Networks: We intend to develop an affiliate program that is
designed to enable other Web sites to create their own sports-related Web
site by linking directly to SportsPrize.com(TM). When visitors follow a
link to our SportsPrize e-commerce shopping venues, the affiliated Web site
receives a commission ranging from approximately five percent to fifteen
percent of any referred sales. Since no payment is made to the affiliate
unless a sale is generated by the affiliate, the program is designed to be
an efficient means of acquiring new customers.
The Internet is becoming increasingly crowded and the competition for visitors
is becoming more intense. Many Internet companies have very aggressive marketing
programs and have developed affiliations that drive traffic to their Web sites.
We cannot assure you that we will successfully market our Web site or attract a
sufficient number of visitors to implement our business plan. See "Note
Regarding Forward Looking Statements." Our inability to successfully market our
Web site may have a material adverse effect on our business and results of
operations.
The e-commerce Industry
The term "e-commerce" was developed with the increase of electronic retailing
transactions conducted over the Internet and the World Wide Web. As interest in
the World Wide Web developed during the 1990's, and as the number of consumers
with access to the Internet grew, companies established Web sites for marketing
purposes to promote their corporate or brand identity or to provide information
about their products, and began using those sites for marketing, merchandising
and sales purposes. Businesses use the Internet as a means to shorten the sales
cycle by appealing to a broad audience and eliminating middlemen in the
distribution channel. The information that is presented on a Web site is
delivered in a focused manner to businesses and individuals who are looking for
specific information. The Internet can reduce costs and level the playing field
for small and large businesses, allowing them to extend their reach globally.
Additionally, the availability of sophisticated Internet and Web technology,
stronger security mechanisms, and the increasing acceptance of the new
communications medium are fueling the use of e-commerce by businesses and
consumers.
We believe that the way in which certain products and services will be directly
or indirectly sold in the future will increasingly shift toward the Internet.
Businesses throughout the world are developing their Web strategies to take
advantage of this shift in the way consumers search for product and service
related information, and purchase goods and services. We believe that an
increasing percentage of business advertising budgets will be allocated to
Internet promotion and marketing strategies. We believe advertisers are and will
look for Web sites that have the volume of users that match the demographic
profile of their target consumer. See "Note Regarding Forward Looking
Statements."
We believe the growth in the Internet represents a substantial opportunity for
companies to conduct business online. Internet retailers are able to communicate
more effectively with customers by providing:
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o Visual product presentations;
o Up-to-date pricing and product information in a consistent and uniform
format;
o Customer support, including opportunities for customer feedback;
o Product offerings tailored to customer preferences; and
o Electronic billing and payment systems.
We anticipate that our focus on sports entertainment and recreation will create
attractive demographic consumer profiles for merchandisers and marketers of
sports-related goods and services. As a result, we anticipate that we will be
able to sell advertising and sponsorships, and enter into promotional joint
ventures with a broad spectrum of sports-related businesses. We also anticipate
that our Web site will generate revenue from the sale of sports-related
merchandise through our virtual stores and through transactions facilitated
through our auction site. See "Note Regarding Forward Looking Statements."
Our Competition
We intend to compete in a highly competitive market. The competition among
e-commerce companies is fierce and there are many competitors that have
established brand names and users. We intend to compete with established Web
sites for advertising revenues, revenues from the sales of sports-related
merchandise and revenues from transactions on our auction site.
Advertising Revenue Competition
The online sports entertainment market in which we intend to compete is
comprised of many competitors, and we expect competition to increase. We also
intend to compete with other non-sports-related Internet sites for the time and
attention of consumers and for advertising and sponsorship revenue. Competition
among Internet sites is intense and is expected to increase significantly in the
future. Our Web site will also compete with a variety of companies that provide
similar offerings through one or more media, such as print, radio and
television. To compete successfully, we must develop and deliver popular,
original, entertaining, information and compelling product offerings. We have
not entered into any agreements to sell advertising on our Web site, and we
cannot assure you that we will sell any advertising in the near future, if at
all.
In our entertainment areas of focus, including games, sports-related discussion
communities, sports merchandising and Internet shopping, we intend to compete
with various Internet sites, such as CBS SportsLine, ESPN.com, SportsLine USA,
Sandbox.com and others. All of these competitors currently offer a wider range
of products, services, information and news than we contemplate offering. Their
products and services may be more attractive to Internet users than ours, and
consequently, may dissuade users from visiting our Web site.
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We believe that our ability to compete will depend, to a great extent, upon our
ability to be a leader in the development and marketing of novel and unique
interactive sports-related entertainment games for our Web site and our ability
to offer a unique mix of sports-related information and merchandise. To be
successful, our Web site must be user friendly and we must respond effectively
to the challenges of technological changes and innovation by continually
enhancing our products and merchandise. The competitive factors affecting the
success of our Web site include product functionality, performance and
reliability, customer support, and cost effectiveness of our advertising
offerings.
We cannot assure you that our Web site content or our SportsPrize Tournament
will appeal to our target market, that we will generate sufficient traffic on
our Web site to sell advertising or that we will generate any revenues from
selling advertising on our Web site.
Retailing Sports-Related Merchandise Competition
The online market for retailing products and services on the Internet is new and
rapidly evolving. We expect to compete with traditional "bricks and mortar"
retail stores and other online retailers of sports-related products and
services. Our competitors include, among others:
o Online retailers, including ShopSports.com; FogDog.com, CBS
SportsLine, Gear.com and Justballs.com;
o Traditional retailers, including Oshman's SuperSports USA, Big 5
Sporting Goods, Gart Sports, The Sports Authority, Sportmart, Dick's
Sports and a variety of independent and regional retailers of
sports-related merchandise;
o Specialty retailers of sports-related merchandise;
o Mail order retailers of sports-related merchandise; and
o Mass merchandisers and department stores, including Costco, Kmart,
Sears, Target and Wal-Mart.
Many of our competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources than we have. To our knowledge, ShopSports.com, FogDog.com, and
SportsLine are market leaders in the sale of sports-related merchandise on the
Internet. Some of our competitors, like ShopSports.com, Gear.com, Justballs.com,
ESPN.com, CNN/SI, and CBS SportsLine, also may be able to secure merchandise
from vendors on more favorable terms, devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability
policies and devote substantially more resources to their Web sites and systems
development than we can. We believe that the principal competitive factors the
sale of sports-related merchandise on the Internet are:
o Product selection;
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o Price;
o Timeliness of delivery;
o Ease of use and Web site convenience; and
o Brand recognition.
We cannot assure you that we will successfully compete against established
competitors or that we will generate sufficient revenues from the sale of
merchandise though our Web site to earn any profits.
Auction Competition
Our Web site will compete directly with various online auction services,
including eBay, Amazon.com, MSN.com, Yahoo!, Onsale, First Auction, Ubid,
Auction Universe, auctions Powered by Onsale and Excite, and a number of other
small services, some of which are free to sellers and buyers, including those
that serve specialty or regional markets such as CityAuction. Some of these
competitors, like eBay and Amazon.com, offer special sports-related product
categories that compete directly with the products that are most likely to be
offered on our SportsPrize.com(TM) Auction site. Others offer auction services
free to sellers and buyers. We also potentially face competition from a number
of large online communities and services that have expertise in developing
online commerce and in facilitating online business-to-person interaction. Some
of these potential competitors, including America Online and Lycos, currently
offer business-to-consumer trading services and classified ad services, and may
introduce person-to-person trading to their large user populations.
We believe that the sports oriented focus of our Web site will appeal to buyers
and sellers of sports-related collectibles, memorabilia and merchandise;
however, we cannot assure you that we will successfully compete with established
auction Web sites or competitors that introduce auction Web sites in the future.
We have not completed development of the technology necessary to launch our
SportsPrize Auction site, and there can be no assurance that we will develop
such technology in a timely manner, if at all.
Regulation
There are currently few laws or regulations directly applicable to access to, or
commerce on, the Internet. Due to the increasing popularity and use of the
Internet, it is possible that laws and regulations may be adopted, covering
issues such as user privacy, defamation, pricing, taxation, content regulation,
quality of products and services, and intellectual property ownership and
infringement. Such legislation could expose us to substantial liability as well
as slow the growth in use of the Internet and decrease the acceptance of the
Internet as a communications and commercial medium. We may be required to incur
significant expenses in complying with any new regulations and restrictions.
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The European Union has recently adopted privacy and copyright directives that
may impose additional burdens and costs on international operations. In
addition, several telecommunications carriers, including America's Carriers'
Telecommunications Association, are seeking to have telecommunications over the
Internet regulated by the Federal Communications Commission, or FCC, in the same
manner as other telecommunications services.
Because the growing popularity and use of the Internet has burdened the existing
telecommunications infrastructure, many areas with high Internet usage have
begun to experience interruptions in phone services. Local telephone carriers,
such as Pacific Bell, have petitioned the FCC to regulate the Internet and to
impose access fees. Increased regulation or the imposition of access fees could
substantially increase the costs of communicating on the Internet, potentially
decreasing the demand for our content or the ability to access our Web site.
A number of proposals have been made at the federal, state and local level that
would impose additional taxes on the sale of goods and services through the
Internet. Such proposals, if adopted, could substantially impair the growth of
e-commerce and could adversely affect us.
The United States recently passed the Digital Millennium Copyright Act, which is
intended to reduce the liability of online service providers for listing or
linking to third-party Web sites that include materials that infringe
copyrights. The United States also recently passed the Children's Online
Protection Act and the Children's Online Privacy Act, which will restrict the
distribution of certain materials deemed harmful to children and impose
additional restrictions on the ability of online services to collect user
information from minors. Further, the United States recently passed the
Protection of Children from Sexual Predators Act, which mandates that electronic
communication service providers report facts or circumstances from which a
violation of child pornography laws is apparent. We cannot currently predict the
effect, if any, that this legislation will have on our business. There can be no
assurance that this legislation will not impose significant additional costs on
our business or subject us to additional liabilities. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, copyright, defamation, obscenity and personal privacy is uncertain.
We may be subject to claims that our services violate rules, regulations or
applicable laws or the rights of third parties. Any new legislation or
regulation in the United States or abroad or the application of existing laws
and regulations to the Internet could damage our business.
In addition, our SportsPrize Tournament may be subject to state and local laws
related to sweepstakes and contests. We do not intend to charge any fees for
playing the SportsPrize Tournament or charge any fees or require any purchases
to be eligible to receive prizes or gifts. Although we do not believe our
SportsPrize Tournament violates any federal, state and local laws, there can be
no assurance that future federal, state or local legislation or regulations will
not adversely affect our operation of the SportsPrize Tournament. Any such
legislation may have a material adverse effect on our business and results of
operations.
Due to the global nature of the Internet, it is possible that the governments of
other states and foreign countries might attempt to regulate our transmissions
or prosecute us for violations of
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their laws. We might unintentionally violate such laws. Such laws may be
modified, or new laws may be enacted, in the future. Any such development could
damage our business.
Plan of Operation
Our plan of operation includes several important strategic initiatives and is
based on estimates of our senior management. A summary of our plan of operation
and operating budget for our business as well as for our administration and
marketing for the 12 months ending August 31, 2000 is set forth below.
Summary of Plan of Operation
The following is a summary of our corporate plan of operation through August 31,
2000. During the period ending February 29, 2000, the primary focus of the plan
is to develop and launch our Web site and build the necessary infrastructure to
operate and market the site. We launched the initial version of our Web site on
November 8, 1999. Once our Web site is fully operational, we plan to implement a
major marketing program to build the SportsPrize brand as well as the Web site
Membership. We also will continue developing and enhancing the Web site during
this period. During our first two fiscal quarters ending August 31, 2000, we
intend to allocate up to 55% of our operating budget towards marketing and
promotion to facilitate the aforementioned marketing program. Our other primary
operating objectives will be to continue establishing strategic alliances with
corporate advertisers, sponsors, e-commerce associates, and other potential
content and marketing associates. We also intend to continue to build the
SportsPrize community areas on the SportsPrize.com(TM) Web site by increasing
sports information, news and chat room content, and sports celebrity-related
content.
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Our major strategic initiatives through August 31, 2000 are as follows:
Description of Major Strategic Initiatives
- --------------------------------------------------------------------------------
i. Raise sufficient capital to finance our business.
ii. Complete initial rounds of private financing to raise a total of $5,000,000
of initial capital to operate the business throughout 1999.
iii. Complete secondary round of private financing to raise an additional
$15,000,000 of capital to fund and implement the aforementioned strategic
and marketing initiatives and fund the growth of the business in 2000.
- --------------------------------------------------------------------------------
Appoint or Recruit Senior Management:
i. Chairman of the Board and Chief Executive Officer
ii. Vice President of Sales
iii. Vice President of Business Development
iv. Vice President of Sports Development
- --------------------------------------------------------------------------------
Complete Development, Beta Testing and Launch of the SportsPrize Web site:
i. Design the Home Page and Graphical User Interface for the site.
ii. Integrate the major components of the site.
iii. Complete the SportsPrize Tournament and integrate the Tournament into the
Web site.
iv. Develop and complete the E-Shopping component of the site and integrate the
E-Shopping component into the Web site.
v. Develop and complete the Community component of the site and integrate the
Community component into the Web site;
vi. Launch the Web site.
vii. Conduct a Public Beta Test of the Web site.
viii. Develop and enhance the interface design and content on the Web site.
- --------------------------------------------------------------------------------
Build the Technological Infrastructure Necessary to Operate Our Web site.
i. Obtain the equipment and Internet connectivity services necessary to
operate the site.
ii. Develop sufficient technology to operate and manage the site and its
Membership Database, and other technological components of the site.
- --------------------------------------------------------------------------------
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Description of Major Strategic Initiatives
- --------------------------------------------------------------------------------
Corporate Development:
i. Recruit Outside Directors to increase the Board of Directors to seven
Directors, including four Outside Directors.
ii. Establish a Sports Advisory Panel with representatives from each of the
major sports categories offered on our Web site.
iii. Enter into strategic relationships with content associates for our Web
site.
- --------------------------------------------------------------------------------
Preparation of Sales, Marketing and Business Development Plans/Implementation:
i. Complete the initial sales, marketing and business development plans.
ii. Obtain Prizes and Awards for the SportsPrize Tournament.
iii. Once the site is fully operational, commence sales process to begin
generating revenue.
iv. Once the site is fully operational, commence the marketing and business
development processes to build the membership base, build the brand, and
broaden the content offering on the Web site.
- --------------------------------------------------------------------------------
Locate and lease a new corporate office in the Los Angeles area.
- --------------------------------------------------------------------------------
Shareholder Relations and Investor Relations:
i. Develop comprehensive database of shareholders and maintain communication
with them.
ii. Develop and deliver comprehensive information about our company to
prospective investors to broaden our shareholder base and capital
structure.
- --------------------------------------------------------------------------------
Once our Web site is fully operational, we intend to concentrate our efforts on
marketing our Web site to users, sponsors and advertisers; soliciting feedback
on our content and technology offerings from our users, sponsors and
advertisers; selling advertising and sponsorships; increasing sales of products
offered through our SportsPrize e-commerce shopping venues; building additional
strategic relationships; developing new content and technology offerings;
obtaining endorsements from professional athletes, coaches and sports
organizations; and enhancing and improving our Web site.
We cannot assure you that we will successfully complete all of the items
contemplated in our plan of operation on a timely basis, if at all. Our ability
to complete our plan of operation will be dependent on a number of factors, some
of which are beyond our control, including our ability to raise additional
financing on acceptable terms, our ability to develop our content and technology
on a timely basis, our ability to attract advertisers and sponsors, and the
acceptance of our SportsPrize.com(TM) Web site.
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Summary of Operating Budget
Our operating budget for our plan of operation is estimated to be approximately
$16,850,000 for the period beginning September 1, 1999 and ending August 31,
2000. See "Note Regarding Forward Looking Statements." Our projected operating
budget is as follows:
<TABLE>
9/1/99 to 3/1/00 to
2/29/00 8/31/00 Total
------------ ------------- -------------
<S> <C> <C> <C>
Operating Expenses:
Financing Fees and Costs $ 100,000 $ 750,000 $ 850,000
Content Costs 250,000 500,000 750,000
General and Administrative 1,500,000 3,500,000 5,000,000
Marketing 2,150,000 6,000,000 8,150,000
------------ ------------- -------------
Total Operating Expenses $ 4,000,000 $ 10,750,000 $ 14,750,000
------------ ------------- -------------
Capital Expenditures:
Web Site Equipment/Software $ 250,000 $ 250,000 $ 500,000
Web Site Design/Development 250,000 500,000 750,000
Office Equipment/Software 250,000 250,000 500,000
Other 100,000 250,000 350,000
------------ ------------- -------------
Total Capital Expenditures $ 850,000 $ 1,250,000 $ 2,100,000
------------ ------------- -------------
Total Capital Required $4,850,000 $12,000,000 $16,850,000
============ ============= ============
</TABLE>
As of August 31, 1999, we had approximately $2,360,000 in cash and cash
equivalents. Currently we are expending approximately $250,000 per month. We
cannot assure you that our actual expenditures for the period from September 1,
1999 through August 31, 2000 will not exceed our estimated operating budget. We
based our projected cost on our results of operations, our current contractual
commitments, our discussions and negotiations with potential third party service
providers, public disclosure of our competitors of their historical costs for
similar operations, our discussions with consultants, our planned business
activities and our management's experience. See "Note Regarding Forward Looking
Statements." Actual expenditures will depend on a number of factors, some of
which are beyond our control, including, but not limited to, timing of changes
to our SportsPrize Web site, our ability to generate revenue from advertising,
sponsorships, e-commerce sales and our auction site; the availability of
financing on acceptable terms; reliability of the assumptions of management in
estimating cost and timing; certain economic and industry factors; the time
expended by consultants and professionals and fees associated with developing
strategic relationships related to our business plan; our ability to enter into
strategic relationships with third parties; the success of our SportsPrize
Tournament; and our ability to attract visitors to our SportsPrize Web site. You
are cautioned not to place undue certainty in management's assessments and
projections. If the actual expenditures for such costs exceed the estimated
costs or if we are incapable of generating revenues from our operations, we will
be required to raise additional financing or to defer certain expenditures.
We anticipate we will need to raise approximately $14,750,000 to meet our
projected capital requirements through August 31, 2000. We intend to raise
additional financing to fund our operating budget by issuing equity or debt
through a combination of private and public financings. We cannot assure you
that we will successfully raise additional financing on acceptable terms, if at
all. If we cannot raise additional financing, we anticipate that we will
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reduce our projected expenditures related to marketing our SportsPrize Web site
and concentrate our resources on selling advertising and sponsorships, and
developing our SportsPrize Web site and the SportsPrize Tournament. The failure
to meet certain expenditures may cause us to default on material obligations and
such default may have a material adverse effect on our business and results of
operations.
History of Our Company
We were incorporated in the State of Nevada on August 25, 1995 as "Par Golf,
Inc." with an authorized share capital of 25,000,000 shares of common stock with
a par value of $0.001 per share.
We were generally inactive until August 1997. In August 1997, we commenced the
business of marketing advanced graphic technologies and services by offering
print and screen services to the wholesale and retail sectors of the screen,
print and publication industries. On August 21, 1997, we amended our Articles of
Incorporation and changed our authorized share capital to 25,000,000 shares,
consisting of 20,000,000 shares of common stock with a par value of $0.001 per
share and 5,000,000 shares of preferred stock with a par value of $0.001 per
share, and changed our name to "Kodiak Graphics Company". We did not generate
sufficient revenues to make this business plan commercially viable and abandoned
this business plan in the second quarter of 1999.
On May 14, 1999, we acquired all of the issued and outstanding shares of
SportsPrize Inc., a Nevada corporation, pursuant to a statutory share exchange.
SportsPrize Inc. was in the process of designing, developing, building and
operating an Internet site focused on the sports and entertainment sectors of
the Internet market. In connection with the share exchange, we amended our
Articles of Incorporation to change our name to "SportsPrize Entertainment Inc."
on May 21, 1999.
At the time of the share exchange, we were a non-operating shell with no
revenues, expenses, assets or liabilities, and our book value was $1,440, which
were written down to zero at the time of the share exchange. Prior to our
acquisition of SportsPrize Inc., SportsPrize Inc. was engaged in the mineral
exploration business. SportsPrize Inc. had an option to purchase mineral
property rights located in the Province of Alberta, Canada pursuant to an
agreement with Jody Dahrouge and Halferdahl & Associates, Ltd. SportsPrize Inc.
elected not to exercise the option, and the option expired unexercised on
February 11, 1999. In February 1999, SportsPrize Inc. shifted its business
strategy from resource exploration to developing an Internet business.
As a result of the share exchange, all of the assets of SportsPrize Inc. became
the assets of SportsPrize Entertainment Inc., and our historical and ongoing
operations are deemed to be those of SportsPrize Inc. for accounting purposes.
As such, we have presented our interim consolidated financial information for
the six month period ended August 31, 1999, and we have included the audited
financial statements of SportsPrize Inc. for the fiscal year ended February 28,
1999.
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In June 1999, we amended our Articles of Incorporation to change our authorized
share capital to 105,000,000 shares consisting of 100,000,000 shares of common
stock with a par value of $0.001 per share and 5,000,000 shares of preferred
stock with a par value of $0.001 per share.
Our common stock is currently quoted on the National Association of Securities
Dealers' over-the-counter bulletin board and trades under the symbol "JOCK".
SportsPrize Inc. is our sole subsidiary. We have not been subject to any
bankruptcy, receivership or other similar proceedings.
Development of Our Business to Date
The SportsPrize business concept and initial business plan were developed by
SportsPrize Inc., our wholly owned subsidiary. Jeffrey Paquin, a director and
our former President, was the founder and President of SportsPrize Inc., and
guided the development of the initial business plan and company strategy.
Since May 14, 1999, we have taken the following steps to implement our business
plan:
o Acquired SportsPrize Inc.;
o Developed the prototype of the SportsPrize Tournament;
o Developed the initial software and technology for the
SportsPrize.com(TM) Web site;
o Obtained computer software licenses related to the SportsPrize
technology;
o Filed a patent application related to our SportsPrize system and
method for delivering targeted advertising through our online
SportsPrize Tournament Marketing System;
o Completed initial financings totaling $3,500,000, providing sufficient
capital to develop our plan to the revenue generation stage, and
arranged on a best efforts basis for additional financing of
$1,500,000 scheduled to close in December 1999;
o Retained Interactive Marketing Inc. to assist us in defining and
prioritizing our strategic and marketing objectives;
o Added four new members to our Board of Directors: Alan Gerson, Abe
Carmel, Robert Hunziker and Bruce Cameron;
o Hired and retained Bruce Cameron, as our President, Chief Financial
Officer and Treasurer, Robert Hunziker, as our Senior Vice President
of Corporate Finance, Donald MacKay as our Senior Vice President and
Controller, and Michael Wiedder, as our Vice President of Marketing,
thereby supplementing our executive and senior management team;
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o Appointed Alan Gerson as our Chairman of the Board;
o Submitted a trademark application for SportsPrize.com(TM) in both the
United States and Canada; and
o Completed the launch of the initial version of our Web site on
November 8, 1999; and
o Negotiated the following consulting, software development, marketing
and vendor fulfillment agreements:
<TABLE>
Consultant Services
- ---------- --------
<S> <C>
Quad-Linq Software Quad-Linq is designing the graphical user interface
and programming the database for the SportsPrize Tournament.
Interactive Marketing Inc. Interactive Marketing is providing us with strategic marketing and
operational guidance through May 2000.
Kaleidoscope Sports and Kaleidoscope is assisting us in developing strategic alliances with
Entertainment, LLC potential corporate sponsors, professional sports leagues, players
associations and professional athletes.
Las Vegas Sports Consultants DBC Sports will support our SportsPrize Tournament by providing the
Inc., d.b.a. DBC Sports sports content and statistical information, as well as develop
ongoing questions for the SportsPrize Tournament.
Tridian Design and Tridian is designing the graphical user interface for the SportsPrize Web
Development site.
Intershop Communications, Intershop is providing us with the software and implementation
Inc. necessary to complete the infrastructure to host our various
e-commerce sites.
Frontier/Globalcenter Frontier will host the SportsPrize.com(TM) Web site and deliver the Web
content to our online audience.
Dreams Products, Inc. Dreams Products will provide vendor fulfillment services related to our
sports memorabilia product line.
ShopSports.com ShopSports.com is providing merchandise and vendor fulfillment services
related to approximately 14,000 sports-related products.
Focus Partners, LLC Focus is providing investor relations services.
</TABLE>
Our Acquisition of SportsPrize Inc.
Effective May 14, 1999, we acquired all the issued and outstanding shares of
SportsPrize Inc. pursuant to a statutory share exchange and SportsPrize Inc.
became our wholly-owned subsidiary. We acquired also all of the assets of
SportsPrize Inc. Our historical and ongoing
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operations are those of SportsPrize Inc. for accounting purposes. Pursuant to
the terms of Agreement and Plan of Share Exchange:
o We issued 9,999,709 shares of our common stock for 5,804,000 shares of
common stock of SportsPrize Inc. or 1.7229 shares of our common stock
for each share of SportsPrize Inc. We issued the exchange shares at a
deemed price of $0.01 per share;
o The holders of the exchange shares agreed that if a registration
statement was filed to register the sale of their exchange shares,
they would hold at least 50% of their shares for at least six months;
o We undertook to use our best efforts to file a resale registration
statement with the SEC to register the exchange shares for resale
under the Securities Act;
o We completed a $2,500,000 private placement of 1,666,665 shares of our
common stock at a price of $1.50 per share on May 7, 1999. We paid
Sonora Capital Corp. a finder's fee of $70,000 in connection with this
private placement;
o We agreed to use reasonable efforts to arrange additional financings,
for a total amount of $2,500,000, of which $1,000,000 closed in July
1999 and $1,500,000 is expected to close in December 1999;
o We agreed to adopt a stock option plan and reserve 3,000,000 shares of
our common stock for issuance under the plan at a price of no less
than $0.25 per share. From the 3,000,000 shares, we agreed to grant
options to acquire 805,000 shares of our common stock to Jeffrey
Paquin (300,000 shares), Olsen Cove Consulting (100,000 shares),
Donald MacKay (100,000 shares), John Thompson (175,000 shares), Mark
O'Donoghue (100,000 shares) and Gilmore MacKay Roberts Consulting Ltd.
(30,000 shares), former option-holders of SportsPrize Inc., on a
one-for-one basis; and
o We undertook to file this Registration Statement with the SEC to
register our common stock and to become a reporting issuer under the
Securities Exchange Act of 1934, as amended.
Agreement Among Certain SportsPrize Inc. Shareholders
Under the terms of the exchange agreement, certain principal shareholders of
SportsPrize Inc., namely Jeffrey Paquin, Randy Daggitt, James Brown, Michael
Slater, Anthony Vecchio and Gang Consulting Inc., entered into an escrow
agreement dated May 7, 1999. The escrow agreement provided, among other things,
that the shareholders place 2,530,150 of their exchange shares into escrow for a
period of up to one year. The shareholders agreed to personally convey these
escrowed shares to key management personnel that we recruit. These shares would
be used as compensation and signing bonuses to enable us to hire and retain
high-quality senior management. If the escrowed shares are not granted as
compensation and signing bonuses by May 6, 2000, the shareholders agreed that
the escrowed shares would be released pro rata: 50% to the contributing
shareholders, pro rata as a group, and 50% to Sonora.
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As of December 6, 1999, 600,000 of the escrowed shares have been reserved to be
transferred to Interactive Marketing Inc. pursuant to our consulting agreement
with Interactive Marketing Inc. at $0.01 per share. See "Interactive Marketing
Inc. - Strategic Marketing Consulting Agreement." No other shares have been
reserved or transferred.
Our Agreements with Sonora
Sonora Capital Corp. initially introduced us to SportsPrize Inc. Prior to our
acquisition of SportsPrize Inc. we had no material business or operations. In
connection with our acquisition of SportsPrize Inc., we entered into two
agreements with Sonora anticipated to raise a total of $5,000,000, including a
$2,500,000 financing in connection with the statutory share exchange and three
additional financings for a total of $2,500,000. We agreed to pay Sonora
finder's fees for these transactions. We also entered an agreement with Sonora
under which Sonora agreed to assist us with our corporate affairs and to provide
us with consulting services related to the development of our business strategy
and investor relations services. Our agreements with Sonora are as follows:
o On May 7, 1999, we entered into an agreement with Sonora under which
we agreed, upon closing of the additional financings, to pay Sonora a
finder's fee equal to 2.8 percent of the aggregate gross proceeds
derived from the initial financing of $2,500,000, as well as for the
three additional financings contemplated in the share exchange
agreement, provided that the additional financings are fully completed
with minimum gross proceeds of $2,500,000; and
o On May 21, 1999, we entered into an agreement with Sonora under which
Sonora agreed to assist us with our corporate affairs and to perform
certain consulting services related to the development of our business
strategy and investor relations services. Sonora provided these
consulting and investor relations services to us from May 1999 through
September 30, 1999. In consideration for Sonora's services, we paid
Sonora $20,000 per month. Our consulting and investor relations
services agreement with Sonora was terminated on September 30, 1999.
Our business relationship with Sonora has been as follows:
o Sonora initially introduced us to SportsPrize Inc.;
o Sonora introduced us to Lamplighter Investments Ltd., Strathburn
Investments Inc. and Aero Atlantic Ltd., which participated in our May
1999 private placement of 1,666,665 shares at $1.50 per share and our
July 1999 private placement of 250,000 shares at $4.00 per share. See
"Recent Sales of Unregistered Securities";
o Sonora assisted in defining our investor relations goals and
objectives;
o Sonora assisted us in preparing a corporate fact sheet for
distribution to targeted investment professionals and certain
accredited investors;
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o Sonora arranged periodic meetings with interested retail brokers, fund
managers and investment advisers;
o Sonora assisted us in preparing and disseminating press release
materials to the financial community and media;
o Sonora assisted us in communicating with NASD market makers by
informing them of recent company developments;
o Sonora provided potential investors with certain company approved due
diligence/investor relations kits;
o Sonora provided us with recommendations to improve disclosure on our
Web site related to investors relations;
o Sonora agreed to assist us in developing relationships with merchant
and investment banks, private placement professionals and other
intermediaries which could provide us with additional private
placement financing;
o Sonora assisted us in developing our business strategy and identifying
potential target markets for our Web site;
o Sonora assisted us in developing relationships with potential
strategic e-commerce associates; and
o Sonora assisted us in developing our plan of operation and initial
operating budget.
Agreements Related to Our Business
In connection with our acquisition of SportsPrize Inc., we acquired all of the
assets of SportsPrize Inc. and assumed the rights to technologies, know-how and
assets that are related to our business including several agreements with
various strategic entities. Subsequently, we entered into additional agreements
related to technology development, marketing and vendor fulfillment.
Technology Development Agreement
We acquired and assumed 100% of the interest and rights in the
SportsPrize.com(TM) Web site and games, including the SportsPrize Tournament
created by John Thompson, Vice-President of Game Content and Development of
SportsPrize Inc. The development of these technologies was coordinated and
overseen by Thomas Cove, Vice-President of Technology of SportsPrize Inc., who
together with software programmers and developers, Quad-Linq Software Inc.,
created the patent pending technology that will be used in connection with our
SportsPrize.com(TM) Web site.
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Quad-Linq - Software Development Agreement
We assumed a software development agreement dated February 18, 1999, by and
between SportsPrize, Inc. and Quad-Linq Software, Inc. pursuant to our share
exchange with SportsPrize, Inc. Under the terms of the software development
agreement, Quad-Linq agreed to provide the ability, technical knowledge and
services to develop a commercially viable, Internet based application, which is
now our SportsPrize Tournament. SportsPrize Inc. agreed to pay Quad-Linq as
follows:
(i) $50,000 in three installments:
(a) $17,000 on signing;
(b) $16,500 on March 30, 1999; and
(c) $16,500 upon delivery of the application;
(ii) 200,000 shares of common stock in to escrow, released as follows:
(a) 100,000 shares upon delivery of the application and
(b) 100,000 shares upon completion of testing the application;
(iii)a 5% royalty on the first $1,000,000 in net sales of any products
manufactured, used, licensed or sold by SportsPrize and a 3% royalty
on net sales over $1,000,000.
On May 12, 1999, SportsPrize Inc. and Quad-Linq amended the software development
agreement to eliminate the royalty based compensation in consideration for:
(i) an additional cash payment of $80,000 upon delivery of the application
for testing;
(ii) $30,000 upon completion of testing the application by July 1, 1999 or
$10,000 if testing was completed after July 1, 1999; and
(iii)options exercisable to acquire 50,000 shares of common stock at $0.25
per share.
SportsPrize also agreed to pay Quad-Linq $80 per hour for software development
work unrelated to the development of the SportsPrize Tournament.
We assumed all of SportsPrize Inc.'s interests, rights and obligations related
to the Quad-Linq development agreement in connection with our share exchange
with SportsPrize Inc. See "Our Acquisition of SportsPrize Inc."
Interactive Marketing Inc. - Strategic Marketing Consulting Agreement
As a result of the share exchange, we assumed a marketing consulting agreement
with Interactive Marketing Inc. dated as of May 6, 1999 from SportsPrize Inc.
Pursuant to the terms of the agreement, Interactive Marketing will provide us
with overall strategic and tactical marketing as well as operational strategy,
including recommendations for the operational, revenue, marketing and
organizational issues involved in the launch of the SportsPrize.com(TM) Web site
for a period
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of six months to one year. Interactive Marketing agreed to provide the following
consulting services:
o Advice regarding the creation and operation of our planned retailing
areas;
o A review of the structure and operation of the SportsPrize.com(TM)
games;
o A review of all legal and regulatory issues relating to the conduct of
the SportsPrize.com(TM) games;
o Reviews of site design, navigation, hosting, hardware and
connectivity;
o Reviews of database design, capabilities and report functions;
o The creation of a "go-to-market" plan for securing media and event
affiliates and for promotion;
o Assistance in identifying key management and advisory board members;
and
o Consulting services related to developing revenue models from such
sources as advertising, e-commerce, sponsorships, promotions and
subscriptions, and retailing.
In consideration for the services provided by Interactive Marketing Inc., we
agreed to:
o Pay Interactive Marketing a monthly retainer of $25,000 over the first
three months;
o Pay Interactive Marketing a monthly retainer of $30,000 for each
subsequent month for up to nine subsequent months; and
o Pay Interactive Marketing 15% of any and all of our recurring net
revenues resulting from advertising, sponsorship and promotional
revenues generated by sales and agreements that Interactive Marketing
directly brings to us during the term of the agreement and any
extensions thereto. Interactive Marketing will also be entitled to
that commission on other direct revenue opportunities with respect to
which we request Interactive Marketing's assistance in developing and
closing.
We also agreed that Interactive Marketing had the right to purchase 600,000
shares of our common stock at a price of $0.01 per share from shares pooled by
certain principal shareholders of SportsPrize Inc., who placed 2,530,150 shares
of our common stock into escrow to be used as signing bonuses. See "Agreement
Among Certain SportsPrize Inc. Shareholders." Under our agreement with
Interactive Marketing, Interactive Marketing had the right to purchase 400,000
shares on the effective date of the agreement and an additional 200,000 shares
180 days after the effective date of the agreement, provided the agreement was
not cancelled. We also agreed to provide full "piggyback" registration rights,
at our expense, in the event we file a registration statement to register shares
under the Securities Act. Interactive Marketing agreed that when such shares
become free trading, Interactive Marketing would limit the shares it offers for
sale in
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any single week to 5% of the previous weeks' total share trading volume. As of
December 6, 1999, Interactive Marketing has not purchased the shares.
Alan Gerson, president of Interactive Marketing Inc., became a director of
SportsPrize Entertainment Inc. on July 8, 1999 and our Chairman of the Board on
November 1, 1999. See "Certain Relationships and Related Transactions."
Kaleidoscope - Consulting Agreement
As a result of the share exchange, we assumed an agreement with Kaleidoscope
Sports and Entertainment, LLC, a division of the Interpublic Group of Companies,
dated May 1, 1999, from SportsPrize Inc. We amended this agreement in September
1999 to extend the term of the agreement for an additional two months without
additional compensation. Kaleidoscope is in the business of planning, designing,
marketing, selling and consulting for sports-related ventures and companies.
Pursuant to the terms of the agreement, Kaleidoscope agreed to perform the
following functions, for an initial period of six months, which commenced on May
15, 1999:
o Provide a list of qualified candidates with Internet company
development experience to serve as our President and a list of
professional athletes, former sports stars, coaches and sports
celebrities to serve as possible spokespersons for SportsPrize, and
advise and work with us to negotiate the relevant employment
contracts;
o Prepare a strategic plan to allow us to make presentations to
officials with major professional sports leagues, including, for
example, the National Football League, Major League Baseball, the
National Basketball Association, the National Hockey League and Major
League Soccer, and players associations for the endorsement of our
SportsPrize Tournament and Web site;
o Assist Interactive Marketing Inc. and us in creating an overall
marketing and operational strategy for the promotional revenue,
marketing and partnership issues involved in the launching the
SportsPrize.com(TM) Web site, including:
(a) identifying and procuring e-commerce associations to assist us in
generating advertising revenues;
(b) securing commitments for endorsements from professional athletes,
coaches and sports figures;
(c) securing commitments by advertisers;
(d) identifying and securing special events sponsors and sponsorships
for our Web site; and
(e) identifying and procuring strategic media associates; and
o Consult and oversee the implementation and execution of the strategies
and recommendations of Kaleidoscope.
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In consideration for the services provided by Kaleidoscope, we have agreed to:
o Pay Kaleidoscope four monthly payments of $20,000, commencing on May
15, 1999, and four monthly payments of $10,000, commencing on
September 15, 1999;
o Grant Kaleidoscope a two-year option to purchase up to 100,000 shares
of our common stock at $0.25 per share, with resale restrictions for a
one year period from the date of purchase;
o Grant Kaleidoscope a two-year option to purchase an additional 100,000
shares of our common stock at $0.25 per share, with resale
restrictions for a one year period from the date of purchase, if
Kaleidoscope:
(a) successfully produces a list of qualified individual candidates
with Internet company development experience to serve as our
President or in the alternative provides us with a well known
athlete or sports figure spokesperson; and
(b) approaches and secured definitive times for presentation by us
before two of the four major professional sports leagues, which
include the National Football League, Major League Baseball, the
National Basketball Association and the National Hockey League
for approval and endorsement of our SportsPrize Tournament; and
o Grant Kaleidoscope an option to purchase an additional 300,000 shares
of our common stock at a price equal to the average closing price of
our shares less 20%, for a period of ten days preceding the completion
of the conditions set forth in (iii) above, with resale restrictions
for a one year period from the date of purchase, provided that
Kaleidoscope reasonably completes the conditions set forth in (iii)
above. We will release the shares to Kaleidoscope at 30,000 shares per
month over a period of ten months. Kaleidoscope agreed to limit its
sale of shares into the market at a volume of no greater than 2% of
the volume of the preceding weeks total amount of our traded shares
after expiration of the resale restrictions.
DBC Sports - News Wire Service
We entered into a data and service agreement with DBC Sports, dated as of May
26, 1999. DBC Sports, a subsidiary of Data Broadcasting Corporation, provides a
sports statistical database and media information, distributes headline news,
sports scores, statistics and other information. Pursuant to the terms of the
agreement, DBC Sports will provide us with the following, for a period of three
years, which commenced on June 1, 1999:
o All sports information necessary to conduct the weekly SportsPrize
Tournament, including the questions for the Tournament, and
statistical content including results of sporting events; and
o Additional technical and research staff necessary to gather and
provide data in sports categories where information may not be readily
available, including developing relationships with various sports
leagues.
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In consideration for the services provided by DBC Sports, we have agreed to pay
to DBC Sports:
o $8,500 per month from June 1, 1999 to August 1, 1999;
o $11,000 per month from September 1, 1999 to November 1, 1999;
o $15,000 per month from December 1, 1999 to March 1, 2000; and
o $20,000 per month from April 1, 2000 to termination of the DBC Sports
Agreement.
Tridian Agreement
On August 2, 1999, we entered into an agreement with Tridian Design and
Development to develop the graphical user interface for our SportsPrize.com(TM)
Web site. We agreed to pay Tridian approximately $15,000 to $20,000 for such
services.
Intershop - Letter Agreement
We entered into a letter agreement with Intershop dated June 24, 1999. We will
deploy Intershop's e-commerce solutions to develop and customize our online
storefronts. We anticipate that integrating Intershop's technology with the
SportsPrize.com(TM) business model will allow Members of the SportsPrize
community to browse, select and purchase sports merchandise and memorabilia
online at the SportsPrize.com(TM) e-commerce stores. Pursuant to the terms of
the Intershop Agreement, Intershop will provide the following services by way of
a professional services consulting agreement:
o On-site solution definition;
o Off-site solution definition; and
o Development and implementation of the e-commerce software pertaining
to our Web site.
As of November 30, 1999, we paid Intershop approximately $161,000 in fees. We do
not anticipate that we will pay Intershop any additional fees related to this
agreement.
Frontier - Master Service Agreement
We entered into a master service agreement with Frontier dated July 22, 1999.
Frontier is a provider of computer systems, applications and hardware for
Internet sites. Under our agreement, Frontier provided us with high-speed
servers and a software system that have been installed at its facilities located
in Sunnyvale, California. Sun E250 and E450 servers, suitable for large-scale
and mission-critical applications, will support our Web site including all
sports content, the SportsPrize Tournament, including data input, management and
warehousing, and e-commerce applications intrinsic to the SportsPrize business
model. Pursuant to the terms of the Frontier Agreement, Frontier will provide us
with the following:
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o Internet connectivity services;
o The lease or purchase of our equipment to provide such connectivity
services and the installation of such equipment;
o The lease of data center space suitable to store and operate such
equipment;
o Management, planning and consulting resources to support such
services, including maintenance and operation of such equipment; and
o The licensing of software to provide such services, which together
comprise an Internet connectivity and co-location package to support
our Web site.
We have paid approximately $116,000 to Frontier for internal equipment as of
November 30, 1999. We anticipate that we will pay Frontier approximately $2,000
to $5,000 per month for its co-location and Internet connectivity services
through August 31, 2000.
Dreams Products, Inc. Agreement
We entered into an Internet Distribution and Marketing Agreement with Dreams
Products, Inc. dated August 6, 1999, related to vendor fulfillment services for
sports memorabilia and collectibles. The agreement was for a term of three
years. Under the terms of the Agreement, we are authorized to offer, pursuant to
a non-exclusive, non-assignable and royalty-free license, products cataloged and
inventoried by Dreams Products, and Dreams Products agreed to provide vendor
fulfillment services related to such products. These products include sports
memorabilia, collectibles and other sports-related products.
Dreams Products has also agreed to provide us with a range of products that will
be offered exclusively in SportsPrize special events or promotions.
ShopSports - Merchandising, Fulfillment and Customer Service Agreement
We entered into a merchandising, fulfillment and customer service agreement with
ShopSports.com dated September 17, 1999, pursuant to which we agreed to develop
a co-branded shopping environment to be offered on our SportsPrize.com(TM) Web
site. Under the agreement, ShopSports.com agreed to provide the following
support services for our Web site:
o Product merchandise, warehousing and fulfillment;
o Site hosting;
o Customer service;
o Order processing; and
o Financial reporting and audit support.
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Under the terms of the agreement we agreed to co-brand our SportsPrize.com(TM)
Web site with the ShopSports.com Web site by offering the following venues:
o Winners Store - the Winners Store will provide SportsPrize Registered
and Non-Registered Members select access to a predetermined collection
of products at variable discounts based on success in the SportsPrize
Tournament. The weekly winners of the SportsPrize Tournament will be
entitled to receive discounts of 5% to 35% on merchandise offered in
the Winners Store; and
o SportsPrize SuperStore - The SportsPrize SuperStore will offer our Web
site users access to a collection of products and features from eight
super stores and five specialty shops offered through the
ShopSports.com Web site. SportsPrize Members playing the SportsPrize
Tournament will be eligible for discounts on most purchases from the
SuperStore.
On November 8, 1999, we completed the initial launch of our Web site, which
contains our co-branded SportsPrize SuperStore. Our SportsPrize SuperStore is
co-branded with ShopSports and features the inventory of ShopSports. Our
visitors can browse and select purchases from the ShopSports inventory through
an interface from our Web site without leaving our Web site. The graphical
display of our SportsPrize SuperStore is designed to emulate the other pages on
our Web site and contains the logo of ShopSports. We are currently in the
process of redesigning the graphical display of our SportsPrize SuperStore and
anticipate the graphical displays of our SportsPrize SuperStore will be
redesigned by December 29, 1999.
We agreed to pay a project fee of $29,800 for site development and
implementation to ShopSports.com. As of November 30, 1999, we have paid $15,000
of this project fee. In addition, we agreed to pay ShopSports.com for any
consulting, project management, programming, development and design, production
and administrative services based on their standard hourly rates. We also agreed
to share equally the net profits from all sales facilitated through the Winners
Store and the SportsPrize SuperStore.
Focus Partners Group Agreement
We entered into a letter agreement with Focus Partners LLC, dated July 27, 1999,
pursuant to which Focus agreed to provide us with investor relations services.
The agreement commenced on August 1, 1999 through July 31, 2000. Under the terms
of the agreement, we agreed to pay Focus a fee of $6,000 per month and to grant
Focus options to acquire 25,000 shares of our common stock. Focus agreed to
provide the following investor relations services including assisting us in
developing an investor relations strategy, preparing and distributing company
information to investment professionals, institutional investors and potential
retail investors, arranging periodic meetings with interested analysts,
preparing and distributing an investor relations kit for us, assisting us in
preparing and disseminating press releases and providing other investor
relations services.
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Research and Development
Our research and development program consists of developing technologies related
to our SportsPrize Web site and the SportsPrize Tournament. As of August 31,
1999, we had spent $99,149 for research and development, including expenses
related to developing the SportsPrize Tournament and other technological aspects
of our Web site.
Trademarks and Patents
We have applied for trademark registration and protection for "SportsPrize.com"
in Canada and the United States. We have also applied for patent protection in
the United States for our system and method for delivering targeted advertising
through our SportsPrize Tournament marketing system. However, we have not been
granted any patents, copyrights or trademarks. In the event we determine that we
have created an asset whose value can be protected, we will attempt to protect
our proprietary assets by applying for patents, copyrights or trademarks. In
addition, we will endeavor to rely on trade secret laws and non-disclosure and
confidentiality agreements with our employees and consultants who have access to
our proprietary technology.
Employees or Consultants
As of November 30, 1999, we had fifteen full-time employees or consultants. We
anticipate that we will hire an additional fifteen to thirty employees during
the calendar year of 2000, including 5 to 10 content personnel, 5 to 10
technical personnel, 4 to 8 sales and marketing personnel and 1 or 2 customer
service personnel. From time to time, we may retain additional consultants and
consulting firms to provide us with special expertise in developing marketing,
software and telecommunications technologies.
Risk Factors
We have included information in this Registration Statement that contains
"forward looking statements." Our actual results may materially differ from
those projected in the forward looking statements as a result of risks and
uncertainties. Although we believe that the assumptions made and expectations
reflected in the forward looking statements are reasonable, we cannot assure you
that the underlying assumptions will, in fact, prove to be correct or that
actual future results will not be different from the expectations expressed in
this report. An investment in our securities is speculative in nature and
involves a high degree of risk. You should read this Registration Statement
carefully and consider the following risk factors.
Insufficiency of current round of financing; our ability to carry out our
proposed business activities depends upon securing additional financing
We are dependent upon the proceeds of additional financing in order to implement
our business plan. Unless we can obtain such financing, we will be unable to
conduct our business or to otherwise carry out all of our proposed business
activities. There is no assurance that we will be able to raise the funds sought
in a timely manner, if at all.
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Our ability to meet our business projections may depend on the securing of
additional operating capital in the amount of $14,750,000 or more through August
31, 2000
We also anticipate we may need to seek additional capital in the amount of
$14,750,000 or more during the next 12 months, and no assurance can be given
that any additional financing would be available or, if available, that it would
be available on terms acceptable to us. See "Note Regarding Forward Looking
Statements." Furthermore, any issuance of additional securities may result in
dilution to the then existing shareholders. If adequate funds are not available,
we will lack sufficient capital to pursue our business fully, which will have a
material adverse effect upon our ability to meet our business projections.
We may be required to sell additional common stock or parties may exercise
options and warrants that cause dilution of your shares
The number of shares of our outstanding common stock held by non-affiliates is
large relative to the trading volume of our common stock. Any substantial sale
of our common stock or even the possibility of such sales occurring may have an
adverse effect on the market price of our common stock.
At November 30, 1999, we had outstanding options to purchase an aggregate of
3,005,000 shares of our common stock.
We also have reserved up to an additional 2,995,000 shares of common stock for
issuance upon exercise of options which have not yet been granted under our
stock option plan. Holders of the options are likely to exercise them when, in
all likelihood, we could obtain additional capital on terms more favorable than
those provided by the options. However, there can be no assurance that such
options will be exercised. Further, while our options are outstanding, our
ability to obtain additional financing on favorable terms may be adversely
affected.
We have a limited operating history and a history of losses, which makes our
ability to continue as a going concern questionable
We have incurred net losses since our inception and anticipate that we will
continue to incur losses for the foreseeable future. As of August 31, 1999, we
had an accumulated deficit of $3,509,581 and we had a net loss of $3,365,456 for
the six-month period ended August 31, 1999. Due to a number of factors, we do
not believe that our revenues will be sufficient to support our operations in
fiscal 1999. Therefore, in the foreseeable future, we believe that such expenses
will increase our net losses, and we cannot assure you that we will ever be
profitable.
As of August 31, 1999, we had approximately $2,360,000 in cash and cash
equivalents, and we are currently expending approximately $250,000 per month.
While we anticipate raising additional capital through sales of our common stock
or debt, we cannot assure you that we will be able to obtain adequate financing
or on terms favorable to us, to support our operations. Our ability to continue
after April 2000 will depend on our ability to obtain additional financing.
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Because we have only recently begun operations, it is difficult to evaluate our
business and our prospects. Our revenue and income potential is unproven and our
business model is still emerging. We cannot assure you that we will attract
registered users, advertisers, consumers and network affiliates or achieve
significant revenues or operating margins in future periods. We cannot guarantee
we will ever achieve commercial success.
We do not intend to declare dividends, which may lower the market value of our
shares
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
Broker-dealers may be discouraged from effecting transactions in our shares
because they are considered penny stocks and are subject to the penny stock
rules
Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales
practice and disclosure requirements on NASD brokers-dealers who make a market
in "a penny stock." A penny stock generally includes any non-NASDAQ equity
security that has a market price of less than $5.00 per share. Our shares are
quoted on the OTCBB and the closing price of our shares on November 30, 1999 was
$1.78125 per share. As such, our shares will be deemed penny stock for the
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed upon brokers-dealers may discourage broker-dealers from
effecting transactions in our shares, which could severely limit the market
liquidity of the shares and impede the sale of our shares in the secondary
market.
Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or "accredited investor," generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse, must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale, unless the broker-dealer or
the transaction is otherwise exempt. In addition, the penny stock regulations
require the broker-dealer to deliver, prior to any transaction involving a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, unless the broker-dealer or the transaction is otherwise exempt. A
broker-dealer is also required to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for the
securities. Finally, a broker-dealer is required to send monthly statements
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.
We lack current advertising agreements and our success depends on securing
relationships or agreements with a network of advertisers
We currently have no relationships or agreements with advertisers, and we
believe that any relationships developed with advertisers will be terminable
within a short period of time. Consequently, our advertising customers, if any,
may move their advertising to competing Internet sites, or from the Internet to
traditional media, quickly and at relatively low costs,
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thereby increasing our exposure to competing pressures and fluctuations in
revenues and operating results. In selling Internet-based advertising, we
probably will depend on advertising sales rep. firms, which will sell such
advertising on our behalf.
Our ability to attract advertisers may be hampered by management's limited
experience in sales and marketing of advertising
Few of our senior management team have any significant experience in selling
advertising on the Internet or any other medium, and few members of our senior
management team have any significant experience in the Internet industry or
providing entertainment on the Internet. Achieving acceptance by potential
advertisers and advertising agencies of our Internet sites as a viable marketing
forum will require us to develop and maintain relationships with key advertisers
and advertising agencies, and there can be no assurance that any such
relationships will be developed, on a timely basis or at all.
Our ability to attract advertisers will depend on our ability to attract a
significant user base
Our success will depend on our ability to convince advertisers and advertising
agencies of the benefits of advertising on our SportsPrize Web site, and on our
ability to retain, broaden and diversify our future base of advertising
customers. In order to generate significant advertising revenues, we will depend
on the development of a larger base of users possessing demographic
characteristics attractive to advertisers. If we are unable to attract and
retain paying advertisers or are forced to offer lower than anticipated
advertising rates, our business, financial condition and operating results will
be materially adversely affected and we may never achieve commercial success.
Our ability to secure and retain advertising revenues may depend on whether our
users actually access our advertisers' Internet sites
Currently, we are seeking to negotiate advertising and sponsorship arrangements
with third parties to provide a variety of ad placements and sponsorships on our
Web site. In connection with these arrangements, we may receive advertising
and/or sponsorship fees as well as a portion of transaction revenues received by
sponsors in return for minimum levels of user impressions or "click throughs"
from our Web site to their Web sites. To the extent implemented, these
arrangements may expose us to potentially significant financial risks, including
the risk that we fail to deliver required minimum levels of user impressions or
click throughs, in which case, these agreements typically provide for
adjustments to the fees payable thereunder or "make good" periods, and that
third party sponsors do not renew the agreements at the end of their terms. We
anticipate that certain of these arrangements will require us to integrate
sponsors' content with our services, which may require the dedication of
resources and significant programming and design efforts to accomplish. We
cannot guarantee that we will be able to attract sponsors or that we will be
able to renew sponsorship arrangements, if any, when they expire.
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Our ability to contract with advertisers may be materially limited by
exclusivity provisions of certain of our sponsors
We anticipate we will grant exclusivity provisions to certain of our sponsors.
Such exclusivity provisions may have the effect of preventing us, for the
duration of such exclusivity arrangements, from accepting advertising or
sponsorship arrangements within a particular subject matter in our Web site or
across our entire service. Our inability to enter into further sponsorships or
advertising arrangements as a result of its exclusivity arrangements could have
a material adverse effect on our business, financial condition and operating
results.
Our success depends on the services of our President, Chief Financial Officer
and Treasurer, our Senior Vice President of Corporate Finance, our Senior Vice
President and Controller and our Vice President of Marketing, and our ability to
attract and maintain qualified, experienced personnel
Our future success depends on the services of Bruce Cameron, our President,
Chief Financial Officer and Treasurer, Robert Hunziker, our Senior Vice
President of Corporate Finance, Donald MacKay, our Senior Vice President and
Controller, and Michael Wiedder, our Vice President of Marketing. The loss of
these key personnel could have an adverse effect on our operations, and we do
not maintain insurance to cover losses that may result from the death of any of
our key personnel. We also heavily rely upon consultants and advisors who are
not employees. Our ability to attract, train and retain qualified, experienced
personnel and management is uncertain. Competition for qualified employees is
intense, and an inability to attract, retain and motivate additional, highly
skilled personnel required for expansion of operations and development of
technologies could adversely affect our business, financial condition and
results of operations. Each of our officers and directors has been affiliated
with us for less than one year. We cannot assure you we will be able to retain
our existing personnel or attract additional, qualified persons when required
and on acceptable terms. Although we have made application to obtain directors'
and officers' liability insurance, there can be no assurance that we will be
able to obtain such insurance or in such amounts or on terms that are acceptable
to us.
Investors may not be able to secure foreign enforcement of civil liabilities
against our management
Some of our directors and officers are residents of Canada. Consequently, it may
be difficult for United States investors to effect service of process within the
United States upon those directors or officers who are not residents of the
United States, or to realize in the United States upon judgments of United
States courts predicated upon civil liabilities under the United States
Securities Exchange Act of 1934, as amended. A judgment of a U.S. court
predicated solely upon such civil liabilities would probably be enforceable in
Canada by a Canadian court if the U.S. court in which the judgment was obtained
had jurisdiction, as determined by the Canadian court, in the matter. There is
substantial doubt whether an original action could be brought successfully in
Canada against any of such persons or SportsPrize Entertainment Inc. predicated
solely upon such civil liabilities.
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We have capacity constraints and system development risks that could damage our
customer relations or inhibit our possible growth, and we may need to expand our
management systems and controls quickly
Our success and our ability to provide high quality customer service, largely
depends on the efficient and uninterrupted operation of our computer and
communications systems and the computers and communication systems of our third
party vendors in order to accommodate any significant numbers or increases in
the numbers of consumers and advertisers using our service. Our success also
depends upon us and our vendors' abilities to rapidly expand
transaction-processing systems and network infrastructure without any systems
interruptions in order to accommodate any significant increases in use of our
service. We have engaged Frontier to provide Internet servers and Internet
connectivity for our Web site, and we are dependent on Frontier's ability to
deliver such services.
Although we anticipate that we and our vendors will enhance and expand our
respective transaction-processing systems and network infrastructure as they
grow, we and our vendors may experience periodic systems interruptions and
infrastructure failures, which we believe may cause customer dissatisfaction and
may adversely affect our results of operations. Limitations of our technology
infrastructure and our vendors' technology infrastructures may prevent us from
maximizing our business opportunities.
Our ability to adapt our management systems and controls quickly may depend on
the availability of certain employees or contractors
In addition, we expect that many of our software systems and our vendors'
software systems may be custom-developed and that we and our vendors may rely on
employees and certain third-party contractors to develop and maintain these
systems. If certain of these employees or contractors become unavailable, we and
our vendors may experience difficulty in improving and maintaining these
systems. Furthermore, we expect that we and our vendors may continue to be
required to manage multiple relationships with various software and equipment
vendors whose technologies may not be compatible, as well as relationships with
other third parties to maintain and enhance their technology infrastructures.
Our failure and our vendors' failure to achieve or maintain high capacity data
transmission and security without system downtime and to achieve improvements in
our respective transaction processing systems and network infrastructure could
adversely affect our business and results of operations.
Our commercial viability depends on our ability to successfully develop our
SportsPrize Tournament and to successfully attract and retain users with
demographic characteristics valuable to advertisers
We believe our commercial viability depends in large part upon our ability to
develop and provide the SportsPrize Tournament and our ability to successfully
attract and retain users with demographic characteristics valuable to the
various advertisers and advertising agencies. We cannot assure you that our
products and services will be attractive enough to a sufficient number of
Internet users to generate advertising revenues or that we will be able to
anticipate, monitor and successfully respond to rapidly changing consumer tastes
and preferences so as to attract a
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sufficient number of users to our SportsPrize Web site within the demographics
desirable to potential advertisers and advertising agencies.
Internet users can freely navigate and instantly switch among a large number of
Internet sites, many of which offer competitive entertainment products and
services, making it difficult for us to distinguish our product offerings and
attract users. In addition, many other Internet sites offer very specific,
highly targeted single sports event media that may have greater appeal than the
sports categories that will be offered on our SportsPrize Web site. In addition,
users of the Internet who do not use the most recent browser or operating
software will have greater difficulty in accessing and navigating our
SportsPrize Web site than users who use the most recent versions of such
software. Such difficulty could cause Internet users to cease using our
SportsPrize Web site. If we are unable to develop original and compelling
Internet-based entertainment in a manner that allows us to attract, retain and
expand a loyal user-base targeted by advertisers and advertising agencies, then
we will be unable to generate sufficient advertising or subscription revenues,
and our business, financial condition and operating results will be materially
adversely affected.
We anticipate expanding into new business areas that require significant
expenses and programming and that have no guaranteed market
The success of our business strategy will depend to a significant extent on our
ability to successfully develop the SportsPrize Tournament and to expand our
offerings into other revenue generating areas such as subscription-based
products and services and other e-commerce opportunities. We cannot guarantee
that we will be able to develop the SportsPrize Tournament into an operating
game or that visitors or potential advertisers or sponsors will accept the
concept of the SportsPrize Tournament. We cannot assure you that we will
successfully expand into other areas, develop and launch any new entertainment
concepts or enhance existing ones.
Any expansion of product offerings or operations, or new games developed and
launched by us that are not favorably received by Internet users could damage
our reputation or the SportsPrize.com(TM) brand.
Expansion into new business areas or the development and launching of new games
also will require significant additional expenses and programming and other
resources and will strain our management, financial and operational resources.
Furthermore, any expansion of business areas and the developing and launching of
new games, as well as the enhancement of our contemplated SportsPrize
Tournament, will necessarily rely on untested business models. Our failure to
develop and launch the SportsPrize Web in a cost effective and timely manner
will have a material adverse effect on our business, financial condition and
operating results.
We cannot guarantee that our venture will ever achieve profitability, and a
failure by us to recover the substantial investment required to launch and
operate our Web site would have a material adverse effect on our business,
financial condition and operating results.
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The e-commerce industry is highly competitive, and we cannot assure you that we
will be able to compete effectively
The market for Internet-based products and services is relatively new, intensely
competitive and rapidly evolving. There are minimal barriers to entry, and
current and new competitors can launch new Internet sites at a relatively low
cost within relatively short time periods. In addition, we compete for the time
and attention of Internet users with thousands of non-profit Internet sites
operated by, among other persons, individuals, government and educational
institutions. Existing and potential competitors also include magazine and
newspaper publishers, cable television companies and start-up ventures attracted
to the Internet market. Accordingly, we expect competition to persist and
intensify and the number of competitors to increase significantly in the future.
Should we seek in the future to attempt to expand the scope of our Internet site
and product offerings, we will compete with a greater number of Internet sites
and other companies. Because the operations and strategic plans of existing and
future competitors are undergoing rapid change, it is extremely difficult for us
to anticipate which companies are likely to offer competitive products and
services in the future. We cannot guarantee that our SportsPrize Web site will
compete successfully. In addition, expansion into new business areas and new
entertainment offerings may bring us into direct competition with new
competitors.
Due to the emerging nature of Internet commerce, we are unable to forecast our
expenses and revenues accurately, and should our expenses exceed our revenues,
we may never become profitable
As a result of the emerging nature of the Internet, including Internet-based
advertising, services and electronic commerce, we are unable to forecast our
expenses and revenues accurately. We believe that due primarily to the
relatively brief time the Internet has been available to the general public,
there are several uncertainties related to the successful operation of any form
of Internet-based business. Our current and future estimated expense levels are
based largely on our estimates of future revenues and may increase considerably.
Few, if any, of our operating expenses can be quickly or easily reduced, such as
the laying off of personnel or reducing our commitment to our consultants and
service providers, in a manner which would not cause a material adverse effect
to our business, financial condition and operating results. In addition, we may
be unable to adjust spending in a timely manner to compensate for any unexpected
expenditures; and a shortfall in actual revenues as compared to estimated
revenues would have an immediate material adverse effect on our business,
financial condition and operating results.
Our ability to generate revenues will depend upon advertisers' acceptance of the
Internet as an advertising medium and upon the on the use of the Internet by
consumers
Use of the Internet by consumers is at a very early stage of development and
market acceptance of the Internet as a medium for information, entertainment,
commerce and advertising is subject to a high level of uncertainty. We believe
that our success depends upon our ability to obtain significant revenues from
our Internet operations, which will require the development and acceptance of
the Internet as an advertising medium. We believe that most advertisers and
advertising agencies have limited experience with the Internet as an advertising
medium and neither advertisers nor advertising agencies have devoted a
significant portion of their advertising
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budgets to Internet-related advertising to date. In order for us to generate
advertising revenues, advertisers and advertising agencies must direct a portion
of their budgets to the Internet as a whole, and specifically to our Web site.
There can be no assurance that advertisers or advertising agencies will be
persuaded, or able, to allocate or continue to allocate portions of their
budgets to Internet-based advertising, or if so persuaded or able, that they
will find Internet-based advertising to be more effective than advertising in
traditional media such as television, print or radio, or in any event decide to
advertise on our Internet sites. Moreover, we cannot assure you that the
Internet advertising market will develop as an attractive and sustainable medium
that we will achieve market acceptance of our products or that we will be able
to execute our business strategy successfully.
Acceptance of the Internet among advertisers and advertising agencies will also
depend on the level of use of the Internet by consumers, which is highly
uncertain, and on the acceptance of the alternative new model of conducting
business and exchanging information presented by the Internet. Advertisers and
advertising agencies that have invested resources in traditional methods of
advertising may be reluctant to modify their media buying behavior or their
systems and infrastructure to use Internet based advertising. Furthermore, no
standards to measure the effectiveness of Internet based advertising have yet
gained widespread acceptance, and we cannot assure you that such standards will
be adopted or adopted broadly enough to support widespread acceptance of
Internet-based advertising. If Internet-based advertising is not widely accepted
by advertisers and advertising agencies, our business, financial condition and
operating results will be materially adversely affected and we may cease to be a
commercially viable enterprise.
Our business may be harmed if the recent growth in the use of the Internet is
limited by inadequate infrastructure, technology or standards and protocols
Rapid growth in the use of and interest in the Internet is a recent phenomenon,
and we cannot assure you that acceptance and use of the Internet will continue
to develop or that a sufficient base of users will emerge to support our
business. Revenues from our Internet operations will depend largely on the
widespread acceptance and use of the Internet as a source of information and
entertainment and as a vehicle for commerce in goods and services. The Internet
may not be accepted as a viable commercial medium for a number of reasons,
including potentially inadequate development of the necessary infrastructure,
lack of timely development of enabling technologies or lack of commercial
support for Internet-based transactions and advertising. To the extent that the
Internet continues to experience an increase in users, an increase in frequency
of use or an increase in the bandwidth requirements of users, there can be no
assurance that the Internet infrastructure will be able to support the demands
placed upon it. In addition, the Internet could lose its viability as a
commercial medium due to delays in the development or adoption of new standards
and protocols required to handle increased levels of Internet activity, or due
to increased government regulation. Changes in or insufficient availability of
telecommunications services to support the Internet also could result in slower
response times and could adversely affect use of the Internet generally and of
our Internet sites in particular. If use of the Internet does not continue to
grow or grows more slowly than expected, or if the Internet infrastructure does
not effectively support growth that may occur, our business, financial condition
and operating results would be materially adversely affected.
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Our success may depend on successfully developing and defending intellectual
property rights without which competitors may copy aspects of our products or
services
We anticipate our success will depend significantly on our proprietary
technology. We intend to rely primarily on a combination of patent, copyright,
trademark and trade secret laws, license agreements, non-disclosure agreements
and other contractual provisions to establish, maintain and protect our
proprietary rights in our products and technology, all of which afford only
limited protection. We have applied for intellectual property protection for our
SportsPrize marketing system technology, and we have put in place agreements
attempting to protect our intellectual property. There can be no assurance that
our intellectual property protection applications will be granted or that we
will be able to continue to successfully negotiate agreements protecting our
intellectual property. In addition, despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or services or to obtain and use information that we regard as
proprietary. Third parties may also independently develop similar technology
without breach of our proprietary rights. In addition, the laws of some foreign
countries do not protect the proprietary rights to the same extent as do the
laws of the United States.
If we cannot protect our Internet domain name, our ability to conduct our
operations may be impeded
We anticipate that the Internet domain name, "SportsPrize.com(TM)" will be an
extremely important part of our business. Governmental agencies and their
designees generally regulate the acquisition and maintenance of domain names.
The regulation of domain names in the United States and in foreign countries may
be subject to change in the near future. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, we may be unable
to acquire or maintain relevant domain names in all countries in which we
conduct business. Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights is
unclear. Therefore, we may be unable to prevent third parties from acquiring
domain names that are similar to, infringe upon or otherwise decrease the value
of our trademarks and other proprietary rights.
Our business may be harmed by claims that we have infringed intellectual
property rights of others
Claims of infringement are becoming increasingly common as the software industry
develops and legal protections are applied to software products. Litigation may
be necessary to protect our proprietary technology, and third parties may assert
infringement claims against us with respect to their proprietary rights. Any
claims or litigation can be time-consuming and expensive regardless of their
merit. Infringement claims against us could cause product release delays,
require us to redesign our products or require us to enter into royalty or
license agreements, which agreements may not be available on terms acceptable to
us or at all.
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Changing technology may render our equipment, software and programming obsolete
or irrelevant
The market for Internet-based products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. The emerging character of these products and services and
their rapid evolution will require that we continually improve the performance,
features and reliability of our Internet-based products and services,
particularly in response to competitive offerings. There can be no assurance
that we will be successful in responding quickly, cost effectively and
sufficiently to these developments. In addition, the widespread adoption of new
Internet technologies or standards could require substantial expenditures by us
to modify or adapt our Internet sites and services and could fundamentally
affect the character, viability and frequency of Internet-based advertising,
either of which could have a material adverse effect on our business, financial
condition and operating results. In addition, new Internet-based products,
services or enhancements offered by us may contain design flaws or other defects
that could require costly modifications or result in a loss of consumer
confidence, either of which could have a material adverse effect on our
business, financial condition and operating results.
Our business may encounter periodic system disruptions that may harm our ability
to attract and retain advertisers
The satisfactory performance, reliability and availability of our SportsPrize
Web site and our computer network infrastructure are critical to attracting
Internet users and maintaining relationships with advertising customers. Our
Internet-based advertising revenues will be directly related to the number of
advertising impressions delivered by us. We have engaged Frontier to provide an
Internet solution to meet our systems requirements. System interruptions that
result in the unavailability of our Internet sites or slower response times for
users would reduce the number of advertisements delivered and reduce the
attractiveness of our Internet sites to users and advertisers. We may experience
periodic systems interruptions from time to time in the future.
Our Internet operations are vulnerable to interruption by fire, earthquake,
power loss, telecommunications failure and other events beyond our control. We
cannot assure you that interruptions in service will not materially adversely
affect our operations in the future. While we will carry business interruption
insurance to compensate us for losses that may occur, there can be no assurance
that such insurance will be sufficient to provide for all losses or damages
incurred by us.
If system constraints are exceeded, our operations may be subject to system
disruptions that harm our business
Additionally, any substantial increase in traffic on our Internet site may
require us to expand and adapt our computer network infrastructure. Our
inability to add additional computer software, hardware and bandwidth to
accommodate increased use of our Internet sites may cause unanticipated system
disruptions and result in slower response times.
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We cannot assure you that we will be able to expand our computer network
infrastructure on a timely basis to meet increased use. Any system interruptions
or slower response times resulting from the foregoing factors could have a
material adverse effect on our business, financial condition and operating
results.
We depend on third parties for uninterrupted Internet access and may be harmed
by the loss of any such service
We are dependent on Frontier, an Internet service provider located in Sunnyvale,
California, and on other third parties for uninterrupted Internet access. In
addition, we are dependent on various third parties for substantially all of our
information. Loss of such services from any one or more of such third parties
may have a material adverse effect on our business, financial condition and
operating results. We cannot guarantee whether, or on what terms, we would be
able to obtain such services from other third parties in the event of the loss
of any of such services.
Increased security risks of online commerce may deter future use of our services
which may adversely affect our ability to generate revenues
We intend to institute security measures designed to protect our Internet site
and other operations from unauthorized use and access. As of November 30, 1999,
we have implemented a firewall with a redundant backup to prevent all but
standard Web traffic, with the exception of a small opening for secure and
encrypted terminal connections. We also have isolated our database on a server
that is sitting on a private network. This means that someone would have to
break into our firewall and external network before trying to get into our
database. Our servers are housed in Frontier's Globalcenter Media Distribution
Center. Security measures employed at this location include biometric hand
scanners, ramming ballards, laser sniffers and bullet proof glass. Such measures
cannot guarantee complete security, however, and a party who is able to
circumvent our or our vendors' security measures could misappropriate
proprietary information or cause interruptions in our Internet operations.
We may be required to expend significant capital and resources to protect
against the threat of such security breaches or to alleviate problems caused by
such breaches. Concerns over the security of Internet transactions and the
privacy of users may also inhibit the growth of the Internet generally,
particularly as a means of conducting commercial transactions. To the extent
that our activities or the activities of any third party contractors involve the
storage and transmission of proprietary information, such as computer software
or credit card numbers, security breaches could expose us to a risk of loss or
litigation and possible liability. We cannot guarantee that contractual
provisions attempting to limit our liability in such areas will be successful or
enforceable, or that parties will accept such contractual provisions as part of
our agreements.
In addition, while we believe that both our and our vendors' data repositories,
financial systems and other technology resources will be secure from security
breaches or sabotage, we cannot guarantee that this will continue to be true as
technology changes and becomes more sophisticated.
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We may encounter significant costs should our software fail to meet Year 2000
compliance requirements
The "Year 2000" issue concerns the potential exposures related to the automated
generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions. We
have completed our review of the potential impact of Year 2000 issues and do not
anticipate any significant costs, problems or uncertainties associated with
becoming Year 2000 compliant. Our failure or failure of our software providers
to adequately address the Year 2000 issue could result in misstatement of
reported financial information or otherwise adversely affect our business
operations. See "Financial Information - Year 2000 Compliance."
Our business may be subject to government regulation and legal uncertainties
that may increase the costs of operating our Internet site or limit our ability
to generate revenues
As a publisher and a distributor of content over the Internet, we face potential
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that we publish or distribute. In addition, we could be exposed to liability
with respect to the content or unauthorized duplication of material indexed in
our search services. Our liability insurance may not cover potential claims of
this type or may not be adequate to indemnify us for all liability that may be
imposed. Any imposition of liability that is not covered by insurance or is in
excess of insurance coverage could have a material adverse effect on our
business, financial condition and operating results. There are currently few
laws and regulations directly applicable to the Internet, but it is possible
that new laws and regulations will be adopted covering issues such as, among
other things, pricing, characteristics and quality of Internet products and
services. As a provider of Internet-based products and services, we are subject
to the provisions of existing and future federal and local legislation that
could be applied to our operation. Such legislation could also dampen the growth
of the Internet generally and decrease the acceptance of the Internet as an
advertising medium, and could, thereby, have a material adverse effect on our
business, financial condition and operating results.
Our SportsPrize Tournament may be subject to regulatory review under state and
federal gaming laws that may limit our ability to generate revenues
There is substantial risk that our SportsPrize Tournament may be subject to
regulatory review by state and federal regulatory authority as the size of our
prizes grow. Although we will not charge visitors to the SportsPrize Web any
registration fees, require any purchase to play the SportsPrize Tournament,
charge any cost to deliver prizes or gifts or otherwise imply that a purchase is
required to play the SportsPrize Tournament, there can be no assurance that the
SportsPrize Tournament will not be subject to investigation or review by
federal, state local regulatory authorities.
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Our business may be subject to sales and other taxes, which may cause
administrative difficulties and increase our cost of operations
One or more states may seek to impose additional sales tax collection
obligations on companies such as ours that engage in or facilitate online
commerce. Several proposals have been made at the state and local level that
would impose additional taxes on the sale of goods and services through the
Internet. These proposals, if adopted, could substantially impair the growth of
electronic commerce, and could diminish our opportunity to derive financial
benefit from our activities. The U.S. federal government recently enacted
legislation prohibiting states or other local authorities from imposing new
taxes on Internet commerce until October 21, 2001. This tax moratorium will last
only for a limited period and does not prohibit states or the Internal Revenue
Service from collecting taxes on our income, if any, or from collecting taxes
that are due under existing tax rules. A successful assertion by one or more
states or any foreign country that we should collect sales or other taxes on the
exchange of merchandise on our system could harm our business and adversely
affect our results of operations.
Item 2. Financial Information.
Selected Financial Data
The following table sets forth selected financial data regarding our
consolidated operating results and financial position of our Company. The data
has been derived from our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The following selected financial data is qualified
in its entirety by, and should be read in conjunction with, the consolidated
financial statements and notes thereto included elsewhere in this Registration
Statement.
<TABLE>
Six Months Ended August Fiscal Year Ended
31, 1999 February 28, 1999
--------------------------- -------------------------
$ $
--------------------------- -------------------------
<S> <C> <C>
Net Sales - -
Gross Profit - -
Total Operating Expenses 3,396,720 66,766
Net Loss from (3,365,456) (137,306)
Continuing Operations
Net Loss from - (6,819)
Discontinued Operations
Net Loss (3,365,456) (144,125)
Net Loss per Share
Continuing Operations ($0.22) ($0.041)
</TABLE>
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<PAGE>
<TABLE>
Six Months Ended August Fiscal Year Ended
31, 1999 February 28, 1999
--------------------------- -------------------------
$ $
--------------------------- -------------------------
<S> <C> <C>
Discontinued Operations - ($0.002)
Net Loss Per Share ($0.22) ($0.043)
</TABLE>
<TABLE>
At At
August 31, 1999 February 28, 1999
--------------------------- --------------------------
$ $
--------------------------- --------------------------
<S> <C> <C>
Working Capital 2,338,416 66,477
Total Assets 2,804,149 103,202
Total Liabilities 88,141 3,331
Shareholders' Equity 2,716,008 99,871
Long-term Obligations - -
Cash Dividends - -
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward looking
statements. Actual results may materially differ from those projected in the
forward looking statements as a result of certain risks and uncertainties set
forth in this Registration Statement. Although management believes that the
assumptions made and expectations reflected in the forward looking statements
are reasonable, there is no assurance that the underlying assumptions will, in
fact, prove to be correct or that actual future results will not be different
from the expectations expressed in this Registration Statement.
Overview
In May 1999, we completed a statutory share exchange with SportsPrize Inc.
pursuant to the laws of the State of Nevada. With our acquisition of SportsPrize
Inc., we have implemented a new business strategy and plan, which is building a
Web-based entertainment company dedicated to creating an interactive community
on the Internet. Through our Web site, SportsPrize.com(TM), we intend to provide
a multi-faceted online sports entertainment community. We believe one of the
featured attractions will be the SportsPrize Tournament, a proprietary,
interactive sports game we developed to generate interest in our Web site. We
also intend to focus on retailing sports equipment, apparel, memorabilia and
other products through our various stores on our Web site.
At the time of the share exchange, we were a shell company with no revenues,
expenses, assets or liabilities, and our book value was $1,440, which was
written down to zero at the time of the share exchange. As a result of the share
exchange, all of the assets of SportsPrize Inc. became our assets, and our
historical and ongoing operations are deemed to be those of SportsPrize Inc. for
accounting purposes. The assets of SportsPrize Inc. consisted of cash and
investments of
50
<PAGE>
approximately $61,000, prepaid expenses and deposits of approximately $26,000
and other assets of approximately $16,000. As such, we have presented our
interim consolidated financial information for the six month period ending
August 31, 1999, and we have included the audited financial statements of
SportsPrize Inc. for the fiscal year ended February 28, 1999.
Results of Operations
Six Months Ended August 31, 1999
The six month period ended August 31, 1999 was our first period of material
operations with our new business plan. We had no revenues during this period.
Our loss of $3,365,456 was comprised primarily of cash compensation and
consulting costs totaling $700,260, as well as $2,234,558 in compensation
expense related to stock grants and stock option grants. Our legal and audit
costs were $121,570, and our research and development costs were $99,149. We
expect our general and administrative expenses to continue to be a material
component of our total expenses during the start-up phase of our development.
Once we launch our Web site, sales and marketing costs will become the largest
component of our expenses.
We generated $6,300 through the disposal of assets not integral to our business
operations during this six month period. We intend to dispose of other assets
that are not integral to our business operations in a timely manner.
With the receipt of $2,500,000 from a private placement of our common stock in
May 1999, we had $2,338,416 in working capital as of August 31, 1999.
While we expended only a nominal amount on capital equipment during this period,
these expenditures will accelerate as we complete the infrastructure for our Web
site and e-commerce operations.
Year Ended February 28, 1999
In our first eleven months of operations, we explored several business
opportunities. We attempted to secure mineral and oil and gas equity
participation interests in selected mineral properties. We purchased securities
in a publicly traded oil and gas company, with which we anticipated entering
into an exploration and development program. Oil and gas prices declined, and
the financing we anticipated receiving to complete this investment did not
develop. Consequently, we abandoned the business strategy of exploring mineral
properties and embarked on our current business plan to establish a leading
Internet sports-based entertainment, merchandising and community destination Web
site. As a result of the disposal of our investment portfolio, we lost $71,455.
These losses are non-recurring.
Our operating loss was $66,766, and the largest component of this was consulting
costs of $31,164.
We raised a total of $239,572 from private placements of our common stock, net
of finder's fees of $26,187, to finance our initial startup. At February 28,
1999, we had $34,345 cash on hand.
51
<PAGE>
Liquidity and Capital Resources
Since our Share Exchange with SportsPrize Inc., we have raised a total of
$3,500,000 less finder's fees of $98,000. We completed our initial funding at
the time of the Share Exchange by issuing 1,666,665 shares of our common stock
at a price of $1.50 per share, providing us with $2,500,000, less a finder's fee
of $70,000 paid to Sonora Capital. We also completed a private placement in July
1999, the first of three financings to be completed as part of our Share
Exchange with SportsPrize Inc., of 250,000 shares of our common stock at a price
of $4.00 per share, providing us with $1,000,000. We paid Sonora a finder's fee
of $28,000 in connection with this private placement.
As of August 31, 1999, we had working capital of $2,338,416. Our current working
capital requirements are approximately $250,000 to $300,000 per month. Once our
Web site is fully operational and we are fully staffed, our working capital
requirements related to financing fees and costs, content costs, and general and
administrative expenses are anticipated to increase to approximately $800,000
per month during the period from March 1, 2000 to August 31, 2000. Our working
capital requirements related to marketing expenses are anticipated to increase
to approximately $1,000,000 per month during the period from March 1, 2000 to
August 31, 2000, provided we are able to obtain sufficient financing to
implement our marketing program. We also anticipate that we will invest
approximately $200,000 per month for capital expenditures including Web site
equipment and software, Web site design and development and office equipment.
See "Summary of Operating Budget."
We anticipate that we will require additional capital of approximately
$2,750,000 to fund our operations through February 29, 2000. See "Note Regarding
Forward Looking Statements." We anticipate we will complete additional private
placements of our common stock to raise $1,500,000 in December 1999. We cannot
assure you that we will successfully complete the planned additional private
placements on acceptable terms, if at all.
In addition to the anticipated $1,500,000 in private placements, we anticipate
we will need to raise approximately $14,750,000 to meet our projected Operating
Budget requirements for content development, general and administrative
expenses, as well as marketing costs through the second fiscal quarter of 2000.
See "Summary of Operating Budget." We intend to complete additional financing to
fund our Operating Budget by issuing equity or debt through a combination of
private and public financings. We cannot assure you that we will successfully
complete additional financing on acceptable terms, if at all. If we cannot raise
additional financing, we anticipate that we will reduce our projected
expenditures related to marketing our SportsPrize Web site and concentrate our
resources on selling advertising and sponsorships and developing the
technologies related to our SportsPrize Web site and the SportsPrize Tournament.
We have the following material financial obligations to fulfillment vendors,
software systems developers, Internet access providers and marketing
communications providers:
52
<PAGE>
<TABLE>
Vendor Obligation
- ------ ----------
<S> <C>
Quad-Linq $5,000-25,000 per month
Interactive Marketing $30,000 per month
Kaleidoscope $10,000 per month through December 1999
DBC Sports $11,000 per month through November 1,
1999; $15,000 per month from December 1, 1999
to March 1, 2000; and $20,000 per month from
April 1, 2000 to termination
Tridian $15,000 to $20,000
Frontier $2,000 to $5,000 per month
ShopSports.com $14,800
Focus Partners $6,000 per month
Office Lease Agreements $10,000 per month
</TABLE>
In addition to these material commitments, we have agreements with our employees
and consultants, which require us to make monthly payments totaling
approximately $100,000 per month. Our failure to meet these financial
commitments and our future obligations may have a material adverse effect on our
business and results of operations.
Recent Financings
Our current business activities and operations have been funded to date through
issuance of shares of our common stock in the following transactions:
<TABLE>
Summary of Transactions
-----------------------
Total
Number of Consideration
Shares for Shares ($)
--------------- ------------------
<S> <C> <C> <C>
Private Placement at $1.50 per share 1,666,665 $2,500,000
Private Placement at $4.00 per share 250,000 1,000,000
--------------- ------------------
TOTAL 1,916,665 $3,500,000
=============== ==================
</TABLE>
Year 2000 Compliance
The Year 2000 issue arises with the change in century and the potential
inability of information systems to correctly "rollover" dates to the new
century. To save on computer storage space, many systems were programmed with a
two-digit century, i.e. December 31, 1999 would appear as 12/31/99, assuming
that all years would be part of the 20th century. On January 1, 2000, systems
with this programming will default to 01/01/1900 instead of 01/01/2000, and
calculations using or reporting the date will not be correct and errors will
arise. To prevent this from occurring, information systems need to be updated to
ensure they recognize dates during and after the Year 2000.
53
<PAGE>
The potential exists that we are exposed to a risk that our Web site and the
services that support our Web site will fail or suffer impairment as a result of
internally operated or externally contracted hardware or software systems and
services not being able to correctly "rollover" dates to the new century. The
risk stems from our reliance on computer hardware, servers, payment systems,
software and other services to carry out the daily operation of our proposed
business. The exposure may result from, among other things, the use of
computers, general software and servers for office purposes and data storage;
connections to and use of the services of Internet Service Providers and
telephone companies for office purposes and customer service and support; the
software underlying the operation of our Web site and our online e-commerce
operation; and the servers that allow us to distribute our Web site to the
public.
We have only been operating and developing our business during the last six
months. The office hardware, general software, custom developed software,
servers and services of Internet Service Providers and telephone companies have
been acquired during this period. As a result, and in consultation with the
suppliers of this hardware, software and services, we believe the related
systems that we intend, directly or indirectly, to use in our respective
businesses are Year 2000 compliant. Our due diligence also included an
evaluation of supplier provided technology and the implementation of new
policies to require our suppliers to confirm in writing that they have disclosed
and will correct Year 2000 compliance issues. However, we have not undertaken
any other measures to assure year 2000 compliance of our third party vendors and
we cannot assure you that such vendor systems will not experience disruptions as
a result of the Year 2000 Issue. Although we are relying primarily on systems
developed with current technology and on systems designed to be Year 2000
compliant, we may have to replace, upgrade or reprogram certain systems to
ensure that all interfacing technology will be Year 2000 compliant when running
jointly.
In the event that we incur expenses associated with resolving Year 2000
compliance issues, we intend to expense the operating costs as they are incurred
and capitalize the capital costs as they are incurred. However, our purchases of
hardware and general and specific purpose software have been relatively recent,
and the more expensive of the hardware and general and specific software items
that we have purchased are covered under warranties that will extend over the
rollover period to January 1, 2000. As a result, we do not expect to incur any
major operating or capital expenditures that would have a material impact on our
financial condition or results of operations. Our Year 2000 compliance costs to
date have been non-material and are estimated to be less than $2,000.
We do not currently anticipate any disruption in our operations as the result of
the Year 2000 issue. We do not have any information concerning the Year 2000
compliance status of our suppliers and customers that would affect our
operations. Any failure of our material systems, our vendors' material systems
or the Internet to be Year 2000 compliant may have a material adverse effect on
our business and results of operations.
In the worst case scenario, the systems of our third-party vendors and the
Internet will fail as a result of year 2000. If such worst case scenario occurs,
we anticipate we will delay further development of our Web site until systems
are re-established for the Internet. Such a material failure would have a
material adverse effect on our business. See "Note Regarding Forward Looking
Statements."
54
<PAGE>
In order to protect against the possibility of any material disruption in our
operations as a result of the Year 2000 issue, we have taken or will be taking
the following precautions:
o Developed, initiated and maintained procedures that ensure that the
information stored on the office computer hard drives are backed up on
a regular basis and stored safely;
o Copies of the source code for the special purpose software are
maintained in secure offsite locations by the developers of the
software;
o Install a backup server; and
o Implemented a policy of acquiring name brand hardware and retained
experienced consultants upon whose warranties we believe that we can
rely.
New Accounting Pronouncements
The recent and future accounting pronouncements do not and are not expected to
have any significant effect on our financial position or operating results.
Item 3. Properties.
On September 27, 1999, we entered into a short-term lease agreement with
eOfficeSuites, Inc. for office space located at 13101 Washington Boulevard,
Suite 131, Culver City, California. The term of the lease is for two months from
October 1, 1999 through November 30, 1999, and will continue on a month to month
basis after November 30, 1999. Currently, the base rent is $7,000 per month, and
we agreed to pay additional rent of $2,000 per month for other services
including furniture rental, telephone instruments and voice mail, high speed
Internet service and parking.
We also currently rent a research and development office at 101 West 5th Avenue,
Vancouver, British Columbia, Canada, on a month-to-month basis. Our monthly
payments are approximately $2,200.
We do not presently own or lease any other property or real estate.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners.
The following table sets forth certain information concerning the number of
shares of our common stock owned beneficially as of December 6, 1999 by: (i)
each of our officers and directors, (ii) each person, including any group, known
to us to own more than five percent (5%) of any class of our voting securities,
and (iii) officers and directors as a group. Unless otherwise indicated, the
shareholders listed possess sole voting and investment power with respect to the
shares shown.
55
<TABLE>
Title of Class Name and Address of Amount and Nature of Percentage of Class
Beneficial Owner Beneficial Ownership
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
<S> <C> <C> <C>
Officers and Directors
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Common Shares Bruce Cameron, Director, 100,000(1) 0.49%(1)
President, Chief Financial
Officer and Treasurer
13101 Washington Boulevard,
Suite 131
Culver City, California
90066
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Robert Hunziker, Director 100,000(1) 0.49%(1)
Senior Vice President of
Corporate Finance
13101 Washington Boulevard,
Suite 131
Culver City, California
90066
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Jeffrey Paquin, Director 1,333,740(2) 6.50%(2)
4775 Woodgreen Drive
West Vancouver, B.C.
Canada V7S 2Z9
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Alan Gerson, Director Nil Nil
225 S. Sepulveda Boulevard,
Suite 360
Manhattan Beach, California
90266
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Abe Carmel, Director 125,000(1) 0.61%(1)
4550 Northpark Avenue, #809
Chevy Chase, Maryland 20815
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Michael Wiedder, 50,000(1) 0.24%(1)
Vice-President of Marketing
13101 Washington Boulevard,
Suite 131
Culver City, California
90066
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Donald MacKay, 358,435(3) 1.75%(3)
Senior Vice President and
Controller
1840 Redwood Drive
Surrey, B.C.
Canada V4P 1M6
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
John Thompson, 778,015(4) 3.79%(4)
Vice-President of Game
Content and Development
6368 Crescent Court
Delta, B.C.
Canada V4K 4Y5
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Skye Cove, Vice-President 358,434(3) 1.74%(3)
of Technology
921 Roslyn Boulevard
North Vancouver, B.C.
Canada V7G 1P4
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
David Bissett, Corporate Nil Nil
Secretary
1040-999 W. Hastings Street
Vancouver, B.C.
Canada V6C 2W2
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Common Shares Officers and Directors as a 3,203,624(5) 15.60%(5)
Group
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
</TABLE>
56
<PAGE>
<TABLE>
Title of Class Name and Address of Amount and Nature of Percentage of Class
Beneficial Owner Beneficial Ownership
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
<S> <C> <C> <C>
5% Shareholders
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Lamplighter Investments Ltd. 1,088,888 5.59%
88 Ellis Road
Crowthorne Berks, England
Common Shares RG45 6PN
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
James Brown 1,033,740(6) 5.31%(6)
5453 West Vista Court
West Vancouver, B.C.
Canada V7W 3G8
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Randy Daggitt 1,033,740(6) 5.31%(6)
12714 25A Avenue
Surrey, B.C.
Canada V4A 5R5
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Michael Slater 1,033,740(6) 5.31%(6)
5289 Keith Road
West Vancouver, B.C.
Canada V7W 2M9
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
Anthony Vecchio 1,033,740(6) 5.31%(6)
4728 Woodvalley Place
West Vancouver, B.C.
Canada V7S 2X3
- ----------------------------- ----------------------------- ---------------------------- ---------------------------
</TABLE>
(1) Consisting of vested stock options exercisable within 60 days of December
6, 1999 to acquire such shares.
(2) Includes (a) vested stock options exercisable within 60 days of December 6,
1999 to acquire 300,000 shares and (b) 433,740 shares held in escrow
pursuant to an Escrow Agreement dated May 7, 1999. See "Description of
Business - Agreement Among Certain SportsPrize Inc. Shareholders."
(3) Includes vested stock options exercisable within 60 days of December 6,
1999 to acquire 100,000 shares.
(4) Includes vested stock options exercisable within 60 days of December 6,
1999 to acquire 175,000 shares.
(5) Includes vested stock options exercisable within 60 days of December 6,
1999 to acquire 1,050,000 shares.
(6) Includes 433,740 shares held in escrow pursuant to an Escrow Agreement
dated May 7, 1999. See "Description of Business - Agreement Among Certain
SportsPrize Inc. Shareholders."
Security Ownership of Management.
We are not aware of any arrangement that might result in a change in control in
the future.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Directors and Officers
All of our directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their successors
are duly elected and qualified, unless they sooner resign or cease to be
directors in accordance with our Articles and Bylaws. The date of our next
annual general meeting has yet to be determined. Our executive officers are
appointed by and serve at the pleasure of our Board of Directors.
57
<PAGE>
As at September 30, 1999, the following persons were our directors and/or
officers:
<TABLE>
- ------------------------------------------------------------------ ----------------------
Director/
Officer/
Name and present office held Employee since
- ------------------------------------------------------------------ ----------------------
<S> <C>
Bruce Cameron, Director September 16, 1999
President, Chief Financial Officer and Treasurer
- ------------------------------------------------------------------ ----------------------
Robert Hunziker, Director August 16, 1999
Senior Vice President of Corporate Finance
- ------------------------------------------------------------------ ----------------------
Jeffrey Paquin, May 14, 1999
Director
- ------------------------------------------------------------------ ----------------------
Alan Gerson, July 8, 1999
Director and Chairman of the Board (1)
- ------------------------------------------------------------------ ----------------------
Abe Carmel, July 8, 1999
Director
- ------------------------------------------------------------------ ----------------------
Donald MacKay, May 14, 1999
Senior Vice President and Controller
- ------------------------------------------------------------------ ----------------------
Michael Wiedder, June 24, 1999
Vice-President of Marketing
- ------------------------------------------------------------------ ----------------------
John Thompson, Vice-President of Game Content and Development May 14, 1999
- ------------------------------------------------------------------ ----------------------
Skye Cove, Vice-President of Technology May 14, 1999
- ------------------------------------------------------------------ ----------------------
David Bissett, Corporate Secretary May 14, 1999
- ------------------------------------------------------------------ ----------------------
</TABLE>
(1) Mr. Gerson has served as our Chairman of the Board since November 1, 1999.
The following is a brief biographical information on each of the officers,
directors and significant employees listed:
Bruce Cameron, age 43, has served as our President, Chief Financial Officer and
Treasurer, and a Director since September 16, 1999. Prior to joining us, Mr.
Cameron was Executive Vice President and Chief Financial Officer of Hollywood
Online Inc., a movie-oriented Web publishing company. Prior to joining Hollywood
Online, Mr. Cameron served as Vice President and Manager at Imperial Bank and
First Interstate Bank. Prior to his banking experience, Mr. Cameron held a
senior management consulting position with Gorsey, Hanson & Company from 1986 to
1988. From 1978 to 1986, he worked in a variety of managerial roles at Price
Waterhouse. Mr. Cameron has a Bachelor of Arts Degree in Economics from the
University of California, Los Angeles and is a CPA.
Robert Hunziker, age 55, has served as our Senior Vice President of Corporate
Finance and a Director since August 16, 1999. Prior to joining us, Mr. Hunziker
was a Limited Partner and Associate Director of Bear Stearns & Company from 1984
to 1991 and a Vice President and a Principal of Oppenheimer from 1975 to 1984.
Since 1992, Mr. Hunziker has been self-employed as a corporate advisor and
financier. Mr. Hunziker also serves on the board of directors of Advanced Gaming
Technology, Inc. and Chapleau Resources, Ltd. Mr. Hunziker has a M.A. degree in
Economic History from DePaul University/Chicago.
Jeffrey Paquin, age 36, has been a director since May 14, 1999 and was our
President from May 14, 1999 to September 15, 1999. Mr. Paquin is a lawyer and is
currently President of JD
58
<PAGE>
Paquin Personal Law Corporation. Mr. Paquin's corporate experience includes
directorships in the following emerging public companies: Broadwater Development
Inc., a natural resource exploration company listed on the Vancouver Stock
Exchange, from 1996 to 1997; Solar Pharmaceuticals Ltd., a manufacturer and
supplier of medical devices and services formally listed on the Vancouver Stock
Exchange, from 1995 to 1998; and Watson Bell Communications Inc., now Cosworth
Ventures, listed on the Vancouver Stock Exchange, from 1993 to 1995. Mr. Paquin
was the President and Director of SportsPrize Inc. from its inception to May 14,
1999.
Alan Gerson, age 53, has been a director since July 8, 1999 and the Chairman of
our Board since November 1, 1999. Mr. Gerson's experience includes broadcast and
cable television, e-commerce, live event marketing, and the Internet. Mr. Gerson
is a principal and President of Interactive Marketing Inc. Mr. Gerson was a
longtime senior executive at NBC, Inc. and from 1991 to 1994 was the Executive
Vice-President of the Home Shopping Network. In 1994, he consulted for various
media, Interactive Marketing Inc. and electronic commerce companies. In 1995,
Mr. Gerson joined Ticketmaster Corp. as Senior Vice-President of Television and
Business Development and oversaw Ticketmaster's Direct Marketing Division and
the launch of the Ticketmaster Online store. In 1996, Mr. Gerson held an
executive consulting position with Softbank Interactive Marketing. Prior to
establishing Interactive Marketing Inc., Mr. Gerson served as President and
Chief Executive Officer of WorldSite Networks, Inc. under an executive
consulting arrangement.
Abe Carmel, age 66, has been a director since July 8, 1999. Since 1986, Mr.
Carmel has lead Carmel Associates LLC, an international investment banking firm
which specializes in the financing and marketing of high technology, Internet
and telecommunications companies.
Donald MacKay, age 47, was our Chief Financial Officer from May 14, 1999 to
September 15, 1999 and our Treasurer from June 30, 1999 to September 15, 1999.
Mr. MacKay has been a Certified Management Accountant since 1991. Mr. MacKay was
the Chief Financial Officer of Advanced Gaming Technology, Inc. from 1995 to
1998; the manager of business analysis of TCG International Inc. from 1994 to
1995; and a senior financial accountant of GLENTEL Inc. from 1989 to 1993.
Michael Wiedder, age 40, has been our Vice-President of Marketing since June 24,
1999. Mr. Wiedder founded and served as CEO of Online Expo, an Internet
exposition and conference produced in Los Angeles, San Francisco and New York.
Mr.
Wiedder has been involved in the Internet marketing industry since 1994.
John Thompson, age 41, has been our Vice-President of Game Content and
Development since May 14, 1999. Mr. Thompson created and developed the
SportsPrize Tournament game. Mr. Thompson spent 14 years as an oddsmaker and
sports analyst with the British Columbia Lottery Corporation. Mr. Thompson was a
Vice-President of SportsPrize Inc. prior to the Share Exchange.
59
<PAGE>
Skye Cove, age 23, has been our Vice-President of Technology since May 14, 1999.
Since 1994, Mr. Cove has been a computer programming consultant and an employee
of Olson Cove Consulting. Mr. Cove was a Vice-President of SportsPrize Inc.
prior to the Share Exchange.
David Bissett, age 45, has been our Corporate Secretary since May 14, 1999.
Since 1988, Mr. Bissett has been a partner of the law firm Scott, Bissett, of
Vancouver, British Columbia, Canada, that specializes in securities law. He is a
past Chair of the Securities Subsection of the British Columbia branch of the
Canadian Bar Association. Mr. Bissett served as Corporate Secretary of
SportsPrize Inc. prior to the Share Exchange.
Members of the Board of Directors are elected by our shareholders. Our Board of
Directors meets periodically to review significant developments affecting our
company and to act on matters requiring Board approval. Although the Board of
Directors delegates many matters to others, it reserves certain powers and
functions to itself. Our audit committee is directed to review the scope, cost
and results of the independent audit of our books and records, the results of
the annual audit with management and the adequacy of our accounting, financial
and operating controls; to recommend annually to the Board of Directors the
selection of the independent auditors; to consider proposals made by the
Registrant's independent auditors for consulting work; and to report to the
Board of Directors, when so requested, on any accounting or financial matters.
None of our directors or executive officers is a party to any arrangement or
understanding with any other person pursuant to which said he was elected as a
director or officer.
None of our directors or executive officers has any family relationship with any
other officer or director.
None of our officers or directors have been involved in the past five years in
any of the following: (1) bankruptcy proceedings; (2) subject to criminal
proceedings or convicted of a criminal act; (3) subject to any order, judgment
or decree entered by any court limiting in any way his or her involvement in any
type of business, securities or banking activities; or (4) subject to any order
for violation of federal or state securities laws or commodities laws.
Item 6. Compensation of Officers and Directors.
As of February 28, 1999, our sole named executive officer was Joseph Ochoa. On
April 3, 1999, Joseph Ochoa was replaced by William Turner as our sole named
executive officer. On May 14, 1999, William Turner was replaced by Jeffrey
Paquin, our President, and a named executive officer until being succeeded by
Bruce Cameron on September 16, 1999. Currently, our three highest paid named
executive officers are as follows:
o Bruce Cameron became our President, Chief Financial Officer and
Treasurer and a named executive officer on September 16, 1999.
o Robert Hunziker became our Senior Vice President of Corporate Finance
and a named executive officer on August 16, 1999.
60
<PAGE>
o Michael Wiedder became our Vice President of Marketing and a named
executive officer on June 17, 1999.
Subsequent to our fiscal year ended February 28, 1999, through November 30,
1999, we paid the following compensation to the following named executive
officers:
<TABLE>
SUMMARY COMPENSATION TABLE
--------------------------
Long Term Compensation
- ------------------------- ----------------------------------------- -------------------------- ----------
Annual Compensation Awards Payouts
- ------------------------- --------- --------- ------ -------------- ------------ ------------- ----------
Other Annual
Compen-sation Restricted Securities
($) Stock Underlying LTIP All Other
Name and Salary Bonus Award(s) Options/ Payouts Compen-sation
Principal Position Period ($) ($) ($) SARs(#) ($) ($)
- ------------------------- -------- -------- ------ ------------ ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey Paquin, Eight 90,000(2) Nil Nil Nil 300,000 Nil Nil
President(1) Months
Ended
11/30/99
- ------------------------- -------- -------- ------ ------------ ----------- ------------ -------- -------------
Bruce Cameron,
President, Chief Eight 43,750 Nil Nil Nil 100,000 Nil Nil
Financial Officer Months
and Treasurer(3) Ended
11/30/99
- ------------------------- -------- -------- ------ ------------ ----------- ------------ -------- -------------
Robert Hunziker,
Senior Vice Eight 38,333 Nil Nil Nil 100,000 Nil Nil
President of Months
Corporate Finance(4) Ended
11/30/99
- ------------------------- -------- -------- ------ ------------ ----------- ------------ -------- -------------
Michael Wiedder,
Vice President of Eight 68,750 Nil Nil Nil 50,000 Nil Nil
Marketing(5) Months
Ended
11/30/99
- ------------------------- -------- -------- ------ ------------ ----------- ------------ -------- -------------
</TABLE>
(1) Mr. Paquin was replaced by Bruce Cameron as our President, effective
September 16, 1999, and currently serves us as a Director and a consultant.
(2) Includes $45,000 paid to Mr. Paquin as severance pay upon his replacement
on September 16, 1999.
(3) Bruce Cameron became our President, Chief Financial Officer and Treasurer
and a named executive officer on September 16, 1999.
(4) Robert Hunziker became our Senior Vice President of Corporate Finance and a
named executive officer on August 16, 1999.
(5) Michael Wiedder became our Vice President of Marketing and a named
executive officer on June 17, 1999.
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<PAGE>
The following table contains information concerning compensation paid to our
named executive officers during the fiscal year ended February 28, 1999.
<TABLE>
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long-Term Compensation
-----------------------------------------------------------------------
Awards Pay-outs
---------------------------------------
Other Securities LTIP
Annual Restricted Under-lying Payouts All Other
Compen- Stock Options/ Compen-
Name and Salary Bonus sation Award(s) SARs (#) sation
Principal Position Year ($) ($) ($) ($) ($)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey Paquin 1999 $6,375 Nil Nil Nil Nil
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Stock Options
During our most recently completed fiscal year ended February 28, 1999, we
granted options to acquire 300,000 common shares to Jeffrey Paquin, our sole
named executive officer and no long-term incentive plan awards were made to a
named executive officer. No share purchase options were outstanding during the
fiscal year ended February 28, 1999. We do not have a defined benefit or
actuarial plan. We have adopted a stock option plan. See "Description of 1999
Stock Option Plan."
The following table contains information concerning options granted paid to our
named executive officers during the fiscal year ended February 28, 1999.
<TABLE>
OPTION/SAR GRANTS IN LAST FINANCIAL YEAR
----------------------------------------
Individual Grants
-----------------
Name Number of % of Total
Securities Options/SARs Exercise or
Underlying Granted to Base Price Expiration Grant Date
Options/SARs Employees in ($/Sh) Date Present Value($)
Granted Fiscal Year
======================== ============= ============== ================ =============== ============================
<S> <C> <C> <C> <C> <C>
Jeffrey Paquin 300,000 44.4% $0.25/share May 14, 2004 $ 21,000(1)
======================== ============= ============== ================ =============== ============================
</TABLE>
(1) The fair market value of the option grant estimated at the grant date using
the Black Scholes option-pricing model for the period from March 6, 1998
(inception) to August 31, 1999, assuming a risk-free interest rate ranging
from 5.27% to 5.6%, volatility of 30%, zero dividend yield, and an expected
life of 2 to 3 years. The fair market value of the shares underlying the
options on the date of grant was $0.25, based on the price similar shares
issued in conjunction with a private placement completed during the same
period.
There were no share purchase options exercised by our officers, directors and
employees during the fiscal year ended February 28, 1999.
There were no long-term incentive plans granted to our officers, directors and
employees during the fiscal year ended February 28, 1999.
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<PAGE>
Description of 1999 Stock Option Plan
We adopted a stock option plan and authorized the issuance of up to 3,000,000
shares of our common stock as incentive stock options to our current and future
key employees and consultants on June 21, 1999. The Board of Directors approved
an amendment to the plan to increase the number of shares issuable under the
plan to 6,000,000, and our shareholders ratified the plan and approved the
amendments at our annual shareholders meeting held on October 6, 1999. As of
November 30, 1999, we granted options to acquire 3,005,000 common shares. The
following is a summary of the principal features of the 1999 Plan.
Under the amended stock option plan, the total number of shares of common stock
reserved for issuance 6,000,000 shares of our common stock, which may be
Incentive Stock Options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, or nonqualified stock options. If any
outstanding option expires or is terminated for any reason, the shares of common
stock allocable to the unexercised portion of that option may again be subject
to an option to the same optionee or to a different person eligible under the
1999 Plan.
The option grant program is administered by the Board of Directors or a
committee of two or more members of the Board. Plan administrators have sole
authority to prescribe the form, content and status of options to be granted,
select the eligible recipients, determine the timing of option grants, determine
the number of shares subject to each grant, the exercise price, vesting
schedule, and term for which any option will remain outstanding, provided,
however, that the exercise price for any ISOs granted may not be less than the
fair market value per share of the common stock at the date of grant. The Board
of Directors has the authority to determine the terms and restrictions on all
restricted option awards granted under the 1999 Plan, and in general, to
construe and interpret any provision of the 1999 Plan.
The exercise price for outstanding option grants under the 1999 Plan may be paid
in cash or in shares of common stock valued at fair market value on the exercise
date, having shares withheld from the amount of shares of common stock to be
received by the optionee, by delivery of an irrevocable subscription agreement
obligating the optionee to take and pay for the shares of common stock to be
purchased within one year of the date of such exercise, through a same-day
cashless exercise program or a reduction in the amount of any liability on our
behalf to the optionee, or by such other consideration and method of payment for
the issuance of shares to the extent permitted by applicable laws.
Under the 1999 Plan, no stock option can be granted for a period longer than ten
years or for a period longer than five years for ISOs granted to optionees
possessing more than 10% of the total combined voting power of all of our
classes of stock. Unless extended by the Plan administrators until a date not
later than the expiration date of the option, the right to exercise an option
terminates 90 days after the termination of an optionee's employment,
contractual or director relationship with SportsPrize Entertainment Inc. If the
optionee dies or is disabled, the option will remain exercisable for a period of
one year after the termination of employment or relationship with us.
63
<PAGE>
Pursuant to our statutory share exchange with SportsPrize Inc., we agreed to
issue options to acquire 805,000 shares of our common stock to the option
holders of SportsPrize Inc., of which 300,000 options were granted to Jeffrey
Paquin, a named executive officer.
Compensation of Directors
Our Directors do not receive any salary for their services as directors or
members of committees of the Board of Directors, but by resolution of the Board,
a fixed fee and expenses of attendance may be allowed for attendance at each
meeting. Directors may also serve our company in other capacities as an officer,
agent or otherwise, and may receive compensation for their services in such
other capacity.
During our most recently completed fiscal year ended February 28, 1999, no
director of the registrant was compensated for any service as a director. There
is currently no arrangement or agreement to compensate any directors for their
service as a director.
We granted to Abe Carmel options to acquire 125,000 shares of our common stock
as an incentive to become a director of our company. These options are
exercisable at $0.75 per share.
Executive Officer Agreements
We entered into the following agreements with our named executive officers:
We entered into an agreement with Bruce Cameron, as our President, Chief
Financial Officer and Treasurer, dated September 16, 1999. Under the terms of
the agreement, we agreed to pay Mr. Cameron compensation in the amount of
$14,583.33 per month during the two year term of the agreement, beginning
September 16, 1999, subject to a minimum increase of 15% on September 1, 2000
and annually thereafter for any additional period for which the agreement is
renewed. We also granted Mr. Cameron options exercisable to acquire up to
600,000 shares of our common stock, exercisable as follows: 200,000 at $0.50 per
share, 200,000 at $1.00 per share and 200,000 at $2.00 per share. Of the options
exercisable at $0.50 per share, 25,000 vested immediately upon execution of the
agreement, and the balance vests pro rata over the following seven months at
25,000 per month. The options exercisable at $1.00 per share vest pro rata in
the amount of 25,000 shares per month, beginning eight months from September 16,
1999. The options exercisable at $2.00 per share vest pro rata in the amount of
25,000 shares per month, beginning sixteen months from September 16, 1999.
We entered into an agreement with Robert Hunziker, a Director and our Senior
Vice President of Corporate Finance, dated August 15, 1999. Under the terms of
the agreement, we agreed to pay Mr. Hunziker compensation in the amount of
$10,000 per month during the six month term of the agreement, beginning August
16, 1999. We also granted Mr. Hunziker options exercisable to acquire up to
400,000 shares of our common stock, exercisable as follows: 200,000 at $0.50 per
share and 200,000 at $2.00 per share. Of the options exercisable at $0.50 per
share, 100,000 vested immediately upon execution of the agreement and 100,000
vest in the event that our trading price closes at a price equal to or greater
than $7.00 per share or in the event that we complete a financing in excess of
$10,000,000. If 100,000 of the options exercisable at $0.50 per share vest as a
result of our trading price closing at a price equal to or greater than $7.00
per
64
<PAGE>
share, then, of the options exercisable at $2.00 per share, 50,000 vest
immediately and 150,000 vest in the event we complete a financing in excess of
$10,000,000. If 100,000 of the options exercisable at $0.50 per share vest as a
result of us completing a financing in excess of $10,000,000, then, of the
options exercisable at $2.00 per share, 50,000 vest immediately and 150,000 vest
in the event that our trading price closes at a price equal to or greater than
$7.00 per share.
We entered into an agreement with Michael Wiedder, our Vice President of
Marketing, dated June 17, 1999, as amended August 30, 1999. Under the terms of
the agreement, we agreed to pay Mr. Wiedder compensation in the amount of
$12,500 per month during the six month term of the agreement. We also agreed to
grant Mr. Wiedder options exercisable to acquire 100,000 shares of our common
stock for $0.50 per share, 50,000 vesting pro rata over six months at 8,333 per
month and 50,000 vesting at the end of six months, provided that 50,000 of such
options shall be cancelled in the event that Mr. Wiedder does not agree to
extend the term of the agreement for an additional one year period. Mr. Wiedder
agreed to assist us in developing marketing strategies and developing strategic
relationships related to the development of our SportsPrize Web site and our
business. We also agreed to grant Mr. Wiedder options to acquire an additional
300,000 shares of our common stock at $4.00 per share, vesting over an eighteen
month period, in the event that we agree to renew the contract for an additional
one year period.
Item 7. Certain Relationships and Related Transactions.
Transactions with Management and Others
Except for (a) the ownership of our securities and (b) the compensation
described herein, none of our directors, executive officers, holders of ten
percent of our outstanding shares of common stock, or any associate or affiliate
of such person, have, to our knowledge, had a material interest, direct or
indirect, during the year ended February 28, 1999 and the six month period ended
August 31, 1999, or in any proposed transaction which may materially affect us.
David Bissett is our Corporate Secretary. Mr. Bissett is also a partner at
Scott, Bissett, which is our Canadian counsel. Scott, Bissett is a Canadian law
firm, which provides legal services in the areas of general corporate and
securities law. At August 31, 1999, we paid Scott, Bissett legal fees in the
total amount of $69,856.
We have employment agreements with Bruce Cameron and Robert Hunziker. See
"Compensation of Officers and Directors Executive Officer Agreements."
Under the terms of the statutory share exchange, certain shareholders of
SportsPrize Inc., namely Jeffrey Paquin, Randy Daggitt, James Brown, Michael
Slater, Anthony Vecchio and Gang Consulting Inc., entered into an escrow
agreement dated for reference May 7, 1999. See "Our Acquisition of SportsPrize
Inc. - Agreement Among Certain SportsPrize Inc.
Shareholders." These shareholders agreed:
o To place 2,530,150 of their shares into escrow for a period of up to
one year; and
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<PAGE>
o To convey the escrowed shares to key personnel which we hire in the
future as compensation or signing bonuses; and that if the escrowed
shares are not conveyed as compensation or signing bonuses, the
escrowed shares would be released pro rata: 50% to the shareholders,
as a group, and 50% to Sonora.
As a result of our share exchange with SportsPrize Inc., the following officers
and directors of our company received shares of our common stock:
<TABLE>
------------------------------------------------------------------------------------------------
Number of Shares Deemed Value of Shares
Name and Principal Position Received Received
------------------------------------------------------------------------------------------------
<S> <C> <C>
Jeffrey Paquin, Director 1,033,740(1) $0.01/per share (2)
Donald MacKay, Senior Vice President 258,435 $0.25/per share (3)
and Controller
John Thompson, 633,015 $0.25/per share(3)
Vice-President of Game Content and
Development
Skye Cove, 258,434 $0.25/per share(3)
Vice-President of Technology
------------------------------------------------------------------------------------------------
</TABLE>
(1) Of which 433,740 shares are held in escrow pursuant to an Escrow Agreement
dated May 7, 1999.
(2) The deemed value of such shares is based on the fair market value of the
shares on the date such shares were acquired by the shareholders. Mr.
Paquin acquired his shares as founder's shares for $0.01.
(3) The deemed value of such shares is based on the fair market value on the
date of issuance, which is based on the price of similar shares issued in
conjunction with a private placement completed during the same period.
These shares were issued as consideration for services at $0.25.
As a result of our share exchange with SportsPrize Inc., we agreed to grant the
following officers and directors of our company options exercisable to acquire
shares of our common stock:
<TABLE>
----------------------------------------------------------------------------------------------
Name and Principal Position Number of Exercise Market Value of
Shares Price Common Shares on the
Underlying Date of Grant
Options
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jeffrey Paquin, Director 300,000 $0.25 $0.25/per share (1)
Donald MacKay, Senior Vice 100,000 $0.25 $0.25/per share (1)
President and Controller
John Thompson, 175,000 $0.25 $0.25/per share (1)
Vice-President of Game Content
and Development
Skye Cove, 100,000 $0.25 $0.25/per share (1)
Vice-President of Technology
----------------------------------------------------------------------------------------------
</TABLE>
(1) The fair value of such shares is based on the price of similar shares
issued in conjunction with a private placement completed during the same
period.
66
<PAGE>
As a result of our share exchange, we assumed from SportsPrize Inc. a marketing
consulting agreement with Interactive Marketing Inc. dated as of May 6, 1999.
Alan Gerson, a director and the Chairman of the Board of our company, is the
President of Interactive Marketing Inc. Interactive Marketing Inc. provides us
with overall strategic and tactical marketing and operational strategy
consulting services. See "Interactive Marketing Inc. - Marketing Consulting
Agreement."
We believe that the terms of all of these agreements are no less fair to us than
contracts that would have been negotiated with unrelated parties at arms'
length.
Indebtedness of Management
Since the beginning of our last fiscal year, none of the following persons have
been indebted to us or our subsidiary in an amount in excess of $60,000: (i)
director or executive officer, (ii) nominee for election as a director, (iii)
member of the immediate family of a person specified in (i) or (ii), (iv)
corporation or organization other than us or our majority owned subsidiary of
which any of the persons specified in (i) or (ii) is an executive officer or
partner or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities, (v) any trust or other estate in which
any of the persons specified in (i) or (ii) has a substantial beneficial
interest or as to which such person serves as a trustee or in a similar
capacity.
Item 8. Legal Proceedings.
To the best of our knowledge, we are not subject to any active or pending legal
proceedings or claims against us or any of our properties. However, from time to
time, we may become subject to claims and litigation generally associated with
any business venture.
Item 9. Market Price of and Dividends on Registrant's Common Equity and
Related Stockholder Matters.
Our common stock is approved for trading on the OTCBB under the symbol "JOCK".
The following table sets forth, for the periods indicated, the range of the high
and low bid quotations as reported by NASD. There were no trades of our
securities on the OTCBB during the first quarter of 1999 prior to May 12, 1999.
The bid quotations set forth below, reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not reflect actual transactions:
OTCBB
1999 High Low Volume
- ---- ---- --- ------
First Fiscal Quarter $9.1875 $5.7500 836,600
Second Fiscal Quarter $5.9375 $2.8750 9,213,700
Third Fiscal Quarter $4.00 $1.6250 2,909,400
67
<PAGE>
On November 29, 1999, the last reported sales price of our common stock, as
reported by the NASD, was $1.78125 per share.
As of November 30, 1999, there were 103 registered holders of record of our
common stock.
We have not declared or paid any cash dividends on our common stock since our
inception, and our Board of Directors currently intends to retain all earnings
for use in the business for the foreseeable future. Any future payment of
dividends will depend upon our results of operations, financial condition, cash
requirements and other factors deemed relevant by our Board of Directors.
Item 10. Recent Sales of Unregistered Securities.
In 1995, we initially issued 9,000,000 shares of common stock at $0.001 per
share for legal services and services rendered to the Registrant in connection
with the forming, organizing and developing of the business plan, valued at
$9,000. The issuance of these shares was exempt from registration under the
provisions of Section 4(2) of the Securities Act, as amended.
In 1997, we issued 2,564,000 shares of our common stock for $0.01 per share to
raise $26,640. This offering was made to 42 subscribers, 21 of which were
resident in Nevada and 21 were outside the United States. The offering was not
underwritten. This sale was exempt from registration in reliance upon Rule 504
under Regulation D promulgated under the Securities Act. The aggregate offering
price did not exceed $1,000,000, and the offering was otherwise in compliance
with Rules 501 and 502 promulgated under the Securities Act. No fees or
commissions were paid in connection with the transaction.
In April 1999, as part of a capital reorganization, we issued 5,000,000 shares
of our common stock at a deemed value of $0.01 per share, and we redeemed
9,000,000 shares of our common stock held by two shareholders, at a deemed value
of $0.001 per share. The share issuance was made to 11 subscribers, including
Dreamweaver Investments Ltd., Lamplighter Investments Ltd., Cronwall Investments
Inc., Anchor Cove Investments Inc., Spirit Investments Ltd., Strathburn
Investments Inc., Aero Atlantic Ltd., Swordfish Capital, Castaway Holdings,
Dynamic Investments Ltd. and BCLM Investment Corporation, all of which were
resident outside the United States. The offering was not underwritten. This sale
was exempt from registration in reliance upon Rule 504 under Regulation D
promulgated under the Securities Act. The aggregate offering price did not
exceed $1,000,000, and the offering was otherwise in compliance with Rules 501
and 502 promulgated under the Securities Act. No fees or commissions were paid
in connection with the transaction.
In May 1999, we issued 9,999,709 shares of our common stock at a deemed price of
$0.01 per share pursuant to a statutory share exchange whereby we acquired all
of the issued and outstanding shares of SportsPrize Inc., our wholly owned
subsidiary, by exchanging 1.7229 shares of our common stock for each share of
common stock of SportsPrize Inc. The share exchange was effected pursuant to a
statutory share exchange under the laws of Nevada. The sale was exempt from
registration in reliance upon Section 4(2), Rule 506 under Regulation D and/or
Regulation S promulgated under the Securities Act. No fees or commissions were
paid in connection with the transaction.
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<PAGE>
In May 1999, we issued 1,666,665 shares of our common stock at $1.50 per share
to raise $2,500,000. This offering was made to three subscribers, Lamplighter
Investments Ltd., Strathburn Investments Inc., and Aero Atlantic Ltd., each
outside the United States. The offering was not underwritten. The sale was
exempt from registration under Regulation S promulgated under the Securities
Act. No placement agent was retained in connection with the offering. A finder's
fee was paid in cash to Sonora Capital in the amount equal to 2.8% of the gross
proceeds.
In July 1999, we issued 250,000 shares of our common stock at $4.00 per share to
raise $1,000,000. This offering was made to three subscribers, Lamplighter
Investments Ltd., Strathburn Investments Inc., and Aero Atlantic Ltd., each
outside the United States. The offering was not underwritten. This sale was
exempt from registration under Regulation S promulgated under the Securities
Act. A finder's fee was paid to Sonora in cash in the amount equal to 2.8% of
the gross proceeds. This offering was the first of three offerings to be
completed as part of our Share Exchange Agreement with SportsPrize Inc.
Item 11. Descriptions of Registrant's Securities to be Registered.
Our authorized share capital consists of 100,000,000 shares of common stock with
a par value of $0.001 per share and 5,000,000 shares of preferred stock with a
par value of $0.001 per share. At September 30, 1999, there were 19,480,374
shares of common stock issued and outstanding and no shares of preferred stock
issued and outstanding. An additional 3,005,000 shares of common stock have been
allotted and reserved for issuance pursuant to outstanding options to purchase
shares as of November 30, 1999.
Holders of common stock are entitled (i) to receive ratable dividends from funds
legally available for distribution when and if declared by the Board of
Directors; (ii) to share ratably in all of our assets available for distribution
upon our liquidation or winding up; and (iii) to one vote for each share held of
record on each matter submitted to a vote of shareholders. The common stock does
not have cumulative voting, pre-emptive, purchase or conversion rights. There
are no sinking fund provisions in relation to the common stock and they are not
liable to further calls or to assessment by us.
There are no restrictions on the repurchase or redemption of common stock by us
provided that we are not insolvent at the time of such repurchase or redemption
nor would be made insolvent by such action.
We are limited in our ability to pay dividends on our common stock by
limitations under Nevada General Corporation Law if (i) we would be unable to
pay our debts as they become due in the ordinary course of business or (ii) we
would be insolvent, meaning total liabilities plus the amount require to satisfy
preferential shareholder rights on liquidation exceed total assets, after making
such distribution. We currently have no intention of paying dividends on our
common stock.
The preferred stock may contain special preferences as determined by our Board
of Directors, including, but not limited to, the bearing of interest and
convertibility into shares of common stock.
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<PAGE>
Item 12. Indemnification of Directors and Officers
Our Articles of Incorporation and Bylaws require us to indemnify to the fullest
extent permitted by Nevada law, each person that we have the power to indemnify.
Nevada law permits a corporation, under specified circumstances, to indemnify
its directors, officers, employees or agents against expenses, including
attorney's fees, judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought by third parties by reason of the fact that they were or are directors,
officers, employees or agents of the corporation, if such directors, officers,
employees or agents acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reason to believe their
conduct was unlawful. In a derivative action, that is, one by or in the right of
the corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Our Articles of Incorporation and Bylaws also contain provisions stating that no
director shall be liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty as a director, except with respect to (1) a breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Nevada law for unlawful payment of
dividends, or unlawful stock purchases or redemptions or (4) a transaction from
which the director derived an improper personal benefit. The intention of the
foregoing provisions is to eliminate the liability of our directors or our
stockholders to the fullest extent permitted by Nevada law.
Item 13. Financial Statements and Supplementary Data.
Not Applicable.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
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<PAGE>
Item 15. Financial Statements and Exhibits.
(a) Financial Statements
The following financial statements and related schedules are included in this
Item:
Interim Consolidated Financial Statements of SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company) as of June 30, 1999.
Audited Financial Statements of SportsPrize Inc. (formerly SportsPrize
Entertainment Inc., formerly Beagle Ventures Resources Management Inc.) for
the year ended February 28, 1999.
(b) Exhibits
Exhibit
Number Description
- ------ -----------
2.1 Articles of Share Exchange
3.1 Articles of Incorporation of Par Golf, Inc. effective August 25,
1995
3.2 Articles of Amendment to Par Golf, Inc. effective August 21, 1997
3.3 Articles of Amendment to Kodiak Graphics Company effective May
21, 1999
3.4 Articles of Amendment to SportsPrize Entertainment Inc. effective
June, 1999
3.5 Bylaws of Par Golf Inc.
10.1 Form of Stock Option Plan
10.2 Form of Stock Option Agreement
10.3 Agreement and Plan of Share Exchange by and between Kodiak
Graphics Company and SportsPrize Entertainment Inc. dated May 7,
1999
10.4 Escrow Agreement by and between Kodiak Graphics Company of the
first part, Randy Daggitt, Jeff Paquin, James Brown, Michael
Slater, Anthony Vecchio and Gang Consulting Inc. of the second
part and Clark, Wilson of the third part, dated May 7, 1999
71
<PAGE>
Exhibit
Number Description
- ------ -----------
10.5 Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and Jeffrey D. Paquin, dated
March 1, 1999
10.6 Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and John Thompson, dated March 1,
1999
10.7 Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and Donald MacKay, dated March 1,
1999
10.8 Service Agreement by and between SportsPrize Entertainment Inc.
and Olson Cove Consulting, dated March 1, 1999
10.9 Contract by and between SportsPrize Inc. and Quad-Linq Software
Inc., dated February 18, 1999 and Addendum thereto dated May 12,
1999
10.10 Acquisition Agreement by and between SportsPrize Inc. and Justin
Tighm Innovative Games Inc., dated March 1, 1999 and Addendum
thereto dated May 21, 1999
10.11 Marketing Consulting Agreement by and between Interactive
Marketing Inc. and SportsPrize Entertainment Inc., dated May 6,
1999
10.12 Agreement by and between Kaleidoscope Sports & Entertainment, LLC
and SportsPrize Entertainment Inc., dated May 1, 1999
10.13 Assignment and Assumption Agreement by and between Kaleidoscope
Sports & Entertainment, LLC and SportsPrize Entertainment Inc.
effective as of May 14, 1999
10.14 Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Lamplighter Investments Ltd., dated May 6,
1999
10.15 Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Strathburn Investments Inc., dated May 6,
1999
10.16 Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Lamplighter Investments Ltd., dated July 15,
1999
72
<PAGE>
Exhibit
Number Description
- ------ -----------
10.17 Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Strathburn Investments Inc., dated July 15,
1999
10.18 Data and Service Agreement by and between Las Vegas Sports
Consultants, Inc. (dba DBC Sports) and SportsPrize Entertainment
Inc., dated May 26, 1999
10.19 Agreement and Contract for Services by and between SportsPrize
Entertainment Inc. and Michael Wiedder, dated June 17, 1999
10.20 Agreement and Contract for Services by and between SportsPrize
Entertainment Inc. and Ronald Sheridan, dated July 1, 1999
10.21 Letter Agreement by and between Intershop Communications, Inc.
and SportsPrize Entertainment Inc., dated June 29, 1999
10.22 Master Service Agreement by and between Frontier Global Center
and SportsPrize Entertainment Inc., dated July 22, 1999
10.23 Letter Agreement by and between Kodiak Graphics Company and
Sonora Capital Corp., dated May 7, 1999
10.24 Investor Relations Agreement by and between SportsPrize
Entertainment Inc. and Sonora Capital Corp., dated May 21, 1999
10.25 Letter Agreement by and between SportsPrize Entertainment Inc.
and FOCUS Partners LLC, dated July 27, 1999
10.26 Internet Distribution and Marketing Agreement by and between
SportsPrize Entertainment Inc. and Dreams Products, Inc., dated
August 6, 1999
10.27 Executive Employment Agreement by and between SportsPrize
Entertainment Inc. and Bruce R. Cameron, dated September 16, 1999
10.28 Executive Employment Agreement by and between SportsPrize
Entertainment Inc. and Robert Hunziker, dated August 15, 1999
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<PAGE>
Exhibit
Number Description
- ------ -----------
10.29 Addendum to Agreement and Contract for Services by and between
SportsPrize Entertainment Inc. and Michael Wiedder, dated August
30, 1999
10.30 Proposal Agreement by and between SportsPrize Entertainment Inc.
and ShopSports.com, dated September 17, 1999
10.31 Lease Agreement by and between eOfficeSuites Inc. and SportsPrize
Entertainment Inc., dated September 27, 1999
10.32 Amendment to Assignment and Assumption Agreement by and between
Kaleidoscope Sports and Entertainment, LLC and SportsPrize
Entertainment Inc., dated September 10, 1999
10.33 Agreement by and between Tridian Design and Development and
SportsPrize Entertainment Inc., dated August 2, 1999
10.34 Form of Confidentiality Agreement
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
74
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Corporation)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEETS
as of
<TABLE>
August 31, February 28,
1999 1999
(Unaudited) (Audited)
---------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,359,550 $ 34,345
Accrued interest receivable 10,544 -
Portfolio investments (Note 3) 12,966 26,350
Prepaid expenses 43,497 9,113
---------------- --------------
2,426,557 69,808
---------------- --------------
Equipment and Software
Software development costs 228,742 -
Internet equipment 124,001 -
Office computers and equipment 14,839 3,649
Less: accumulated depreciation and amortization (1,548) (730)
---------------- --------------
366,034 2,919
---------------- --------------
Other
Organization costs, net 11,558 13,475
Deposit - 17,000
---------------- --------------
11,558 30,475
---------------- --------------
Total assets $ 2,804,149 $ 103,202
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 8,689 $ 2,847
Accrued liabilities 79,452 484
---------------- --------------
88,141 3,331
---------------- --------------
Stockholders' Equity
Common stock - $0.001 par value
authorized 100,000,000 shares;
19,480,374 issued and outstanding 19,480 4,424
Preferred stock - $0.001 par value
authorized 5,000,000 shares;
none issued and outstanding - -
Additional paid - in capital 5,861,807 239,571
Contributed capital 596,000 -
Deferred compensation (251,698) -
Deficit accumulated during the development stage (3,509,581) (144,124)
---------------- --------------
2,716,008 99,871
---------------- --------------
$ 2,804,149 $ 103,202
================ ==============
</TABLE>
The accompanying Notes to Financial Statements are an
integral part of these financial statements
2
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Corporation)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF LOSS
for the periods ended
<TABLE>
Period August 31, February 28,
from Inception 1999 1999
(March 6, 1998) (6 months) (12 months)
to August 31, 1999 (Unaudited) (Audited)
-------------------- ----------------- ----------------
<S> <C> <C> <C>
Revenue $ - $ - $ -
-------------------- ----------------- ----------------
Operating expenses
General and administrative 3,356,968 3,293,632 63,336
Research and development 99,159 99,149 -
Depreciation and amortization 7,369 3,939 3,430
-------------------- ----------------- ----------------
3,463,486 3,396,720 66,766
-------------------- ----------------- ----------------
Operating loss (3,463,486) (3,396,720) (66,766)
Other income (expense)
Foreign exchange (2,486) (3,764) 1,278
Interest income 27,554 27,522 32
Interest expense (395) (395)
(Loss) gain on sale of investments (63,949) 7,506 (71,455)
-------------------- ----------------- ----------------
Loss before discontinued operations (3,502,762) (3,356,456) (137,306)
Discontinued operations (6,819) - (6,819)
-------------------- ----------------- ----------------
Net loss for the period $ (3,509,581) $ (3,356,456) $ (144,125)
==================== ================= ================
Weighted average shares outstanding 15,321,978 3,515,244
================= ================
Net loss per share $ (0.22) $ (0.04)
================= ================
</TABLE>
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
3
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Corporation)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
for the period from inception (March 6, 1998) to August 31, 1999
(data for periods subsequent to February 28, 1999 is unaudited)
<TABLE>
Additional Common
Common Stock Paid - in Stock Deferred
Date(s) Stock Amount Capital Subscribed Compensation Deficit Total
-------------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - March 6, 1998 - $ - $ - $ - $ - $ - $ -
Issuance of common stock
for cash March 1998 - 7,622,110 7,622 236,374 243,996
February 1999
Net loss for the period (144,125) (144,125)
---------- ---------- ----------- ---------- ---------- ----------- ----------
Balance - February 28, 1999 7,622,110 7,622 236,374 0 0 (144,125) 99,871
---------- ---------- ----------- ---------- ---------- ----------- ----------
Issuance of common stock March -
for cash April 1999 913,134 913 157,811 158,724
Less: share issuance costs March -
April 1999 (26,187) (26,187)
Issuance of common stock
for compensation (Note 5) March 1, 1999 1,464,465 1,465 211,035 212,500
---------- ---------- ----------- ---------- ---------- ----------- ----------
Common stock issued in
reverse merger 9,999,709 10,000 579,033 0 0 (144,125) 444,908
Issuance of common stock
for compensation (Note 5) May 6, 1999 596,000 596,000
Common stock
before merger May 14, 1999 7,564,000 7,564 (7,564) -
Issuance of common stock
for cash May 14, 1999 1,666,665 1,666 2,498,332 2,499,998
Less: share issuance costs May 14, 1999 (70,000) (70,000)
Issuance of common stock
for cash July 27, 1999 250,000 250 999,750 1,000,000
Less: share issuance costs July 27, 1999 (28,000) (28,000)
Compensation expense
for stock options 1,890,256 (251,698) 1,638,558
Net loss for the period (3,365,456) (3,365,456)
---------- ---------- ----------- ---------- ---------- ----------- ----------
Balance - August 31, 1999 19,480,374 $ 19,480 $5,861,807 $596,000 $(251,698) $(3,509,581) 2,716,008
========== ========== =========== ========== ========== ============ ==========
</TABLE>
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
4
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Corporation)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the periods ended
(Unaudited)
<TABLE>
Period
from Inception August 31, February 28,
(March 6, 1998) 1999 1999
to August 31, 1999 (Unaudited) (Audited)
------------------- ---------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,509,581) $ (3,365,456) $ (144,125)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 7,369 3,939 3,430
Loss ( gain ) on sale of investments 63,949 (7,506) 71,455
Issuance of common stock for compensation 808,500 808,500 -
Compensation expense for stock options 1,638,558 1,638,558 -
Foreign exchange 2,486 3,764 (1,278)
Change in operating assets and liabilities:
Accrued interest receivable (10,544) (10,544) -
Prepaid expenses (43,497) (34,384) (9,113)
Accounts payable 8,689 5,842 2,847
Accrued liabilities 79,452 78,968 484
------------------- ---------------- ---------------
Net cash used in continuing operations (954,619) (878,319) (76,300)
Net cash used by discontinued operations (6,819) - (6,819)
------------------- ---------------- ---------------
Net cash used in operating activities (961,438) (878,319) (83,119)
Cash flows from investing activities:
Proceeds from sale of investments 218,307 60,513 157,794
Purchases of portfolio investments (290,207) (47,129) (243,078)
Software development costs (228,742) (228,742) -
Purchases of equipment (138,840) (135,191) (3,649)
Deposit - 17,000 (17,000)
Organization costs (13,637) 2,538 (16,175)
------------------- ---------------- ---------------
Net cash used in investing activities (453,119) (331,011) (122,108)
------------------- ---------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,924,481 3,658,722 265,759
Share issuance costs (150,374) (124,187) (26,187)
------------------- ---------------- ---------------
Net cash provided by financing activities 3,774,107 3,534,535 239,572
------------------- ---------------- ---------------
Net change in cash and cash equivalents $ 2,359,550 2,325,205 34,345
===================
Cash and cash equivalents at beginning of period - -
---------------- ---------------
Cash and cash equivalents at end of period $ 2,359,550 $ 34,345
================ ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 395 $ - $ 395
Non cash investing and financing activities;
Issuance of common stock for compensation $ 808,500 $ 808,500 $ -
Compensation expense for stock options $ 1,638,558 $ 1,638,558 $ -
</TABLE>
The accompanying Notes to Financial Statements are an
integral part of these mfinancial statements.
5
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodak Graphics Corporation)
Notes to Financial Statements
as of August 31, 1999
(data for periods subsequent to February 28, 1999 is unaudited)
1. Presentation of Interim Consolidated Financial Information
The accompanying unaudited interim consolidated financial statements have
been prepared by SportsPrize Entertainment Inc., and its subsidiary,
SportsPrize Inc., in conformity with generally accepted accounting
principles for interim financial information and with the rules and
regulations of the U.S. Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such regulations. The
unaudited interim consolidated financial statements reflect all normal,
recurring adjustments and disclosures which are, in the opinion of
management, necessary for a fair presentation. The results of operations
for the interim period are not necessarily indicative of the results to be
expected for the full year.
Comparative results for the period from inception to August 31, 1998 are
not presented as no significant transactions occurred.
2. Significant Accounting Policies
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during
the year. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Accounting For Stock Options
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock - Based Compensation ("SFAS No.
123"), which requires entities to calculate the fair value of stock awards
granted to employees. This statement provides entities with the option of
either electing to expense the fair value of employee stock - based
compensation or continue to recognize compensation expense under previously
existing accounting pronounce - ments and provide pro forma disclosures of
net income and, if presented, earnings per share, as if the above -
referenced fair value method of accounting was used in determining
compensation expense. However, pro - forma disclosures are not required for
interim statements.
The Company accounts for stock based employee compensation arrangements in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB No. 25'). The Company has included the
additional disclosures about stock - based employee compensation plans
required by SFAS 123 in these interim financial statements.
Stock options issued to non - employees are recorded at the fair value of
the services received or the fair value of the options issued, whichever is
more reliably measurable. Compensation is charged to expense over the
shorter of the service or vesting period. Unearned amounts are shown as
deferred compensation in shareholders' equity.
3. Portfolio Investments
All marketable securities were reclassified from the category "Available
for Sale" to "Trading Securities". There were no unrealized gains or losses
recorded in equity at the reclassification date. Therefore there was no
accounting impact on the Statement of Loss. Any unrealized gains and losses
are reported in earnings. Realized gains and losses are recorded by using
the specific identification method.
6
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodak Graphics Corporation)
Notes to Financial Statements
as of August 31, 1999
(data for periods subsequent to February 28, 1999 is unaudited)
4. Recapitalization
Kodiak Graphics Company, a Nevada Corporation, ("Kodiak Graphics"), entered
into a merger agreement to acquire all the outstanding common stock of
SportsPrize Inc., a Nevada corporation, in a transaction described for
legal purposes as a reverse merger. The merger became effective on May 14,
1999. The surviving entity, Kodiak Graphics, changed its name to
SportsPrize Entertainment Inc. The transaction has been treated as a
recapitalization of SportsPrize Inc.
For reporting purposes, the historical information disclosed in the
financial statements of SportsPrize Entertainment Inc. are those of
SportsPrize Inc., the accounting acquirer. However, the capital structure
is that of the legal acquirer, Kodiak Graphics. All shares listed in the
Statement of Stockholders' Equity prior to the reverse merger represent
those of SportsPrize Inc., and have been converted at the conversion rate
described below.
Immediately prior to the merger, Kodiak Graphics was a non - operating
shell with no net assets and 7,564,000 shares of common stock outstanding.
As part of the recapitalization, Kodiak Graphics issued an additional
9,999,709 shares in exchange for all of the shares of SportsPrize Inc. (
5,804,000 ), at a conversion rate of 1.7229 shares of Kodiak Graphics for
each share of SportsPrize Inc. Approximately 57 % of the shares outstanding
in SportsPrize Entertainment Inc. were held by the former shareholders of
SportsPrize Inc. immediately following the transaction.
5. Stockholders' Equity
Common Stock
The Company's Articles of Incorporation authorizes the issuance of up to
100,000,000 shares of Common Stock, $0.001 par value per share, of which
19,480,374 shares were outstanding as of August 31, 1999. Holders of shares
of Common Stock are entitled to one vote for each share on all matters to
be voted on by the stockholders. Holders of Common Stock have no cumulative
voting rights. Holders of shares of Common Stock are entitled to share
ratably in dividends, if any, as may be declared from time to time by the
Board of Directors, from funds legally available. In the event of
liquidation, dissolution or winding up of the Company, the holders of
shares of Common Stock are entitled to share pro rata all assets remaining
after payment in full of all liabilities. Holders of Common Stock have no
preemptive rights to purchase the Company's common stock. There are no
conversion rights or redemption or sinking fund provisions with respect to
the common stock. All of the outstanding shares of common stock are fully
paid and non - assessable.
On March 1, 1999, the Company executed agreements to issue 850,000 shares
of common stock to employees and an outside consultant for services. The
value of the services was $212,500. The value was based on equivalent
shares issued in conjunction with a private placement financing occurring
in the same period. The shares were subsequently converted into 1,464,465
shares based on the exchange rate of 1.7229 in connection with the
aforementioned reverse merger (Note 4).
On May 6, 1999, the Company executed a strategic marketing and consulting
agreement with Interactive Marketing Inc.("IMI"). IMI is providing overall
strategic and tactical marketing as well as operational strategy. As an
inducement to enter into the contract, IMI was granted the right to
purchase 400,000 common shares for $4,000 or $0.01 per share. The fair
market value of the shares was $600,000 at the time of the grant. As of
August 31, 1999, IMI has not purchased these shares.
7
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodak Graphics Corporation)
Notes to Financial Statements
as of August 31, 1999
(data for periods subsequent to February 28, 1999 is unaudited)
6. Earnings per share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share". Basic earnings per share is based on the weighted
effect of all common shares issued and outstanding. The following table
sets forth the computation of basic and diluted earnings per share for the
six months ended August 31, 1999, and the period ended February 28, 1999.
<TABLE>
August 31,1999 February 28, 1999
-------------- -----------------
<S> <C> <C>
Numerator:
Numerator for basic and diluted
earnings per share - net loss ($3,365,456) ($144,125)
Denominator
Denominator for basic and diluted
earnings per share -
weighted average shares outstanding 15,321,978 3,515,244
</TABLE>
Options to purchase 2,305,000 shares of common stock ranging from $0.25 -
$2.00 a share were outstanding at August 31, 1999. Such options were not
included in the computation of diluted earnings per share because they were
antidilutive.
7. Stock Options and Warrants
The Company established a stock option plan effective June 21, 1999, and
amended it October 6, 1999. The plan originally allowed issuance of up to
3,000,000 shares of our common stock as incentive stock options to our
current and future key employees and consultants. The amended plan
increased the options issuable to 6,000,000. The Plan is administered by
the Board of Directors or a committee of two or more members of the Board.
The Board of Directors has the authority to determine the terms and
restrictions on all options, as well as to construe and interpret any
provision of the Plan.
The options can be granted for periods up to ten years, or five years for
ISOs granted to optionees possessing more than 10 % of the total combined
voting power of all classes of stock. Unless extended by the Plan
administrators, the right to exercise on option terminates 90 days after
the termination of an optionee's relationship with the Company. If the
optionee dies or becomes disabled, the option will remain exercisable for
one year.
The Company accounts for its stock option plan in f accordance with the
provisions of APB Opinion No.25, Accounting for Stock Issued to Employees.
Had compensation cost for the stock option plan been determined based on
the fair value at the grant date consistent with the method summarized in
SFAS No. 123, Accounting for Stock - Based Compensation, the Company's net
loss and net loss per share would have been the pro forma amounts indicated
below: For the six months ended August 31, 1999
For the six months ended
August 31, 1999
Actual net loss $ (3,365,456)
Pro forma net loss $ (4,299,442)
Actual net loss $ (0.22)
Pro forma net loss $ (0.28)
The fair value of each option grant was estimated at the grant date using
the Black - Scholes option - pricing model for the period from March 6,
1998 (inception) to August 31, 1999, assuming a risk - free interest rate
ranging from 5.27 % to 5.6 %, volatility of 30 %, zero dividend yield, and
an expected life of 2 to 3 years.
8
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodak Graphics Corporation)
Notes to Financial Statements
as of August 31, 1999
(data for periods subsequent to February 28, 1999 is unaudited)
7. Stock Options and Warrants (continued)
The Black - Scholes option valuation method was developed for use in
estimating the fair value of traded options and warrants which have no
vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions,
including the expected stock price volatility. Because the Company's
employee stock options and warrants have characteristics significantly
different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
A summary of the status of the company's options as of August 31, 1999 and
changes during the period from March 6, 1998 (inception) to August 31, 1999
is presented below:
<TABLE>
Exercise Price Weighted Average
Per Share Exercise Price Shares
------------------ ------------------- ----------------
<S> <C> <C> <C>
Granted Below FMV $0.25 - 2.00 $0.49 1,500,000
At FMV $0.25 $0.25 805,000
----------------
Total options outstanding at August 31, 1999 $0.39 2,305,000
================
Total options exercisable at August 31, 1999 $0.30 1,780,000
Weighted - average fair value of
options granted during the period $1.02 2,305,000
</TABLE>
The following table summarizes information concerning options outstanding
at August 31, 1999:
<TABLE>
Total Outstanding Exercisable
------------------------------------------------------------- ------------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise prices of Shares Life (years) Exercise Price of Shares Exercise Price
--------------- ---------------- ------------------ ------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
$0.25 1,580,000 3.00 $0.25 1,555,000 $0.25
$0.50 - $0.75 475,000 3.00 $0.57 225,000 $0.64
$2.00 250,000 2.00 $2.00 - -
</TABLE>
For the period ended August 31, 1999, total employee compensation expense
related to the granting of these stock options was $678,646.
Non - Employees
The Company granted options to purchase 905,000 shares of the Company's
common stock to non employees during the period ended August 31, 1999 and
recognized expense related to these options of $959,913. The total
compensation expense was determined by the fair value of the options issued
calculated the Black - Scholes model.
9
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodak Graphics Corporation)
Notes to Financial Statements
as of August 31, 1999
(data for periods subsequent to February 28, 1999 is unaudited)
8. Contingencies
All shares in escrow to Quad - Linq and certain individuals have been
distributed and recorded at fair market value. These shares were converted
at 1.7229 shares of Kodiak Graphics Company for each share of SportsPrize
Entertainment Inc. upon the merger of the Companies.
On May 12, 1999, the Company negotiated an addendum to the original
agreement with Quad - Linq Software Inc. Under this addendum, the Company
agreed to pay an additional $80,000 to Quad - Linq when the product is
completed and ready for testing. At August 31, 1999, $55,000 had been paid
in connection with this addendum. The Company will also pay Quad - Linq at
their contracted rates, for any additional software development and
programming services not related to the product.
Pursuant to an agreement dated May 6, 1999, with Interactive Marketing,
Inc. , who will provide strategic, marketing and other consulting services,
the Company committed to the following;
* Cash payments totaling $165,000.
* 15 % royalties on net revenues that Interactive Marketing, Inc.
materially participates in developing on behalf of the Company.
Additional cash payments of $180,000, and the option for IMI to purchase an
additional 200,000 common shares may also be due under the extension
provisions of this agreement.
On June 24, 1999, the Company signed a letter agreement with INTERSHOP to
utilize INTERSHOP's e - commerce solutions to develop and customize its
online storefronts. Pursuant to this agreement,the Company has paid
$120,680 in cash 'through August 31, 1999; and has incurred an additional
$41,000 payable in cash for this software product.
9. Subsequent Events
In September 1999, Mr. Bruce Cameron was elected a director, and appointed
President, Chief Financial Officer and Treasurer. In November 1999, Mr.
Alan Gerson was appointed Chairman of the Board of Directors of the
Company. In September 1999, 700,000 options were issued to an executive
officer and a consultant to the Company.
10
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FEBRUARY 28, 1999
AUDIT REPORT
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
FEBRUARY 28, 1999
Page
----
Independent Auditor's Report 2
Financial Statements:
Balance Sheet 3
Statement of Loss 4
Statement of Stockholders' Equity 5
Statement of Cash Flows 6
Notes to Financial Statements 7-11
<PAGE>
[Geneyne Hodges, CPA Letterhead]
1135 Terminal Way
Sutie 208B
Reno, NV 89502
Phone (775) 332-2985
Fax (775) 332-2986
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
Sportsprize, Inc.
Reno, Nevada
I have audited the accompanying balance sheet of Sportsprize, Inc.,
formerly Sportsprize Entertainment, Inc., formerly Beagle Ventures Resources
Management, Inc., (a development stage company) as of February 28, 1999 and the
related statements of loss, stockholders' equity and cash flows for the period
March 6, 1998 (date of inception) to February 28, 1999. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sportzprize, Inc., (a
development stage company) as of February 28, 1999, and the results of its
operations and its cash flows for the period March 6, 1998 (date of inception)
to February 28, 1999 in conforming with generally accepted accounting
principles.
/s/ Geneyne A. Hodges
May 25, 1999
2
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
FEBRUARY 28, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents - (Note 3) $ 34,345
Investments - (Note 1b) 26,350
Prepaid Expenses 9,113
----------------
69,808
----------------
EQUIPMENT - (Notes 1d & 4) 2,919
----------------
OTHER ASSETS
Deposits - (Note 1e) 17,000
Organization Costs - (Note 1f) 13,475
----------------
30,475
----------------
$ 103,202
================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,847
Accured liabilities 484
----------------
3,331
----------------
STOCKHOLDERS' EQUITY
Common stock -$0.001 par value
Authorized 25,000,000 shares;
4,424,000 shares issued and outstanding 4,424
Additional paid-in capital 239,572
Deficit accumulated during the development stage (144,125)
----------------
99,871
----------------
$ 103,202
================
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 3 -
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSS
PERIOD FROM MARCH 6, 1998 (DATE OF INCEPTION) TO FEBRUARY 28, 1999
<TABLE>
<S> <C>
REVENUES $ -0-
OPERATING EXPENSES
Consulting 31,164
Rent 6,628
Legal 5,887
Miscellaneous 5,615
Telephone 4,758
Office 3,215
Amortization 2,700
Travel 2,282
Entertainment 2,057
Accounting 1,730
Depreciation 730
----------------
(66,766)
Loss from operations (66,766)
----------------
OTHER INCOME (EXPENSE)
Gain on exchange 1,278
Interest income 32
Interest expense (395)
Loss on sale of investments (71,455)
----------------
(70,540)
Loss before provision for federal income taxes (137,306)
PROVISIONS FOR FEDERAL INCOME TAXES -0-
Loss from continuing operations (137,306)
DISCONTINUED OPERATIONS
Loss from operations of discontinued division (6,819)
----------------
NET LOSS $ (144,125)
================
Per share of common stock
Loss from continuing operations $ (.0410)
Loss from operations of discontinued operations (.0020)
----------------
Net loss $ (.0430)
================
Weighted average shares outstanding 3,515,244
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 4 -
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM MARCH 6, 1998 (DATE OF INCEPTION) TO FEBRUARY 28, 1999
COMMON STOCK
.001 PAR VALUE 25,000,000 SHARES AUTHORIZED
4,424,000 SHARES ISSUED AND OUTSTANDING
<TABLE>
ADDITIONAL
COMMON STOCK PAID-IN
DATES SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ---------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 6, 1998 -0- $ -0- $ -0- $ -0- $ -0-
Net loss for the period -0- -0- -0- (144,125) (144,125)
Issuance of common March 1998-
stock for cash February 1999 4,424,000 4,424 239,572 -0- 243,996
---------- ---------- ------------ --------- ---------
Balance February 28, 1999 4,424,000 $ 4,424 $ 239,572 $(144,125) $ 99,871
========== =========== ============ ========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 5 -
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 6, 1998 (DATE OF INCEPTION) TO FEBRUARY 28, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (144,125)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for depreciation and amortization 3,430
Loss on sale of marketable securities 71,455
Gain on exchange (1,278)
Increases in operating assets and liabilities:
Prepaid expenses (9,113)
Deposits (17,000)
Organizational costs (16,175)
Accounts payable 2,847
Accrued liabilities 484
--------------
Net cash used by continuing operations (109,475)
Net cash used by discontinued operations (6,819)
--------------
Net cash used by operating activities (116,294)
--------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities 157,794
Purchases of marketable securities (243,078)
Purchases of equipment (3,649)
--------------
Net cash used by investing activities (88,933)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES
Loan advances from officer 15,416
Loan repayment to officer (15,416)
Proceeds from issuance of common stock (net of financing
of $26,187) 239,572
---------------
Net cash provided by financing activities 239,572
---------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 34,345
CASH AND CASH EQUIVALENTS AT
BEGINNING PERIOD -0-
----------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 34,345
================
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 6 -
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM MARCH 6, 1998 (DATE OF INCEPTION) TO FEBRUARY 28, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Sportsprize, Inc.
(formerly Sportsprize Entertainment, Inc., formerly Beagle Ventures Resource
Management, Inc. (A Development Stage Company), (the Company) is presented to
assist in understanding the Company's financial statements. These accounting
procedures conform to generally accepted accounting principles and have been
consistently applied in the preparation of financial statements.
a) Business Activity
The Company, formerly known as Beagle Ventures Resources Management,
Inc., changed its name to Sportsprize Entertainment, Inc. on February
25, 1999, and subsequently May 13, 1999 changed its name to
Sportsprize, Inc.. The Company is currently engaged in the business of
promoting and creating a web site that provides the opportunity to
play a pool game that the company is developing on the Internet.
Previously, the Company was engaged primarily in acquiring the rights
to explore and exploit the commercial mineral potential, specifically
diamonds, in property located in the Province of Alberta, Canada.
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual
results could vary from the estimates that were used.
b) Marketable Securities
The Company accounts for marketable securities in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This statement
requires securities which are available for sale to be carried at fair
value, with changes in fair value recognized as a separate component
of stockholders' equity.
As of February 28, 1999, the fair value of the securities did not
materially differ from the cost. Therefore, there were no changes in
fair market value to recognize in stockholders' equity for the period
then ended. Proceeds from sales of securities available for sale were
$157,794. Losses of $71,455 were realized on those sales.
- 7 -
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Accounting Basis for Recording Income
The books and records of the Company are kept on the accrual basis for
financial reporting and income tax purposes.
d) Equipment and Depreciation
Equipment is stated at cost. Expenditures for maintenance and repairs
are expensed as incurred while renewals and betterments are
capitalized.
Depreciation and amortization are provided for in amounts sufficient
to relate the costs of depreciable assets to operations over their
estimated service lives, principally on the straight-line and double
declining balance methods.
e) Deposits
The deposit of $17,000 pertained to the agreement with QUAD-LINQ that
required the company to deliver a retainer of one third of the $50,000
contract upon execution.
f) Organizational Costs
Costs incident to the creation of the corporation, including various
legal and accounting fees, have been capitalized and are being
amortized over a five-year period. Amortization expense for the period
ended February 28, 1999 amounted to $2,700.
g) Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due. Taxes
currently payable are based upon the determination of taxable income
which is not materially different from financial statement income.
Therefore, there are no temporary differences reported in this
financial statement
As of February 28, 1999, the company has a net operating loss of
$144,125 for tax and book purposes, which will begin to expire in the
year 2019.
- 8 -
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
NOTE 2 - DEVELOPMENT STAGE OPERATIONS
The Corporation was formed in Nevada on March 6, 1998, Operations have been
devoted primarily to raising capital, acquiring property rights, marketing,
research and development, and administrative functions.
NOTE 3 - CASH AND CASH EQUIVALENTS
The company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. As of February 28, 1999
cash and temporary investments consisted of the following:
Demand deposits $ 34,345
==============
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment, stated at costs as of February 28, 1999 consisted
of the following:
Office Equipment $ 3,649
Less: Accumulated depreciation (730)
---------------
$ 2,919
===============
NOTE 5 - MINERAL PROPERTY RIGHTS
The Company had entered into a one-year option agreement with Jody Dahrouge
and Halferdahl & Associates, Ltd. (collectively the "Optionor" to purchase
mineral property rights located in the Province of Alberta, Canada. The company
did not proceed with the operation and terminated the option when it expired on
February 11, 1999 (measurement date). There are no future liabilities or
contingencies associated with the termination of the mineral property rights
option. The termination did not cause a material impact to the financial
statements.
- 9 -
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMENT, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
NOTE 6 - CONTINGENCIES
On February 18, 1999, the Company entered into a software development
contract with QUAD-LINQ Software, Inc., a British Columbia Company, consisting
of certain sports pool and lottery schemes that demonstrate significant online
betting applications within the Internet and lotto industry "The Product."
QUAD-LINQ Software, Inc. has agreed to provide their services, know-how and
ability and facilities to deliver the Company a tested working product that is
commercially viable and meets the Company's objectives. QUAD-LINQ has agreed to
insure as part of its service that the product is operational and functioning
over the Company's web site over the Internet. In consideration of QUAD-LINQ
performing these services for the Company, upon the execution of this agreement,
the Company has paid a retainer of approximately one-third ($17,000) of the
agreed upon price of $50,000. The remaining two installments of $16,500 each,
are due on March 30, 1999, and on the product deliver date, respectively.
Additionally, the Company will issue 200,000 Common Class A shares from its
treasury into an escrow account. These shares will be issued to QUAD-LINQ on a
performance basis. 100,000 shares will be released from escrow on the product
deliver date. The remaining 100,000 shares will be released when the systems and
products have been tested and are in operation on the Company's Web site.
The Company shall also pay to QUAD-LINQ Software, Inc. a royalty of five
percent (5%) per annum on the first one million dollars ($1,000,000) in net
sales of the product manufactured, used, licensed, or sold by the Company, and
three percent (3%) on the net sales over one million dollars.
In March 1999, the Company entered into one-year service agreements with
five different parties. These agreements require the company to pay an aggregate
$11,000 - $19,000 per month in cash.
Additionally, 225,000 shares of common stock are to be issued pursuant to
an exemption from registration available under Regulation S of the United States
Securities Act of 1933, as amended, as consideration for entering into the
service agreements. An additional 425,000 shares are to be delivered into escrow
until satisfaction of certain performance conditions are met. When the 225,000
and the 425,000 shares are issued, they will be accounted for as a noncash
issuance of common stock for compensation. These shares will be issued at fair
market value, and will be shown as a separate item on the statement of
stockholders' equity and as compensation expense on the statement of loss.
- 10 -
<PAGE>
SPORTSPRIZE, INC.
(FORMERLY SPORTSPRIZE ENTERTAINMNET, INC.,
FORMERLY BEAGLE VENTURES RESOURCES MANAGEMENT, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
NOTE 6 - CONTINGENCIES (continued)
The Company is also directed to issue incentive stock options exercisable
to acquire 705,000 common shares for no less than $0.25 per share and 100,000
shares for no less than $0.50 per share.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has paid Jeffrey Paquin $3,000 for legal fees rendered for the
preparation of offering memorandum, $4,018 in consulting fees, and $15,416 for
loan repayment.
NOTE 8 - DISCONTINUED OPERATIONS
During 1999, the Company disposed of its mining and mineral exploration
operations by not exercising its option on February 11. 1999 (measurement date),
and incurred a one-time loss of $6,819, on disposal, with no future consequences
or liabilities. The income tax benefit from this loss is immaterial. The effect
of this transaction on the company's net loss is as follows:
Mineral property rights $ (6,819)
==================
NOTE 9 - SUBSEQUENT EVENTS
On May 13, 1999, the Board of Directors approved an agreement and plan of
share exchange by and among Kodiak Graphics Company. Kodiak wishes to acquire
the entire issued and outstanding share capital of the company in exchange for
shares of Kodiak, making the Company the wholly owed subsidiary of Kodiak.
Sportsprize and Kodiak entered into a letter agreement on April 22, 1999
pursuant to which Kodiak has agreed to acquire all of the issued and outstanding
shares of common stock of Sportsprize, subject to the approval of the
Sportsprize shareholders, in exchange for 10,000,000 shares of common stock of
Kodiak. Each of the Constituent Corporations has, subject to the approval of
Sportsprize shareholders, adopted this statutory plan of share exchange.
This Share Exchange is intended to qualify as a reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code.
On May 13, 1999, the Company filed a Certificate of Amendment to Articles
of Incorporation with the Nevada Secretary of State to change the legal name of
the company to Sportsprize, Inc.
- 11 -
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: December 6, 1999
SPORTSPRIZE ENTERTAINMENT INC.
/s/ Bruce R. Cameron
- -----------------------------------------------------
Bruce R. Cameron, President
<PAGE>
Exhibit
Number Description
- ------ -----------
2.1 Articles of Share Exchange
3.1 Articles of Incorporation of Par Golf, Inc. effective August 25,
1995
3.2 Articles of Amendment to Par Golf, Inc. effective August 21, 1997
3.3 Articles of Amendment to Kodiak Graphics Company effective May
21, 1999
3.4 Articles of Amendment to SportsPrize Entertainment Inc. effective
June, 1999
3.5 Bylaws of Par Golf Inc.
10.1 Form of Stock Option Plan
10.2 Form of Stock Option Agreement
10.3 Agreement and Plan of Share Exchange by and between Kodiak
Graphics Company and SportsPrize Entertainment Inc. dated May 7,
1999
10.4 Escrow Agreement by and between Kodiak Graphics Company of the
first part, Randy Daggitt, Jeff Paquin, James Brown, Michael
Slater, Anthony Vecchio and Gang Consulting Inc. of the second
part and Clark, Wilson of the third part, dated May 7, 1999
10.5 Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and Jeffrey D. Paquin, dated
March 1, 1999
10.6 Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and John Thompson, dated March 1,
1999
10.7 Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and Donald MacKay, dated March 1,
1999
10.8 Service Agreement by and between SportsPrize Entertainment Inc.
and Olson Cove Consulting, dated March 1, 1999
10.9 Contract by and between SportsPrize Inc. and Quad-Linq Software
Inc., dated February 18, 1999 and Addendum thereto dated May 12,
1999
10.10 Acquisition Agreement by and between SportsPrize Inc. and Justin
Tighm Innovative Games Inc., dated March 1, 1999 and Addendum
thereto dated May 21, 1999
<PAGE>
Exhibit
Number Description
- ------ -----------
10.11 Marketing Consulting Agreement by and between Interactive
Marketing Inc. and SportsPrize Entertainment Inc., dated May 6,
1999
10.12 Agreement by and between Kaleidoscope Sports & Entertainment, LLC
and SportsPrize Entertainment Inc., dated May 1, 1999
10.13 Assignment and Assumption Agreement by and between Kaleidoscope
Sports & Entertainment, LLC and SportsPrize Entertainment Inc.
effective as of May 14, 1999
10.14 Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Lamplighter Investments Ltd., dated May 6,
1999
10.15 Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Strathburn Investments Inc., dated May 6,
1999
10.16 Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Lamplighter Investments Ltd., dated July 15,
1999
10.17 Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Strathburn Investments Inc., dated July 15,
1999
10.18 Data and Service Agreement by and between Las Vegas Sports
Consultants, Inc. (dba DBC Sports) and SportsPrize Entertainment
Inc., dated May 26, 1999
10.19 Agreement and Contract for Services by and between SportsPrize
Entertainment Inc. and Michael Wiedder, dated June 17, 1999
10.20 Agreement and Contract for Services by and between SportsPrize
Entertainment Inc. and Ronald Sheridan, dated July 1, 1999
10.21 Letter Agreement by and between Intershop Communications, Inc.
and SportsPrize Entertainment Inc., dated June 29, 1999
10.22 Master Service Agreement by and between Frontier Global Center
and SportsPrize Entertainment Inc., dated July 22, 1999
10.23 Letter Agreement by and between Kodiak Graphics Company and
Sonora Capital Corp., dated May 7, 1999
10.24 Investor Relations Agreement by and between SportsPrize
Entertainment Inc. and Sonora Capital Corp., dated May 21, 1999
10.25 Letter Agreement by and between SportsPrize Entertainment Inc.
and FOCUS Partners LLC, dated July 27, 1999
10.26 Internet Distribution and Marketing Agreement by and between
SportsPrize Entertainment Inc. and Dreams Products, Inc., dated
August 6, 1999
10.27 Executive Employment Agreement by and between SportsPrize
Entertainment Inc. and Bruce R. Cameron, dated September 16, 1999
10.28 Executive Employment Agreement by and between SportsPrize
Entertainment Inc. and Robert Hunziker, dated August 15, 1999
<PAGE>
Exhibit
Number Description
- ------ -----------
10.29 Addendum to Agreement and Contract for Services by and between
SportsPrize Entertainment Inc. and Michael Wiedder, dated August
30, 1999
10.30 Proposal Agreement by and between SportsPrize Entertainment Inc.
and ShopSports.com, dated September 17, 1999
10.31 Lease Agreement by and between eOfficeSuites Inc. and SportsPrize
Entertainment Inc., dated September 27, 1999
10.32 Amendment to Assignment and Assumption Agreement by and between
Kaleidoscope Sports and Entertainment, LLC and SportsPrize
Entertainment Inc., dated September 10, 1999
10.33 Agreement by and between Tridian Design and Development and
SportsPrize Entertainment Inc., dated August 2, 1999
10.34 Form of Confidentiality Agreement
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
EXHIBIT 2.1
FILED
THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 14 1999
No. C4582-98
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
ARTICLES OF SHARE EXCHANGE
between
KODIAK GRAPHICS COMPANY
a Nevada corporation
and
the holders of the entire issued share capital of
SPORTSPRIZE ENTERTAINMENT, INC.
a Nevada corporation
In accordance with NRS 92A.200
The undersigned, William Turner, being the Secretary of Kodiak Graphics
Company, a Delaware corporation, ("Kodiak") and David Bissett, being the
Secretary of Sportsprize Entertainment, Inc., a Nevada corporation,
("Sportsprize")(collectively, the "Constituent Corporations"), DO HEREBY CERTIFY
as follows:
(1) The Constituent Corporations in the share exchange (the "Exchange")
are:
Kodiak Graphics Company, a Nevada corporation, whose principal business
office is located at 2034 Western Avenue, Las Vegas, Nevada, 89102; and
Sportsprize Entertainment, Inc, a Nevada corporation, whose principal
business office is located at 555 - 999 Canada Place, Vancouver, British
Columbia, V6C 3E1.
(2) An Agreement and Plan of Share Exchange dated as of May 7, 1999 (the
"Plan of Share Exchange") has been approved, adopted, and executed by each of
the Constituent Corporations in accordance with NRS 92A.200 et seq. of the
Nevada Corporations Act.
(3) Approval of the Exchange was not required by the owners of Kodiak.
(4) Approval of the Exchange was required by the owners of Sportsprize and
the Plan of Share Exchange was duly approved by unanimous written consent of the
owners of Sportsprize effective on May 12, 1999 in accordance with NRS 92A.120
of the Nevada Corporations Act.
(5) The Plan of Share Exchange is on file at the Registered Office of
Kodiak located at 2034 Western Avenue, Las Vegas, Nevada, 89102, and a copy of
the Plan will be furnished by Kodiak, on the request and without cost to any
owner of any entity which is a party to this Exchange.
(6) The Exchange shall become effective at 5:00 p.m. Nevada time on the
date on which these Articles of Share Exchanged are filed by the Secretary of
State of the state of Nevada.
<PAGE>
2
IN WITNESS WHEREOF, the parties hereto have caused these Articles of Share
Exchange to be duly executed as of this 13th day of May, 1999.
Kodiak Graphics Company,
a Nevada corporation
By: /s/ William Turner
--------------------------------------------
William Turner, Secretary/President
State/Province of British Columbia )
) ss.
County/City of Vancouver )
On May 13, 1999, personally appeared before me, a Notary Public, William
Turner, who acknowledged that he executed the above instrument.
/s/ [Illegible]
------------------------------------------------
Signature of Notary
Sportsprize Entertainment, Inc.,
a Nevada corporation
By: /s/ David Bissett
--------------------------------------------
David Bissett, Secretary
State/Province of British Columbia )
) ss.
County/City of Vancouver )
On May 13, 1999, personally appeared before me, a Notary Public, David
Bissett, who acknowledged that he executed the above instrument.
/s/ Graham H. Scott
------------------------------------------------
Signature of Notary
GRAHAM H. SCOTT
Barrister & Solicitor
1040 - 899 West Hastings Street
Vancouver, B.C. V6C 2W2
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
PAR GOLF, 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 and pursuant to the laws
of the State of Nevada, and we do hereby certify that:
ARTICLE I
NAME OF THE CORPORATION
The exact name of the Corporation shall be and hereby is:
Par Golf, Inc.
ARTICLE II
RESIDENT AGENT OF THE CORPORATION
The resident Agent of the Corporation is Max C. Tanner, Esq., The Law
Office of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada
89121.
ARTICLE III
DURATION OF THE CORPORATION
The Corporation shall have perpetual existence.
<PAGE>
ARTICLE IV
PURPOSES OF THE CORPORATION
The purpose, object and nature of the business for which this Corporation
is organized are:
(a) To engage in any lawful activity;
(b) To carry on such business as may be necessary, convenient, or
desirable to accomplish the above purposes, and to do all other things
incidental thereto which are not forbidden by law or by these Articles
of Incorporation.
ARTICLE V
POWERS OF THE CORPORATION
The powers of the Corporation shall be those powers granted by 78.060 and
78.070 of the Nevada Revised Statutes under which this corporation is formed. In
addition, the Corporation shall have the following specific powers:
(a) To elect or appoint officers and agents of the Corporation and to fix
their compensation;
(b) To act as an agent for any individual, association, partnership,
corporation or other legal entity;
(c) To receive, acquire, hold, exercise rights arising out of the
ownership or possession thereof, sell, or otherwise dispose of, shares
or other interests in, or obligations of, individuals, associations,
partnerships, corporations, or governments;
(d) To receive, acquire, hold, pledge, transfer, or otherwise dispose of
shares of the corporation, but such shares may only be purchased,
directly or indirectly, out of earned surplus;
(e) To make gifts or contributions for the public welfare or for
charitable, scientific or educational purposes, and in time of war, to
make donations in aid of war activities.
2
<PAGE>
ARTICLE VI
CAPITAL STOCK
Section 1.
Authorized Shares. The total number of shares which this Corporation is
authorized to issue is 25,000,000 shares of Common Stock at $.001 par value per
share.
Section 2.
Voting Rights of Shareholders. Each holder of the Common Stock shall be
entitled to one vote for each share of stock standing in his name on the books
of the Corporation.
Section 3.
Consideration for Shares. The Common Stock shall be issued for such
consideration, as shall be fixed from time to time by the Board of Directors. In
the absence of fraud, the judgment of the Directors as to the value of any
property for shares shall be conclusive. When shares are issued upon payment of
the consideration fixed by the Board of Directors, such shares shall be taken to
be fully paid stock and shall be non-assessable. The Articles shall not be
amended in this particular.
Section 4.
Pre-emptive Rights. Except as may otherwise be provided by the Board of
Directors, no holder of any shares of the stock of the Corporation, shall have
any preemptive right to purchase, subscribe for, or otherwise acquire any shares
of stock of the Corporation of any class now or hereafter authorized, or any
securities exchangeable for or convertible into such shares, or any warrants or
other instruments evidencing rights or options to subscribe for, purchase, or
otherwise acquire such shares.
Section 5.
Stock Rights and Options. The Corporation shall have the power to create
and issue rights, warrants, or options entitling the holders thereof to purchase
from the corporation any shares of its capital stock of any class or classes,
upon such terms and conditions and at such times and prices as the Board of
Directors may provide, which terms and conditions shall be incorporated in an
instrument or instruments evidencing such rights. In the absence of fraud, the
judgment of the Directors as to the adequacy of consideration for the issuance
of such rights or options and the sufficiency thereof shall be conclusive.
3
<PAGE>
ARTICLE VII
ASSESSMENT OF STOCK
The capital stock of the Corporation after the amount of the subscription
price has been fully paid in, shall not be assessable for any purpose, and no
stock issued as fully paid up shall ever be assessable or assessed. The holders
of such stock shall not be individually responsible for the debts, contracts, or
liabilities of the Corporation and shall not be liable for assessments to
restore impairments in the capital of the Corporation.
ARTICLE VIII
DIRECTORS OF THE CORPORATION
For the management of the business, and for the conduct of the affairs of
the Corporation, and for the future definition, limitation, and regulation of
the powers of the Corporation and its directors and shareholders, it is further
provided:
Section 1.
Size of Board. The members of the governing board of the Corporation shall
be styled directors. The number of directors of the Corporation, their
qualifications, terms of office, manner of election, time and place of meeting,
and powers and duties shall be such as are prescribed by statute and in the
by-laws of the Corporation. The name and post office address of the directors
constituting the first board of directors, which shall be ONE (1) in number are:
NAME ADDRESS
---- -------
MAX C. TANNER 2950 E. Flamingo, Suite G
Las Vegas, Nevada 89121
Section 2.
Powers of Board. In furtherance and not in limitation of the powers
conferred by the laws of the State of Nevada, the Board of Directors is
expressly authorized an empowered:
(a) To make, alter, amend, and repeal the By-Laws subject to the power of
the shareholders to alter or repeal the By-Laws made by the Board of
Directors.
4
<PAGE>
(b) Subject to the applicable provisions of the ByLaws then in effect, to
determine, from time to time, whether and to what extent, and at what
times and places, and under what conditions and regulations, the
accounts and books of the Corporation, or any of them, shall be open
to shareholder inspection. No shareholder shall have any right to
inspect any of the accounts, books or documents of the Corporation,
except as permitted by law, unless and until authorized to do so by
resolution of the Board of Directors or of the Shareholders of the
Corporation;
(c) To issue stock of the Corporation for money, property, services
rendered, labor performed, cash advanced, acquisitions for other
corporations or for any other assets of value in accordance with the
action of the board of directors without vote or consent of the
shareholders and the judgment of the board of directors as to value
received and in return therefore shall be conclusive and said stock,
when issued, shall be fully-paid and non-assessable.
(d) To authorize and issue, without shareholder consent, obligations of
the Corporation, secured and unsecured, under such terms and
conditions as the Board, in its sole discretion, may determine, and to
pledge or mortgage, as security therefore, any real or personal
property of the Corporation, including after-acquired property;
(e) To determine whether any and, if so, what part, of the earned surplus
of the Corporation shall be paid in dividends to the shareholders, and
to direct and determine other use and disposition of any such earned
surplus;
(f) To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other lawful
purpose;
(g) To establish bonus, profit-sharing, stock option, or other types of
incentive compensation plans for the employees, including officers and
directors, of the Corporation, and to fix the amount of profits to be
shared or distributed, and to determine the persons to participate in
any such plans and the amount of their respective participations.
(h) To designate, by resolution or resolution passed by a majority of the
whole Board, one or more committees, each consisting of two or more
directors, which, to the extent permitted by law and authorized by the
resolution or the By-laws, shall have and may exercise the powers of
the Board;
5
<PAGE>
(i) To provide for the reasonable compensation of its own members by
By-Law, and to fix the terms and conditions upon which such
compensation will be paid;
(j) In addition to the powers and authority herein before, or by statute,
expressly conferred upon it, the Board of Directors any exercise all
such powers and do all such acts and things as may be exercised or
done by the corporation, subject, nevertheless, to the provisions of
the laws of the State of Nevada, of these Articles of Incorporation,
and of the By-Laws of the Corporation.
Section 3.
Interested Directors. No contract or transaction between this Corporation
and any of its directors, or between this Corporation and any other corporation,
firm, association, or other legal entity shall be invalidated by reason of the
fact that the director of the Corporation has a direct or indirect interest,
pecuniary or otherwise, in such corporation, firm, association, or legal entity,
or because the interested director was present at the meeting of the Board of
Directors which acted upon or in reference to such contract or transaction, or
because he participated in such action, provided that: (1) the interest of each
such director shall have been disclosed to or known by the Board and a
disinterested majority of the Board shall have nonetheless ratified and approved
such contract or transaction (such interested director or directors may be
counted in determining whether a quorum is present for the meeting at which such
ratification or approval is given); or (2) the conditions of N.R.S. 78.140 are
met.
ARTICLE IX
LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS
The personal liability of a director or officer of the corporation to the
corporation or the Shareholders for damages for breach of fiduciary duty as a
director or officer shall be limited to acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law.
ARTICLE X
INDEMNIFICATION CLAUSE
Each director and each officer of the corporation may be indemnified by the
corporation as follows:
6
<PAGE>
(a) The corporation may indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative other than an action by or in the right of the
corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with the action, suit or
proceeding, if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of
the corporation and with respect to any criminal action or proceeding,
had no reasonable cause to believe this conduct was unlawful. The
termination of any action, suite or proceeding, by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent, does not of itself create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and
that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation may indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed
action or suit by or in the right of the corporation, to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit, if
he acted in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals there from, to be liable
to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of
the case the person
7
<PAGE>
is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b) of this Article, or in defense of any claim, issue or matter
therein, he must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the defense.
(d) Any indemnification under subsections (a) and (b) unless ordered by a
court or advanced pursuant to subsection (e), must be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be
made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act,
suit or proceeding;
(iii) If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders,
by independent legal counsel in a written opinion; or
(iv) If a quorum consisting of directors who were not parties to
the act, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
(e) 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. The provisions of
this subsection do not affect any rights to advancement of expenses to
which corporate personnel other than directors or officers may be
entitled under any contract or otherwise by law.
(f) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
8
<PAGE>
(i) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the certificate or articles of incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection
(b) or for the advancement of expenses made pursuant to
subsection (e) may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(ii) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE XI
PLACE OF MEETINGS AND CORPORATE RECORD BOOKS
Subject to the laws of the State of Nevada, the shareholders and the
Directors shall have power to hold their meetings, and the Directors shall have
power to have an office or offices and to maintain the books of the Corporation
outside the State of Nevada, at such place or places as may from time to time be
designated in the By-Laws or by appropriate resolution.
ARTICLE XII
AMENDMENT OF ARTICLES
The provisions of these Articles of Incorporation may be amended, altered
or repealed from time to time to the extent and in the manner prescribed by the
laws of the State of Nevada, and additional provisions authorized by such laws
as are then in force may be added. All rights herein conferred on the directors,
officers and shareholders are granted subject to this reservation.
9
<PAGE>
ARTICLE XIII
INCORPORATOR
The name and address of the sole incorporator signing these Articles of
Incorporation is as follows:
NAME POST OFFICE ADDRESS
---- -------------------
1. Max C. Tanner 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 25th day of August, 1995.
/s/ Max C. Tanner
------------------------------------------
MAX C. TANNER
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
On August 25, 1995 personally appeared before me, a Notary Public, Max C.
Tanner, who acknowledged to me that he executed the foregoing Articles of
Incorporation for Par Golf, Inc., a Nevada corporation.
/s/ Patricia Perkins
------------------------------------------
Notary Public
[NOTARY SEAL]
NOTARY PUBLIC
STATE OF NEVADA
County of Clark
PATRICIA PERKINS
My Appointment Expires May 22, 1999
[RECEIVED STAMP]
RECEIVED
AUG 25, 1999
Secretary of State
10
EXHIBIT 3.2
FILING STAMP
------------
[FILED
In the Office of the
Secretary of State of the
STATE OF NEVADA
C14398-95
August 21, 1995
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE]
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
PAR GOLF, INC.
Pursuant to NRS 78.385 and 78.390, the undersigned President and Secretary
of Par Golf, Inc. do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held on the 17th day of July, 1997, adopted resolutions to amend the original
articles as follows:
Article I is hereby amended to read as follows:
The exact name of the Corporation is: Kodiak Graphics Company
Article VI Section 1 is hereby amended to read as follows:
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 25,000,000 Shares of Capital Stock at
$.001 par value per share.
(a) The total number of shares of Common Stock which this Corporation
is authorized to issue is 20,000,000 shares at $.001 par value
per share.
(b) The total number of shares of Preferred Stock which this
Corporation is authorized to issue is 5,000,000 shares at $.001
par value per share, which Preferred Stock may contain special
preferences as determined by the Board of Directors of the
Corporation, including, but not limited to, the bearing of
interest and convertibility into shares of Common Stock of the
Corporation.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 9,000,000; that the said change
and amendment have been consented to and approved by a unanimous vote of the
stockholders of each class of stock outstanding and entitled to vote thereon.
/s/ Joseph Ochoa
--------------------------------------
Joseph Ochoa, President
/s/ Tina Ochoa
--------------------------------------
Tina Ochoa, Secretary
State of Nevada )
) ss.
County of Clark )
On August 12, 1997, personally appeared before me, a Notary Public, Joseph
Ochoa, President of Par Golf, Inc. and Tina Ochoa, Secretary of Pro Golf, Inc.,
who acknowledged that they executed the above instrument.
/s/ Lise-Lotte Rizocka
NOTARY SEAL ----------------------------------------
LISE-LOTTE RIZOCKA Signature of Notary
Notary Public - State of Nevada
Appointment Recorded in Clark County
My Appointment Expires July 25, 2000
EXHIBIT 3.3
FILED
THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 21 1999
No. C14398-95
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
FOR PROFIT NEVADA CORPORATION
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
- Remit in Duplicate -
1. Name of Incorporation: "Kodiak Graphics Company"
2. The articles have been amended as follows (provide article numbers, if
applicable):
Article I of the Articles of Incorporation of the Corporation be amended to
read in full as follows:
"Article I. NAME The name of this corporation is Sportsprize
Entertainment Inc."
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a
vote by classes or series, or as may be required by the provisions of the
articles of incorporation have voted in favour of the amendment is: 90%
4. Signatures:
/s/William Turner
-------------------------------------
President and Secretary
(acknowledgement required)
<PAGE>
-2-
City of: Vancouver )
Province of: British Columbia )
On April 30, 1999 before me, the undersigned a notary public personally appeared
William Turner, personally known to me (or provided to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal
/s/Nestor Vlod Nestor
Nestor Vlod Nestor
Printed Name of Notary Public
My Commission expires: Unrestricted Commission, For Life [seal]
- --------------------------------------------------------------------------------
EXHIBIT 3.4
FILED
THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
------- 1998
No. C14398-95
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
FOR PROFIT NEVADA CORPORATION
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
- Remit in Duplicate -
1. Name of Incorporation: "Sportsprize Entertainment Inc."
2. The articles have been amended as follows (provide article numbers, if
applicable):
Article VI Section 1 of the Corporation's Articles of Incorporation is
hereby amended to read as follows:
"Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 105,000,000 Shares of Capital Stock
at $.001 par value per share.
(a) The Total number of shares of Common stock which this Corporation is
authorized to issue is 100,000,000 shares at $.001 par value per
share.
(b) The total number of shares of Preferred Stock which this Corporation
is authorized to issue is 5,000,000 shares at $.001 par value per
share, which Preferred Stock may contain special preferences as
determined by the Board of Directors of the Corporation, including,
but not limited to, the bearing of interest and convertibility into
shares of Common Stock of the Corporation."
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a
vote by classes or series, or as may be required by the provisions of the
articles of incorporation have voted in favour of the amendment is: 100%
4. Signatures:
/s/ William Turner, President
---------------------------------
President and Secretary
(acknowledgement required)
<PAGE>
City of: Vancouver )
Province of: British Columbia )
On May 11, 1999 before me, the undersigned a notary public personally appeared
William Turner, personally known to me (or provided to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal
/s/Asha Lohia
- --------------------------------
Asha Lohia
- --------------------------------
Printed Name of Notary Public
My Commission does not expire: [seal]
EXHIBIT 3.5
BY-LAWS OF
PAR GOLF, INC.
ARTICLE I
SHAREHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the shareholders shall
be held at such date and time as shall be designated by the board of directors
and stated in the notice of the meeting or in a duly-executed waiver of notice
thereof. If the corporation shall fail to provide notice of the annual meeting
of the shareholders as set forth above, the annual meeting of the shareholders
of the corporation shall be held during the month of November or December of
each year as determined by the Board of Directors, for the purpose of electing
directors of the corporation to serve during the ensuing year and for the
transaction of such other business as may properly come before the meeting. If
the election of the directors is not held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the president
shall cause the election to be held at a special meeting of the shareholders as
soon thereafter as is convenient.
Section 1.02 Special Meetings. Special meetings of the shareholders may be
called by the president or the Board of Directors and shall be called by the
president at the written request of the holders of not less than 51% of the
issued and outstanding shares of capital stock of the corporation.
All business lawfully to be transacted by the shareholders may be
transacted at any special meeting at any adjournment thereof. However, no
business shall be acted upon at a special meeting, except that referred to in
the notice calling the meeting, unless all of the outstanding capital stock of
the corporation is represented either in person or by proxy. Where all of the
capital stock is represented, any lawful business may be transacted and the
meeting shall be valid for all purposes.
Section 1.03 Place of Meetings. Any meeting of the shareholders of the
corporation may be held at its principal office in the State of Nevada or such
other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the shareholders entitled to vote may
designate any place for the holding of such meeting.
Section 1.04 Notice of Meetings.
(a) The secretary shall sign and deliver to all shareholders of record
written or printed notice of any meeting at least ten (10) days, but not
more than sixty (60) days, before the date of such meeting; which notice
shall state the place, date and time of the meeting, the general nature of
the business to be transacted, and, in the case of any meeting at which
directors are to be elected, the names of nominees, if any, to be presented
for election.
PARGOLFMINUTES\BYLAWS Page 1
<PAGE>
(b) In the case of any meeting, any proper business may be
presented for action, except that the following items shall be valid
only if the general nature of the proposal is stated in the notice or
written waiver of notice:
(1) Action with respect to any contract or transaction
between the corporation and one or more of its directors or
another firm, association, or corporation in which one or more of
its directors has a material financial interest;
(2) Adoption of amendments to the Articles of Incorporation;
or
(3) Action with respect to the merger, consolidation,
reorganization, partial or complete liquidation, or dissolution
of the corporation.
(c) The notice shall be personally delivered or mailed by first
class mail to each shareholder of record at the last known address
thereof, as the same appears on the books of the corporation, and the
giving of such notice shall be deemed delivered the date the same is
deposited in the United States mail, postage prepaid. If the address
of any shareholder does not appear upon the books of the corporation,
it will be sufficient to address any notice to such shareholder at the
principal office of the corporation.
(d) The written certificate of the person calling any meeting,
duly sworn, setting forth the substance of the notice, the time and
place the notice was mailed or personally delivered to the several
shareholders, and the addresses to which the notice was mailed shall
be prima facie evidence of the manner and fact of giving such notice.
Section 1.05 Waiver of Notice. If all of the shareholders of the
corporation shall waive notice of a meeting, no notice shall be required, and,
whenever all of the shareholders shall meet in person or by proxy, such meeting
shall be valid for all purposes without call or notice, and at such meeting any
corporate action may be taken.
Section 1.06 Determination of Shareholders of Record.
(a) The Board of Directors may at any time fix a future date as a
record date for the determination of the shareholders entitled to notice of
any meeting or to vote or entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any
rights in respect of any other lawful action. The record date so fixed
shall not be more than sixty (60) days prior to the date of such meeting
nor more than sixty (60) days prior to any other action. When a record date
is so fixed, only shareholders of record on that date are entitled to
notice of and to vote at the meeting or to receive the dividend,
distribution or allotment of rights, or to exercise their rights, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
PARGOLFMINUTES\BYLAWS Page 2
<PAGE>
(b) If no record date is fixed by the Board of Directors, then (1) the
record date for determining shareholders entitled to notice of or to vote
at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the day next preceding the day on
which the meeting is held; (2) the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the
day on which written consent is given; and (3) the record date for
determining shareholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto, or the sixtieth (60th) day prior to the date of such
other action, whichever is later.
Section 1.07 Quorum: Adjourned Meetings.
(a) At any meeting of the shareholders, a majority of the issued and
outstanding shares of the corporation represented in person or by proxy
shall constitute a quorum.
(b) If less than a majority of the issued and outstanding shares are
represented, a majority of shares so represented may adjourn from time to
time at the meeting, until holders of the amount of stock required to
constitute a quorum shall be in attendance. At any such adjourned meeting
at which a quorum shall be present, any business may be transacted which
might have been transacted as originally called. When a shareholders'
meeting is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, unless the adjournment is for
more than ten (10) days in which event notice thereof shall be given.
Section 1.08 Voting.
(a) Each shareholder of record, such shareholder's duly authorized
proxy or attorney-in-fact shall be entitled to one (1) vote for each share
of stock standing registered in such shareholder's name on the books of the
corporation on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (included
pledged shares) shall be cast only by that individual or such individual's
duly authorized proxy or attorney-in-fact. With respect to shares held by a
representative of the estate of a deceased shareholder, guardian,
conservator, custodian or trustee, votes may be cast by such holder upon
proof of capacity, even though the shares do not stand in the name of such
holder. In the case of shares under the control of a receiver, the receiver
may cast votes carried by such shares even though the shares do not stand
in the name of the receiver provided that the order of the court of
competent jurisdiction which appoints the receiver contains the authority
to cast votes carried by such shares. If shares stand in the name of a
minor, votes may be cast only by the duly-appointed guardian of the estate
of such minor if such guardian has provided the
PARGOLFMINUTES\BYLAWS Page 3
<PAGE>
corporation with written notice and proof of such appointment.
(c) With respect to shares standing in the name of a corporation on
the record date, votes may be case by such officer or agents as the by-laws
of such corporation prescribe or, in the absence of an applicable by-law
provision, by such person as may be appointed by resolution of the Board of
Directors of such corporation. In the event no person is so appointed, such
votes of the corporation may be cast by any person (including the officer
making the authorization) authorized to do so by the Chairman of the Board
of Directors, President or any Vice President of such corporation.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast by shares owned by this corporation or its subsidiaries,
if any. If shares are held by this corporation or its subsidiaries, if any,
in a fiduciary capacity, no votes shall be cast with respect thereto on any
matter except to the extent that the beneficial owner thereof possesses and
exercises either a right to vote or to give the corporation holding the
same binding instructions on how to vote.
(e) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a shareholder
voting agreement or otherwise and shares held by two or more persons
(including proxy holders) having the same fiduciary relationship respect in
the same shares, votes may be cast in the following manner:
(1) If only one such person votes, the votes of such person binds
all.
(2) If more than one person casts votes, the act of the majority
so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast
proportionately as split.
(f) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case
of elections of directors. If such holder entitled to vote fails to specify
the number of affirmative votes, it will be conclusively presumed that the
holder is casting affirmative votes with respect to all shares held.
(g) If a quorum is present, the affirmative vote of holders of a
majority of the shares represented at the meeting and entitled to vote on
any matter shall be the act of the shareholders, unless a vote of greater
number or voting by classes is required by the laws of the State of Nevada,
the Articles of Incorporation and these By-Laws.
PARGOLFMINUTES\BYLAWS Page 4
<PAGE>
Section 1.09 Proxies. At any meeting of shareholders, any holder of shares
entitled to vote may authorize another person or persons to vote by proxy with
respect to the shares held by an instrument in writing and subscribed to by the
holder of such shares entitled to vote. No proxy shall be valid after the
expiration of six (6) months from the date of execution thereof, unless coupled
with an interest or unless otherwise specified in the proxy. In no event shall
the term of a proxy exceed seven (7) years from the date of its execution. Every
proxy shall continue in full force and effect until its expiration or
revocation. Revocation may be effected by filing an instrument revoking the same
or duly-executed proxy bearing a later date with the secretary of the
corporation.
Section 1.10 Order of Business. At the annual shareholders meeting, the
regular order of business shall be as follows:
(1) Determination of shareholders present and existence of
quorum;
(2) Reading and approval of the minutes of the previous meeting
or meetings;
(3) Reports of the Board of Directors, the president, treasurer
and secretary of the corporation, In the order named;
(4) Reports of committee;
(5) Election of directors;
(6) Unfinished business;
(7) New business;
(8) Adjournment.
Section 1.11 Absentees Consent to Meetings. Transactions of any meeting of
the shareholders are as valid as though had at a meeting duly-held after regular
call and notice if a quorum is present, either in person or by proxy, and if,
either before or after the meeting, each of the persons entitled to vote, not
present in person or by proxy (and those who, although present, either object at
the beginning of the meeting to the transaction of any business because the
meeting has not been lawfully called or convened or expressly object at the
meeting to the consideration of matters not included in the notice which are
legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person objects at the beginning of the meeting to the transaction of
any business because the meeting is not lawfully called or convened and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the
PARGOLFMINUTES\BYLAWS Page 5
<PAGE>
notice of such objection is expressly made at the beginning. Neither the
business to be transacted at nor the purpose of any regular or special meeting
of shareholders need be specified in any written waiver of notice, except as
otherwise provided in Section 1.04(b) of these By-Laws.
Section 1.12 Action Without Meeting. Any action which may be taken by the
vote of the shareholders at a meeting may be taken without a meeting if
consented to by the holders of a majority of the shares entitled to vote or such
greater proportion as may be required by the laws of the State of Nevada, the
Articles of Incorporation, or these By-Laws. Whenever action is taken by written
consent, a meeting of shareholders needs not be called or noticed.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure and Qualification. Except as otherwise provided
herein, the Board of Directors of the corporation shall consist of at least one
(1) but no more than nine (9) persons, who shall be elected at the annual
meeting of the shareholders of the corporation and who shall hold office for one
(1) year or until their successors are elected and qualify.
Section 2.02 Resignation. Any director may resign effective upon giving
written notice to the chairman of Board of Directors, the president, or the
secretary of the corporation, unless the notice specifies a later time for
effectiveness of such resignation. If the Board of Directors accepts the
resignation of a director tendered to take effect at a future date, the Board or
the shareholders may elect a successor to take office when the resignation
becomes effective.
Section 2.03 Reduction in Number. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his
term of office.
Section 2.04 Removal.
(a) The Board of Directors or the shareholders of the corporation, by
majority vote, may declare vacant the office of a director who has been
declared incompetent by an order of a court of competent jurisdiction or
convicted of a felony.
Section 2.05 Vacancies.
(a) A vacancy in the Board of Directors because of death, resignation,
removal, change in number of directors or otherwise may be filled by the
shareholders at any regular or special meeting or any adjourned meeting
thereof or the remaining director(s) by the affirmative vote of a majority
thereof. A Board of Directors consisting of less than the maximum number
authorized in Section 2.01 of ARTICLE II constitutes vacancies on the Board
of Directors for purposes of this paragraph and may be filled as set forth
above
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including by the election of a majority of the remaining directors. Each
successor so elected shall hold office until the next annual meeting of
shareholders or until a successor shall have been duly-elected and
qualified.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the shareholders shall
constitute less than a majority of the directors then in office, any holder
or holders of an aggregate of five percent (5%) or more of the total number
of shares entitled to vote may call a special meeting of shareholders to be
held to elect the entire Board of Directors. The term of office of a
director shall terminate upon such election of a successor.
Section 2.06 Regular Meetings. Immediately following the adjournment of,
and at the same place as, the annual meeting of the shareholders, the Board of
Directors, including directors newly elected, shall hold its annual meeting
without notice, other than this provision, to elect officers of the corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date and hour for
holding additional regular meetings.
Section 2.07 Special Meetings. Special meetings of three Board of Directors
may be called by the chairman and shall be called by the chairman upon the
request of any two (2) directors or the president of the corporation.
Section 2.08 Place of Meetings. Any meeting of the directors of the
corporation may be held at its principal office in the State of Nevada, or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver or notice signed by the directors may designate any place
for holding of such meeting.
Section 2.09 Notice of Meetings. Except as otherwise provided in Section
2.06, the chairman shall deliver to all directors written or printed notice of
any special meeting, at least three (3) days before the date of such meeting, by
delivery of such notice personally or mailing such notice first class mail, or
by telegram. If mailed, the notice shall be deemed delivered two (2) business
days following the date the same is deposited in the United States mail, postage
prepaid. Any director may waive notice of any meeting, and the attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
unless such attendance is for the express purpose of objecting to the
transaction of business threat because the meeting is not properly called or
convened.
Section 2.10 Quorum: Adjourned Meetings.
(a) A majority of the Board of Directors in office shall constitute a
quorum.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until
a quorum is
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present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
Section 2.11 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if a written consent thereto is signed by all of the
members of the Board of Directors or of such committee. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board of
Directors or committee. Such action by written consent shall have the same force
and effect as the unanimous vote of the Board of Directors or committee.
Section 2.12 Telephonic Meetings. Meetings of the Board of Directors may be
held through the use of a conference telephone or similar communications
equipment so long as all members participating in such meeting can hear one
another at the time of such meeting. Participation in such a meeting constitutes
presence in person at such meeting.
Section 2.13 Board Decisions. The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 2.14 Powers and Duties.
(a) Except as otherwise provided in the Articles of Incorporation or
the laws of the State of Nevada, the Board of Directors is invested with
the complete and unrestrained authority to manage the affairs of the
corporation, and is authorized to exercise for such purpose as the general
agent of the corporation, its entire corporate authority in such manner as
it sees fit. The Board of Directors may delegate any of its authority to
manage, control or conduct the current business of the corporation to any
standing or special committee or to any officer or agent and to appoint any
persons to be agents of the corporation with such powers, including the
power to sub-delegate, and upon such terms as may be deemed fit.
(b) The Board of Directors shall present to the shareholders at annual
meetings of the shareholders, and when called for by a majority vote of the
shareholders at a special meeting of the shareholders, a full and clear
statement of the condition of the corporation, and shall, at request,
furnish each of the shareholders with a true copy thereof.
(c) The Board of Directors, in its discretion, may submit any contract
or act for approval or ratification at any annual meeting of the
shareholders or any special meeting properly called for the purpose of
considering any such contract or act, provided a quorum is present. The
contract or act shall be valid and binding upon the corporation and upon
all the shareholders thereof, if approved and ratified by the affirmative
vote of a majority of the shareholders at such meeting.
(d) In furtherance and not in limitation of the powers conferred by
the laws of the State of Nevada, the Board of Directors is expressly
authorized and empowered to issue
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stock of the Corporation for money, property, services rendered, labor
performed, cash advanced, acquisitions for other corporations or for any
other assets of value in accordance with the action of the Board of
Directors without vote or consent of the shareholders and the judgment of
the Board of Directors as to the value received and in return therefore
shall be conclusive and said stock, when issued, shall be fully-paid and
non-assessable.
Section 2.15 Compensation. The directors shall be allowed and paid all
necessary expenses incurred in attending any meetings of the Board.
Section 2.16 Board Officers.
(a) At its annual meeting, the Board of Directors shall elect, from
among its members, a chairman to preside at the meetings of the Board of
Directors. The Board of Directors may also elect such other board officers
and for such term as it may, from time to time, determine advisable.
(b) Any vacancy in any board office because of death, resignation,
removal or otherwise may be filled by the Board of Directors for the
unexpired portion of the term of such office.
Section 2.17 Order of Business. The order of business at any meeting of the
Board of Directors shall be as follows:
(1) Determination of members present and existence of quorum;
(2) Reading and approval of the minutes of any previous meeting
or meetings;
(3) Reports of officers and committeemen;
(4) Election of officers;
(5) Unfinished business;
(6) New business;
(7) Adjournment.
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ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its first meeting
following the annual meeting of shareholders, shall elect a president, a
secretary and a treasurer to hold office for one (1) year next coming and until
their successors are elected and qualify. Any person may hold two or more
offices. The Board of Directors may, from time to time, by resolution, appoint
one or more vice presidents, assistant secretaries, assistant treasurers and
transfer agents of the corporation as it may deem advisable; prescribe their
duties; and fix their compensation.
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it whenever, in its
judgment, the best interest of the corporation would be served thereby. Any
office may resign at any time upon written notice to the corporation without
prejudice to the rights, if any, of the corporation under any contract to which
the resigning officer is a party.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal, or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 President. The president shall be the general manager and
executive officer of the corporation, subject to the supervision and control of
the Board of Directors, and shall direct the corporate affairs, with full power
to execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The president shall preside
at all meetings of the shareholders and shall sign the certificates of stock
issued by the corporation, and shall perform such other duties as shall be
prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the president shall
have full power and authority on behalf of the corporation to attend and to act
and to vote at any meetings of the shareholders of any corporation in which the
corporation may hold stock and, at any such meetings, shall possess and may
exercise any and all rights and powers incident to the ownership of such stock.
The Board of Directors, by resolution from time to time, may confer like powers
on any person or persons in place of the president to represent the corporation
for these purposes.
Section 3.05 Vice President. The Board of Directors may elect one or more
vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act,
including the signing of the certificates of stock issued by the corporation,
and the vice president shall perform such other duties as shall be prescribed by
the Board of Directors.
Section 3.06 Secretary. The secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in books provided for
that purpose. The secretary shall
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attend to the giving and service of all notices of the corporation, may sign
with the president in the name of the corporation all contracts authorized by
the Board of Directors or appropriate committee, shall have the custody of the
corporate seal, shall affix the corporate seal to all certificates of stock duly
issued by the corporation, shall have charge of stock certificate books,
transfer books and stock ledgers, and such other books and papers as the Board
of Directors or appropriate committee may direct, and shall, in general perform
all duties incident to the office of the secretary. All corporate books kept by
the secretary shall be open for examination by any director at any reasonable
time.
Section 3.07 Assistant Secretary. The Board of Directors may appoint an
assistant secretary who shall have such powers and perform such duties as may be
prescribed for him by the secretary of the corporation or by the Board of
Directors.
Section 3.08 Treasurer. The treasurer shall be the chief financial officer
of the corporation, subject to the supervision and control of the Board of
Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer shall sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these By-laws or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter regularly in the books of the corporation, to be kept for
that purpose, full and accurate accounts of all monies received and paid on
account of the corporation and whenever required by the Board of Directors, the
treasurer shall render a statement of any or all accounts. The treasurer shall
at all reasonable times exhibit the books of account to an directors of the
corporation and shall perform all acts incident to the position of treasurer
subject to the control of the Board of Directors. The treasurer shall, if
required by the Board of Directors, give a bond to the corporation in such sum
and with such security as shall be approved by the Board of Directors for the
faithful performance of all the duties of the treasurer and for restoration to
the corporation in the event of the treasurer's death, resignation, retirement,
or removal from office, of all books, records, papers, vouchers, money and other
property belonging to the corporation. The expense of such bond shall be borne
by the corporation.
Section 3.09 Assistant Treasurer. The Board of Directors may appoint an
assistant treasurer who shall have such powers and perform such duties as may be
prescribed by the treasurer of the corporation or by the Board of Directors, and
the Board of Directors may require the assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for the
restoration to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property belonging to the corporation. The expense of
such bond shall be borne by the corporation.
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ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of capital stock of the corporation shall be
issued in such manner and at such times and upon such conditions as shall be
prescribed by the Board of Directors.
Section 4.02 Certificates. Ownership in the corporation shall be evidenced
by certificates for shares of stock in such form as shall be prescribed by the
Board of Directors, shall be under the seal of the corporation and shall be
signed by the president or the vice president and also by the secretary and an
assistant secretary. Each certificate shall contain the name of the record
holder, the number, designation, if any, class or series of shares represented,
a statement of summary of any applicable rights, preferences, privileges, or
restrictions thereon, and a statement that the shares are assessable, if
applicable. All certificates shall be consecutively numbered. The name and
address of the shareholder, the number of shares, and the date of issue shall be
entered on the stock transfer books of the corporation.
Section 4.03 Surrender: Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares shall have been canceled, except
that in case of a lost, stolen, destroyed or mutilated certificate, a new one
may be issued therefor. However, any shareholder applying for the issuance of a
stock certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with hi, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and an indemnity bond in an amount and upon such terms
as the treasurer, or the Board of Directors, shall require. In no case shall the
bond be in amount less than twice the current market value of the stock and it
shall indemnify the corporation against any loss, damage, cost or inconvenience
arising as a consequence of the issuance of a replacement certificate.
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, including, without limitation, the merger or
consolidation of the corporation with another corporation or the reorganization
of the corporation, to cancel any outstanding certificate for shares and issue a
new certificate therefor conforming to the rights of the holder, the Board of
Directors may order any holders of outstanding certificates for shares to
surrender and exchange the same for new certificates within a reasonable time to
be fixed by the Board of Directors. The order may provide that a holder of any
certificate (s) ordered to be surrendered shall not be entitled to vote, receive
dividends or exercise any other rights of shareholders until the holder has
complied with the order provided that such order operates to suspend such rights
only after notice and until compliance.
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Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation by the certificate
therefor, accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer on the books of the
corporation.
Section 4.06 Transfer Agent. The Board of Directors may appoint one or more
transfer agents and registrars of transfer and may require all certificates for
shares of stock to bear the signature of such transfer agent and such registrar
of transfer.
Section 4.07 Stock Transfer Books. The stock transfer books shall be closed
for a period of ten (10) days prior to all meetings of the shareholders and
shall be closed for the payment of dividends as provided in Article V hereof and
during such period as, from time o time, may be fixed by the Board of Directors,
and, during such periods, no stock shall be transferable.
Section 4.08 Miscellaneous. The Board of Directors shall have the power and
authority to make such rules and regulation not inconsistent herewith as it may
deem expedient concerning the issue, transfer and registration of certificates
for shares of the capital stock of the corporation.
ARTICLE V
DIVIDENDS
Section 5.01 Dividends may be declared, subject to the provisions of the
laws of the State of Nevada and the Articles of Incorporation, by the Board of
Directors at any regular or special meeting and may be paid in cash, property,
shares of corporate stock, or any other medium. The Board of Directors may fix
in advance a record date, as provided in Section 1.06 of these By-laws, prior to
the dividend payment for the purpose of determining shareholders entitled to
receive payment of any dividend. The Board of Directors may close stock transfer
books for such purpose for a period of not more than ten (10) days prior to the
payment date of such dividend.
ARTICLE VI
OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS
Section 6.01 Principal Office. The principal office of the corporation In
the State of Nevada shall be the Law Offices of Max C. Tanner, 2950 East
Flamingo Road, Suite G, Las Vegas, Nevada 89121, and the corporation may have an
office in any other state or territory as the Board of Directors may designate.
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Section 6.02 Records. The stock transfer books and a certified copy of the
By-laws, Articles of Incorporation, any amendments thereto, and the minutes of
the proceedings of the shareholders, the Board of Directors, and committees of
the Board of Directors shall be kept at the principal office of the corporation
for the inspection of all who have the right to see the same and for the
transfer of stock. All other books of the corporation shall be kept at such
places as may be prescribed by the Board of Directors.
Section 6.03 Financial Report on Request. Any shareholder or shareholders
holding at least five percent (5%) of the outstanding shares of any class of
stock may make a written request for an income statement of the corporation for
the three (3) month, six (6) month, or nine (9) month period of the current
fiscal year ended more than thirty (30) days prior to the date of the request
and a balance sheet of the corporation as of the end of such period. In
addition, if no annual report for the last fiscal year has been sent to
shareholders, such shareholder or shareholders may make a request for a balance
sheet as of the end of such fiscal year and an income statement and statement of
changes in financial position for such fiscal year. The statement shall be
delivered or mailed to the person making the request within thirty (30) days
thereafter. A copy of the statements shall be kept on file in the principal
office of the corporation for twelve (12) months, and such copies shall be
exhibited at all reasonable times to any shareholder demanding an examination of
them or a copy shall be mailed to each shareholder. Upon request by any
shareholder, there shall be mailed to the shareholder a copy of the last annual,
semiannual or quarterly income statement which it has prepared and a balance
sheet as of the end of the period. The financial statements referred to in this
Section 6.03 shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.
Section 6.04 Right of Inspection.
(a) The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and committees of the Board of
Directors shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours for a purpose reasonably related to such
holder's interest as a shareholder or as the holder of such voting trust
certificate. This right of inspection shall extend to the records of the
subsidiaries, if any, of the corporation. Such inspection may be made in
person or by agent or attorney, and the right of inspection includes the
right to copy and make extracts.
(b) Every director shall have the absolute right at any reasonable
time to inspect and copy all books, records and documents of every kind and
to inspect the physical properties of the corporation and/or its subsidiary
corporations. Such inspection may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and make
extracts.
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Section 6.05 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.06 Fiscal Year. The fiscal year-end of the corporation shall be
the calendar year or such other term as may be fixed by resolution of the Board
of Directors.
Section 6.07 Reserves. The Board of Directors may create, by resolution,
out of the earned surplus of the corporation such reserves as the directors may,
from time to time, in their discretion, think proper to provide for
contingencies, or to equalize dividends or to repair or maintain any property of
the corporation, or for such other purpose as the Board of Directors may deem
beneficial to the corporation, and the directors may modify or abolish any such
reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification. The corporation shall, unless prohibited by
Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in any
manner (including, without limitation, as a party or a witness) or is threatened
to be so involved in any threatened, pending or completed action suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation, any action, suit or proceeding
brought by or in the right of the corporation to procure a judgment in its favor
(collectively, a "Proceeding") by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other entity or enterprise, against all Expenses and Liabilities actually and
reasonably incurred by him in connection with such Proceeding. The right to
indemnification conferred in this Article shall be presumed to have been relied
upon by the directors, officers, employees and agents of the corporation and
shall be enforceable as a contract right and inure to the benefit of heirs,
executors and administrators of such individuals.
Section 7.02 Indemnification Contracts. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnitee with specific rights
of indemnification in addition to the rights provided hereunder to the fullest
extent permitted by Nevada Law. Such agreements or arrangements may provide (i)
that 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 any such action, suit or
proceeding provided that, if required by Nevada Law at the time of such advance,
the officer or director provides an undertaking to repay such amounts if it is
ultimately determined
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by a court of competent jurisdiction that such individual is not entitled to be
indemnified against such expenses, (iii) that the Indemnitee shall be presumed
to be entitled to indemnification under this Article or such agreement or
arrangement and the corporation shall have the burden of proof to overcome that
presumption, (iii) for procedures to be followed by the corporation and the
Indemnitee in making any determination of entitlement to indemnification or for
appeals therefrom and (iv) for insurance or such other Financial Arrangements
described in Paragraph 7.02 of this Article, all as may be deemed appropriate by
the Board of Directors at the time of the execution of such agreement or
arrangement.
Section 7.03 Insurance and Financial Arrangements. The corporation may,
unless prohibited by Nevada Law, purchase and maintain insurance or make other
financial arrangements ("Financial Arrangements") on behalf of any Indemnitee
for any liability asserted against him and liability and expenses incurred by
him in his capacity as a director, officer, employee or agent, or arising out of
his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses. Such other Financial
Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest or
other lien on any assets of the corporation, or (iv) the establishment of a
letter of credit, guaranty or surety.
Section 7.04 Definitions. For purposes of this Article:
Expenses. The word "Expenses" shall be broadly construed and, without
limitation, means (i) all direct and indirect costs incurred, paid or
accrued, (ii) all attorney's fees, retainers, court costs, transcripts,
fees of experts, witness fees, travel expenses, food and lodging expenses
while traveling, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service, freight or other transportation fees
and expenses, (iii) all other disbursements and out-of-pocket expenses,
(iv) amounts paid in settlement, to the extent permitted by Nevada Law, and
(v) reasonable compensation for time spent by the Indemnitee for which he
is otherwise not compensated by the corporation or any third party,
actually and reasonably incurred in connection with either the appearance
at or investigation, defense, settlement or appeal of a Proceeding or
establishing or enforcing a right to indemnification under any agreement or
arrangement, this Article, the Nevada Law or otherwise; provided, however,
that "Expenses" shall not include any judgments or fines or excise taxes or
penalties imposed under the Employee Retirement Income Security Act of
1974, as amended (`ERISA") or other excise taxes or penalties.
Liabilities. "Liabilities" means liabilities of any type whatsoever,
including, but not limited to, judgments or fines, ERISA or other excise
taxes and penalties, and amounts paid in settlement.
Nevada Law. "Nevada Law" means Chapter 78 of the Nevada Revised
Statutes as amended and in effect from time to time or any successor or
other statutes of Nevada having similar import and effect.
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This Article. "This Article" means Paragraphs 7.01 through 7.04 of
these By-Laws or any portion of them.
Power of Stockholders. Paragraphs 7.01 through 7.04, including this
Paragraph, of these By-Laws may be amended by the stockholders only by vote
of the holders of sixty-six and two-thirds percent (66 2/3%) of the entire
number of shares of each class, voting separately, of the outstanding
capital stock of the corporation (even though the right of any class to
vote is otherwise restricted or denied); provided, however, no amendment or
repeal of this Article shall adversely affect any right of any Indemnitee
existing at the time such amendment or repeal becomes effective.
Power of Directors. Paragraphs 7.01 through 7.04 and this Paragraph of
these By-Laws may be amended or repealed by the Board of Directors only by
vote of eighty percent (80%) of the total number of Directors and the
holders of sixty-six and two-thirds percent (66 2/3) of the entire number
of shares of each class, voting separately, of the outstanding capital
stock of the corporation (even though the right of any class to vote is
otherwise restricted or denied); provided, however, no amendment or repeal
of this Article shall adversely affect any right of any Indemnitee existing
at the time such amendment or repeal becomes effective.
ARTICLE VIII
BY-LAWS
Section 8.01 Amendment. Amendments and changes of these By-Laws may be made
at any regular or special meeting of the Board of Directors by a vote of not
less than all of the entire Board, or may be made by a vote of, or a consent in
writing signed by the holders of a majority of the issued and outstanding
capital stock.
Section 8.02 Additional By-Laws. Additional by-laws not inconsistent
herewith may be adopted by the Board of Directors at any meeting of the Board of
Directors at which a quorum is present by an affirmative vote of a majority of
the directors present or by the unanimous consent of the Board of Directors in
accordance with Section 2.11 of these By-laws.
CERTIFICATION
I, the undersigned, being the duly elected secretary of the Corporation, do
hereby certify that the foregoing By-laws were adopted by the Board of Directors
on the 25th day of August, 1995.
/s/ Tina Ochoa
-----------------------------------------
Tina Ochoa, Secretary
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EXHIBIT 10.1
Sportsprize Entertainment Inc.
(formerly Kodiak Graphics Company)
1999 STOCK OPTION PLAN
This 1999 Stock Option Plan (the "Plan") provides for the grant of options
to acquire shares of common stock, $ 0.001 par value (the "Common Stock"), of
Sportsprize Entertainment 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). 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."
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have authority to reasonably (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.
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
("Non-Insiders"), and are not "covered employees" as such term is defined for
purposes of Section 162(m) of the Code ("Non-Covered 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
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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
11 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
Non-Insiders and Non-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 who are not Employees as the Plan
Administrator 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 2,000,000
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 Corporation" 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 3,000,000 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. In the event that 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; provided however, that
any canceled Options will be counted against the maximum number of shares with
respect to which Options may be granted to any particular person as set forth in
Section 3 hereof.
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)
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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
may be 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.
(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 (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:
Number of Years Percentage of Total
Following Date of Grant Option Vested
- ------------------------------------- ----------------------------------
One 25%
Two 50%
Three 75%
Four 100%
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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 as provided for in the Option and, 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; or (ii) 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 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
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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, for the payment of the aggregate exercise
price for all shares for which the Option shall have been exercised and for
satisfaction of any required 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
takes title to such Option in the manner permitted by subsection 5(k) hereof.
(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
irrevocable 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 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.
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<PAGE>
(l) 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.
If required by applicable law or regulation an applicable legend may
be stamped on the certificates representing such shares in order to assure an
exemption from registration. The Plan Administrator also may reasonably require
such other documentation as may from time to time be necessary to comply with
federal and state securities laws.
(2) The Holder shall 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 required federal, state,
local and foreign withholding taxes that result upon exercise of an Option or
from a transfer or other disposition of shares of Common Stock acquired upon
exercise of an Option or otherwise related to an Option or shares of Common
Stock acquired in connection with an Option. A Holder may satisfy such
obligation by complying with one or more of the following alternatives:
(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 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 until the applicable
requirements of the federal and state securities laws and the required
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
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may be, proportionately, without further action on the part of the Plan
Administrator, the Company, the Company's shareholders, or any Holder.
(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 shall, subject to applicable law, 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-Qualified 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. [Any
Option granted by the Plan Administrator to any Covered Employee prior to the
approval of this Plan by the shareholders of the Company in accordance with such
Code provision 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.
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.
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
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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 as 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 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.
Effective Date: ---------------------------.
EXHIBIT 10.2
STOCK OPTION AGREEMENT
Sportsprize Entertainment Inc.
(formerly Kodiak Graphics Company)
1999 STOCK OPTION PLAN
THIS AGREEMENT is entered into as of the _____ day of _______, 1999 ("Date
of Grant") between Sportsprize Entertainment Inc., a Nevada corporation (the
"Company"), and __________________________ (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has approved
and adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board
is authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
WHEREAS, the Plan provides for the granting of stock options that either
(i) are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options");
WHEREAS, the Board has authorized the grant to Optionee of options to
purchase a total of ________ shares of Common Stock (the "Options"), which
Options are intended to be (select one):
----------- Incentive Stock Options
----------- Non-Qualified Stock Options;
NOW, THEREFORE, the Company agrees to offer to the Optionee the option to
purchase, upon the terms and conditions set forth herein and in the Plan,
_________ shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
1. Exercise Price. The exercise price of the options shall be $ ___ per
share.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) ___% of the Options may be exercised after ________.
(b) ____% of the Options may be exercised after ________.
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
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5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Company may require, as a condition of exercising
the Options, that the Optionee execute an undertaking, in such a form as the
Company shall reasonably specify, that the Stock is being purchased only for
investment and without any then-present intention to sell or distribute such
shares.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(i) Expiration: Ten (10) years; except, that the expiration date of
any Incentive Stock Option granted to a greater-than ten percent (>
10%) shareholder of the Company shall not be later than five (5) years
from the Date of Grant.
(ii) Termination for Cause: 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) Termination Due to Death or Disability: The expiration of one
(1) year from the date of the death of the Optionee or cessation of an
Optionee's employment or contractual relationship by reason of
Disability (as defined in Section 5(g) of the Plan). If an Optionee's
employment or contractual relationship is terminated by death, any
Option held by the Optionee shall be exercisable only by the person or
persons to whom such Optionee's rights under such Option shall pass by
the Optionee's will or by the laws of descent and distribution.
(iv) Termination Due to Cessation of Service as a Director: The
expiration of ninety (90) days from the date an Optionee, if a
director of the Company, ceases to serve as a director of the Company.
(v) Termination for Any Other Reason: 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 in Section 5(g) of the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan) 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.
-2-
<PAGE>
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 Secretary of the Company at its principal executive office, specifying the
number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(i) by delivering to the Company shares of Common Stock previously
held by such person 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 purchase price to be paid by the
Optionee upon such exercise;
(ii) by delivering a properly executed exercise notice together with
irrevocable 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
(iii) by complying with any other payment mechanism approved by the
Plan Administrator at the time of exercise.
It is a condition precedent to the issuance of shares of Common Stock that the
Optionee execute and deliver to the Company a Stock Transfer Agreement, in a
form acceptable to the Company, to the extent required pursuant to the terms
thereof.
9. Holding Period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into or one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of such shares prior
to the above determined date to the Company within one (1) business day after
such sale is concluded. The Optionee also agrees to pay to the Company, within
five (5) business days after such sale is concluded, the amount necessary for
the Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(l)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom, or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan. The terms of the Options are subject
to the provisions of the Plan, as the same may from time to time be amended, and
any inconsistencies between this Agreement and the Plan, as the same may be from
time to time amended, shall be governed by the provisions of the Plan, a copy of
which has been delivered to the Optionee, and which is available for inspection
at the principal offices of the Company
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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
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<PAGE>
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,
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Sportsprize Entertainment Inc.
Attention: Jeffrey Paquin, President
The Optionee: ---------------------------------------
---------------------------------------
---------------------------------------
(address)
Sportsprize Entertainment Inc.
By: --------------------------- ---------------------------------------
Its: --------------------------
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
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<PAGE>
EXHIBIT A
Notice of Election to Exercise
This Notice of Election to Exercise shall constitute proper notice pursuant
to Section 5(h) of the Sportsprize Entertainment Inc. 1999 Stock Option Plan
(the "Plan") and Section 8 of that certain Stock Option Agreement (the
"Agreement") dated as of the ____ day of _______, 1999 between Sportsprize
Entertainment Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to purchase
__________ shares of the common stock of the Company at a price of $__________
per share, for aggregate consideration of $______, on the terms and conditions
set forth in the Agreement and the Plan. Such aggregate consideration, in the
form specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this ____ day of __________, 19__.
----------------------------------------
Signature
----------------------------------------
Name (typed or printed)
-5-
EXHIBIT 10.3
AGREEMENT AND PLAN OF SHARE EXCHANGE
This AGREEMENT AND PLAN OF SHARE EXCHANGE (the "Agreement") is made as of
the 7th day of May, 1999 by and among Kodiak Graphics Company, a Nevada
corporation ("Kodiak "), Sportsprize Entertainment, Inc., a Nevada corporation
("Sportsprize"), and certain shareholders of Sportsprize, whose names and
addresses for service are set forth on Exhibit A to this Agreement (the
"Principal Vendors") (Kodiak and Sportsprize are collectively referred to as the
"Constituent Corporations").
RECITALS
WHEREAS Sportsprize is engaged in the business of marketing and promoting sports
merchandise on the Internet and intends to conduct its business pursuant to the
Business Plan as set forth in Exhibit B (the "Sportsprize Business"), attached
hereto and incorporated by this reference;
WHEREAS Kodiak wishes to acquire the entire issued and outstanding share capital
of Sportsprize in exchange for shares of Kodiak, and Sportsprize wishes to
become the wholly owned subsidiary of Kodiak;
WHEREAS Sportsprize and Kodiak have entered into a letter agreement dated April
22, 1999, pursuant to which Kodiak has agreed to acquire all of the issued and
outstanding shares of common stock of Sportsprize, subject to the approval of
the Sportsprize shareholders, in exchange for 10,000,000 shares of common stock
of Kodiak;
WHEREAS each of the Constituent Corporations has, subject to the approval of the
Sportsprize shareholders, adopted the statutory plan of share exchange embodied
in this Agreement (the "Share Exchange");
WHEREAS the parties intend to make certain representations, warranties,
covenants, and agreements in connection with the Share Exchange; and
WHEREAS the Share Exchange is intended to qualify as a reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code (the "Code").
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the Constituent Corporations and the Principal Vendors do hereby agree
to the Share Exchange, on the terms and conditions herein provided, as follows:
Agreement and Plan of Share Exchange
Page - 1
<PAGE>
1. The Share Exchange.
1.1. Share Exchange between Kodiak and Sportsprize. On the Effective Date
(as defined herein), by virtue of the Share Exchange and without any
action on the part of the holders thereof, all of the then outstanding
shares of common stock of Sportsprize as set forth on Schedule 1.1
(collectively, the "Sportsprize Shares") shall be exchanged as
follows:
1.1.1. All of the Sportsprize Shares shall be exchanged for, in aggregate,
ten million (10,000,000) shares of common stock of Kodiak (the
"Exchange Shares") or 1.7229 Exchange Shares for each Sportsprize
Share, rounded down to the nearest Exchange Share at the deemed value
of $0.01 per Exchange Share;
1.1.2. Each share of common stock held by Sportsprize as treasury stock
immediately prior to the Effective Time (as defined herein) shall be
cancelled and no payment shall be made with respect to such shares;
1.1.3. This Agreement, once executed, shall act without more, as evidence of
the transfer of the Sportsprize Shares to Kodiak, subject to the terms
and conditions set forth in this Agreement; and
1.1.4. Prior to the Effective Time, Kodiak shall appoint an agent (the
"Exchange Agent") for the purpose of exchanging certificates
representing Sportsprize Shares for the Exchange Shares. Promptly
after the Effective Time, Kodiak will send, or will cause the Exchange
Agent to send, to each Sportsprize shareholder at the Effective Time,
a letter of transmittal for use in such exchange, which shall specify
that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the certificates representing
Sportsprize Shares to the Exchange Agent.
1.2 Shares Not Registered. The shareholders of Sportsprize and the
Principal Vendors each acknowledge that the Exchange Shares to be
issued pursuant to the Share Exchange have not been registered
pursuant to the securities laws of any jurisdiction and are being
issued pursuant to exemptions from registration contained in the
Securities Act (British Columbia)(the "B.C. Securities Act"), the
Securities Act (Ontario) (the "Ontario Act") and the United States
Securities Act of 1933, as amended (the "1933 Act"), and the Exchange
Shares may only be sold in a jurisdiction in accordance with the
restrictions on resale prescribed under the laws of the jurisdiction
in which such shares are sold, all of which may vary depending on the
jurisdiction.
Each of the shareholders of Sportsprize is aware that Kodiak is not a
"reporting issuer" as defined in the B.C. Securities Act and the
Ontario Act and as a consequence the Exchange Shares are restricted
from transfer within the provinces of British Columbia and Ontario
indefinitely or for a period of twelve (12) months after Kodiak
becomes a "reporting issuer." Further, each of the shareholders of
Sportsprize is aware that Kodiak has no obligation or present
intention of becoming a "reporting issuer" in the Province of British
Agreement and Plan of Share Exchange
Page - 2
<PAGE>
Columbia and as a result, any shareholders of Sportsprize who are
British Columbia residents may require an exemption order from the
British Columbia Securities Commission in order to resell their
Exchange Shares and any shareholders of Sportsprize who are Ontario
residents may require an exemption order from the Ontario Securities
Commission in order to resell their Exchange Shares.
1.3 Exchange Shares Fully Paid and Non-assessable. The Exchange Shares
will be issued from the treasury of Kodiak as fully paid and
non-assessable shares and shall be free and clear of all liens,
charges and encumbrances.
1.4 Principal Vendor Escrow Agreement. On or before the Effective Date (as
defined herein), the Principal Vendors will enter into an escrow
agreement in substantially the form attached hereto as Exhibit C (the
"Escrow Agreement").
1.5 Restrictions on Resale.
1.5.1. Except as otherwise provided, all of the Sportsprize shareholders,
other than the Principal Vendors, agree that they can only resell
their Exchange Shares in accordance with the following limitations:
(a) up to fifty percent (50%) of their respective Exchange Shares
upon the effectiveness of a registration statement to register
such Exchange Shares for resale pursuant to the 1933 Act filed
with the Securities and Exchange Commission (the "SEC")(the
"Resale Registration"); and
(b) up to 100% of their respective Exchange Shares on the earlier of
six (6) month after the effectiveness of the Resale Registration
or one year after the Effective Date (as defined herein).
1.5.2. The Principal Vendors agree that they will not resell any Exchange
Shares for a period of one year from the Effective Date (as defined
herein).
2. Effective Date.
2.1 Articles of Share Exchange. As soon as practicable after satisfaction
or, to the extent permitted hereunder, waiver of all conditions to the
Share Exchange, Kodiak and Sportsprize will file Articles of Share
Exchange in substantially the form attached hereto as Exhibit D (the
"Articles of Share Exchange") with the Secretary of State of the state
of Nevada and make all other filings or recordings required by Nevada
law in connection with the Share Exchange.
2.2 Effective Date of Share Exchange. The "Effective Date" of the Share
Exchange shall be, and such term as used herein shall mean, 5:00 p.m.,
Pacific Standard Time (the "Effective Time"), on the day on which the
Articles of Share Exchange are filed in the office of the
Agreement and Plan of Share Exchange
Page - 3
<PAGE>
Secretary of State of the state of Nevada, after satisfaction of the
requirements of applicable laws of the state's prerequisites to such
filings.
2.3 Effect of Share Exchange. From and after the Effective Time, Kodiak
shall possess all the rights, privileges, powers and franchises and be
subject to all of the restrictions, disabilities and duties of
Sportsprize, all as provided under Nevada and other applicable law.
3. The Kodiak Covenant. Kodiak agrees to use reasonable efforts to
arrange three (3) financings (the "Additional Financings"), each in
the amount of $840,000; one to close at the end of July 1999 (the
"July Financing") at a price which is the greater of $3.00 per share
or 75% of the 10 day average closing price of Kodiak's common shares
(for the 10 days prior to the close of the July Financing), one to
close at the end of October, 1999 (the "October Financing") at a price
which is the greater of $4.00 per share or 75% of the 10 day average
closing price of Kodiak's common shares (for the 10 days prior to the
close of the October Financing), and one to close at the end of
December 1999 (the "December Financing") at a price which is the
greater of $5.00 per share or 75% of the 10 day average closing price
of the Kodiak's common shares (for the 10 days prior to the close of
the October Financing). The Additional Financings will be arranged by
Sonora Capital Corp. pursuant to an agreement (the "Additional
Financings Agreement") between Kodiak and Sonora Capital Corp., the
terms of which agreement will be approved by the Principal Vendors.
3.1 Resignation and Appointment of Directors. On the Effective Date,
William Turner, the sole director of Kodiak, will resign, and the
persons designated in the Certificate of Designation, attached hereto
as Schedule 3.1 (the "Certificate of Designation"), shall be appointed
as directors of Kodiak.
3.2 Securities and Exchange Commission Registrations.
3.2.1 Kodiak will, as soon as practicable after the Effective Date,
undertake to file a registration statement with the SEC to complete a
registration to register the Exchange Shares held by the Sportsprize
shareholders, other than the Exchange Shares held by Principal
Vendors, for resale pursuant to the 1933 Act.
3.2.2 Kodiak will undertake to file a Form 10-SB or other applicable
registration statement under the Securities and Exchange Act of 1934,
as amended (the "1934 Act"), with the SEC to register the class of
common stock of Kodiak on or before January 31, 2000.
3.3 Issuance of Kodiak Options. Kodiak agrees to issue up to 3 million
options exercisable to acquire shares of common stock of Kodiak at a
price of no less than $0.25 per share during the first year after the
Effective Date as follows:
Agreement and Plan of Share Exchange
Page - 4
<PAGE>
(a) Kodiak agrees to issue options, to acquire shares of Kodiak
common stock, pursuant to the terms and conditions set forth in
each of the agreements set forth on Schedule 3.3(a). Such options
shall be exercisable to acquire one (1) share of Kodiak common
stock for each Sportsprize common share (rounded down to the
nearest share) at the exercise price set forth in such agreement.
(b) Kodiak agrees to adopt a stock option plan to be administered by
an administrator to issue up to 3 million options to acquire
shares of Kodiak common stock (less the options issued pursuant
to Section 3.3(a) of this Agreement) as incentive stock options
to current and future employees of Kodiak. Such incentive stock
options, will be granted at the sole discretion of the board of
directors of Kodiak.
4. Deliveries on or before the Effective Date.
4.1 Deliveries by Sportsprize. On or before the Effective Date, the
Principal Vendors and Sportsprize will deliver to Kodiak:
(a) a certificate in the form attached hereto as Exhibit E that the
form of written consent and Notice of Special Meeting have been
sent to all of the Sportsprize shareholders;
(b) the Certificate of Designation designating the appointment of the
new directors for Kodiak;
(c) the Escrow Agreement duly executed by each of the Principal
Vendors;
(d) satisfactory proof that the issued and outstanding shares of
Sportsprize on the Effective Date have been duly issued and
registered to the Sportsprize shareholders;
(e) certified copies of resolutions of the directors of Sportsprize
authorizing the transfer of the Sportsprize Shares subject to the
relevant stock transfer forms being duly stamped and the
registration of the Sportsprize Shares in the name of Kodiak and
authorizing the issue of new share certificates representing such
shares in the name of Kodiak;
(f) all books, records and accounts of Sportsprize and any other
information necessary for Kodiak to operate and manage the
business of and the assets owned by Sportsprize;
(g) the common seal(s) of Sportsprize, if any;
(h) satisfactory evidence that the directors and shareholders of
Sportsprize have approved the transfer of the Sportsprize Shares
to Kodiak;
Agreement and Plan of Share Exchange
Page - 5
<PAGE>
(j) necessary approvals from Sportsprize and any third parties as may
be required have been obtained and are in full force and effect
with respect to the transfer of all the Sportsprize Shares to
Kodiak as contemplated herein;
(j) a letter from legal counsel representing Sportsprize in form and
substance satisfactory to counsel for Kodiak confirming that the
Sportsprize Shares will be deemed, under Nevada law, to be
converted into shares of Kodiak upon the filing the Articles of
Share Exchange with the Secretary of State of Nevada; and
(k) such other documents and instruments as counsel for Kodiak may
reasonably require to effectuate or evidence the transactions
contemplated hereby.
4.2 Deliveries by Kodiak. On or before the Effective Date, Kodiak will
deliver to Sportsprize:
(a) satisfactory evidence that the directors of Kodiak have approved
the transactions contemplated herein;
(b) the Escrow Agreement duly executed by an authorized signatory of
Kodiak;
(c) resignation of William Turner as a director and officer of
Kodiak, effective on the Effective Date;
(d) written consent appointing the persons set forth on the
Certificate of Designation as directors of Kodiak, effective on
the Effective Date;
(e) satisfactory evidence that the Kodiak has established a reserve
of not less than 10,000,000 shares of common stock of Kodiak to
be issued as Exchange Shares in connection with the Share
Exchange;
(f) satisfactory proof that the issued and outstanding shares of
Kodiak on the Effective Date have been duly issued and registered
to the shareholders set forth on Schedule 4.2(f) attached hereto;
(g) an executed and delivered private placement subscription
agreement related to a $2,500,000 private placement (the "Initial
Financing"), comprising common shares in the capital of Kodiak
issued at a price of $1.50 per share, to close on or before the
Effective Date, subject to the payment of a $70,000 finders fee
payable to Sonora Capital Corp.;
(h) a copy of the executed Additional Financings Agreement;
Agreement and Plan of Share Exchange
Page - 6
<PAGE>
(i) certified copies of resolutions of the directors of Kodiak
authorizing the issue of new share certificates representing the
Exchange Shares in the name of each Sportsprize shareholder;
(j) all necessary approvals from Kodiak and any third parties as may
be required have been obtained and are in full force and effect
with respect to the issuance of all the Exchange Shares or Kodiak
to the Sportsprize shareholders as contemplated herein; and
(k) such other documents and instruments as counsel for Sportsprize
may reasonably require to effectuate or evidence the transactions
contemplated hereby.
5. Sportsprize and Principal Vendors' Representations and Warranties.
Sportsprize and the Principal Vendors represent and warrant to Kodiak
as of the date hereof and on the Effective Date that:
5.1 Sportsprize is a corporation validly existing and in good standing
under the laws of the State of Nevada. Sportsprize has the power and
authority to carry on the Sportsprize Business as it is now conducted
and to own the assets it now owns.
5.2 Sportsprize shareholders set forth on Schedule 1.1 own all of the
issued and outstanding shares of stock of Sportsprize, free and clear
of any claim, security interest, mortgage, pledge, or other lien or
encumbrance of any kind whatsoever. Except as set forth on Schedule
1.1 or otherwise described in this Agreement, there are no outstanding
options, agreements, contracts, calls or commitments of any character
which would require the issuance by Sportsprize of any shares of
stock.
5.3 The execution, delivery and performance of this Agreement have been
duly and validly authorized and approved by Sportsprize's board of
directors, and Sportsprize has the corporate power and authority to
execute, deliver and perform this Agreement and such other instruments
as appropriate to consummate the transactions herein contemplated, to
perform and comply with all of the terms, covenants and conditions to
be performed and complied with by Sportsprize hereunder and
thereunder, and to consummate the transactions contemplated hereby and
thereby. This Agreement constitutes the valid and binding obligation
of Sportsprize, and is enforceable against Sportsprize in accordance
with its terms, except as the enforceability may be affected by
bankruptcy, insolvency or similar laws affecting creditor's rights
generally or court applied equitable remedies. Sportsprize's
execution, delivery and performance of this Agreement do not (i)
conflict with or result in a breach of any of the terms, conditions or
provisions of the articles of incorporation or bylaws of Sportsprize
or any judgment, order, injunction, decree, regulation or ruling of
any court or other governmental authority to which Sportsprize is
subject or of any agreement or contract listed on any schedule
delivered pursuant hereto or any other material agreement or contract
to which Sportsprize is a party or is subject, or constitute a default
thereunder, or (ii) give to others any rights of termination or
Agreement and Plan of Share Exchange
Page - 7
<PAGE>
cancellation of any agreement or contract listed on any schedule
delivered pursuant hereto or any other material agreement or contract
to which Sportsprize is a party or is subject, or (iii) create any
lien or encumbrance upon the assets of Sportsprize, or (iv) require
the consent, authorization or approval of any governmental agency,
body, official or authority.
5.4 Neither Sportsprize nor the Principal Vendors are aware of nor has
either failed to disclosed to Kodiak any change, event or circumstance
which would adversely affect the Sportsprize Business or the assets of
Sportsprize or prospects, operation or condition of Sportsprize or
which would reasonably be considered to reduce the value of the
Sportsprize Business or the value of Sportsprize Shares to Kodiak.
5.5 Neither Sportsprize nor the Principal Vendors have made any untrue
statement to Kodiak nor has either failed to state a material fact
that is required to be stated or that is necessary to prevent a
statement that is made from being materially false or misleading in
the circumstances in which it was made.
5.6 The Sportsprize financial statements for the year ended February 28,
1998 (the "Financial Statements") are true and correct in every
material respect and present fairly the financial position of
Sportsprize as of the dates of such statements, and the results of its
operations for the periods then ended and are prepared in accordance
with generally accepted accounting principles applied on a consistent
basis except as specifically provided therein.
5.7 All of the assets of Sportsprize are in good working order and to the
best of the Principal Vendors' knowledge contain no latent defects.
5.8 The Principal Vendors have disclosed all contracts, engagements and
commitments, whether oral or written, relating to Sportsprize.
5.9 All licenses, permits, approvals, consents, certificates,
registrations and authorizations required in the ordinary course of
the Sportsprize Business or in the use of the assets of Sportsprize
have been obtained and are in good standing and are not terminable on
the basis of a transfer in ownership of the Sportsprize Shares.
5.10 Each Principal Vendor has the full and absolute right, power and
authority to enter into this Agreement on the terms and subject to the
conditions herein set forth, to carry out the transactions
contemplated hereby and to transfer on the Effective Date, legal and
beneficial title and ownership of his or her portion of the
Sportsprize Shares to Kodiak.
5.11 The authorized capital of Sportsprize consists of 25,000,000 common
shares with a par value of $0.001, of which a total of 5,804,000
common shares have been validly issued, are outstanding and are fully
paid and non-assessable.
Agreement and Plan of Share Exchange
Page - 8
<PAGE>
5.12 All alterations, if any, to the Articles of Incorporation of
Sportsprize since its incorporation have been duly approved by the
shareholders of Sportsprize.
5.13 The corporate records of Sportsprize, as required to be maintained by
it under its statute of incorporation and constating documents, are
accurate, complete and up-to-date in all material respects and reflect
all material transactions of Sportsprize.
5.14 Sportsprize has good and marketable title to all of its assets, and
such asses are free and clear of any financial encumbrances not
disclosed in the Financial Statements of Sportsprize.
5.15 Sportsprize has filed all necessary tax returns in all jurisdictions
required to be filed by it, all returns affecting workers compensation
with the appropriate agency, corporation capital tax returns, if
required, and any other material reports and information required to
be filed by Sportsprize with any governmental authority; Sportsprize
has withheld and remitted to tax collection authorities such taxes as
are required by law to be withheld and remitted as and when due;
Sportsprize has paid all income, sales and capital taxes payable by it
as and when due; Sportsprize has paid all installments of corporate
taxes due and payable, and there is not presently outstanding nor does
Sportsprize expect to receive any notice of re-assessment from any
applicable tax collecting authority.
5.16 Sportsprize has not declared or paid any dividends of any kind or
declared or made any other distributions of any kind whatsoever
including, without limitation, by way of redemption, repurchase or
reduction of its authorized capital.
5.17 There has been no material adverse change in the financial condition
and position of Sportsprize and no damage, loss destruction or other
change in circumstances materially affecting the business, property or
assets of Sportsprize or its right or capacity to carry on business
since the date of the Financial Statements of Sportsprize.
5.18 After the date of the Financial Statements of Sportsprize, Sportsprize
has not engaged in any transaction or made any disbursement or assumed
or incurred any liability or obligation or made any commitment,
including, without limitation, any forward purchase commitment or
similar obligation, to make any expenditure which would materially
affect its operations, property, assets or financial condition.
5.19 Sportsprize has not waived or surrendered any right of substantial
value and has not made any gift of money or of any of its property or
assets. Sportsprize has carried on business in the normal course.
5.20 Sportsprize is not in default under or in breach of, or would, after
notice or lapse of time or both, be in default under any contract,
agreement, indenture or other instrument to which it is a party or by
which it is bound.
Agreement and Plan of Share Exchange
Page - 9
<PAGE>
5.21 There are no claims threatened or against or affecting Sportsprize nor
are there any actions, suits, judgments, proceedings or investigations
pending or, threatened against or affecting Sportsprize, at law or in
equity, before or by any court, administrative agency or other
tribunal or any governmental authority.
5.22 Neither Sportsprize nor any of the Principal Vendors are aware of any
infringement by Sportsprize of any registered patent, trademark or
copyright.
5.23 Sportsprize is the legal and beneficial owner of the trademark
"Sportsprize.com" (the "Trademark"), free and clear of all
encumbrances, and is not a party to or bound by any contract or any
other obligation whatsoever that limits or impairs its ability to
sell, transfer, assign or convey, or that otherwise affects, the
Trademark.
5.24 No person other than Sportsprize has been granted any interest in or
right to use all or any portion of the Trademark.
6. Kodiak Representations and Warranties. Kodiak represents and warrants
to Sportsprize and the Sportsprize shareholders as of the date hereof
and on the Effective Date that:
6.1 Kodiak is a corporation validly existing and in good standing under
the laws of the State of Nevada. Kodiak has the power and authority to
carry on the Kodiak business as it is now conducted.
6.2 The execution, delivery and performance of this Agreement have been
duly and validly authorized and approved by Kodiak board of directors,
and Kodiak has the corporate power and authority to execute, deliver
and perform this Agreement and such other instruments as appropriate
to consummate the transactions herein contemplated, to perform and
comply with all of the terms, covenants and conditions to be performed
and complied with by Kodiak hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. This
Agreement constitutes the valid and binding obligation of Kodiak, and
is enforceable against Kodiak in accordance with its terms, except as
the enforceability may be affected by bankruptcy, insolvency or
similar laws affecting creditor's rights generally or court applied
equitable remedies. Kodiak's execution, delivery and performance of
this Agreement do not (i) conflict with or result in a breach of any
of the terms, conditions or provisions of the articles of
incorporation or bylaws of Kodiak or any judgment, order, injunction,
decree, regulation or ruling of any court or other governmental
authority to which Kodiak is subject or of any agreement or contract
listed on any schedule delivered pursuant hereto or any other material
agreement or contract to which Kodiak is a party or is subject, or
constitute a default thereunder, or (ii) give to others any rights of
termination or cancellation of any agreement or contract listed on any
schedule delivered pursuant hereto or any other material agreement or
contract to which Kodiak is a party or is subject, or (iii) create any
lien or encumbrance upon the assets of Kodiak, or (iv) require the
consent, authorization or approval of any governmental agency, body,
official or authority.
Agreement and Plan of Share Exchange
Page - 10
<PAGE>
6.3 Kodiak has filed with all applicable securities and regulatory
authorities (including exchanges and markets) all information and
documents required to be filed with such authorities (the "Public
Record") and the statements set forth in the Public Record are true,
correct and complete and do not contain any misrepresentation as of
the date made and Kodiak has not filed any confidential material
change reports or similar reports.
6.4 There has not been any adverse material change in the business,
operations or affairs, financial or otherwise, of Kodiak since
December 31, 1998, being the date of the last audited financial
statements of Kodiak.
6.5 The Exchange Shares when issued will be issued as fully paid and
non-assessable shares free and clear of all liens, charges, claims or
encumbrances.
6.6 Kodiak has been approved for trading on the National Association of
Securities Dealers Over-the-Counter Bulletin Board (the "OTC BB") and
is eligible for quotation on the OTC BB as of the Effective Date.
6.7 As of the Effective Date, the authorized capital of Kodiak consists of
20,000,000 common shares with par value of $0.001 per common share and
5,000,000 of preferred shares with a par value of $0.001 per preferred
share.
6.8 As of the Effective Date, 7,564,000 common shares and no preferred
shares were issued and outstanding and have been validly issued and
are fully paid and non-assessable.
6.9 As at December 31, 1998, Kodiak had assets of $4,560 and liabilities
of $3,120.
6.10 Kodiak is not aware nor has it failed to disclose to Sportsprize and
the Sportsprize shareholders any change, event or circumstance which
would adversely affect the Exchange Shares or the prospects, operation
or condition of Kodiak or which would reasonably be considered to
reduce the value of the Exchange Shares.
6.11 Kodiak has not made any untrue statement to the Principal Vendors nor
has it failed to state a material fact that is required to be stated
or that is necessary to prevent a statement that is made from being
false or misleading in the circumstances in which it was made.
6.12 The Kodiak audited financial statement for the year ended December 31,
1998 (The "Kodiak Financial Statements"), are true and correct in
every material respect and present fairly the financial position of
Kodiak as of the dates of such statements, and the results of its
operations for the periods then ended and are prepared in accordance
with generally accepted accounting principles applied on a consistent
basis with that of the previous year except as specifically provided
therein.
Agreement and Plan of Share Exchange
Page - 11
<PAGE>
6.13 Kodiak has disclosed all contracts, engagements and commitments,
whether oral or written, relating to Kodiak.
6.14 All licenses, permits, approvals, consents, certificates,
registrations and authorizations required in the ordinary course of
Kodiak's business or in the use of the assets of Kodiak have been
obtained and are in good standing and are not terminable on the basis
of the transactions contemplated herein.
6.15 Kodiak has the full and absolute right, power and authority to enter
into this Agreement on the terms and subject to the conditions herein
set forth, to carry out the transactions contemplated hereby.
6.16 All alterations, if any, to the Articles of Incorporation of Kodiak
since its incorporation have been duly approved by the shareholders of
Kodiak.
6.17 The corporate records of Kodiak, as required to be maintained by it
under its statute of incorporation and constating documents, are
accurate, complete and up-to-date in all material respects and reflect
all material transactions of Kodiak.
6.18 Kodiak has good and marketable title to all of its assets, and such
assets are free and clear of any financial encumbrances not disclosed
in the Kodiak Financial Statements.
6.19 Kodiak has filed all necessary tax returns in all jurisdictions
required to be filed by it, all returns affecting workers compensation
with the appropriate agency, corporation capital tax returns, if
required, and any other material reports and information required to
be filed by Kodiak with any governmental authority; Kodiak has paid
all income, sales and capital taxes payable by it as and when due;
Kodiak has withheld and remitted to tax collection authorities such
taxes as are required by law to be withheld and remitted as and when
due; Kodiak has paid all installments of corporate taxes due and
payable, and there is not presently outstanding nor does Kodiak expect
to receive any notice of re-assessment from any applicable tax
collecting authority.
6.20 Kodiak has not declared or paid any dividends of any kind or declared
or made any other distributions of any kind whatsoever including,
without limitation, by way of redemption, repurchase or reduction of
its authorized capital, except as has been described to the Principal
Vendors and Sportsprize.
6.21 There has been no material adverse change in the financial condition
and position of Kodiak and no damage, loss destruction or other change
in circumstances materially affecting the business, property or assets
of Kodiak or its right or capacity to carry on business since the date
of the Kodiak Financial Statements.
6.22 After the date of the Kodiak Financial Statements, Kodiak has not
engaged in any transaction or made any disbursement or assumed or
incurred any liability or obligation
Agreement and Plan of Share Exchange
Page - 12
<PAGE>
or made any commitment, including, without limitation, any forward
purchase commitment or similar obligation, to make any expenditure
which would materially affect its operations, property, assets or
financial condition.
6.23 Kodiak has not waived or surrendered any right of substantial value
and has not made any gift of money or any of its property or assets.
Kodiak has carried on business in the normal course.
6.24 Kodiak is not in default under or in breach of, or would, after notice
or lapse of time or both, be in default under any contract, agreement
indenture or other instrument to which it is a party or by which it is
bound.
6.25 There are no claims threatened or against or affecting Kodiak nor are
there any actions, suits, judgments, proceedings or investigations
pending or, threatened against or affecting Kodiak, at law or in
equity, before or by any court, administrative agency or other
tribunal or any governmental authority.
6.26 There are no outstanding options, agreements, contracts, calls or
commitments of any character which would require the issuance by
Kodiak of any shares of stock.
7. Conditions Precedent and Termination.
7.1 Sportsprize Conditions Precedent. The obligations of Sportsprize to
close hereunder are subject to satisfaction of the following
conditions on or before the Effective Date:
(a) The Initial Financing as set forth in Section 4.2(g) herein shall
close on or before the Effective Date;
(b) Kodiak shall have entered into the Additional Financings
Agreement, subject to the terms and conditions approved by
Sportsprize;
(c) All agreements, obligations, covenants and conditions, required
by this Agreement to be performed or complied with by Kodiak
prior to or at the Effective Date hereunder, shall have been so
performed or complied with by Kodiak;
(d) the representations and warranties of Kodiak shall have been true
at the time made and shall be true as at the Effective Date;
(e) there shall have been no adverse material change in the business,
operations or affairs, financial or otherwise, of Kodiak since
the date of this Agreement;
(f) all of the transactions contemplated by this Agreement shall have
been approved, as required, by the shareholders and the directors
of Kodiak; and
Agreement and Plan of Share Exchange
Page - 13
<PAGE>
(g) on or before Effective Date, Kodiak shall have delivered to
Sportsprize a Statutory Declaration of an officer or director of
Kodiak certifying the truth, accuracy and correctness of the
Kodiak representations and warranties contained in this
Agreement.
7.2 Kodiak Conditions Precedent. The obligations of Kodiak to close
hereunder are subject to satisfaction of the following conditions on
or before the Effective Date:
(a) Sportsprize and the Principal Vendors shareholders shall have
satisfied all of their respective covenants as contemplated
herein;
(b) the representations and warranties of Sportsprize and the
Principal Vendors shall be true and correct on and as of the
Effective Date;
(c) all agreements, obligations, covenants and conditions required by
this Agreement to be performed or complied with by Sportsprize
and the Principal Vendors prior to or at the Effective Date
hereunder shall have been so performed or complied with by them;
(d) all parties whose consents are necessary to the assignment of any
of the contracts, lease or other agreements to Kodiak shall have
granted their consents thereto, including without limitation, the
landlord under any lease of the business premises of Sportsprize;
(e) no event shall have occurred, which materially and adversely
affects the value of the Sportsprize assets or the ability of
Sportsprize to carry on the Sportsprize Business as presently
conducted or contemplated, and which, in the good faith and
judgment of Kodiak, renders it unadvisable to proceed with the
filing of the Articles of Share Exchange;
(f) all of the transactions contemplated by this Agreement shall have
been approved, as required, by the shareholders and the directors
of Sportsprize; and
(g) on or before the Effective Date, Sportsprize shall have delivered
to Kodiak a Statutory Declaration of an officer or director of
Sportsprize certifying the truth, accuracy and correctness of the
Sportsprize representations and warranties contained in this
Agreement.
7.3 Special Meeting. In the event that all of the Sportsprize shareholders
do not consent to the Share Exchange, then Sportsprize will call a
Special Meeting of the Sportsprize shareholders on May 18, 1999 at
9:00 am (Pacific Standard Time) at the principal office of Sportsprize
at which Meeting the Principal Shareholders agree to vote in favour of
the Share Exchange, and take all other actions necessary to effect the
Share Exchange.
Agreement and Plan of Share Exchange
Page - 14
<PAGE>
7.4 Termination. Notwithstanding anything contained in this Agreement to
the contrary, this Agreement may be terminated and the Share Exchange
abandoned:
(a) Upon written notice at any time prior to the Effective Date by
mutual consent of the Constituent Corporations;; or
(c) If there exists a suit, action, or other proceeding commenced,
pending or threatened, before any court or other governmental
agency of the federal or state government, in which it is sought
to restrain, prohibit or otherwise adversely affect the
consummation of the Share Exchange contemplated hereby.
In exercising their rights under this Section 7.3, each of the
Constituent Corporations may act by its Board of Directors, and such
rights may be so exercised, notwithstanding the prior approval of this
Agreement by the Sportsprize shareholders.
8. Modification. Notwithstanding anything contained in this Agreement,
this Agreement may be amended or modified in writing at any time prior
to the Effective Date; provided that, an amendment made subsequent to
the adoption of this Agreement by the Sportsprize shareholders shall
not: (1) alter or change the amount or kind of shares, securities,
cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof
of the Constituent Corporations; (2) alter or change any term of the
Articles of Incorporation of a Constituent Corporation; or (3) alter
or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class
or series thereof of the Constituent Corporations; provided, however,
the Constituent Corporations may by agreement in writing extend the
time for performance of, or waive compliance with, the conditions or
agreements set forth herein.
In exercising their rights under this Section 8, each of the
Constituent Corporations may act by its Board of Directors, and such
rights may be so exercised, notwithstanding the prior approval of this
Agreement by the Sportsprize shareholders.
9. Each of the Constituent Corporations shall (i) keep its records and
file in connection with its federal and state income tax returns all
such information as may be required by Treas. Reg. Section 1.368-3;
(ii) for federal and state income tax purposes report the share
exchange as qualifying as a reorganization under Section 368(a)(1)(B)
of the Code; (iii) refrain from taking any position in connection with
its federal or any state income tax liability that would be
inconsistent with such qualification; and (iv) comply with all the
requirements of Section 368(a)(1)(B) applicable to such corporation.
Agreement and Plan of Share Exchange
Page - 15
<PAGE>
10. Indemnification.
10.1 Indemnification by Principal Vendors. The Principal Vendors will
indemnify and hold harmless Kodiak from any liabilities relating to
the Sportsprize Shares and Sportsprize accruing up to and including
the day before the Effective Date and in particular, will ensure that
Sportsprize has paid all wages, holiday pay, income tax, Pension Plan,
Unemployment Insurance and other compensation payable to or related to
the employees.
10.2 Indemnification by Kodiak. Kodiak will indemnify and hold the
Principal Vendors and the Sportsprize shareholders harmless from any
liabilities relating to the Exchange Shares and Kodiak accruing up to
and including the day before the Effective Date and in particular,
will ensure that Sportsprize has paid all wages, holiday pay, income
tax, Pension Plan, Unemployment Insurance and other compensation
payable to or related to the employees; and
11. Miscellaneous.
11.1 Share Exchange. This Agreement supersedes all prior agreements,
written and oral, concerning the matters contained herein.
11.2 Successors. This Agreement shall be binding upon and inure to the
benefit of the heirs and successors of each of the parties. None of
the party may assign this Agreement without the prior written consent
of the other party.
11.3 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada. Each of Kodiak and
Sportsprize acknowledge that it was represented by competent legal
counsel or advised to seek legal counsel in the review of the terms
and conditions set forth in this Agreement and the other documents
relating to this transaction, including, but not limited to, the
documents attached as exhibits to this Agreement, and, therefore,
neither this Agreement nor any of the other documents shall be
construed against any party as the drafter.
11.4 Counterparts. This Agreement may be executed in multiple counterparts,
including facsimile counterparts, that when taken together shall
constitute a single instrument; provided that original signed
counterpart copies are delivered to each party.
11.5 Public Announcements. No party hereto shall make any public
announcement or disclosure of the terms or conditions of this
Agreement without the prior written consent of the other parties,
except that any parties' approval shall not be required as to any
statements or other information which may be required to make pursuant
to any rule or regulation of the any competent securities commissions
or otherwise required by law.
11.6 Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and
shall in no way restrict or otherwise modify any or the terms or
provisions of this Agreement.
Agreement and Plan of Share Exchange
Page - 16
<PAGE>
11.7 Severability. Any provision of this Agreement which is found to be
contrary to Nevada law or otherwise unenforceable shall not affect the
remaining terms of this Agreement, which shall be construed in such
event as if the unenforceable provision were absent from this
Agreement.
11.8 Notices. All notices, requests and other communications from any of
the parties hereto to the other shall be in writing and shall be
considered to have been duly given or served when (i) personally
delivered, (ii) when received if delivered by confirmed facsimile
transmission, air courier or other comparable delivery service, or
(iii) on the third day after deposit in the United States mail,
certified or registered, return receipt requested, postage prepaid,
addressed to the party at their address set forth on the signature
page below, or to such other address as such party may hereafter
designate by written notice.
11.9 Attorneys' Fees. In the event of any dispute hereunder between the
parties hereto, the party prevailing in any litigation instituted
hereunder shall be entitled to recover from the other its costs and
expenses thereof including, specifically, its reasonable attorneys'
fees.
11.10 Jurisdiction and Venue. Any litigation instituted hereunder shall be
venue in the appropriate state or federal courts in Las Vegas, Nevada,
as to which jurisdiction Kodiak and Sportsprize hereby consent.
The parties have executed this Agreement as of the day and year first above
written.
KODIAK GRAPHICS COMPANY, a Nevada corporation
By: /s/William Turner
-----------------------------------
Its: President
-----------------------------------
Address: 2034 Western Avenue
Las Vegas, NV 89102
Facsimile: (___) ____________
SPORTSPRIZE ENTERTAINMENT, INC., a Nevada corporation
By:/s/Jeffrey D. Paquin
-----------------------------------
Its:President
-----------------------------------
555-999 Canada Place
Vancouver, British Columbia V6C 3E1
Agreement and Plan of Share Exchange
Page - 17
<PAGE>
SPORTSPRIZE PRINCIPAL VENDORS
/s/Jeffrey D. Paquin
- --------------------------------------
Jeffrey D. Paquin
/s/ Randy L. Daggitt
- --------------------------------------
Randy L. Daggitt
/s/Anthony A Vecchio
- --------------------------------------
Anthony A. Vecchio
/s/James A. Brown
- --------------------------------------
James A. Brown
/s/Michael Slater
- --------------------------------------
Michael Slater
GANG CONSULTING INC.
By: Nancy Gray
- --------------------------------------
Its: President & Secretary
- --------------------------------------
Agreement and Plan of Share Exchange
Page - 18
<PAGE>
EXHIBIT A
List of Principal Vendors
- -------------------------
Jeffrey D. Paquin(1)
Randy L. Daggitt(1)
Anthony A. Vecchio(1)
James A. Brown(1)
Michael Slater(1)
Gang Consulting Inc.
(1) The following Principal Vendors will each transfer 100,000 shares to Gang
Consulting Inc. on May 7, 1999. Such shares will be Escrow Shares.
Address for Service of all Principal Vendors
- --------------------------------------------
c/o 1500 - 885 West Georgia Street
Vancouver, British Columbia, Canada V6C 3E8
Agreement and Plan of Share Exchange
Page - 19
<PAGE>
EXHIBIT B
Escrow Agreement
(Attached as Exhibit 10.3)
Agreement and Plan of Share Exchange
Page - 20
<PAGE>
EXHIBIT C
Articles of Share Exchange
(Attached as Exhibit 2.1
Agreement and Plan of Share Exchange
Page - 21
<PAGE>
EXHIBIT D
Certificate
(Attached)
Agreement and Plan of Share Exchange
Page - 22
<PAGE>
EXHIBIT D
Certificate
I HEREBY CERTIFY that the form of written consent and Notice of Special
Meeting was sent to all of the shareholders of Sportsprize Entertainment Inc. on
May 7, 1999.
DATED this 7th day of May, 1999.
Sportsprize Entertainment, Inc.
/s/Jeff Paquin
----------------------------------------
Jeff Paquin, President
On behalf of the Principal Vendors
/s/Jeff Paquin
----------------------------------------
Jeff Paquin
Agreement and Plan of Share Exchange
Page - 23
<PAGE>
SCHEDULE 1.1
Shareholder List of Sportsprize Enterprises, Inc.
Name of Shareholder Number of Shares Held
------------------- ---------------------
Ron Adie 20,000
Adrail Services Ltd. 80,000
Gus Apostalakos 100,000
Amarjit Berar 100,000
Charles Bingham, Todd Bingham 40,000
and Gerald Gosime
Alvin Bissett 40,000
James A. Brown 600,000 (restricted)
Robert Chase 20,000
CKS Enterprises Ltd. 40,000
Clarion Investments 40,000
Clive Barwin Computer Consultants Inc. 160,000
Corp Finance Advisory Services Inc. 20,000
Randy L. Daggitt 600,000 (restricted)
Division Eight Holdings 40,000
Ralph Belle Fleur 20,000
Gang Consulting Inc. 500,000 (restricted)
Yaraslav Grabovetsky 20,000
Nancy Gray 40,000
Steve Jeske 20,000
Justin Tigham Innovative Games 50,000
Justin Tigham Innovative Games 300,000 (escrowed)
Dave Kepkay 40,000
Donald Robert MacKay 150,000
Karen McMillan 8,000
Marble Arch Development Corp. 160,000
Meadow Park North Ltd. 140,000
James J. Murphy 20,000
Olson Cove Consulting Ltd. 25,000
Olson Cove Consulting Ltd. 125,000 (escrowed)
Jeffrey D. Paquin 600,000 (restricted)
Qual-ling Software, Inc. 100,000
Qual-ling Software, Inc. 100,000 (escrowed)
James Richards 4,000
Robert Rodda 20,000
Gary Segal 32,000
Michael J. Slater 600,000 (restricted)
Agreement and Plan of Share Exchange
Page - 24
<PAGE>
Name of Shareholder Number of Shares Held
------------------- ---------------------
D.J. Taylor 40,000
Earle Thompson 50,000
Anthony A. Vecchio 600,000 (restricted)
Wayne Yack 40,000
Yorkton Securities Inc. 100,000
----------
Total 5,804,000
==========
Agreement and Plan of Share Exchange
Page - 25
<PAGE>
SCHEDULE 3.1
Certificate of Designation
The following persons shall be appointed as directors of Kodiak Graphics
Company on the "Effective Date", as that term is defined in the Agreement and
Plan of Share Exchange dated May 7, 1999, among Kodiak Graphics Company,
Sportsprize Entertainment Inc. and certain shareholders of Sportsprize
Entertainment Inc.:
Jeff Paquin
--------------------------------
--------------------------------
--------------------------------
Agreement and Plan of Share Exchange
Page - 26
<PAGE>
SCHEDULE 3.3(a)
Options Granted by Sportsprize
Optionee Number of Options
------------------------------------------------------------------
Jeffrey Paquin 300,000
Olsen Cove Consulting 100,000
Donald Robert MacKay 100,000
Gilmour McKay Roberts
Consulting Ltd.(1)
Michael Thompson 175,000
Meadow North Park Ltd. 100,000
------------------------------------------------------------------
Total 775,000
(1) Pursuant to a letter agreement dated April 1, 1999, Sportsprize agreed to
pay to Gilmour McKay Roberts Consulting Ltd. a consulting fees (on the basis of
a monthly retainer) in the amount of $2,500 per month for a period of six
months, 50% of which may be paid in the form of Options to acquire shares of
common stock of Sportsprize at $0.25 per share.
Agreement and Plan of Share Exchange
Page - 27
<PAGE>
SCHEDULE 4.2(f)
Shareholder List of Kodiak Graphics Company
Date: APR 14, 1999 Stockholder Certificate List Page: 1
Time: 5:39PM Name Sequence
KODIAK GRAPHICS COMPANY
<TABLE>
Stkhldr Name/Address Cert Number Issued Trans Shares
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAL7307 AERO ATLANTIC LTD
PALM CHAMBERS P O BOX 119
ROAD TOWN TORTOLA
BRITISH VIRGIN ISLANDS
1049 4/05/99 0000162 N N 450,000
JAO5195 ALMOETE, JOCELYN
COMPETETIVE EDGE, INC.
MAKATI CITY, M.M.
PHILLIPPINES
1001 9/10/97 0000108 N N 50,000
ACI7304 ANCHOR COVE INVESTMENTS INC
2 ELYSTON COURT, HOWARDS LAND
PUTNEY, LONDON
ENGLAND SW15 6QH
1046 4/05/99 0000158 N N 450,000
ACA5312 ATIENZA, ANTONIO C.
#20 EVERLASTING ST. BLK-3 LOT3
TS CRUZ SUBD. ALMANZA
LAS PINAS, M.M.
PHILLIPPINES,
1002 9/10/97 0000109 N N 26,000
AGB5313 BARILLA, ANTONIO G.
701 MIDLAND MANSION
839 PASAY ROAD, LOGASPI VILLAG
MAKATI M.M.
PHILIPPINES,
1003 9/10/97 0000110 N N 20,000
LOB5767 BARTOSIS, LOURDES O
701 MIDLAND MANSION
839 PASAY ROAD
MAKATI M M
PHILIPPINES,
1004 9/10/97 0000111 N N 50,000
CMB5197 BAUTISTA, CLEOPATRA M.
2149 INT. MAGINHANA ST.
MALATE, M.M.
PHILLIPPINES,
1005 9/10/97 0000112 N N 25,000
BCL6964 BCLM INVESTMENT CORPORATION
P O BOX 923 GENESIS BLDG 3FL
GEORGE TOWN
</TABLE>
Agreement and Plan of Share Exchange
Page - 28
<PAGE>
Date: APR 14, 1999 Stockholder Certificate List Page: 2
Time: 5:39PM Name Sequence
KODIAK GRAPHICS COMPANY
<TABLE>
Stkhldr Name/Address Cert Number Issued Trans Shares
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GRAND CAYMAN
CAYMAN ISLANDS BWI,
1053 4/05/99 0000167 N N 500,000
TCO6750 CACCIOLA, THOMAS
2800 ALT DRIVE
LAS VEGAS, NV 89107
1006 9/10/97 0000114 N N 2,500
CHO7309 CASTAWAYS HOLDINGS
PALM CHAMBER P O BOX 119
ROAD TOWN TORTOLA
BRITISH VIRGIN ISLANDS
1051 4/05/99 0000164 N N 450,000
RTC6751 CHAPTER, RICHARD T
2030 WESTERN
LAS VEGAS, NV 89102
1007 9/10/97 0000115 N N 2,500
CII7303 CRONWALL INVESTMENTS INC.
SUITE 95, EAST BAY SHOPPING CT
P O BOX N-1836
NASSAU, BAHAMAS
1045 4/05/99 0000157 N N 450,000
EPC6753 CRUZ, EVANGELINE P
091 A BONIFACIO AVE
CAINTA, RIZAL
PHILIPPINES
1009 9/10/97 0000116 N N 50,000
LAC6754 CURRENT, LINDA A
3864 SCHIFF DRIVE
LAS VEGAS, NV 89103
1010 9/10/97 0000117 N N 5,000
DWI5927 DREAMWEAVER INVESTMENTS LTD
GLENDENNING HOUSE 6/8 WICKLOW
DUBLIN 2 IRELAND
1043 4/05/99 0000155 N N 450,000
DIL7310 DYNAMIC INVESTMENTS LTD
PENTHOUSE SUITE, BUCKINGHAM SQ
WEST BAY RD, SMB, GRAND CAYMAN
CAYMAN ISLANDS BWI
1052 4/05/99 0000166 N N 450,000
</TABLE>
Agreement and Plan of Share Exchange
Page - 29
<PAGE>
Date: APR 14, 1999 Stockholder Certificate List Page: 3
Time: 5:39PM Name Sequence
KODIAK GRAPHICS COMPANY
<TABLE>
Stkhldr Name/Address Cert Number Issued Trans Shares
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SDE6755 ELUDO, SUSANA D
#205 P REYEA STREET
PASSAY CITY
PHILIPPINES
1011 9/10/97 0000118 N N 50,000
TTE5573 ENRIQUEZ, TERESA T
701 MIDLAND MANSION
839 PASAY ROAD
MAKATI M M
PHILIPPINES,
1012 9/10/97 0000153 N N 50,000
MEO1327 EVANS, MARCI 50-40-7230
6357 VICUNA DR
LAS VEGAS, NV 89102
1013 9/10/97 0000120 N N 250,000
MFO6756 FRIEDMAN, MICHAEL
2825 HIGH SAIL COURT
LAS VEGAS, NV 89117
1041 9/02/98 0000154 N 2,500
BBG5318 GIGANTE, BOBBY B.
68-B ZORRA STREET
PACTOK SFDM
MERTRO MANILA
PHILIPPINES,
1015 9/10/97 0000122 N N 15,000
AGO6757 GLASSMEYER, ARTHUR
4534 W DIABLO #103
LAS VEGAS, NV 89118
1016 9/10/97 0000123 N N 5,000
KGO6270 GORNICHEC, KRISTINE
1926 ALTIVO DRIVE
HENDERSON, NV 89014
1017 9/10/97 0000124 N N 500,000
FRH6758 HARRINGTON, FRANKLIN R
3675 S DECATUR #12
LAS VEGAS, NV 89103
1018 9/10/97 0000125 N N 20,000
CJO5206 JIMINEZ, CORAZON
5327 BEN HARRISON STREET
MAKATI CITY, M.M.
PHILLIPPINES,
1019 9/10/97 0000126 N N 50,000
LIL7302 LAMPLIGHTER INVESTMENT LTD
88 ELLIS ROAD, CROWTHORNE
BERKS, ENGLAND RG45 6PN
1044 4/05/99 0000156 N N 450,000
</TABLE>
Agreement and Plan of Share Exchange
Page - 30
<PAGE>
Date: APR 14, 1999 Stockholder Certificate List Page: 4
Time: 5:39PM Name Sequence
KODIAK GRAPHICS COMPANY
<TABLE>
Stkhldr Name/Address Cert Number Issued Trans Shares
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EMO6759 MAGDARAOG, ELENA
701 MIDLAND MANSION
1406 ESTRADA ST, SAN ANDRES
MAKATI M M,
PHILIPPINES,
1020 9/10/97 0000127 N N 5,000
RMO3975 MORATA, RIGS
54 GIL PUYAT ST
8F HOMES III PARANAQUE
METRO MANILA 1700
PHILIPPINES,
1021 9/10/97 0000128 N N 50,000
LLR3987 NEWELL, LISE-LOTTE
6897 E MESQUITE AVENUE
LAS VEGAS, NV 89110
1031 9/10/97 0000139 N N 250,000
BOJ6760 OCHOA JR, BLAS
3967 GLORY COURT
LAS VEGAS, NV 89103
*1022 9/10/97 0000131 N N 20,000
PTO4460 OCHOA, PHILLIP T
2481 OLD FORGE
#104
LAS VEGAS, NV 89121
*1023 9/10/97 0000130 N N 10,000
5006761 ONO, SEAN
3979 GLORY CT
LAS VEGAS, NV 89103
1024 9/10/97 0000132 N N 40,000
HTP6762 PALMA JR, HILARION T
1678 JACINTO ZAMORA STREET
PACO MANILA
PHILIPPINES
1025 9/10/97 0000133 N N 20,000
SPO5503 PANCHERI, SUZANNE
236 COMANCHE PLACE
HENDERSON, NV 89014
1026 9/10/97 0000134 N N 250,000
FPO5209 PASCUA, FELICISIMA
CAA COMPOUND
LAS PINAS, M.M.
PHILLIPPINES,
1027 9/10/97 0000135 N N 4,000
</TABLE>
Agreement and Plan of Share Exchange
Page - 31
<PAGE>
Date: APR 14, 1999 Stockholder Certificate List Page: 5
Time: 5:39PM Name Sequence
KODIAK GRAPHICS COMPANY
<TABLE>
Stkhldr Name/Address Cert Number Issued Trans Shares
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JNP6767 POWERS, JOSEPH N
112 HYACINTH LANE
LAS VEGAS, NV 89107
*1029 9/10/97 0000137 N N 2,500
TLP6763 POWERS, TERRY L
112 HYACINTH LANE
LAS VEGAS, NV 89107
*1028 9/10/97 0000136 N N 5,000
RPO6056 PRADO, RAYMUNDO
265 VICENTE G CRUZ
SAMPALOC M M
PHILIPPINES
1030 9/10/97 0000138 N N 30,000
CCS5213 SAURE, CHARLIE C.
#854 ROSARITO STREET
SAMP., M.M.
PHILLIPPINES,
1032 9/10/97 0000140 N N 5,000
KSO6060 SEVILLA MA, KARENINA
265 VICENTE G CRUZ
SAMPALOC M M
PHILIPPINES
1035 9/10/97 0000143 N N 50,000
BSO6057 SEVILLA, BERTHRAND
265 VICENTE G CRUZ
SAMPALOC M M
PHILIPPINES
1033 9/10/97 0000141 N N 20,000
JSO6059 SEVILLA, JOSE
265 VICENTE G CRUZ
SAMPALOC M M
PHILIPPINES
1034 9/10/97 0000142 N N 20,000
SIL7305 SPIRIT INVESTMENTS LTD
16 PROMENADE SAINT-ANTOINE
GENEVA, SWITZERLAND 1204
1047 4/05/99 0000160 N N 450,000
</TABLE>
Agreement and Plan of Share Exchange
Page - 32
<PAGE>
Date: APR 14, 1999 Stockholder Certificate List Page: 6
Time: 5:39PM Name Sequence
KODIAK GRAPHICS COMPANY
<TABLE>
Stkhldr Name/Address Cert Number Issued Trans Shares
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
_SO3980 STANKIEWICZ, MICHAEL
1725 S RAINBOW
#19B
LAS VEGAS, NV 89107
1036 9/10/97 0000144 N N 500,000
_SII7306 STRATHBURN INVESTMENTS INC
3RD FLOOR, NORTHFOLK HOUSE
FRULERICK STREET
P O BOX N1836
NASSAU, BAHAMAS,
1048 4/05/99 0000161 N N 450,000
_SD6765 SUMSION, KRISTIN
2336 CASERTA COURT
HENDERSON, NV 89014
1037 9/10/97 0000145 N N 10,000
_MC6752 SUZETTE M CLAUDIO
78 CANTON STREET
BF HOMES, PARANAQUE
PHILIPPINES
1008 9/10/97 0000113 N N 50,000
_CO7308 SWORDFISH CAPITA
PALM CHAMBER P O BOX
ROAD TOWN TORTOLA
BRITISH VIRGIN ISLANDS
1050 4/05/99 0000163 N N 450,000
_MT5214 TAN, MA. LUISA M.
839 PASAM ROAD #702
LEGASPI VILLAGE MAKITI, M.M.
PHILLIPPINES,
1038 9/10/97 0000146 N N 44,000
_LW6766 WEST, STEWART L
2010 WESTERN AVE
LAS VEGAS, NV 89102
1039 9/10/97 0000147 N N 2,500
_WO4477 WITTER, KIMBERLY
4000 W FORTUNE DR
LAS VEGAS, NV 89107
1040 9/10/97 0000149 N N 2,500
</TABLE>
Agreement and Plan of Share Exchange
Page - 33
<PAGE>
Date: APR 14, 1999 Stockholder Certificate List Page: 7
Time: 5:39PM Name Sequence
KODIAK GRAPHICS COMPANY
<TABLE>
Stkhldr Name/Address Cert Number Issued Trans Shares
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Certificates Shares
------------ ------
New 50 7,561,500
Reissued 1 2,500
51 Stockholders Restricted 0 0
Total 51 7,564,000
Agreement and Plan of Share Exchange
Page - 34
</TABLE>
EXHIBIT 10.4
ESCROW AGREEMENT
THIS AGREEMENT dated for reference the 7th day of May, 1999 (the "Effective
Date").
AMONG:
KODIAK GRAPHICS COMPANY, a company duly incorporated under the
laws of the State of Nevada, and having an office at 2034 Western
Avenue, Las Vegas, Nevada, U.S.A., 89102
(the "Kodiak")
OF THE FIRST PART
AND:
RANDY DAGGITT, JEFF PAQUIN, JAMES BROWN, MICHAEL SLATER, ANTHONY
VECCHIO and GANG CONSULTING INC., all c/o Suite 1500 - 885 West
Georgia Street, Vancouver, British Columbia, Canada, V6C 3E8
(collectively the "Principal Vendors")
OF THE SECOND PART
AND:
CLARK, WILSON, Barristers & Solicitors, of Suite 800 - 885 West
Georgia Street, Vancouver, British Columbia, Canada, V6C 3H1
(the "Escrow Agent")
OF THE THIRD PART
<PAGE>
-2-
WITNESSES THAT WHEREAS:
A. Pursuant to a Share Exchange Agreement (the "Share Exchange Agreement"),
dated May __, 1999, between Kodiak, the Principal Vendors and the other
shareholders (the "Other Vendors") of Sportsprize Entertainment Inc.
("Sportsprize"), Kodiak has agreed to purchase all of the issued and outstanding
shares in the capital of Sportsprize in consideration of, among other things,
Kodiak issuing an aggregate of 10,000,000 common shares (the "Purchase Shares")
in the capital of Kodiak to the Principal Vendors and the Other Vendors;
B. The Share Exchange Agreement further provides that the Principal Vendors
will deliver to the Escrow Agent and deposit in escrow 2,556,410 of the Purchase
Shares (the "Escrow Shares") to be held by the Escrow Agent;
C. The Escrow Shares will be held in escrow and used to satisfy signing
bonuses and fees which will be paid to certain high level management recruited
and outside consultants retained in the future by Kodiak or Sportsprize;
D. Kodiak and the Principal Vendors desire to appoint the Escrow Agent, and
the Escrow Agent has agreed to act as escrow agent to hold the Escrow Shares in
accordance with the terms and conditions of this Agreement and the Share
Exchange Agreement;
THEREFORE, in consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration (the receipt and sufficiency
of which are hereby acknowledged), the parties covenant and agree as follows:
I. INTERPRETATION
1.1 Any capitalized term not defined herein shall have the meaning ascribed
thereto in the Share Exchange Agreement.
1.2 In this Agreement:
(a) the headings have been inserted for convenience of reference only and
in no way define, limit, or enlarge the scope or meaning of the
provisions of this Agreement;
(b) all references to any party, whether a party to this Agreement or not,
will be read with such changes in number and gender as the context or
reference requires; and
(c) when the context hereof makes it possible, the word "person" includes
in its meaning any firm and any body corporate or politic.
<PAGE>
-3-
2. DEPOSIT OF ESCROW SHARES
2.1 The Principal Vendors will, on closing of the Share Exchange Agreement,
deliver share certificate(s) representing the Escrow Shares, together with Stock
Powers of Attorney duly endorsed for transfer of all of the Escrow Shares with
signatures duly guaranteed, to the Escrow Agent for deposit in escrow with the
Escrow Agent on the terms of this Agreement and the Share Exchange Agreement.
3. ESCROW PROVISIONS - ESCROW SHARES
3.1 The Principal Vendors hereby direct the Escrow Agent to retain the Escrow
Shares, and not to do or cause anything to be done to release the same from
escrow except in accordance with this Agreement. The Escrow Agent accepts its
responsibilities hereunder and agrees to perform them in accordance with the
terms hereof.
3.2 The Escrow Agent will hold the Escrow Shares in escrow and undelivered
until written confirmation (the "Confirmation") executed by each of the
following:
(a) Clive Barwin or another authorized representative of the Board of
Directors of Sonora Capital Corp., and
(b) Jeff Paquin or any one of the Principal Vendors (other than Gang
Consulting Inc.),
is received, in which case the Escrow Agent shall deliver certificates
representing the number of Escrow Shares as instructed in the Confirmation.
3.3 If there are any Escrow Shares held by the Escrow Agent on the first
anniversary of the Effective Date, then the Escrow Agent is authorized and
directed to deliver such Escrow Shares as follows:
(a) as to 50% of such Escrow Shares to Sonora Capital Corp.; and
(b) as to 50% of such Escrow Shares to the Principal Vendors pro-rata
based upon the number of Purchase Shares that each of the Principal
Vendors deposited into Escrow.
3.4 The registered owner of any Escrow Shares held by the Escrow Agent is
entitled to exercise all voting rights attached to such Escrow Shares.
3.5 The Escrow Shares will not be sold, assigned, hypothecated, alienated,
released from escrow, transferred within escrow or otherwise in any manner
dealt with except in accordance with this Agreement or as may be required
by reason of the bankruptcy of the
<PAGE>
-4-
Principal Vendors, in which case the Escrow Agent will hold the Escrow Shares
subject to this Agreement, for whatever person, firm or corporation shall be
legally entitled to be or become the registered owner thereof.
4. THE ESCROW AGENT
4.1 In exercising the rights, duties and obligations prescribed or confirmed by
this Agreement, the Escrow Agent will act honestly and in good faith and will
exercise that degree of care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances.
4.2 Kodiak and the Principal Vendors jointly and severally covenant and agree
from time to time and at all times hereafter well and truly to save, defend and
keep harmless and fully indemnify the Escrow Agent, its successors, and assigns,
from and against all loss, costs, charges, suits, demands, claims, damages and
expenses which the Escrow Agent, its successors or assigns may at any time or
times hereafter bear, sustain, suffer or be put unto for or by reason or on
account of its acting pursuant to this Agreement or anything in any manner
relating thereto or by reason of the Escrow Agent's compliance in good faith
with the terms hereof.
4.3 In case proceedings should hereafter be taken in any court respecting any
of the Escrow Shares, the Escrow Agent will not be obliged to defend any such
action or submit its rights to the court until it has been indemnified by other
good and sufficient security in addition to the indemnity given in Clause (b)
against its costs of such proceedings.
4.4 The Escrow Agent will have no responsibility in respect of loss of any of
the Escrow Shares except the duty to exercise such care in the safekeeping
thereof as it would exercise if the Escrow Shares belonged to the Escrow Agent.
The Escrow Agent may act on the advice of counsel but will not be responsible
for acting or failing to act on the advice of counsel.
4.5 The Escrow Agent will not be bound in any way by any contract between the
parties hereto whether or not it has notice thereof or of its terms and
conditions and the only duty, liability and responsibility of the Escrow Agent
will be to hold the Escrow Shares as herein directed and to pay and deliver the
same to such persons and other such conditions as are herein set forth. The
Escrow Agent will not be required to pass upon the sufficiency of the Escrow
Shares or to ascertain whether or not the person or persons who have executed,
signed or otherwise issued or authenticated the said documents have authority to
so execute, sign or authorize, issue or authenticate the said documents or any
of them, or that they are the same persons named therein or otherwise to pass
upon any requirement of such instruments that may be essential of their
validity, but it shall be sufficient for all purposes under this Agreement
insofar as the Escrow Agent is concerned that the said documents are deposited
with it as herein specified by the parties executing this Agreement with the
Escrow Agent.
4.6 In no event will the Escrow Agent be deemed to have assumed any liability
or responsibility for the sufficiency, form and manner of making any notice or
demand provided for
<PAGE>
-5-
under this Agreement or of the identity of the persons executing the same, but
it shall be sufficient if any writing purporting to be such a notice, demand or
protest is served upon the Escrow Agent in any manner sufficient to bring it to
its attention.
4.7 In the event that any of the Escrow Shares are attached, garnished or
levied upon under any court order, or if the delivery of such property is stayed
or enjoined by any court order or if any court order, judgment or decree is made
or entered affecting such property or affecting any act by the Escrow Agent, the
Escrow Agent may, in its sole discretion, obey and comply with all writs,
orders, judgments or decrees so entered or issued, whether with or without
jurisdiction, notwithstanding any provision of this Agreement to the contrary.
If the Escrow Agent obeys and complies with any such writs, order, judgment or
decrees it will not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding that
such writs, orders, judgments or decrees may be subsequently reversed, modified,
annulled, set aside or vacated.
4.8 Except as herein otherwise provided, the Escrow Agent is authorized and
directed to disregard in its sole discretion any and all notices and warnings
which may be given to it by any of the parties hereto or by any other person,
firm, association or corporation. It will, however, obey the order, judgment or
decree of any court of competent jurisdiction, and it is hereby authorized to
comply with and obey such orders, judgements or decrees and in case of such
compliance, it shall not be liable by reason thereof to any of the parties
hereto or to any other person, firm, association or corporation, even if
thereafter any such order, judgment or decree may be reversed, modified,
annulled, set aside or vacated.
4.9 If the Escrow Agent receives any written instructions contrary to the
instructions contained in this Agreement, the Escrow Agent may continue to hold
the Escrow Shares until the lawful determination of the issue between the
parties hereto.
4.10 If protest is made to any action contemplated by the Escrow Agent under
this Agreement, the Escrow Agent may continue to hold the Escrow Shares until
the right to the documents is legally determined by a court of competent
jurisdiction or otherwise.
4.11 If written notice of protest is made by either Kodiak or the Principal
Vendors to the Escrow Agent to any action contemplated by the Escrow Agent under
this Agreement, and such notice sets out reasons for such protest, the Escrow
Agent will be entitled to continue to hold the Escrow Shares until the right to
the documents is legally determined by a court of competent jurisdiction or
otherwise.
4.12 The Escrow Agent may resign as Escrow Agent by giving not less then ten
(10) days' notice thereof to each of Kodiak and the Principal Vendors. Kodiak
and the Principal Vendors may terminate the Escrow Agent by giving to the Escrow
Agent a notice of termination executed by each of them not less than ten (10)
days' prior to the proposed date of termination. The resignation or termination
of the Escrow Agent will be effective and the Escrow Agent will cease to be
bound by this Agreement on the date that is ten (10) days after the date of
receipt of
<PAGE>
-6-
the termination notice given hereunder or on such other date as the Escrow
Agent, Kodiak and the Principal Vendors may agree upon. All indemnities granted
to the Escrow Agent will survive the termination of this Agreement or the
resignation or termination of the Escrow Agent.
4.13 Notwithstanding anything herein to the contrary, the Escrow Agent may act
upon any written instructions given by the Principal Vendors and Kodiak jointly.
4.14 Notwithstanding anything to the contrary contained herein, in the event of
any dispute arising between Kodiak and the Principal Vendors or between any
other persons or between any of them with respect to the Share Exchange
Agreement, this Agreement or any matters arising thereto, or with respect to the
any of the Escrow Shares, the Escrow Agent may in its sole discretion deliver
and interplead the Escrow Shares into court and such delivery and interpleading
will be an effective discharge to the Escrow Agent.
4.15 The Escrow Agent is under no responsibility to take any action whatsoever
unless and until the reasonable fees and disbursements of the Escrow Agent due
or reasonably expected to accrue are paid in full.
5. COUNTERPARTS
5.1 This Agreement may be executed in several counterparts, each of which will
be deemed to be an original and all of which will together constitute one and
the same instrument.
6. GENERAL
6.1 Except as herein otherwise provided, no subsequent alteration, amendment,
change or addition to this Agreement will be binding upon the parties hereto
unless reduced to writing and signed by the parties.
6.2 This Agreement will enure to the benefit of and be binding upon the parties
and their respective heirs, executors, administrators, successors, and assigns.
6.3 The parties will execute and deliver all such further documents, do or
cause to be done all such further acts and things, and give all such further
assurances as may be necessary to give full effect to the provisions and intent
of this Agreement.
6.4 This Agreement will be governed by and construed in accordance with the law
of British Columbia.
6.5 Any notice required or permitted to be given under this Agreement will be
in writing and may be given by delivering, sending by electronic facsimile
transmission or other means of electronic communication capable of producing a
printed copy, or sending by prepaid registered mail posted in Canada the United
States and Australia, the notice to the addresses set forth on the first page of
this agreement (or to such other address or facsimile number as any
<PAGE>
-7-
party may specify by notice in writing to another party). Any notice delivered
or sent by electronic facsimile transmission or other means of electronic
communication capable of producing a printed copy on a business day will be
deemed conclusively to have been effectively given on the day the notice was
delivered, or the transmission was sent successfully, as the case may be. Any
notice sent by prepaid registered mail will be deemed conclusively to have been
effectively given on the third business day after posting; but if at the time of
posting or between the time of posting and the third business day thereafter
there is a strike, lockout, or other labour disturbance affecting postal
service, then the notice will not be effectively given until actually delivered.
6.6 Time is of the essence of this Agreement.
6.7 Delivery of an executed copy of this Agreement by electronic facsimile
transmission or other means of electronic communication capable of producing a
printed copy will be deemed to be execution and delivery of this Agreement on
the date of such communication by the party so delivering such copy, subject to
delivery of an originally executed copy of this Agreement to the other party
hereto within two weeks of the date of delivery of the copy sent via the
electronic communication.
6.8 It is understood and agreed by the parties to this Agreement that the only
duties and obligations of the Escrow Agent are those specifically stated herein
and no other.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed under
seal and delivered this ____ day of _________, 1999.
CLARK, WILSON
Per: /s/ Bernard Pinsky
------------------------------------
Partner
KODIAK GRAPHICS COMPANY
Per: /s/ William Turner, President
------------------------------------
Authorized Signatory
GANG CONSULTING INC.
Per: /s/ Authorized Signatory
------------------------------------
Authorized Signatory
<PAGE>
SIGNED, SEALED AND DELIVERED by )
RANDY DAGGITT in the presence of: )
)
)
/s/ Jeff Paquin )
- -------------------------------------- )
Name )
- -------------------------------------- ) /s/ Randy Daggitt
Address ) ----------------------
- -------------------------------------- ) RANDY DAGGITT
)
- -------------------------------------- )
Occupation )
SIGNED, SEALED AND DELIVERED by )
JEFF PAQUIN in the presence of: )
)
/s/ Michael Slater )
- -------------------------------------- )
Signature )
- -------------------------------------- ) /s/ Jeff Paquin
Print Name ) --------------------
- -------------------------------------- ) JEFF PAQUIN
Address )
- -------------------------------------- )
)
- -------------------------------------- )
Occupation )
SIGNED, SEALED AND DELIVERED by )
JAMES BROWN in the presence of: )
)
/s/ Jeff Paquin )
- -------------------------------------- )
Name )
- -------------------------------------- ) /s/ James Brown
Address ) --------------------
- -------------------------------------- ) JAMES BROWN
)
- -------------------------------------- )
Occupation )
<PAGE>
SIGNED, SEALED AND DELIVERED by )
MICHAEL SLATER in the presence of: )
)
/s/ Jeff Paquin )
- -------------------------------------- )
Signature )
- -------------------------------------- ) /s/ Michael Slater
Print Name ) --------------------
- -------------------------------------- ) MICHAEL SLATER
Address )
- -------------------------------------- )
)
- -------------------------------------- )
Occupation )
SIGNED, SEALED AND DELIVERED by )
ANTHONY VECCHIO in the presence of: )
)
/s/ Jeff Paquin )
- -------------------------------------- )
Signature )
- -------------------------------------- ) /s/ Anthony Vecchio
Print Name ) --------------------
- -------------------------------------- ) ANTHONY VECCHIO
Address )
- -------------------------------------- )
)
- -------------------------------------- )
Occupation )
EXHIBIT 10.5
SERVICE AGREEMENT
THIS AGREEMENT dated for reference the 1st day of March, 1999.
BETWEEN:
Jeffrey D Paquin, Lawyer and business man, residing at 4775 Woodgreen
Drive, West Vancouver, British Columbia
("JDP.")
OF THE FIRST PART
AND:
Sportsprize Entertainment Inc.,
A body corporate incorporated under the laws of the
State of Nevada, U.S.A.
("Sportsprize")
OF THE SECOND PART
WHEREAS:
A. Jeffrey Paquin ("JDP") is a Director and President of Sportsprize
Entertainment Inc.
B. Sportsprize wishes to pay JDP. to provide services to Sportsprize, and to
continue toserve as an officer of Sportsprize and perform the duties of the
office of President of Sportsprize, on the terms and subject to the conditions
set out herein.
NOW, THEREFORE, THIS AGREEMENT WITNESSES that the parties mutually agree as
follows:
1. Engagement: Sportsprize engages JDP., to provide the services of President
to Sportsprize to serve as an officer of Sportsprize and perform the duties
of the office of President of Sportsprize.
2. Term: The term ("Term") of the engagement ("Engagement") deemed to have
commenced on the date of execution and will end on the first anniversary,
unless terminated pursuant to this Agreement.
3. Duties and Obligations of JDP: During the Term, JDP. will:
<PAGE>
2
(a) Make himself available for election to the office of President of
Sportsprize, as determined by the Board of Directors (the "Board") of
Sportsprize.
4. Performance: JDP. will perform the duties hereunder as follows:
(a) Subject to ill health, JDP. will provide the services of President to
Sportsprize during each day that is a business day in the Term.
5. Remuneration: In consideration of the services to be provided by JDP.
hereunder, Sportsprize will:
(a) pay JDP. US$ 3,500 (or such other amount as the parties may agree in
writing) per calendar month during the Term on the last day of each
month or, if such days are not business days, on the first prior day
that is a business day;
(1) Once JDP becomes a full time employee of Sportsprize, JDP. shall
receive from Sportsprize USD $7,500 per Month. Further, once the
company achieves an income revenue that is at least equal to the
companies operating costs, then the parties will renegotiate
JDP's monthly remuneration to a rate considered at par to
industry standards.
(b) Reimburse JDP, for all reasonable expenses incurred by JDP. in the
performance of the duties as President .
(b) In the absolute discretion of the Board, grant JDP stock options in
accordance with the rules and regulations of applicable regulatory
authorities. The minimum number of options to be issued per year will
be 300,000 at a price no less than $0.25 per share, and subject to the
appropriate regulatory bodies.
6. Termination: The following will govern termination under this Agreement:
(a) If JDP agrees to become a full-time employee of Sportsprize, JDP. may
deliver to Sportsprize a notice to terminate this Engagement on a day
not less than 30 days after the day of such delivery and the
Engagement will terminate at the expiration of such 30-day period.
(b) if JDP wishes to terminate his employment or this agreement he shall
give the company thirty days notice, and will not receive any further
stock incentives thereafter.
(b) Sportsprize may terminate the Engagement without notice and without
any payment in lieu of notice if:
(i) JDP. is guilty of any wilful act, neglect, or conduct that causes
substantial damage or discredit to Sportsprize, or
(ii) JDP. is convicted of any offense involving fraud.
<PAGE>
3
(c) Sportsprize may terminate the Engagement on notice given not less than
one- (1) months prior to the effective date of termination. Upon such
termination, JDP. will be paid a severance allowance as follows:
Six months income and no more than two thirds of any remaining stock
incentives still outstanding
7. Disclosure: JDP will refrain from making public or disclosing to any person
who is not an officer or direction of Sportsprize any information that may
come to the knowledge of Sky during the Term respecting the business
dealings of Sportsprize or any of the clients of Sportsprize.
8. 1. Indemnity: JDP. will indemnify and save harmless Sportsprize from and
against any and all damages or losses resulting from:
(a) Any breach of this Agreement on the part of JDP., or
(c) Any act or omission of JDP. where such constitutes gross negligence or
wilful misconduct, but no act of JDP will, of itself, be deemed gross
negligence or wilful misconduct if it is done or omitted at the
instruction or with the concurrence of the Board.
2. Sportsprize shall execute an Indemnification Agreement in favour of
JDP acting out his duties as an executive Officer of the Company.
9. Assignment: JDP may not assign all or any part of its interest in this
Agreement or delegate the performance of his duties hereunder to any other
person without the written consent of Sportsprize.
10. Miscellaneous:
(a) Each party will, on the request of the other, execute and deliver such
other agreements, deeds, documents, and instruments, and do such
further acts and things as the other may reasonably request in order
to evidence, carry out and give full force and effect to the terms,
conditions, intent and meaning of this Agreement.
(b) If any provision of this Agreement is invalid or unenforceable for any
reason whatsoever, such provision will be severable from the remainder
of this Agreement, the validity of the remainder will continue in full
force and effect and this Agreement will be construed as if it had
been executed without the invalid or unenforceable provision.
(c) No consent or waiver express or implied, by either party to or of any
breach by the other party in the performance by the other of any or
all of its obligations under this Agreement:
<PAGE>
4
(i) Will be valid unless it is in writing and specifically stated to
be a consent or waiver pursuant to this subsection,
(ii) May be relied on by the other as a consent or waiver to or of any
other breach or default of the same or any other obligation,
(iii)Will constitute a general consent or waiver under this
Agreement, or
(iv) Will eliminate or modify the need for a specific consent or
waiver pursuant to this subsection in any other instance.
(d) Notices, requests, demands, or directions to one party to this
Agreement by another will be in writing and will be delivered as
follows:
If to Sportsprize at:
----------------------------------
----------------------------------
If to JDP. at:
4775 Woodgreen Drive, West Vancouver BC., V7S 2Z9
Attention: Jeffrey Paquin
Or to such other address as may be specified by one party to the other
in a notice given in the manner provided in this subsection.
(e) This Agreement is made in British Columbia with the intention that its
construction and validity and all other issues related to its
administration will, in all respects, be governed by the laws
prevailing in that Province.
(f) In the event of any dispute between the parties in respect of the
interpretation of this Agreement or any matter to be agreed on, such
dispute will be determined by a single arbitrator appointed and acting
pursuant to the Commercial Arbitration Act (British Columbia) and the
decision of the arbitrator will be final and binding on the parties.
<PAGE>
5
(g) This Agreement constitutes the entire agreement between the parties
and there are no representations or warranties, express or implied,
statutory or otherwise, and no agreement collateral hereto other than
as expressly set forth or referred to herein.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
day first above written.
Sportsprize Entertainment Inc.
By it's authorized signatory:
/s/Illegible
- ------------------------------------
Secretary/treasurer
/s/Jeffrey D. Paquin
- ------------------------------------
Jeffrey D Paquin
EXHIBIT 10.6
SERVICE AGREEMENT
THIS AGREEMENT dated for reference the 1st day of March, 1999.
BETWEEN:
John Gordon Thompson.of 6368 Crescent Court, Delta British Columbia
V4K 4Y5
("THOMPSON")
OF THE FIRST PART
AND:
Sportsprize Entertainment Inc.,
A body corporate incorporated under the laws of the
State of Nevada, U.S.A.
("SEI")
OF THE SECOND PART
WHEREAS:
A. Thompson has fourteen years experience in sports related gaming operations
with the British Columbia Lottery Corporation.
B. SEI wishes for Thompson to serve as an officer of SEI and perform the
duties of the office of Vice President of Research and Development of SEI, on
the terms and subject to the conditions set out herein.
NOW, THEREFORE, THIS AGREEMENT WITNESSES that the parties mutually agree as
follows:
1. Engagement: SEI engages Thompson and Thompson agrees, to serve as an
officer of SEI and perform the duties of the office of Vice President of
Research and Development of SEI described in subsection 3(a), on the terms
and subject to the conditions set out herein.
2. Term: The term ("Term") of the engagement ("Engagement") pursuant to
section 1 will be deemed to have commenced on the date of execution and
will end on the first anniversary, unless terminated pursuant to this
Agreement.
3. Duties and Obligations of THOMPSON: During the Term, THOMPSON will:
[Initials]
<PAGE>
2
(a) Make himself available for election to the Office of Vice President of
SEI, including, without limitation, performance of each of the
following duties:
(i) Acting as, and accepting the appointment to the Office of
Vice President of Research & Development.
(ii) Recommending product specifications.
(iii) Responsibility for preparing specifications for product
development and software design.
(iv) Designing and implementing procedures for product and
software development.
(v) Assuming responsibility for direction and development of
product.
(vi) Undertaking strategic planning in all present and future
product development.
(vii) Monitoring and evaluating the product design and systems
support
(viii) Maintaining liaison with key personnel such as software
developers, designers, writers engineers and systems support
staff.
(ix) Participating in corporate strategies for product roll out;
including presentations, board meetings etc.
(x) Assisting the President and otherwise acting in accordance
with his instructions.
(b) Be liable to his own income tax pursuant to the Income Tax Act and any
other applicable legislation.
4. Performance: Thompson and Thompson will perform their duties hereunder as
follows:
(a) Subject to ill health of Thompson, he will provide the services to SEI
during each day that is a business day in the Term.
(b) During the Term to performing the duties described in subsection 3(a)
to the best of his skill and ability.
5. Remuneration: In consideration of the services to be provided by Thompson
hereunder, SEI will:
[Initials]
<PAGE>
3
(a) pay Thompson USD$ 3,500 (or such other amount as the parties may agree
in writing) per calendar month during the Term on the last day of each
month or, if such days are not business days, on the first prior day
that is a business day;
(1) Once Thompson Completes and delivers a working Product that has
been Beta tested on SEI web-site and is available for commercial
use, SEI shall increase the payments to Thompson to USD $5,000
per month.
(2) Once the Product is has been put into commercial use, meaning
that SEI is able to achieve revenue as a result of the working
product, then Thompson shall receive a total of $7,000 per month.
(b) Reimburse Thompson for all reasonable expenses incurred by him in the
performance of the duties described in subsection 3(a) and will
provide to SEI such particulars of such expenses as SEI may reasonably
require;
(C) grant to Thompson, Incentive Stock Options in the amount 150,000
shares priced at $0.25
6. Termination: The following will govern termination under this Agreement:
(a) SEI may terminate the Engagement without notice and without any
payment in lieu of notice if:
(i) Thompson is guilty of any wilful act, neglect, or conduct that
causes substantial damage (materially injure the reputation of
SEI) or discredit to SEI, or
(ii) Thompson is convicted of any offense involving fraud.
(b) SEI may terminate the Engagement on notice given not less than one-
(1) months prior to the effective date of termination. Upon such
termination, Thompson will be paid in an amount equivalent to three
months remuneration as set out in section 5.
7. Disclosure: Thompson will, refrain from making public or disclosing to any
person who is not an officer or direction of SEI any information, not
already in the public domain, that may come to the knowledge of Thompson
during the Term respecting the business dealings of SEI or any of the
clients of SEI.
8. Indemnity: 1. Thompson will indemnify and save harmless SEI from and
against any and all damages or losses resulting from:
(a) Any breach of this Agreement on the part of Thompson, or
[Initials]
<PAGE>
4
(a) Any act or omission of Thompson where such constitutes gross
negligence or wilful misconduct, but no act of Thompson will, of
itself, be deemed gross negligence or willful misconduct if it is done
or omitted at the instruction or with the concurrence of the Board.
2. SEI will provide a separate Indemnification Agreement to Thompson in
respect to his duties as an officer of SEI
9. Miscellaneous
(a) Each party will, on the request of the other, execute and deliver such
other agreements, deeds, documents, and instruments, and do such
further acts and things as the other may reasonably request in order
to evidence, carry out and give full force and effect to the terms,
conditions, intent and meaning of this Agreement.
(b) If any provision of this Agreement is invalid or unenforceable for any
reason whatsoever, such provision will be severable from the remainder
of this Agreement, the validity of the remainder will continue in full
force and effect and this Agreement will be construed as if it had
been executed without the invalid or unenforceable provision.
(c) No consent or waiver express or implied, by either party to or of any
breach by the other party in the performance by the other of any or
all of its obligations under this Agreement:
(i) Will be valid unless it is in writing and specifically stated to
be a consent or waiver pursuant to this subsection,
(ii) May be relied on by the other as a consent or waiver to or of any
other breach or default of the same or any other obligation,
(iii)Will constitute a general consent or waiver under this
Agreement, or
(iv) Will eliminate or modify the need for a specific consent or
waiver pursuant to this subsection in any other instance.
(d) Notices, requests, demands, or directions to one party to this
Agreement by another will be in writing and will be delivered as
follows:
If to Sportsprize at:
----------------------------------
----------------------------------
If to Thompson at:
[Initials]
<PAGE>
5
----------------------------------
----------------------------------
Attention: Mr. Thompson
Or to such other address as may be specified by one party to the other
in a notice given in the manner provided in this subsection.
(e) This Agreement is made in British Columbia with the intention that its
construction and validity and all other issues related to its
administration will, in all respects, be governed by the laws
prevailing in that Province.
(f) In the event of any dispute between the parties in respect of the
interpretation of this Agreement or any matter to be agreed on, such
dispute will be determined by a single arbitrator appointed and acting
pursuant to the Commercial Arbitration Act (British Columbia) and the
decision of the arbitrator will be final and binding on the parties.
[Initials]
<PAGE>
6
(g) This Agreement constitutes the entire agreement between the parties
and there are no representations or warranties, express or implied,
statutory or otherwise, and no agreement collateral hereto other than
as expressly set forth or referred to herein.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
day first above written.
Sportsprize Entertainment Inc.
By it's authorized signatory:
/s/ Jeff Paquin
- ------------------------------------
Jeff Paquin
John Thompson
By his signatory:
/s/ John Thompson
- ------------------------------------
John Thompson
EXHIBIT 10.7
SERVICE AGREEMENT
THIS AGREEMENT dated for reference the 1st day of March, 1999.
BETWEEN:
Donald Robert Mackay, CMA., 1840 Redwood Drive, Surrey,
British Columbia
("Bob")
OF THE FIRST PART
AND:
Sportsprize Entertainment, Inc.,
A body corporate incorporated under the laws of the
State of Nevada, U.S.A.
("SEI")
OF THE SECOND PART
WHEREAS:
A. Bob is a certified Management Accountant, with over twenty years experience
as Chief Financial Officer, Senior Financial Accountant for Reporting Companies.
Mr. Mackay received his Bachelor of Commerce Degree from the University of
British Columbia in 1976.
B. SEI wishes to obtain from Bob, and Bob has agreed to provide to SEI,
accounting services and to serve as an officer of SEI and perform the duties of
the office of Chief Financial Officer of SEI, on the terms and subject to the
conditions set out herein.
NOW, THEREFORE, THIS AGREEMENT WITNESSES that the parties mutually agree as
follows:
1. Engagement: SEI engages Bob and Bob agrees, to provide professional
accounting services to SEI and to serve as an officer of SEI and perform
the duties of the office of Chief Financial Officer of SEI described in
subsection 3(a), on the terms and subject to the conditions set out herein.
2. Term: The term ("Term") of the engagement ("Engagement") pursuant to
section 1 will be deemed to have commenced on the date of execution and
will end on the first anniversary, unless terminated pursuant to this
Agreement.
[Initials]
<PAGE>
2
3. Duties and Obligations of Bob: During the Term, Bob will:
(a) Make himself available for election to the Office of Chief Financial
Officer of SEI, including, without limitation, performance of each of
the following duties:
(i) Acting as, and accepting the appointment to the Office of
Chief Financial Officer.
(ii) Recommending accounting and financial reporting systems.
(iii) Responsibility for preparing monthly banking
reconciliation's, financial statements, accounts payable,
financial reports necessary for Regulatory Filings etc.
(iv) Designing and implementing procedures for corporate
accounting.
(v) Assuming responsibility for direction and development of
corporate filings.
(vi) Undertaking strategic planning in the Office of CFO.
(vii) Monitoring and evaluating the financial systems support.
(viii) Maintaining liaison with key Regulatory Personnel.
(ix) Participating in corporate strategies for product roll out;
including presentations, board meetings etc.
(x) Assisting the President and otherwise acting in accordance
with his instructions.
(b) Be liable to his own income tax pursuant to the Income Tax Act and any
other applicable legislation.
4. Performance: Bob will perform his duties hereunder as follows:
(a) Subject to ill health of Bob, he will provide the services to SEI
during each day that is a business day in the Term.
(b) Bob will devote four hours of his time and energy during normal
business hours on each business days during the Term to performing the
duties described in subsection 3(a) to the best of his skill and
ability.
(c) Notwithstanding subsections (a) and (b), Bob will not be required to
provide the services to SEI on statutory holidays and at such times
and during such periods, being not less than ____ weeks in the
aggregate in respect of the year of the Term, as the parties may
reasonably agree in respect of vacation for Bob.
[Initials]
<PAGE>
3
5. Remuneration: In consideration of the services to be provided by Bob
hereunder, SEI will:
(a) pay Bob USD$2,000 (or such other amount as the parties may agree in
writing) per calendar month during the Term on the last day of each
month or, if such days are not business days, on the first prior day
that is a business day;
(1) Issue Bob 150,000 shares under Regulation "s".
(2) Upon the filing and receipt of the Form 10 with the Securities
and Exchange Commission, SEI will issue to Bob 100,000 stock
options at a price not to be less than usd$.25.
(b) Reimburse Bob for all reasonable expenses incurred by him in the
performance of the duties described in subsection 3(a) and will
provide to SEI such particulars of such expenses as SEI may reasonably
require;
6. Termination: The following will govern termination under this Agreement:
(a) SEI may terminate the Engagement without notice and without any
payment in lieu of notice if:
(i) Bob is guilty of any wilful act, neglect, or conduct that causes
substantial damage or discredit to SEI, or
(ii) Bob is convicted of any offense involving fraud.
(b) SEI may terminate the Engagement on notice given not less than one-
(1) months prior to the effective date of termination. Upon such
termination, Bob will be paid a severance allowance as follows:
One months income.
(c) In the event that Bob becomes permanently disabled prior to
termination of the Engagement hereunder, SEI may terminate the
Engagement in which case the provisions of subsection 6(a) will apply.
(d) In the event the Bob shall become a full time employee then this
Agreement shall be rescinded and replaced with a new Employment
Agreement.
7. Disclosure: Bob will, refrain from making public or disclosing to any
person who is not an officer or direction of SEI any information that may
come to the knowledge of Pat during the Term respecting the business
dealings of SEI or any of the clients of SEI.
[Initials]
<PAGE>
4
8. Indemnity: bob will indemnify and save harmless SEI from and against any
and all damages or losses resulting from:
(a) Any breach of this Agreement on the part of Bob, or
(b) Any act or omission of Bob where such constitutes gross negligence or
wilful misconduct, but no act of Bob will, of itself be deemed gross
negligence or wilful misconduct if it is done or omitted at the
instruction or with the concurrence of the Board.
9. Miscellaneous
(a) Each party will, on the request of the other, execute and deliver such
other agreements, deed, documents, and instruments, and do such
further acts and things as the other may reasonably request in order
to evidence, carry out and give full force and effect to the terms,
conditions, intent and meaning of this Agreement.
(b) If any provision of this Agreement is invalid or unenforceable for any
reason whatsoever, such provision will be severable from the remainder
of this Agreement, the validity of the remainder will continue in full
force and effect and this Agreement will be construed as if it had
been executed without the invalid or unenforceable provision.
(c) No consent or waiver express or implied, by either party to or of any
breach by the other party in the performance by the other of any or
all of its obligations under this Agreement:
(i) Will be valid unless it is in writing and specifically
stated to be a consent or waiver pursuant to this
subsection,
(ii) May be relied on by the other as a consent or waiver to or
of any other breach or default of the same or any other
obligation,
(iii) Will constitute a general consent or waiver under this
Agreement, or
(iv) Will eliminate or modify the need for a specific consent or
waiver pursuant to this subsection in any other instance.
(d) Notices, requests, demands, or directions to one party to this
Agreement by another will be in writing and will be delivered as
follows:
If to SEI at:
--------------------------------
[Initials]
<PAGE>
5
--------------------------------
If to Bob at:
1840 Redwood Drive
Surrey, B.C. V1P 1M6
Attention: Mr. Bob Mackay
Or to such other address as may be specified by one party to the other
in a notice given in the manner provided in this subsection.
(e) This Agreement is made in British Columbia with the intention that its
construction and validity and all other issues related to its
administration will, in all respects, be governed by the laws
prevailing in that Province.
(f) In the event of any dispute between the parties in respect of the
interpretation of this Agreement or any matter to be agreed on, such
dispute will be determined by a single arbitrator appointed and acting
pursuant to the Commercial Arbitration Act (British Columbia) and the
decision of the arbitrator will be final and binding on the parties.
[Initials]
<PAGE>
6
(g) This Agreement constitutes the entire agreement between the parties
and there are no representations or warranties, express or implied,
statutory or otherwise, and no agreement collateral hereto other than
as expressly set forth or referred to herein.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
day first above written.
Sportsprize Entertainment Inc.
By it's authorized signatory:
/s/ Jeff Paquin
- -------------------------------------
Robert MacKay, CMA
By his signatory:
/s/ Bob MacKay
- -------------------------------------
Bob MacKay
EXHIBIT 10.8
SERVICE AGREEMENT
THIS AGREEMENT dated for reference the 1st day of March, 1999.
BETWEEN:
Olson Cove Consulting Ltd., a body corporate incorporated under
The laws of the Province of British Columbia
("OCCL.")
OF THE FIRST PART
AND:
Sportsprize Entertainment Inc.,
A body corporate incorporated under the laws of the
State of Nevada, U.S.A.
("SEI")
OF THE SECOND PART
WHEREAS:
A. Thomas Cove ("Thomas") is an employee of Olson Cove Consulting Ltd.
B. SEI wishes to obtain from OCCL. and OCCL. has agreed to provide to SEI, the
services of Thomas to serve as an officer of SEI and perform the duties of the
office of Vice President Technical Operations of SEI, on the terms and subject
to the conditions set out herein.
NOW, THEREFORE, THIS AGREEMENT WITNESSES that the parties mutually agree as
follows:
1. Engagement: SEI engages OCCL., and OCCL. agrees, to provide the services of
Thomas to SEI to serve as an officer of SEI and perform the duties of the
office of Vice-President Technical Operations of SEI described in
subsection 3(a), on the terms and subject to the conditions set out herein.
2. Term: The term ("Term") of the engagement ("Engagement") pursuant to
section 1 will be deemed to have commenced on the date of execution and
will end on the first anniversary, unless terminated pursuant to this
Agreement.
[Initials]
<PAGE>
2
3. Duties and Obligations of Thomas: During the Term, OCCL. will:
(a) Make Thomas available for election to the office of Vice-President of
technical Operations of SEI as from time to time determined by the
Board of Directors (the "Board") of SEI, including, without
limitation, performance of each of the following duties:
(i) Acting as, and accepting the appointment to the office of
Vice president of Technical Operations.
(ii) Recommending methods and models of execution of product
development plans.
(iii) Responsibility for management of overall product delivery
(iv) Designing and implementing procedures for product
development, including software and graphics design, web
site and Internet functions in relation to product delivery.
(v) Assuming responsibility for direction of the software
writers, engineers and designers, ensuring schedule
requirements quality controls.
(vi) Undertaking strategic planing including the use case models,
identification of technical, resource and budgetary
constraints.
(vii) Monitoring and evaluating the product design and systems
support for operations.
(viii) Maintaining liaison with key personnel such as software
writers, engineers, systems support teams and customers.
(ix) Participating in corporate strategies
(x) Assisting the President and otherwise acting in accordance
with his instructions.
(b) Be liable to comply with the withholding and other requirements of the
Income Tax Act and any other applicable legislation in respect of any
remuneration paid by OCCL to Thomas.
4. Performance: OCCL. and Thomas will perform their duties hereunder as
follows:
(a) Subject to ill health of Thomas, OCCL. will provide the services of
Thomas to SEI during each day that is a business day in the Term.
[Initials]
<PAGE>
3
(b) OCCL. will cause Thomas to devote at least Half all of his time and
energy during normal business hours on each business day during the
Term to performing the duties described in subsection 3(a) to the best
of his skill and ability.
(c) Notwithstanding subsections (a) and (b), OCCL. will not be required to
provide the services of Thomas to SEI on statutory holidays and at
such times and during such periods, being not less than two weeks in
the aggregate in respect of each year of the Term, as the parties may
reasonably agree in respect of vacation for Thomas
5. Remuneration: In consideration of the services to be provided by OCCL.
hereunder, SEI will:
(a) pay OCCL. US$ 2000 (or such other amount as the parties may agree in
writing) per calendar month during the Term on the last day of each
month or, if such days are not business days, on the first prior day
that is a business day;
(1) Once Thomas becomes a full time employee of SEI, OCCL. shall
receive from SEI USD $5,000 per Month. Further, once the company
achieves an income revenue that is at least equal to the
companies operating costs, then the parties will renegotiate
Thomas's monthly remuneration to a rate considered at par to
industry standards.
(2) Issue OCCL 25,000 common class A voting shares as a signing bonus
upon the execution of this Agreement,
(3) Issue OCCL 125,000 Common Shares but to be held in escrow only to
be released to Thomas on the performance of the following;
i. One half (62,500) on July 1.1999.
ii. One half (62,500) on the first anniversary of this Agreement
(b) Reimburse OCCL. or Thomas, as the case may be, for all reasonable
expenses incurred by OCCL. and Thomas in the performance of the duties
described in subsection 3(a) and OCCL. and Thomas, as the case may be,
will provide to SEI such particulars of such expenses as SEI may
reasonably require;
(c) Grant OCCL stock options in accordance with the rules and regulations
of applicable regulatory authorities. The minimum number of options to
be issued per year will be 100,000 at a price no less than $0.50 per
share, and subject to the appropriate regulatory bodies.
6. Termination: The following will govern termination under this Agreement:
(a) If Thomas agrees to become a full-time employee of SEI, OCCL. may
deliver to SEI a notice to terminate the Engagement on a day not less
than 30 days after the day of such delivery and the Engagement will
terminate at the expiration of such 30-day period, provided that
Thomas will then be deemed to replace and to substitute for OCCL. for
all purposes of this Agreement and the provisions of this
[Initials]
<PAGE>
4
Agreement will be construed mutatis mutandis with respect to such
replacement and substitution.
(b) if Thomas wishes to terminate his employment or this agreement he
shall give the company thirty days notice, and will not receive any
further stock incentives thereafter.
(c) SEI may terminate the Engagement without notice and without any
payment in lieu of notice if:
(i) OCCL. Or Thomas is guilty of any wilful act, neglect, or conduct
that causes substantial damage or discredit to SEI, or
(ii) OCCL. Or Thomas is convicted of any offense involving fraud.
(d) SEI may terminate the Engagement on notice given not less than one-
(1) months prior to the effective date of termination. Upon such
termination, OCCL. will be paid a severance allowance as follows:
One months income.
(e) In the event that Thomas becomes permanently disabled prior to
termination of the Engagement hereunder, SEI may terminate the
Engagement in which case the provisions of subsection 6(a) will apply.
7. Disclosure: Thomas will refrain from making public or disclosing to any
person who is not an officer or direction of SEI any information that may
come to the knowledge of Thomas during the Term respecting the business
dealings of SEI or any of the clients of SEI.
8. 1. Indemnity: OCCL. will indemnify and save harmless SEI from and against
any and all damages or losses resulting from:
(a) Any breach of this Agreement on the part of OCCL., or
(b) Any act or omission of OCCL. where such constitutes gross negligence
or wilful misconduct, but no act of Thomas will, of itself, be deemed
gross negligence or wilful misconduct if it is done or omitted at the
instruction or with the concurrence of the Board.
2. SEI shall execute an Indemnification Agreement in favour of Thomas
acting out his duties as an executive Officer of the Company.
[Initials]
<PAGE>
5
9. Assignment: Thomas may not assign all or any part of its interest in this
Agreement or delegate the performance of Thomas's duties hereunder to any
other person without the written consent of SEI.
10. Miscellaneous:
(a) Each party will, on the request of the other, execute and deliver such
other agreements, deeds, documents, and instruments, and do such
further acts and things as the other may reasonably request in order
to evidence, carry out and give full force and effect to the terms,
conditions, intent and meaning of this Agreement.
(b) If any provision of this Agreement is invalid or unenforceable for any
reason whatsoever, such provision will be severable from the remainder
of this Agreement, the validity of the remainder will continue in full
force and effect and this Agreement will be construed as if it had
been executed without the invalid or unenforceable provision.
(c) No consent or waiver express or implied, by either party to or of any
breach by the other party in the performance by the other of any or
all of its obligations under this Agreement:
(i) Will be valid unless it is in writing and specifically stated to
be a consent or waiver pursuant to this subsection,
(ii) May be relied on by the other as a consent or waiver to or of any
other breach or default of the same or any other obligation,
(iii)Will constitute a general consent or waiver under this
Agreement, or
(iv) Will eliminate or modify the need for a specific consent or
waiver pursuant to this subsection in any other instance.
(d) Notices, requests, demands, or directions to one party to this
Agreement by another will be in writing and will be delivered as
follows:
If to Sportsprize at:
----------------------------------
----------------------------------
If to OCCL. at:
921 Roslyn Blvd.
North Vancouver, BC
V7G 1P4
[Initials]
<PAGE>
6
Attention: Thomas Cove.
Or to such other address as may be specified by one party to the other
in a notice given in the manner provided in this subsection.
(e) This Agreement is made in British Columbia with the intention that its
construction and validity and all other issues related to its
administration will, in all respects, be governed by the laws
prevailing in that Province.
(f) In the event of any dispute between the parties in respect of the
interpretation of this Agreement or any matter to be agreed on, such
dispute will be determined by a single arbitrator appointed and acting
pursuant to the Commercial Arbitration Act (British Columbia) and the
decision of the arbitrator will be final and binding on the parties.
[Initials]
<PAGE>
7
(g) This Agreement constitutes the entire agreement between the parties
and there are no representations or warranties, express or implied,
statutory or otherwise, and no agreement collateral hereto other than
as expressly set forth or referred to herein.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
day first above written.
Sportsprize Entertainment Inc.
By it's authorized signatory:
/s/ Jeff Paquin
- ------------------------------------
Jeff Paquin
Olson Cove Consulting Ltd.
By it's authorized signatory:
/s/ Thomas Cove
- ------------------------------------
Thomas Cove
EXHIBIT 10.9
CONTRACT
THIS AGREEMENT IS DATED FOR REFERENCE the 18th day of February, 1999
(hereinafter referred to as the "Agreement").
BETWEEN:
QUAD-LINQ SOFTWARE INC., a British Columbia company with a place of
business and postal address at #401-889 West Pender Street, Vancouver,
British Columbia (hereinafter referred to as "QUAD-LINQ")
AND:
BEAGLE VENTURES RESOURCES MANAGEMENT, INC., a State of Nevada, USA
company with a place of business and postal address at #1500-885 West
Georgia Street, Vancouver, British Columbia (hereinafter referred to
as the "Client")
WHEREAS:
A. QUAD-LINQ is a corporation providing services relating to the design and
development of software programs and systems;
B. The Client wishes to hire QUAD-LINQ as a contractor for the purpose of
providing the services set out in Schedule "A" to this Agreement
(hereinafter referred to as "Schedule A");
THEREFORE, in consideration of the mutual promises contained in this
agreement, QUAD-LINQ and the Client agree as follows:
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GENERAL
1. QUAD-LINQ's authorized representative is Roger L. Betterton, who has full
authority to act as agent of QUAD-LINQ in all matters pertaining to this
agreement.
2. The Client's authorized representative is Jeffrey D. Paquin (the "Client's
Representative").
3. The Client's Representative has full authority to act as agent of the
Client in all matters pertaining to this Agreement.
EMPLOYMENT RELATIONSHIP
4. QUAD-LINQ is an independent contractor and is not an employee of the Client
and is therefore not entitled to any benefits or payments other than as set
out in this Agreement and Schedule C to this Agreement.
SERVICES PROVIDED
5. QUAD-LINQ will provide services to the Client according to the terms set
out in Schedule A.
6. If a change to this Agreement or its schedule(s) is required by QUAD-LINQ
or the Client after this Agreement has been executed, any such change must
be in writing and signed by QUAD-LINQ and the Client (hereinafter referred
to as the "Parties") in order to be binding on either or both of the
Parties.
7. The services provided by QUAD-LINQ under this Agreement are subject to
review by the Client according to the terms and on the dates specified in
Review Schedule to this Agreement (hereinafter referred to as "Schedule
B").
PAYMENT FOR SERVICES PROVIDED
8. QUAD-LINQ's fee (the "Fee") and Payment Schedule, for providing the
services set out in Schedule A, are set out in Schedule "C" to this
Agreement (hereinafter referred to as "Schedule C").
9. QUAD-LINQ may submit interim statements of account for services rendered to
the Client from time to time for payment by the Client.
10. The Client shall pay the Fee to QUAD-LINQ on the terms set out in this
Agreement and in Schedule C.
11. QUAD-LINQ may incur certain expenses (hereinafter referred to as the
"Disbursements") in carrying out this Agreement and in providing the
services as set out in Schedule A. Upon QUAD-LINQ providing the Client with
a statement
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of the Disbursements, the Client shall pay QUAD-LINQ for those
Disbursements notwithstanding that the Disbursements may not be disclosed
in Schedule A or in Schedule C.
CONFLICT OF INTEREST
12. QUAD-LINQ represents that it has made every reasonable effort to ascertain
that it may perform the services set out in Schedule A without placing
itself in a situation of conflict of interest. If a situation arises or new
facts become evident which, in the opinion of QUAD-LINQ, places QUAD-LINQ
in a conflict of interest should it perform the services set out in
Schedule A then QUAD-LINQ may, upon notice to the Client, terminate this
Agreement (hereinafter referred to as a "Conflict Termination"). If there
is a Conflict Termination, the Client shall pay QUAD-LINQ for services
rendered up to the time when the conflict of interest arose or was
discovered. In either case, the Client shall also pay QUAD-LINQ for any
Disbursements incurred by QUAD-LINQ to the date of Conflict Termination.
ASSIGNMENT OF AGREEMENT/EMPLOYMENT OF SUB-CONTRACTORS
13. QUAD-LINQ may not assign the whole of this Agreement except with the
Client's written consent.
14. Notwithstanding the foregoing, QUAD-LINQ may hire any person, firm, or
corporation as subcontractor to perform any or all of the services set out
in Schedule A.
ACKNOWLEDGEMENT OF DEVELOPER
15. QUAD-LINQ will be recognized on the introduction of the software as the
original developer and Client will be recognized for any modifications
developed by their organization.
PROPERTY IN MATERIALS AND PROGRAMS
16. If, in the course of providing the services set out in Schedule A,
QUAD-LINQ develops or produces any programs, resources, images, procedures,
manuals or other materials (hereinafter referred to as the "Resources") for
the use of the Client, the property and all rights to the contents and form
of the Resources become and remain the property of Client.
CONFIDENTIALITY, ACCESS TO CLIENT DOCUMENTS AND INFORMATION
17. The Client shall provide all information and copies of documents which may
be reasonably necessary for QUAD-LINQ (or its assignee or sub-contractor)
to be able to provide the services as set out in Schedule A.
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18. QUAD-LINQ shall take all reasonable precautions to ensure that no
information or documents provided to QUAD-LINQ (or its assignee or
sub-contractor) by the Client shall be made public or shall be provided to
any person by any means unless specifically authorized in writing by the
Client.
TERMINATION BY QUAD-LINQ
20. QUAD-LINQ may terminate this Agreement if:
a. completion or continuation of this Agreement would place QUAD-LINQ or
its employees, assignees or sub-contractors, in a position of conflict
of interest which was not consented to by the parties whose interests
might be compromised; or
b. the Client has failed to pay QUAD-LINQ's statements of account when
due; or
c. the Client has not provided information, documents or participation
reasonably required by QUAD-LINQ to perform the services set out in
Schedule A.
If QUAD-LINQ terminates this Agreement for the reasons set out in (b) or (c)
above, the Client shall pay QUAD-LINQ the entire amount due to QUAD-LINQ
(notwithstanding that QUAD-LINQ has not completed the services set out in
Schedule A) pursuant to the Payment Schedule which amount shall become
immediately due and payable.
TERMINATION BY THE CLIENT
21. The Client may terminate this Agreement:
a. at any time and without cause upon 10 days written notice to QUAD-LINQ
if QUAD-LINQ or its employees, assignees or sub-contractors
unreasonably fails to perform the services set out in Schedule A upon
payment of the Disbursements incurred by QUAD-LINQ (or its assignee or
sub-contractor) including any amounts owing by QUAD-LINQ to its
assignee or sub-contractor.
b. at the time of any scheduled review as set out in Schedule B, if the
services provided by QUAD-LINQ at that time do not reasonably satisfy
the criteria set out in the Schedule B and provided that the Client
shall pay QUAD-LINQ for all services rendered and Disbursements
incurred up to that time.
c. at any time, with 10 days written notice to QUAD-LINQ, if the subject
matter of the services set out in Schedule A ceases to exist and upon
payment of:
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i. QUAD-LINQ's Disbursements incurred to the date of termination;
and
ii. QUAD-LINQ's fee (including applicable taxes) for services
provided to the date of termination; and
iii. payment to QUAD-LINQ of an amount equal to 50% of the fee which
QUAD-LINQ would have been entitled to charge for the services
remaining to be performed as set out in Schedule A.
AGENCY RELATIONSHIP BETWEEN THE PARTIES
22. QUAD-LINQ, its shareholders, directors, agents, employees, and assignees
are the agents of the Client in all matters pertaining to the carrying out
of this Agreement.
INDEMNITY
23. The Client agrees that the Client shall indemnify and save harmless
QUAD-LINQ and its shareholders, directors, agents, employees, and assignees
from all actions and claims against QUAD-LINQ or its shareholders,
directors, agents, employees, and assignees arising from the performance of
this Agreement or use of the Resources.
24. With respect to any action in defamation arising from the performance of
this Agreement or use of the Resources, the Client shall be deemed to have
published all reports, memoranda, recommendations and oral statements in
connection with the subject matter of this Agreement and all other matters
reasonably arising from the subject matter of the services set out in
Schedule A to this Agreement.
WARRANTIES
25. QUAD-LINQ makes no warranties or conditions, express or implied, and there
are expressly excluded all implied or statutory warranties or conditions of
merchantability or fitness for a particular purpose and those arising by
statute or otherwise in law or from a course of dealing or usage of trade.
Any stated express warranties are in lieu of all liabilities or obligations
for damages arising out of or in connection with the delivery, use,
performance or licensing of the Resources or in connection with any
services performed under this Agreement.
LIMITATION OF LIABILITY
26. QUAD-LINQ will only be liable for work done directly by QUAD-LINQ or its
employees. QUAD-LINQ will not be liable for any consequences which are the
direct or indirect result of any unauthorized work performed by anyone not
an employee of QUAD-LINQ.
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27. In no event whatsoever will QUAD-LINQ be liable for indirect,
consequential, exemplary, incidental, special or other similar damages,
including but not limited to lost profits, lost business revenue, failure
to realize expected savings, other commercial or economic loss of any kind
or any claim against the Client by any other party arising out of or in
connection with the delivery, use, performance or licensing of the
Resources or in connection with any services performed under this Agreement
or any breach of this Agreement, even if the Client has been advised of the
possibility of such damages.
CHOICE OF LAW
28. The laws of the Province of British Columbia shall govern this Agreement
and any disputes arising from this Agreement.
DISPUTE RESOLUTION
29. All disputes arising out of or in connection with this Agreement, or in
respect of any defined legal relationship associated therewith or derived
therefrom, shall be referred to and finally resolved by arbitration
administered by the British Columbia International Commercial Arbitration
Centre ("BCICAC") pursuant to its rules, or if the Parties otherwise agree,
by any other arbitrator and pursuant to rules as agreed upon.
30. If the Parties agree not to have their dispute arbitrated by the BCICAC,
then any legal action with respect to this Agreement shall be commenced at
a court registry and be heard by a court within the City of Vancouver.
SUCCESSORS AND ASSIGNS
31. This Agreement shall enure to the benefit and be binding upon QUAD-LINQ and
Client and their respective heirs, executors, administrators, successors
and assigns. "Successors" include any corporation resulting from the
amalgamation of a corporation with any other corporation.
ENTIRE AGREEMENT
32. This Agreement, including the Schedules attached hereto, comprise the
entire Agreement between QUAD-LINQ and the Client.
EFFECTIVE DATE
33. This Agreement comes into force on the date on which it is signed by
QUAD-LINQ or by the Client, whichever is the later date.
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EXECUTION BY TELECOPY
34. This Agreement may be executed by the parties and transmitted by facsimile
transmission and if so executed and transmitted this agreement will be for
all purposes as effective as if the parties had delivered an executed
original agreement.
CONSTRUCTION
35. In this Agreement, except as expressly otherwise provided or as the context
otherwise requires:
a. the headings and captions will be considered as provided for
convenience only and as not forming a part of this Agreement and will
not be used to interpret, define or limit the scope, extent or intent
of this Agreement or any of its provisions;
b. the words "include" or "including" when following any general term or
statement are not to be construed as limiting the general term or
statement to the specific items or matters set forth or to similar
items or matters but rather as permitting it to refer to all other
items or matters that could reasonably fall within its broadest
possible scope;
c. an accounting term not otherwise defined has the meaning assigned to
it under, and all accounting matters will be determined in accordance
with, Generally Accepted Accounting Principles as consistently
applied;
d. a reference to currency means United States currency unless
specifically indicated otherwise;
e. a reference to a statute includes every regulation made pursuant
thereto, all amendments to the statute or to any such regulation in
force from time to time and any statute or regulation that supplements
or supersedes such statute or any such regulation;
f. a reference to time or date is to the local time or date in Vancouver,
British Columbia, unless specifically indicated otherwise;
g. a reference to a particular corporation includes the corporation
derived from the amalgamation of the particular corporation or of a
corporation to which such reference is extended by this clause (g),
with one or more other corporations;
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h. a word importing the masculine gender includes the feminine or neuter;
a word importing the singular includes the plural and vice versa.
IN WITNESS of the foregoing this Agreement has been signed by the authorized
signatories for QUAD-LINQ and the Client on the dates noted below:
SIGNED by Roger L. Betterton, ) QUAD-LINQ SOFTWARE INC., by
authorized signatory for QUAD-LINQ ) its authorized signatory:
SOFTWARE INC., on the 18th day of )
February, 1999 in the presence of: ) /s/ Roger L. Betterton
Name: John Thompson ) ---------------------------
--------------------------- )
Address: 6328 Crescent Crt. )
------------------------ )
Delta, BC )
SIGNED by Jeffrey D. Paquin, ) BEAGLE VENTURES RESOURCES
authorized signatory for BEAGLE ) MANAGEMENT, INC., by
VENTURES RESOURCES ) its authorized signatory:
MANAGEMENT, INC., on the )
18th day of Feb, 1999 in ) /s/ Jeffrey D. Paquin
the presence of: ) ---------------------------
Name: /s/ Chris Georgelin )
--------------------------- )
Address: #401-889 W. Pender, Vanc. )
------------------------ )
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SCHEDULE A - 1.1
Schedule of Services
The software development contract consists of certain sportspool lottery schemes
that demonstrate significant on-line betting applications within the Internet
and lotto industry (the "Product").
In consideration of the premises and agreements set forth, the parties agree as
follows:
1. Deliver Commercial Product. QUAD-LINQ agrees to provide their services,
know-how and ability and facilities to deliver to Client a tested working
Product that is commercially viable and meets Client's objectives, as set
out in the detailed Acceptance Plan, defining what both Parties to this
agreement interperate the final Product to, (attached hereto), on or before
the six month anniversary of this agreement (the "Delivery Date").
a. To establish Operation Systems. QUAD-LINQ agrees to insure as part of
its service that the product is operational and functioning over the
Company's web site over the Internet.
b. To provide a schedule. QUAD-LINQ agrees to provide a schedule for
incremental releases, system design, graphics testing and deployment
of the Product.
2. QUAD-LINQ agrees that we will not during the term of this Agreement, and
for an additional six months, provide either directly or indirectly,
software development services to any Person or Entity anywhere that in any
way competes with the business of the Client.
3. QUAD-LINQ shall make available to Client all Product Technology.
4. Immediately following the execution of this Agreement and anytime
thereafter QUAD-LINQ shall provide to Client, at Client's request, copies
of all reports, drawings, specifications and blueprints, software and
systems relating to any method, product, apparatus or article used in
producing the Product. All material remains proprietary to Client.
5. QUAD-LINQ will immediately provide written notice to Client of any and all
improvements, discoveries and inventions which may be conceive or make,
either alone or while working with others during the term of this Agreement
and which relate to the Product and will immediately upon request by Client
and at its expense, execute and deliver any and all instruments and papers
necessary or desirable to submit Applications for Letters patent and obtain
Letters patent with respect to the inventions, improvements and
discoveries, and in general will do all
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SCHEDULE A - 1.2
Schedule of Services
lawful acts and things as may be requested by Client to obtain Letters patent in
any and all countries.
The schedule of services will consist of the following:
Week 1-3 (2/18/99 - 3/8/99)
Familiarization of Product Concept (Player and Administrative Interface)
- Develop Presentation
Week 4-6 (3/9/99 - 3/29/99)
Registration/Member Database (Player Interface)
- Database Development
- Registration Process
- Member Lookup Process
- Change Personal Information/Password
- Confirmation E-Mail
Week 7-12 (3/30/99 - 4/19/99)
Play Card (Player Interface)
- Play-Card Display Interface
- Integration into Placed-Bets Database
- Confirmation E-Mail
- CSV File Import
Week 13-14 (4/20/99 - 5/3/99)
Posting Results (Administrative Interface)
- Post-Results Interface
- Integration with Placed Bets/Prize Pool Database
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SCHEDULE A - 1.3
Schedule of Services
Week 15-16 (5/25/99 - 6/7/99)
Prize Pool Database (Player Interface)
- Database Development
- Integration with Placed-Bets Database and Play Card Display
Week 17-19 (6/8/99 - 6/28/99)
Play Card Administration (Administrative Interface)
- Database Development (Groups Database)
- Play Card Editor (Start/End Bet Time, Close Time, and Groups)
- Security ACL (Per Play Card)
- CSV File Import (Play Cards' Group)
Week 20-21 (6/29/99 - 7/12/99)
Placed Bets Database (Player Interface)
- Payout Calculation
- Trend Analysis
Week 22-23 (7/13/99 - 7/26/99)
System Administration (Administrative Interface)
- Paramutual Prize Share Configuration (% of Winnings for House)
- Member Administratin (Remove Members, Change Passwords, etc.)
- ACL Setup for Play Cards
Week 24-26 (7/27/99 - 8/16/99)
Final Implementation and Testing
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SCHEDULE B
Review Schedule
<TABLE>
Modules Completed Date Authorized Representative
- ------- -------------- -------------------------
<S> <C> <C>
A. Familiarization of ____________ ______________________
Product Concept
B. Registration/Member ____________ ______________________
Database
C. Play Card ____________ ______________________
D. Placed Bets Database ____________ ______________________
E. Prize Pool Database ____________ ______________________
F. Play Card Administration ____________ ______________________
G. Posting Results ____________ ______________________
H. System Administration ____________ ______________________
I. Final Implementation ____________ ______________________
and Testing
</TABLE>
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SCHEDULE C
Fee
1. In consideration of QUAD-LINQ performing services for Client, Client
agrees:
a. upon the execution of this Agreement to deliver a retainer of one
third the total agreed upon costs of USD$50,000. Additional second and
third payments March 30th 1999 and on the Delivery Date.
b. upon the execution of this Agreement by all the parties agree to issue
and deliver to QUAD-LINQ 200,000 Common Class A Shares issued from
Client's treasurey (hereinafter referred to as "Treasurey Shares") in
the authorized capital of Client, on a performance bases;
i. 100,000 released from escrow on the Delivery Date.
ii. 100,000 released when the systems and product have been tested
and are in operation on Client's Web site.
2. QUAD-LINQ may charge interest on accounts remaining outstanding more than
30 days at a rate of 18% per annum calculated monthly.
3. Client shall also pay to QUAD-LINQ a royalty (the "Royalty") of 5% per
annum on the first One Million dollars in the Net Sales of the Product
manufactured, used, licensed, or sold by Client, 3% on Net sales over one
million. "Net Sales" as used in this Agreement shall mean the net revenue
received by Client in connection with the manufacture, use, license, or
sale of the Product developed under this Agreement including receipts from
design services, prototyping, software licensing, product licensing, player
spend/sales but does not include any sums collected by Client for and paid
to a taxing authority for retail sales, excise or similar taxes imposed by
any governmental authority and does not include credits for any returned
Product and allowances for unreturned defective Product.
4. Commencing on the earliest of the dates set forth in Schedule C section 5,
Client shall deliver to QUAD-LINQ within 60 days after each anniversary
date of this Agreement during the term of this Agreement a report showing
for the preceding 12 months the amount of the Gross Sales and operational
cost an expenses during that period and the amount of the Royalty accrued
during that period.
5. The Royalty provided for herein shall be paid concurrently with the
rendering of the report to QUAD-LINQ. The Royalty payments shall commence
on the earlier of the fourth anniversary date of this Agreement or the
first anniversary date of this Agreement after the date to which the
Product is first put into commercial use.
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6. In order that the Royalty payable under this Agreement may be determined,
and the reports provided for herein be verified, Client agrees:
a. to keep full, complete and accurate books and records showing the
quantity of sales directly related to the Product, and records of
sales of each and every Product manufactured, used, sold, licensed,
shipped or otherwise disposed of by Client under this Agreement.
7. Client agrees to develop, manufacture, sell, distribute, license and to use
its best efforts to promote and market the Product.
8. Client shall have the absolute right at any time to assign, transfer,
sublicense, sublet or encumber its interest in the Product, and/or the
Licensed Rights granted to it without the written consent of QUAD-LINQ
provided that any assignee, transferee, sublicencee shall assume the
obligations of Client hereunder.
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ADDENDUM TO AGREEMENT
Dated May 12, 1999
BETWEEN:
QUAD-LINQ SOFTWARE INC.,
("Quad-linq")
AND:
SPORTSPRIZE ENTERTAINMENT INC., (FORMERLY BEAGLE VENTURES
RESOURCES MANAGEMENT, INC.)
("The client")
WHEREAS:
i. The parties the original Agreement Dated the 18th day of February, 1999.,
wish to set out certain changes related to services design and development
of the software programming and systems.
ii. The client wishes to extent the services of Quad-linq over and above the
services set out in schedule "A" to this Agreement.
IN CONSIDERATION of the promises, and the covenants and the agreements set
forth, the parties agree as follows:
TERMS
1. Quad-linq shall devote a minimum of 600 man-hours of software programming
and development time to Sportsprize over the next
<PAGE>
20 days in order to complete the recent version of the Sportsprize game as
define herein.
"Game" includes the following:
i. Email functions
ii. Chat rooms
iii. Bulletin boards
iv. The tournaments, world, national, regional, and private.
v. Basic story board graphics
vi. Coordinate and implement graphics supplied by the "design group" to be
recommended by the Client.
2. Quad-linq shall complete all necessary testing of the Game by July 1, 1999.
3. Quad-linq shall make it self available, on an hourly rate of $80.00, to the
Client, for any non-game components (e-commerce and auction) related to the
Clients web-site
PAYMENTS
1. The client shall immediately pay Quad-linq the balance of the original
$50,000 pursuant to the original Agreement. ($16,000)
2. Pay quad-linq an additional$80,000 when the Game is complete and ready for
testing (June 1. 1999)
3. Pay quad-linq $30,000 on July 1,1999 if Quad-link completes all testing and
the game is fully operational. If Quad-link is unable to meet the July 1,
1999 deadline then Quad-linq shall be subject to a $20,000 "penalty" and
the Client will only be liable to pay Quad-linq $10,000. For added
certainty "penalty" is not applicable if the following collateral events
occur:
i. Uncontrollable circumstances related to graphics to be provided by the
Design group hired by the Client.
ii. Benchmarking the Game software is delayed with hardware
implementation.
<PAGE>
4. The client shall pay Quad-linq an hourly rate of $80.00 for any additional
software development and programming services not related to the actual
Game itself, (i.e. e-commerce, and auction).
ROYALTIES
1. Quad-linq agrees to surrender any and all rights to the royalties set out
in this Agreement, in exchange for 50,000 stock options in the Clients
Authorized Capital at a price of $.25 per share. Options shall have a
minimum duration of two years.
IN WITNESS WHEREOF the parties hereto have executed this agreement on the day
first written above.
/s/Jeffrey Paquin
- -----------------------------------
Jeffrey Paquin, President
Sportsprize Entertainment Inc.
/s/Roger Betterton
- -----------------------------------
Roger Betterton, president & CEO.
Quad-linq Software Inc.
EXHIBIT 10.10
ACQUISITION AGREEMENT
THIS AGREEMENT dated for reference the 1st day of March, 1999.
BETWEEN:
Sportsprize Entertainment Inc.,
A body corporate incorporated under the laws
of the State of Nevada, U.S.A.
("SEI")
OF THE FIRST PART
AND:
Justin Tighm Innovative Games Inc., of
6368 Crescent Court,
Delta, B.C., V4K 4Y5
("JT INC")
OF THE SECOND PART
WHEREAS:
A. JT INC. has developed certain sports lottery schemes that demonstrate
on-line betting applications within the entertainment and lottery industry (the
"Product");
B. SEI wishes to obtain from JT INC. the exclusive right to improve, enhance,
modify, and develop the Product including ownership of any new software and
computer codes, trademarks and patents to the Product;
C. The parties desire to set forth the terms and conditions of the exclusive
ownership and licensing rights of the Product.
IN CONSIDERATION of the premises, and the covenants and agreements set forth,
the parties agree as follows:
1. Definitions
1.1 In this Agreement (including the recitals) except as expressly provided or
the context otherwise requires:
[Initials]
<PAGE>
2
(a) "Agreement means this Agreement including the recitals and schedules
hereto, as amended and supplemented;
(b) "Treasury Shares" means restricted common shares issued from SEI's
treasury;
(c) "Performance Escrow Shares" means Treasury Shares of SEI that qualify
to become free trading common shares upon JT INC. meeting certain
performance requirements;
(d) "Person" means and includes an individual, partnership, corporation,
joint stock company, joint venture, society, trust or unincorporated
association or other entity;
(e) "Subject-Matter" shall means the Products and all software, web site
designs, and sport betting applications, which are related to the
product;
(f) "Letters Patent and Applications for Letters Patent" shall include all
letters patent and applications for letters patent which may be, or
may have been filed for the Product by JT INC., or for him or in his
name or on his behalf at any time, or which have been issued, or may
be issued to him, or his benefit, whether filed or issued in the
United States of America, the Dominion of Canada or any country
whatever, and any reissues, divisions or continuations thereof;
(g) "New Product" shall include any and all inventions, software, computer
codes, technology, industrial design, trade secrets, research or
development data and know-how, designs, applications and prototypes
relating to the Subject-Matter whether or not patentable, and shall
include all engineering or scientific information; processes and
formulae; manufacturing data and procedures; machinery, apparatus and
equipment design; reports, composition of matter, drawings,
specifications and blueprints relating to any method, product,
apparatus or articles used in producing the Subject-Matter;
(i) "Trade-Marks" shall means all trade-marks including all trade names,
words or logos, certification marks and distinguishing guises which
may be, or may have been filed or registered for the Product by JT
INC., or for him or in his name or on his behalf at any time, or which
have been issued, or may be issued to him, or his benefit, whether
registered or filed in the United States of America, the Dominion of
Canada or any country whatever.
[Initials]
<PAGE>
3
2. JT INC.'s Covenants
2.1 Ownership. JT INC. grants to SEI Inc., subject to the conditions set forth
in this Agreement, an exclusive and transferable ownership of the Product and
New Products throughout the world which shall include the Exclusive Licensed
Rights and the exclusive right to manufacture, sell, distribute, license and put
into use throughout the world the Subject-Matter embodying the Product set forth
or claimed by this Agreement.
2.2 Future Inventions. JT INC. agrees to extend this agreement to include any
and all future patents, patent applications, inventions, discoveries,
improvements in products, New Products, processes and manufacturing techniques
relative to the Subject-Matter falling within the scope of the Letters patent
and Applications for Letters Patent and Product included in the Licensed Rights.
2.3 Disclosure Service. JT INC. shall promptly disclose to SEI Inc at no charge
all Product now in his possession and any discoveries or inventions which are an
improvement to the Product which he may conceive or make, at any time, either
alone or while working with others or which may hereafter come into his
possession during the term of this agreement and to also promptly disclose to
SEI any discovery or invention which is an improvement on the invention claimed
in any Letters patent or Applications for Letters patent which he makes or
acquires during the term of this Agreement and shall make available to SEI all
information relating thereto, including blueprints, sketches, drawings, designs
and other data, all such discoveries or inventions shall be deemed to be part of
the Subject-Matter for all purposes of this Agreement.
2.4 JT INC.'s Restrictions. JT INC. agrees that he will not during the term of
this Agreement, either directly or indirectly, grant to any Person anywhere any
further use or license or sublicense to manufacture, sell, distribute, license
or put into use any Product covered by this Agreement or to use the Licensed
Rights.
2.5 Access to Plans and Advice. Immediately following the execution of this
Agreement JT INC. shall provide to SEI copies of all his reports, drawings,
specifications and blueprints relating to any method, product, apparatus or
article used in producing the Subject-Matter.
2.6 Letters patent and Applications for Letters Patent. JT INC. will
immediately provide written notice to SEI of any and all improvements,
discoveries and inventions which he may conceive or make, either alone or while
working with others during the term of this Agreement and which relate to the
Product and will immediately upon request by SEI and at its expense, execute and
deliver any and all instruments and papers necessary or desirable to submit
Applications for Letters patent and obtain Letters patent with respect to the
inventions, improvements and discoveries, and in general will do all lawful acts
and things as may be requested by SEI to obtain Letters patent in any and all
countries.
3. SEI Covenants
[Initials]
<PAGE>
4
3.1 Initial Consideration. In consideration of JT INC. granting SEI the
ownership of the Product, SEI agrees:
(a) Upon the execution of this Agreement by all the parties SEI agrees to
issue and deliver to JT INC. 50,000 Bonus common Class A Voting shares
in the authorized capital of SEI;
(b) Issue to JT INC. 300,000 Common Class A Shares, to be held in escrow
and released upon JT INC. meeting certain performance requirements as
set out below;
i. SEI shall to JT INC. 300,000 Performance Escrow Common Class A Shares
when JT INC. delivers a working commercial Product ready for
commercial use on a SEI Inc web site.
3.2 Royalty. Commencing the eighteenth Month of this Agreement SEI shall begin
to pay to JT INC. a royalty (the "Royalty") of 1% per annum on the Gross Revenue
Sales (first million) and 5% (over one million) of the revenue directly related
to the Product and New Products manufactured, used, licensed, or sold by SEI
"Gross Sales" as used in this Agreement shall mean the gross revenue received by
SEI in connection with the manufacture, use, license, or sale, or advertising
revenue as a result of the Products this Agreement including receipts from
design services, prototyping, software licensing, product licensing,
advertising, mailing lists, but does not include any sums collected by SEI for
and paid to a taxing authority for retail sales, excise or similar taxes imposed
by any governmental authority and does not include credits for any returned
Produce and allowances for unreturned defective Product. SEI will follow
generally accepted accounting principles (GAPP).
3.3 Royalty Statements. Commencing on the earliest of the dates set forth in
section 3.4, SEI shall deliver to JT INC. within 60 days after each anniversary
date of this Agreement during the term of this Agreement a report showing for
the preceding 12 months the amount of the Gross Sales during that period and the
amount of the Royalty accrued during that period.
3.4 Royalty Payments. The Royalty provided for herein shall be paid
concurrently with the rendering of the report to JT INC.. The Royalty payments
shall commence on the earlier of the second anniversary date of this Agreement
or the first anniversary date of this Agreement after the date to which the
Product is first put into commercial use.
3.5 Records. In order that the Royalty payable under this Agreement may be
determined, and the reports provided for herein be verified, SEI agrees:
(a) To keep full, complete and accurate books and records showing the
quantity of Product manufactured and records of sales of each and
every Product manufactured, used, sold, licensed, shipped or otherwise
disposed of by SEI under this Agreement.
[Initials]
<PAGE>
5
3.6 Payment for Letters Patent and Applications for Letters Patent. SEI agrees
to apply for Letters Patent or Applications for Letters patent with respect to
any invention, improvements and discoveries SEI shall be responsible for all
costs and expenses incurred in connection therewith.
3.7 Confidentiality. SEI shall ensure that all persons (third Parties,
employees, independent contractors, investors, etc.) maintain the trade secret
information in confidence and sign Confidentiality Agreements.
3.8 Exploitation of Product. SEI agrees to develop, manufacture, sell,
distribute, and license and to use its best efforts to promote and market the
Product.
4. Cancellation for Default
4.1 This Agreement shall be subject to cancellation by JT INC. if SEI shall
fail to make the Royalty payments when due and in the manner stated provided,
however, that if JT INC. cancels this License Agreement, JT INC. shall give SEI
90 days' notice in writing of SEI's default or omission constituting grounds for
cancellation, and of its election to cancel this Agreement. In the event of
termination, SEI shall not be relieved of its obligations, nor of its duty to
make Royalty payments for all Subject-Matter made, on hand, in stock or anywhere
under the control of SEI, and SEI shall have the right to sell or license
Product and shall account and make payments as required. If SEI fails to remedy
the arrears following notice from JT INC., which triggers JT INC.'s rights to
terminate this Agreement then JT INC. shall be entitled to an assignment of
ownership of the Products.
5. Termination
5.1 JT INC. shall have the right to terminate this Agreement at any time on or
after the filing by SEI of an assignment in bankruptcy, or on or after SEI is
either bankrupt or insolvent or after any adjudication that applications for the
reorganization, readjustment or rearrangement of the business of SEI under any
law or governmental regulation relating to bankruptcy or insolvency, or on or
after the appointment of a receiver for all or substantially all of the property
or assets of SEI, or on or after the making by SEI of any assignment or
attempted assignment for the benefit of creditors, or on or after the
institution by SEI of any proceedings for the winding-up of its business. In
such a case ownership of the technology shall revert back to JT INC.
6. No waiver
6.1 No failure or delay on the part of JT INC. to exercise his right of
termination or cancellation nor any default by SEI shall be construed to
prejudice JT INC." right of termination or cancellation for default or for any
other subsequent defaults.
[Initials]
<PAGE>
6
7. Notices
7.1 Any notice, demand, direction, report or other communication required or
permitted to be given under this agreement shall be effectually made or given if
delivered by prepaid private courier or by facsimile transmission to the address
of each of the parties set out below:
To John JT INC.:
----------------------------------------
----------------------------------------
To SEI Ventures Resources Management Inc:
----------------------------------------
----------------------------------------
Or to such other address or facsimile numbers as either party may designate in
the manner set out above. Any notice, demand, direction, report or other
communication shall be deemed to have been given and received on the day of
prepaid private courier delivery or facsimile transmission.
8. Service Contract
8.1 Concurrently with the execution of this Agreement SEI shall enter into a
service contract with JT INC. substantially in the form and on the terms set out
in Schedule "A" attached hereto and forming part hereof whereby JT INC. shall be
required to devote substantially all of his time and efforts to further
developing the Product.
9. Arbitration
9.1 All disputes, controversies or claims arising out of or in connection with
or in relation to this Agreement shall be determined by a single arbitrator
appointed and acting pursuant to the Commercial Arbitration Act (British
Columbia) and the decision of the arbitrator will be final and binding on the
parties.
10. Governing Law
10.1 This Agreement is and will be deemed to be an agreement made in and
pursuant to the laws of the Province of British Columbia and for all purposes
will be exclusively governed by and construed and enforced in accordance with
the laws of the Province of British Columbia and the applicable laws of the
Federal Parliament of Canada. Any actions shall be in the Jurisdiction of BC.
11. Further Assurances
[Initials]
<PAGE>
7
11.1 JT INC. and SEI will execute and deliver all such further documents and
instruments and do all acts and things as may be reasonably required to carry
out the full intent and meaning of this Agreement.
12. Successors and Assigns
12.1 This Agreement shall enure to the benefit and be binding upon JT INC. and
SEI and their respective heirs, executors, administrators, permitted successors
and permitted assigns. "Successors" include any corporation resulting from the
amalgamation of a corporation with any other corporation.
13. Entire Agreement
13.1 This Agreement constitutes the entire agreement between the parties and all
prior verbal and written negotiations, communications and agreements between JT
INC. and SEI and their respective representatives are superseded by this
Agreement. This Agreement may not be modified or amended except by an instrument
in writing signed by all parties.
14. Counterparts
14.1 This Agreement may be executed in any number of original counterparts, with
the same effect as if the parties had signed the same document, and will become
effective when one or more counterparts have been signed by all the parties and
delivered to each of the other parties. All counterparts will be construed
together and evidence only one agreement which, notwithstanding the dates of
execution of any counterparts, will be deemed to be dated the date first above
written, and only one of which need to be produced for any purpose.
[Initials]
<PAGE>
8
15. Execution by Telecopy
15.1 This Agreement may be executed by the parties and transmitted by facsimile
transmission and if so executed and transmitted this agreement will be for all
purposes as effective as if the parties had delivered an executed original
agreement.
16. Construction
16. In this Agreement, except as expressly otherwise provided or as the context
otherwise requires:
(a) The headings and captions will be considered as provided for
convenience only and as not forming a part of this Agreement and will
not be used to interpret, define or limit the scope, extent or intent
of this Agreement or any of its provisions;
(b) The words "include" or "including" when following any general term or
statement are not to be construed as limiting the general term or
statement to the specific items or matters set forth or to similar
items or matters but rather as permitting it to refer to all other
items or matters that could reasonably fall within its broadest
possible scope;
(c) An accounting term not otherwise defined has the meaning assigned to
it under, and all accounting matters will be determined in accordance
with, Generally Accepted Accounting Principles as consistently
applied;
(d) A reference to currency means United States currency unless
specifically indicated otherwise;
(e) A reference to a statute includes every regulation made pursuant
thereto, all amendments to the statute or to any such regulation in
force from time to time and any statute or regulation that supplements
or supersedes such statute or any such regulation;
(f) A reference to time or date is to the local time or date in Vancouver,
British Columbia, unless specifically indicated otherwise;
(g) A reference to a particular corporation includes the corporation
derived from the amalgamation of the particular corporation or of a
corporation to which such reference is extended by this clause (g),
with one or more other corporations;
[Initials]
<PAGE>
9
(h) A word importing the masculine gender includes the feminine or neuter;
a word importing the singular includes the plural and vice versa.
IN WITNESS WHEREOF the parties have set their hands and seals this 1st day of
March, 1999.
Sportsprize Entertainment Inc.
By it's authorized signatory:
Per:
/s/ [Illegible]
- ---------------------------------
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
/s/ [Illegible] )
- --------------------------------- )
- --------------------------------- ) /s/ [Illegible]
- --------------------------------- ) ----------------------------------
) Justin Tighm Innovative Games Inc.
)
<PAGE>
ADDENDUM TO THE
ACQUISITION AGREEMENT
THIS ADDENDUM dated for reference the 21st day of May, 1999.
BETWEEN:
Sportsprize Entertainment Inc.,
A body corporate incorporated under the laws
of the State of Nevada, U.S.A.
("SEI")
OF THE FIRST PART
AND:
Justin Tighm Innovative Games Inc., of
6368 Crescent Court,
Delta, B.C., V4K 4Y5
("JT INC")
OF THE SECOND PART
WHEREAS:
A. JT INC has a royalty right as set out in the original Acquisition Agreement
B. B. SEI wishes to obtain back from JT INC. the right to that Royalty;
IN CONSIDERATION of the premises, and the covenants and agreements set forth,
the parties agree as follows
1. TERMS
JT INC shall surrender any and all claims rights or interests in the
royalties to the original Agreement.
<PAGE>
2. SEI Covenants
SEI shall grant to JT INC consideration in the amount of 25,000 stock
options in the Company at a price of $0.25 per share, with a maximum term
of two years from the date of this addendum.
IN WITNESS WHEREOF the parties have set their hands and seals this 21 day of
May, 1999.
Sportsprize Entertainment Inc.
By it's authorized signatory:
Per:
/s/ [Illegible]
- ---------------------------------
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
/s/ Bob Mackay )
- --------------------------------- )
- --------------------------------- )
- --------------------------------- ) ----------------------------------
) Justin Tighm Innovative Games Inc.
) Per /s/ [Illegible]
EXHIBIT 10.11
[LOGO]
Interactive Marketing Inc.
Interactive Marketing Inc.
South Sepulveda Boulevard,
Suite 360, Manhattan Beach,
CA 90266 310.374.1898 Fax
310.374.4233
www.4interactivemarketing.com
TO: CLIVE BARWIN, SPORTSPRIZE ENTERTAINMENT, INC.
FROM: ALAN H. GERSON
SUBJECT: ENGAGEMENT AGREEMENT
DATE: MAY 6, 1999
- --------------------------------------------------------------------------------
Thank you for your interest in retaining Interactive Marketing Inc. (hereafter
IMI) to provide strategic and tactical Marketing services to Sportsprize
Entertainment, Inc., (hereinafter, "SPE"). The following represents the terms of
our engagement:
1. Term.
a) SPE will retain Interactive Marketing Inc., to provide the
services as set forth in paragraph 3 below for a term of one (1)
year, commencing upon the signing of this agreement and the
receipt of the initial monthly retainer by IMI as provided herein
(the "Effective Date"). However, it is understood and agreed by
the parties that both IMI and SPE shall have the right to cancel
this Agreement at the end of the first One Hundred and Eighty
(180) days of such term (the "Term"), upon Five (5) days written
notice.
b) In the event that this Agreement is not cancelled at the end of
the first One Hundred and Eighty (180) days of the term, the
parties agree to begin to negotiate for an extension of this
understanding not later than ninety (90) days prior to the
expiration of the full One (1) year Term, for an exclusive
negotiation period not to exceed sixty (60) days.
2. Status of Personnel. The parties acknowledge that Interactive
Marketing Inc., (hereafter IMI) will be providing services hereunder
as a non-exclusive independent contractor. IMI shall provide the
services of Andrew Batkin and Alan Gerson and such other of its
management and employees as it deems appropriate to provide the
contracted services to SPE hereunder. All such persons will be under
the specific direction and control of IMI and IMI is responsible for
their compensation and any and all other obligations of an employer or
general contractor, including but not limited to withholdings for
taxes and responsibility for any or all employee benefits. Nothing in
this agreement shall be construed to make such persons employees of
SPE for any purpose.
3. Services. IMI shall, during the first One Hundred and Eighty (180)
days of the term provide the following services under this agreement:
[Initials]
<PAGE>
a) Create an overall Marketing and Operational Strategy for the
company, which will contain strategic and tactical business
recommendations for the operational, revenue, marketing and
organizational issues involved in the launch of the
Sportsprize.com website. These strategies and recommendations
will address, among other issues:
o The creation and operation of the Four (4) planned retailing
areas.
o A review of the structure and operations of the play of the
Sportsprize.com games.
o All legal and regulatory issues relating to the conduct of
the Sportsprize.com games.
o Site design, navigation, hosting, hardware and connectivity
issues.
o Database design, capabilities and report functionalities.
o The creation of a Go to Market plan for Sportsprize.com
which will address
- Review and revision of existing business plan
- Personnel requirements and job descriptions
- Liaison with Kaleidoscope Marketing and help secure
media and event partners
- Creation of Revenue, Traffic Building and Public
Relations strategies and assistance in locating
additional resources to execute such strategies,
including public relations, ad sales representation and
promotional marketing.
o Assist in identifying key management personnel and advisory
panels
o During the course of our engagement provide close
consultation to SPE management to develop additional new
business models and revenue generation strategies for SPE,
including revisions and fine-tuning of the Go to Market Plan
as well as integrate SPE into IMI's deal flow and strategic
contacts to extend SPE's business model and create
additional opportunities for the Company.
b) IMI will undertake in good faith to meet the following timetables
with respect to the above:
i) Within 30 days of the commencement of our engagement, IMI
will deliver an Initial Business Review and Assessment of
the company's objectives, core capabilities, assets,
products and services, as well as its relationships and
available media platforms to be leveraged and meet with
Kaleidoscope Marketing to integrate them into the planning
process. Not later than the end of that period, IMI will
meet with SPE management for an Initial Review and
Assessment, and to continue to prioritize Company
objectives.
ii) Within 45 days of the commencement of our engagement, IMI
will complete its review and recommendations relating to the
Site and Game products as well as any database, hardware and
infrastructure issues, as well as an initial review of
Organizational issues.
iii) Within 60 days of the commencement of our engagement, IMI
will present an Initial Draft and Outline of its Go to
Market plan for creating multiple revenue streams from
sources such as advertising, e-commerce, sponsorships,
promotions and subscriptions,
[Initials]
2
<PAGE>
etc. relating to the exploitation of SPE content, player
following, and Retailing operations. Not later than the end
of that period, IMI will meet with SPE to review, prioritize
and finalize the strategies for that Go To Market Plan.
iv) Within 150 days following the commencement of our
engagement, IMI will deliver a detailed Interactive Go to
Market Plan, outlining strategies to create multiple
revenues streams for e-advertising, e-commerce,
e-subscriptions, that leverage interactive media and
technologies as a platform to extend the company's
capabilities, assets, products and services. These
strategies will include but not necessarily be limited to
its Game content and Retail operations and will contain our
strategic and tactical recommendations as to how SPE can
continue to maximize its consumer and trade marketing
effectiveness and generate new revenue opportunities by
leveraging its core assets and capabilities.
v) Throughout this engagement, IMI will provide close
consultation to SPE management to oversee the implementation
and execution of the strategies and tactical approaches
contained in the Plan, and to develop additional
deliverables.
vi) During the course of our engagement, IMI will integrate SPE
into its deal flow and strategic contacts to extend SPE's
business model and create additional opportunities for SPE,
and meet periodically with management to insure that IMI and
Management have the same understanding of Company goals and
objectives.
4. Compensation: It is understood and agreed by and between the parties that
in exchange for the mutual promises and undertakings contained herein that
IMI shall be compensated as follows:
a) IMI will receive a base monthly retainer fee of Twenty Five Thousand
Dollars ($25,000) for the first Three (3) months of the term and a
base monthly retainer fee of Thirty Thousand Dollars ($30,000.00) for
each subsequent month of the term, due and payable on the Effective
Date and thereafter on the first day of each subsequent full month
through the end of the Term.
b) SPE shall designate IMI as its non-exclusive Independent Sales Agent.
For acting in this capacity IMI shall receive as an additional fee,
15% of any and all of SPE's recurring Net revenues resulting from
advertising, sponsorship and promotion revenues generated by sales and
agreements that IMI directly brings to SPE during the term of this
Agreement, as extended, payable monthly for the length of the
underlying sales contract, as extended. IMI will also be entitled to
that commission on other direct revenue opportunities with respect to
which SPE requests IMI's assistance in developing and closing, payable
monthly for the length of the underlying sales contract, as the same
may extended. It is understood that the value of any prize or
merchandise promotions received by SPE shall be calculated at 50% of
the retail value of the merchandise or prize for the purpose of
calculating IMI's commission.
c) In addition, the President of SPE hereby agrees to sell to IMI or its
nominee 600,000 Reg S shares in Sportsprize Entertainment Inc. for a
price of $.01 per share. Of such total, 400,000 shares shall be
offered to IMI and available for sale immediately upon the Effective
Date of this Agreement, and, provided this Agreement is not cancelled
at the end of the first One Hundred Eighty (180) days, IMI shall be
offered and have the right to purchase the remaining 200,000 shares on
the 181st day. These shares are subject to Rule 144 and thus will not
be tradeable for a period of One (1) year. In the event that SPE
completes a registration statement or attains a small cap listing on
NASDAQ, these shares shall have full "piggyback" registration rights,
at SPE's expense, and will thus become free trading. IMI agrees that
when such shares become free trading, that IMI will limit the shares
it offers for sale in any single week to 5% of the previous weeks'
total share trading volume.
[Initials]
3
<PAGE>
d) IMI shall be entitled to reimbursement of all reasonable, necessary
and pre-approved travel, entertainment and business expenses incurred
in furtherance of SPE business and pursuant to this undertaking, upon
submission of reasonable documentation and receipts, SPE will
designate an executive to be available to make timely approval of
requests by IMI to incur reimbursable expenses on SPE's account. IMI
will be guided by SPE policy relating to business entertainment and
travel expenses, and will submit requests for reimbursement on forms
acceptable to SPE. Reimbursement will be made to IMI not later than
Thirty (30) days after submission of documentation. However, it is
understood and agreed that SPE corporate policy notwithstanding, Air
Travel of a duration of more than Three (3) hours, undertaken by
Andrew Batkin or Alan Gerson, at the request of SPE, will be booked in
the next highest level of cabin service above Coach which is available
for a required flight. With respect to other IMI employees, they will
be entitled to reimbursement for the cost of Upgrade Certificates on
such flights, and will book the underlying ticket at Coach fares.
5. Limitation of Liability. In the event of any breach of this Agreement by
either party, the limitation of any claim of loss by the non-breaching
party shall be no greater than the proven financial loss sustained by the
non-breaching party by virtue of such breach. In no event shall either
party be liable hereunder for incidental or consequential damages for any
breach of this Agreement.
6. Basis for Engagement: SPE acknowledges that IMI has been retained because
of its experience and knowledge in the field of Internet and Interactive
marketing, and that IMI will be providing its opinions and consultations
based on its accumulated knowledge and experience and that of its
principals and employees. SPE is free to accept or reject any such advice,
opinions and consultations offered, and to use, modify or reject any such
written materials prepared by IMI.
7. No Rights to Marks: Each party acknowledges that it is not being granted or
vested with any right or interest, ownership or otherwise, in or to any of
the other party's trademarks, trade-names, service marks or logos by virtue
of or pursuant to this Agreement.
8. Entire Agreement: This written Agreement constitutes the sole and only
agreement of the parties relating to the matters covered hereby. Any prior
or contemporaneous agreements, promises, negotiations or representations
not expressly set forth in the Agreement are of no force or effect. This
Agreement supercedes any and all existing contracts and agreements by the
parties with respect to the subject matter covered herein. Any and all
notices made or required hereunder shall be delivered in writing to each
party at their corporate address, attention of the respective Chief
Executive Officers.
If this Agreement, consisting of Four (4) pages including this signature page,
accurately states the terms of our Agreement, please sign below where indicated,
and return to IMI together with the payment specified in section 4a).
Sportsprize Entertainment, Inc. Interactive Marketing, Inc.
By /s/ Jeff Paquin By /s/ Alan H. Gerson
-------------------------------- ----------------------------------
Name and Title Name and Title
Jeff Paquin, President Alan H. Gerson, President
Date May 17/99 Date May, 17, 1999
--------- -------------
Acknowledged, President, Sportsprize Entertainment, Inc.
/s/ Jeff Paquin Date May/99
- ------------------------ -------
[Initials]
4
EXHIBIT 10.12
AGREEMENT
THIS AGREEMENT is made and entered into effective May 1, 1999, by and
between Kaleidoscope Sports & Entertainment, LLC, 136 Madison Avenue, 8th Floor,
New York, New York 10016 (hereinafter referred to as "Kaleidoscope") and
Sportsprize Entertainment, Inc., 885 West Georgia Street, Suite 1500, Vancouver,
British Columbia, Canada V6C 3E8 (hereinafter referred to as "Sportsprize").
AGREEMENT
WHEREAS, Kaleidoscope is a company involved in the planning, designing,
marketing, selling and consulting for various sports related ventures and
properties; and
WHEREAS, Sportsprize is a company that plans to generate revenue and
profits through Internet advertising and merchandise sales by operating a
website that offers a game concept and by selling banners, advertisements,
sponsorships and space in an online mall; and
WHEREAS, Sportsprize desires to use Kaleidoscope's knowledge of and
contacts in the sports business; and
WHEREAS, Kaleidoscope has agreed to provide certain services to Sportsprize
upon the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants set for the
herein, and for other good and valuable consideration, it is agreed as follows:
1. TERM OF AGREEMENT: The term of this Agreement shall be deemed to have
commenced on May 15, 1999 and shall continue for a period of six (6) months
concluding October 15, 1999, unless sooner terminated or extended in
accordance with the terms and conditions hereof.
2. KALEIDOSCOPE SERVICES: Kaleidoscope shall perform the following functions
for Sportsprize:
(a) By July 1, 1999 provide Sportsprize with a list of highly qualified
candidates to serve as President of Sportsprize and a highly qualified
list of candidates to act as Spokesman for Sportsprize. In addition,
Kaleidoscope shall advise and work with Sportsprize in negotiating the
employment contacts with such candidates; and
(b) Work closely with Sportsprize to put together the best possible
strategic plan, by July 15, 1999, for Kaleidoscope to secure
presentations with major professional sports leagues and players
associations with a view toward
[Initials]
1
<PAGE>
getting those leagues and players associations to either endorse or to
approve the Sportsprize concept; and
(c) Assist Sportsprize and Interactive Marketing, Inc., by July 30, 1999,
in creating an overall marketing and operational strategy for
Sportsprize, which will contain strategic and tactical business
recommendations for the promotional revenue, marketing and partnership
issues involved in the launch of the Sportsprize.com website. In this
connection, Kaleidoscope will address the following:
(i) The identification and procurement of Ecomm partners;
(ii) Endorsements for Sportsprize;
(iii) Finding advertisers and advertising for the site;
(iv) Identify and secure special events sponsors and sponsorships;
(v) Identify and procure strategic Media partners; and
(d) Consultation with Sportsprize management to oversee the implementation
and execution of the strategies and recommendations of the
Kaleidoscope plan.
3. COMPENSATION: In consideration of the rights and benefits granted pursuant
to this Agreement, Sportsprize shall pay to Kaleidoscope the following
amounts:
a. One Hundred Twenty Thousand U.S. Dollars ($120,000), such amount to be
paid in six (6) installments of Twenty Thousand U.S. ($20,000) each on
or before the fifteenth (15th) day of May, June, July, August,
September and October, 1999; and
b. Options to purchase up to One Hundred Thousand (100,000) shares of
stock in Sportsprize (currently trading on the Over The Counter market
with the trading symbol "Jock") at a price of Twenty-five Cents ($.25)
per share. Kaleidoscope shall have two (2) years from the date of this
Agreement to exercise said option; provided however, that said options
once exercised, are restricted for sale for a period of one (1) year
from the date of said purchase; and
c. Options to purchase up to One Hundred Thousand (100,000) shares of
stock in Sportsprize (currently trading on the Over The Counter market
with the trading symbol "Jock") at a price of Twenty-five Cents ($.25)
per share, upon the successful completion of Paragraphs 2(a) and 2(b)
above. In this connection, Kaleidoscope shall be deemed to have
successfully completed the requirements of Paragraphs 2(a) and 2(b)
above if it has (1) provided Sportsprize, by July 1, 1999, with a list
of highly qualified individuals to serve as President of Sportsprize
or, in the alternative, has provided Sportsprize with a well-known
spokespeople and (2) either approached two (2) of the four (4) major
professional sports leagues for approval of the Sportsprize concept or
has not approached the said professional sports leagues, after having
had discussions with Sportsprize
[Initials]
2
<PAGE>
as to the advisability of making such an approach and Sportsprize has
decided to forego such an approach. Kaleidoscope shall have two (2)
years from the date of this Agreement to exercise said option;
provided however, that said options once exercised, are restricted for
sale for a period of one (1) year from the date of said purchase.
d. Options to purchase up to Three Hundred Thousand (300,000) shares of
stock, in Sportsprize (currently trading on the Over The Counter
market with the trading symbol "Jock") upon the reasonably
satisfactory completion of Paragraph 2(c) above at the traded price of
Sportsprize less twenty percent (20%) per share provided, however,
that said options, once exercised, are restricted for sale for a
period of one (1) year from the date of said purchase. The traded
price of Sportsprize will be determined by the average closing price
of Sportsprize's shares (traded on the NASDAQ OTC Bulletin Board or
NASDAQ Small Cap Market or suchever market that Sportsprize's shares
shall be traded upon) for a period of Ten (10) days preceding the
agreed to completion. Said shares will be released at 30,000 shares
per month over a Ten (10) month period. It is expressly agreed that
Sportsprize will make every effort to register the shares for early
trading privileges. Kaleidoscope agrees to sell it shares into the
market at a volume of no greater than 21/2% of the true volume of the
preceding weeks total amount of traded shares in Sportsprize. The
number of shares covered by each option above shall be proportionally
adjusted for any increase or decrease in the number of accrued shares
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the common stock, or any increase
or decrease in the number of shares.
4. EXPENSES: Kaleidoscope shall be entitled to reimbursement of all
reasonable, necessary and pre-approved travel, entertainment and business
expenses incurred in furtherance of Sportsprize business and pursuant to
this undertaking, upon submission of reasonable documentation and receipts.
Kaleidoscope will be guided by Sportsprize policy relating to business
entertainment and travel expenses, and will submit requests for
reimbursements on forms acceptable to Sportsprize on a monthly basis.
5. PAYMENTS TO KALEIDOSCOPE: All payments to be made to Kaleidoscope pursuant
to the terms of this Agreement shall be made in U.S. Dollars by check drawn
to the order of Kaleidoscope Sports & Entertainment, LLC, and mailed to it
at 136 Madison Avenue, 8th Floor, New York, New York 10016, Attention:
David Bagliebter, Esq., or to such other address as may be designated in
writing to Sportsprize from time to time by Kaleidoscope.
6. STATUS OF PERSONNEL: Kaleidoscope and Sportsprize acknowledged that
Kaleidoscope will be providing services hereunder as a non-exclusive
independent contractor. Kaleidoscope shall provide the services of David
[Initials]
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<PAGE>
Bagliebter and Robert McQueen and such other of its management and
employees as it deems appropriate to provide the contracted services to
Sportsprize hereunder. All such persons will be under the specific
direction and control of Kaleidoscope and Kaleidoscope is responsible for
their compensation and any and all other obligations of an employer or
general contractor, including but not limited to withholding taxes and
responsibility for any and all employee benefits. Nothing in this Agreement
shall be construed to make such persons employees of Sportsprize for any
purpose.
7. TIME IS OF THE ESSENCE: Sportsprize acknowledges that time is of the
essence in the payment of all fees dues Kaleidoscope hereunder and hereby
agrees that in the event any payment due Kaleidoscope is not received
within fifteen (15) days of the date set forth in this Agreement for such
payment Kaleidoscope shall have the right and option to terminate this
Agreement effective upon expiration of fifteen (15) days following written
notice to Sportsprize of its election to so terminate for failure of
Sportsprize to perform in accordance with the provisions hereof, unless
such payment has been received by Kaleidoscope within such fifteen (15) day
period. The reservation of specific rights by Kaleidoscope herein shall not
preclude Kaleidoscope from exercising any other remedy it may have at law
or in equity to enforce the terms of this Agreement.
8. TERMINATION: In accordance with the terms and conditions hereof either
party shall have the right to terminate the term of this Agreement
immediately, at any time if a Default, as defined below, by the other party
has occurred and is continuing by giving written notice thereof to the
defaulting party. The term "Default" shall mean any of the following: [1]
failure of a party to comply with or perform any material provision or
condition of this Agreement and continuance of such failure for fifteen
(15) days after written notice thereof to such party; or, if the failure
cannot be cured within said 15-day period, if the other party does not
commence to cure such failure within said 15-day period and diligently
pursue such cure hereafter; [2] a party becomes insolvent, is unable to pay
its debts as they mature or is the subject of a petition in bankruptcy,
whether voluntary or involuntary, on any other proceeding under bankruptcy,
insolvency or similar laws; or makes an assignment for the benefit of
creditors; or is named in, or its property is subject to, a suit for
appointment of a received; or is dissolved or liquidated; or [3] any
warranty made in this Agreement is breached, false or misleading in any
material respect. In the event of such termination, subject to the
arbitration provisions hereof, the non-defaulting party shall be entitled
to pursue any remedy provided in law or equity, including injunctive relief
and the right to recover any and all damages it may have suffered by reason
of such Default.
9. FORCE MAJEURE: Neither party hereto shall be considered to be in default of
this Agreement, or be liable for damages thereof, for any failure of
performance hereunder occasioned by an act of God, force of nature,
accident, war or warlike activity, insurrection or civil commotion, labor
dispute, transportation delay,
[Initials]
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<PAGE>
governmental regulatory action (whether or not with proper authority) or
other cause similar or dissimilar to the foregoing and beyond its
reasonable control, provided the party so affected gives prompt notice
thereof to the other. In the event of a suspension of any obligation by
reason of this section, which extends beyond sixty (60) days, the party
non-affected may, at its option, elect to cancel those aspects of this
Agreement, which are reasonably feasible to terminate.
10. NOTICES: Except of any notice required under applicable law to be given in
another manner, all notices, requests and demands as made by the parties to
this Agreement shall be in writing [at the addresses set forth below,
unless the recipient at least two (2) business days prior to the giving of
such notice shall have advised the sender, in a notice given in accordance
with this paragraph of a different address, in which case the notice shall
be addressed to such different address] by any of the following means: [1]
personal service (including service by overnight courier service); [2]
telecopy (if confirmed in writing sent by personal service or registered or
certified, first class mail, postage prepaid, return receipt requested); or
[3] registered or certified, first class mail, postage prepaid, return
receipt requested. Any notice, demand or request pursuant to either
subsection [1] or [2] hereof shall not be effective until actually received
at the address (or facsimile number) specified (and, in the case of an
electronic communication under [2] that is not received between 9:00 a.m
and 5:00 p.m., at the location of the recipient on a Business Day, such
communication shall be deemed received at 9:00 a.m. on the next Business
Day), but notices given under [3] above shall be deemed given two (2) days
following deposit in the United States mails. Any party to this Agreement
may change its address for notices by a notice to the other given in a
manner permitted under this paragraph. For purposes of this paragraph,
"Business Day" means any day other than a Saturday or Sunday, or any other
day on which national or state chartered banks located in New York are
authorized to be closed. Notices shall be as follows:
If to Kaleidoscope: David P. Bagliebter
General Counsel &
Senior Vice President,
Business Affairs
Kaleidoscope Sports & Entertainment, LLC
136 Madison Avenue
New York, New York 10016
If to Sportsprize: Sportsprize Entertainment, Inc.
Jeffrey D. Pacquin
Barrister & Solicitor
World Trade Center
555 - 999 Canada
Vancouver, B.C. V6C 3E1
11. ARBITRATION:
[Initials]
5
<PAGE>
A. Except as set forth with respect to third party claims, any dispute
between the parties arising from this Agreement shall be settled by
arbitration held in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, except as modified by this
section. All disputes shall be referred to a single arbitrator
mutually appointed by the parties. If the parties cannot agree upon a
signal arbitrator within thirty (30) days after a demand for
arbitration is made, the dispute will be referred to an decided by a
panel of three (3) arbitrators. Within twenty (20) days following the
30-day period set forth above, each party shall select an arbitrator
and the arbitrators so selected shall, within thirty (30) days after
their selection, appoint the third arbitrator. If the arbitrators so
selected cannot agree upon a third arbitrator, such third arbitrator
shall be appointed by the President of the American Arbitration
Association. Arbitration hearings shall take place in New York, New
York. The proceedings shall commence and be completed within sixty
(60) days after the selection of the last arbitrator. The agreement of
a majority of the arbitrators, if the parties are unable to agree upon
a single arbitrator, rather than unanimity, shall be binding. Any
award rendered through this process will be final and binding upon the
parties. Unless otherwise directed by the arbitrator(s), each party
shall bear its own costs and expenses of arbitration, except that the
parties shall each bear one-half (1/2) of the costs, if any, of the
third arbitrator and any costs assessed by the American Arbitration
Association.
B. Notwithstanding the above, if there is a breach or threatened breach
by a party of a material terms of this Agreement, the other party
shall be entitled to seek injunctive relief to prevent irreparable
injury.
C. The provisions of this paragraph shall survive the expiration or
sooner termination of this Agreement.
12. RELATIONSHIP OF THE PARTIES: Kaleidoscope and Sportsprize are entering into
this Agreement as independent contractors and agree that they are not, and
shall not become or be deemed to be, agents, partners, principals or
employees of one another as a result of this Agreement or the performance
of their respective obligations hereunder. Nothing in this Agreement is
intended, or shall be deemed, to create a relationship, express or implied,
of principal and agent, employer and employee or joint venture. Each party
is responsible for providing, at their own expense, disability,
unemployment and other insurance and workers' compensation for themselves
and their subcontractors and employees.
13. GOVERNING LAW: This Agreement shall be interpreted in accordance with and
governed by the laws of the State of New York without regard to or for
conflict of laws privileges.
14. SEVERABILITY: If any provision of this Agreement shall be declared or held
by a court of competent jurisdiction or a duly constituted arbitration
panel to be invalid or
[Initials]
6
<PAGE>
unenforceable, such provision shall be deemed modified to the extent
necessary to be valid and enforceable, provided that such modification does
not materially alter the intent or purpose of this Agreement or the
obligations of the parties hereunder. If any such provision cannot be so
modified, such provision shall be severed wherefrom and of no force of
effect unless the severing of such provision materially alters the intent
or purpose of this Agreement or the obligations of the parties hereunder.
The remaining provisions hereof shall continue to be the valid and
enforceable obligations of the parties, all provisions hereof being
severable except as provided above.
15. CAPTIONS; HEADINGS: The captions or headings of the paragraphs of this
Agreement are for convenience only and should not be deemed to limit or in
any way affect the scope, meaning or intent of this Agreement or any
portion hereof.
16. ASSIGNMENT; BINDING EFFECT: This Agreement shall be personal to the parties
hereto, and except as provided herein, neither this Agreement nor the
rights or obligations of any party hereto shall be assigned by any party
without the prior written consent of the other party hereto. This Agreement
shall be binding upon the parties and their respective successors and
permitted assigns.
17. ENTIRE AGREEMENT; WAIVER: This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof shall be modified, amended, terminated,
discharged or waived except by a written instrument signed by the party to
be charged therewith. No such written waiver of any provision shall be
deemed a waiver of the breach or enforcement of any other provision thereof
or of the subsequent breach or enforcement of the same provision whether or
not such breach is similar.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year above written.
KALEIDOSCOPE SPORTS & ENTERTAINMENT, LLC
By: /s/ [Illegible]
------------------------------------
SPORTSPRIZE ENTERTAINMENT, INC.
By: /s/ [Illegible]
------------------------------------
EXHIBIT 10.13
ASSIGNMENT AND ASSUMPTION AGREEMENT
Sportsprize Entertainment Inc.
(formerly Kodiak Graphics Company)
THIS AGREEMENT is effective as of the 14th day of May, 1999 ("Date of
Grant") among Sportsprize Entertainment Inc. (formerly Kodiak Graphics Company),
a Nevada corporation (the "Company"), Sportsprize, Inc. (formerly Sportsprize
Entertainment, Inc.), a Nevada Corporation ("Sportsprize"), and Kaleidoscope
Sports & Entertainment, LLC (the "Kaleidoscope").
WHEREAS, Kaleidoscope entered into an agreement with Sportsprize
Entertainment, Inc. dated May 1, 1999 and effective May 14, 1999, attached
hereto as Exhibit A and incorporated herein, pursuant to which Kaleidoscope was
granted stock options exercisable to acquire common shares of Sportsprize
Entertainment, Inc. in consideration for certain planning, designing, marketing,
selling and consulting services (the "Consulting Agreement");
WHEREAS, the Board of Directors of the Company (the "Board") has approved,
adopted, ratified and confirmed an Agreement and Plan of Share Exchange (the
"Share Exchange Plan"), effective May 14, 1999, pursuant to which the Company
acquired all of the issued and outstanding shares of Sportsprize pursuant to a
statutory share exchange and the Board authorized the grant to certain
consultants and other selected persons stock options exercisable to purchase
common stock of the Company, with a $0.001 par value per share;
WHEREAS, the Company desires to retain the services of Kaleidoscope and
Kaleidoscope desires to deliver such services to the Company pursuant to the
terms and conditions set forth in the Consulting Agreement;
WHEREAS, the Board has determined that it is in the best interest of the
Company to assume the interest of Sportsprize in the Consulting Agreement and
Sportsprize has agreed to assign its interest in the Consulting Agreement to the
Company;
WHEREAS, the Board has determined that it is in the best interest to grant
Kaleidoscope options to acquire shares of the Company's common stock ("Common
Shares") in the amounts and subject to the terms and conditions set forth in the
Consulting Agreement (the "Options"); and
WHEREAS, the Options are not intended to qualify as "Incentive Stock
Options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree to the assignment and assumption of the Consulting Agreement
pursuant to the terms and conditions set forth herein.
1. Assignment of Consulting Agreement.
1.1 Sportsprize hereby grants, bargains, conveys, transfers and assigns its
entire right, title and interest in the Consulting Agreement to the Company, its
successors and assigns.
1.2 It is expressly understood that effective from and after the date
hereof, the Company shall assume all of the obligations of Sportsprize arising
under or pursuant to the Consulting Agreement, including but limited to the
obligation to grant options to acquire Common Shares of the Company to
Kaleidoscope in lieu of the Options granted under the Consulting Agreement, and
agrees to duly and properly perform the obligations of
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<PAGE>
Sportsprize thereunder from and after the date hereof. The Company further
ratifies and confirms the Consulting Agreement as if an original party thereto.
1.3 Kaleidoscope agrees and consents to the assignment of the Consulting
Agreement to the Company and agrees that the Company shall assume all of the
obligations of Sportsprize arising under or pursuant to the Consulting
Agreement, and agrees and consents to the grant of options to acquire Common
Shares of the Company in lieu of the Options. Kaleidoscope agrees to duly and
properly perform its obligations under the Consulting Agreement for the benefit
of the Company as if the Company were an original party thereto.
2. Option Grant.
2.1 Acknowledgement. The Company hereby acknowledges, ratifies and confirms
the grant of the following Options pursuant to the assignment of the Consulting
Agreement from Sportsprize to the Company.
(a) The Company hereby acknowledges the grant of Options exercisable
to acquire One Hundred Thousand (100,000) Common Shares at the
price of Twenty-five Cents ($ 0.25) per share to Kaleidoscope.
Such Options shall vest immediately and shall be fully
exercisable.
(b) The Company agrees to grant Kaleidoscope Options exercisable to
acquire One Hundred Thousand (100,000) Commons Shares at a price
of Twenty-five Cents ($.25) per share, upon the successful
completion of Paragraphs 2(a) and 2(b) set forth in the
Consulting Agreement.
(c) The Company agrees to grant Kaleidoscope Options exercisable to
acquire Three Hundred Thousand (300,000) Commons Shares upon the
reasonably satisfactory completion of Paragraph 2(c) set forth in
the Consulting Agreement at the traded price of the Company's
common shares less twenty percent (20%) per share; provided,
however, that said Options, once exercised, are restricted for
sale for a period of one (1) year from the date of said purchase.
The traded price of the Common Shares will be determined by the
average closing price of the Company's Common Shares (traded on
the NASDAQ OTC Bulletin Board or NASDAQ Small Cap Market or such
ever market that the Company's shares shall be traded upon) for a
period of Ten (10) days preceding the agreed to completion. Said
Common Shares will be released at 30,000 shares per month over a
Ten (10) month period. It is expressly agreed that the Company
will make reasonable efforts to register the shares for early
trading privileges. Kaleidoscope agrees to sell its shares into
the market at a volume of no greater than 2 1/2% of the true
volume of the preceding weeks total amount of the Company's
traded shares. The number of Common Shares covered by each option
above shall be proportionally adjusted for any increase or
decrease in the number of accrued shares resulting from a stock
split, reverse stock split, stock dividend, combination or
reclassification of the Common Shares, or any increase or
decrease in the number of shares
2.2 Options not Transferable. Unless otherwise specified in this Agreement
or by the Board, the Options granted herein 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 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 herein, such Option shall thereupon terminate and become
null and void.
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<PAGE>
2.3 Termination of Options. The Options granted herein shall terminate, to
the extent not previously exercised, on May 14, 2004. The exercise period may be
extended in the sole discretion of the Board.
2.4 Exercise of Options. Options shall be exercisable, in full or in part,
at any time after vesting, until termination; provided, however, that if
Kaleidoscope is subject to the reporting and liability provisions of Section 16
of the Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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. 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.
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 B) to
the Secretary of the Company at its principal executive office, specifying the
number of shares 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. The Options are exercisable only by
Kaleidoscope.
2.5 No Rights as Shareholder. Kaleidoscope shall have no rights as a
shareholder with respect to the Common Stock covered by the Options until
Kaleidoscope becomes a record holder of such Common Shares, irrespective of
whether Kaleidoscope has given notice of exercise. Subject to the provisions set
forth herein, no rights shall accrue to Kaleidoscope 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
Kaleidoscope becomes a record holder of the shares of Common Stock covered by
the Options granted herein, irrespective of whether Kaleidoscope has given
notice of exercise.
3. Entire Agreement. This Agreement is the only agreement among
Kaleidoscope, Sportsprize and the Company with respect to the Consulting
Agreement, and this Agreement shall supersede all prior and contemporaneous oral
and written statements and representations and contain the entire agreement
between the parties with respect to the Consulting Agreement and the assignment
of such agreement.
4. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: Sportsprize Entertainment Inc.
Attention: Jeffrey Paquin, President
101 West 5th Avenue
Vancouver, British Columbia V5Y 1H9
Sportsprize, Inc. Sportsprize, Inc.
Attention: Jeffrey Paquin, President
101 West 5th Avenue
Vancouver, British Columbia V5Y 1H9
Kaleidoscope: Kaleidoscope Sports & Entertainment, LLC
Attention: David P. Bagliebter, Esq.,
General Counsel, Senior Vice President of
Business Affairs
136 Madison Avenue, 8th Floor
New York, NY 10016
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<PAGE>
Sportsprize Entertainment Inc. Kaleidoscope Sports & Entertainment,
LLC
By: ------------------------------- By: -------------------------------
Its: ------------------------------ Its: -------------------------------
Sportsprize, Inc.
By: -------------------------------
Its: ------------------------------
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
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<PAGE>
EXHIBIT A
Consulting Agreement
-5-
<PAGE>
EXHIBIT B
Notice of Election to Exercise
This Notice of Election to Exercise shall constitute proper notice pursuant
to the Assignment Agreement among the undersigned, Sportsprize Entertainment
Inc. and Sportsprize, Inc. (the "Agreement") effective as of the 14th day of
May, 1999.
The undersigned hereby elects to exercise Kaleidoscope's option to purchase
__________ shares of the common stock of the Company at a price of $_________
per share, for aggregate consideration of $______, on the terms and conditions
set forth in the Agreement. Such aggregate consideration, in the form specified
in Section 2.4 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this ____ day of __________,
_____.
--------------------------------------------
Signature
--------------------------------------------
Name (typed or printed)
EXHIBIT 10.14
THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT RELATES TO AN OFFERING OF
SECURITIES IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS
DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT").
NONE OF THE SECURITIES TO WHICH THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
(THE "AGREEMENT") RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT, AND, UNLESS
SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S.
PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
(Foreign/Overseas Subscribers)
TO: KODIAK GRAPHICS COMPANY, a Nevada Corporation (the "Company")
2034 Western Avenue
Las Vegas, Nevada 89102
Purchase of Shares
------------------
1. Subscription
1.1 The undersigned (the "Subscriber") hereby irrevocably subscribes for and
agrees to purchase 555,555 shares (the "Shares") at a price of US$1.50 per Share
(such subscription and agreement to purchase being the "Subscription"), for the
total purchase price of US$833,332.50 (the "Subscription Proceeds"), which is
tendered herewith, on the basis of the representations and warranties and
subject to the terms and conditions set forth herein. This Subscription is part
of a private placement of up to US$2,500,000.
1.2 The Company hereby irrevocably agrees to sell, on the basis of the
representations and warranties and subject to the terms and conditions set forth
herein, to the Subscriber the Shares.
1.3 Subject to the terms hereof, the Subscription will be effective upon its
acceptance by the Company.
2. Payment
2.1 The Subscription Proceeds must accompany this Subscription and shall be
paid by certified cheque or bank draft drawn on a U.S. chartered bank made
payable to the Company. If the funds are wired to the Company or to its agent or
lawyers, those agents or lawyers are authorized to immediately deliver the funds
to the Company.
3. Documents Required from Subscriber
3.1 The Subscriber must complete, sign and return to the Company two (2)
executed copies of this Agreement.
3.2 The Subscriber shall complete, sign and return to the Company as soon as
possible on request by the Company any documents, questionnaires, notices and
undertakings as may be required by regulatory authorities, stock exchanges and
applicable law.
<PAGE>
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4. Closing
4.1 Closing of the offering of the Shares (the "Closing") shall occur on May
15, 1999 or on such other date as may be determined by the Company (the "Closing
Date").
5. Acknowledgements of Subscriber
5.1 The Subscriber acknowledges and agrees that:
(a) the Shares have not been registered under the 1933 Act, or under any
state securities or "blue sky" laws of any state of the United States,
and, unless so registered, may not be offered or sold in the United
States or to U.S. Persons, as that term is defined in Regulation S
under the 1933 Act ("Regulation S"), except pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the 1933 Act;
(b) the decision to execute this Agreement and purchase the Shares agreed
to be purchased hereunder has not been based upon any oral or written
representation as to fact or otherwise made by or on behalf of the
Company and such decision is based entirely upon a review of the news
releases of the Company and any public information filed with the
Securities and Exchange Commission in compliance, or intended
compliance, with applicable securities legislation. If the Company has
presented a business plan to the Subscriber, the Subscriber
acknowledges that the business plan may not be achieved or be
achievable;
(c) by execution hereof the Subscriber has waived the need for the Company
to communicate its acceptance of the purchase of the Shares pursuant
to this Agreement;
(d) the Company is entitled to rely on the representations and warranties
and the statements and answers of the Subscriber contained in this
Agreement, and the Subscriber will hold harmless the Company from any
loss or damage it or they may suffer as a result of the Subscriber's
failure to correctly complete this Agreement;
(e) it will indemnify and hold harmless the Company and, where applicable,
its respective directors, officers, employees, agents, advisors and
shareholders from and against any and all loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and
all fees, costs and expenses whatsoever reasonably incurred in
investigating, preparing or defending against any claim, lawsuit,
administrative proceeding or investigation whether commenced or
threatened) arising out of or based upon any representation or
warranty of the Subscriber contained herein or in any document
furnished by the Subscriber to the Company in connection herewith
being untrue in any material respect or any breach or failure by the
Subscriber to comply with any covenant or agreement made by the
Subscriber to the Company in connection therewith;
(f) the issuance and sale of the Shares to the Subscriber will not be
completed if acceptance would be unlawful or if, in the discretion of
the Company, acting reasonably, acceptance is not in the best
interests of the Company;
(g) it has been advised to consult its own legal, tax and other advisors
with respect to the merits and risks of an investment in the Shares
and with respect to applicable resale restrictions and it is solely
responsible (and the Company is not in any way responsible) for
compliance with applicable resale restrictions;
(h) the Shares are not listed on any stock exchange or automated dealer
quotation system and no representation has been made to the Subscriber
that the Shares will become listed on any stock exchange or automated
dealer quotation system; except that currently certain market makers
make market in shares of the Company on the non-NASDAQ
Over-the-Counter Bulletin Board;
<PAGE>
-3-
(i) it is outside the United States when receiving and executing this
Subscription Agreement and is acquiring the Shares for its own
account, for investment purposes only, and not with a view to, or for,
resale, distribution or fractionalization thereof, in whole or in
part, and no other person has a direct or indirect beneficial interest
in such Shares; or, if not, it is an accredited investor as defined by
US securities laws;
(j) the Shares may not be offered or sold to a U.S. Person or for the
account or benefit of a U.S. Person (other than a distributor) prior
to the end of the Restricted Period (as defined herein), if
applicable;
(k) the Company is under no obligation to register or qualify the Shares
on behalf of the Subscriber or to assist the Subscriber in complying
with any exemption from registration and qualification under the 1933
Act and applicable state securities laws, or any form of exemption
therefrom;
(l) in the view of the Securities and Exchange Commission, the statutory
and regulatory basis for the exemption claimed for the offer and sale
of the Shares, although in technical compliance with Regulation S,
would nonetheless not be available if the offering is part of a plan
or scheme to evade the registration provisions of the 1933 Act;
(m) this Agreement is not enforceable by the Subscriber unless it has been
accepted by the Company; and
(n) the Company will pay a finders fee, in cash, equal to 2.8% of the
gross proceeds received by the Company from the sale of the Shares.
The subscriber further acknowledges that the finder and its officers,
directors, employees and affiliates may, from time to time, hold
positions in securities of the Company.
6. Representations, Warranties and Covenants of the Subscriber
6.1 The Subscriber hereby represents and warrants to and covenants with the
Company (which representations, warranties and covenants shall survive the
Closing) that:
(a) it is not a U.S. Person;
(b) it is not acquiring the Shares for the account or benefit of, directly
or indirectly, a U.S. Person;
(c) the Subscriber has the legal capacity and competence to enter into and
execute this Subscription and to take all actions required pursuant
hereto and, if the Subscriber is a corporation, it is duly
incorporated and validly subsisting under the laws of its jurisdiction
of incorporation and all necessary approvals by its directors,
shareholders and others have been obtained to authorize execution and
performance of this Subscription on behalf of the Subscriber;
(d) the entering into of this Subscription and the transactions
contemplated hereby do not result in the violation of any of the terms
and provisions of any law applicable to, or the constating documents
of, the Subscriber or of any agreement, written or oral, to which the
Subscriber may be a party or by which the Subscriber is or may be
bound;
(e) the Subscriber has duly executed and delivered this Subscription and
it constitutes a valid and binding agreement of the Subscriber
enforceable against the Subscriber;
(f) it is not an underwriter of, or dealer in, the securities of the
Company, nor is the Subscriber participating, pursuant to a
contractual agreement or otherwise, in the distribution of the Shares;
(g) it is purchasing the Shares for its own account or for an account with
respect to which it exercises sole investment discretion, and that it
or such account is an accredited investor as that term is defined in
Rule 501 under the 1933 Act (an "Accredited Investor") acquiring the
Shares for investment purposes and not for distribution;
<PAGE>
-4-
(h) it understands and agrees that none of the Shares has been registered
under the 1933 Act, and they may not be sold except as permitted in
paragraph (i) below;
(i) it understands and agrees (i) that the Shares are being offered only
in a transaction not involving any public offering within the meaning
of the 1933 Act, and (ii) that (A) if within one year after the date
of original issuance of the Shares, or if within three months after it
ceases to be an affiliate (within the meaning of Rule 144 under the
1933 Act ("Rule 144")) of the Company, it decides to resell, pledge or
otherwise transfer the Shares on which the legend as set forth below
appears, such Shares may be resold, pledged or transferred only (1) to
the Company, (2) so long as the Shares are eligible for resale
pursuant to Rule 144A under the 1933 Act ("Rule 144A"), to a person
whom the seller reasonably believes is a qualified institutional
investor buyer ("QIB") as that term is defined in Rule 144A(a)(1) that
purchases for its own account or for the account of a QIB to whom
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the
transferor on the certificate of transfer on the reverse of the
Shares), (3) in an offshore transaction in accordance with Regulation
S (as indicated by the box checked by the transferor on the
certificate of transfer on the reverse of the Shares), (4) to an
Institutional Accredited Investor (as indicated by the box checked by
the transferor on the certificate of transfer on the reverse of the
Shares) who has certified to the Company that such transferee is an
Institutional Accredited Investor and is acquiring such security for
investment purposes and not for distribution, (5) pursuant to an
exemption from registration provided by Rule 144 (if applicable) under
the 1933 Act, or (6) pursuant to an effective registration statement
under the 1933 Act, in each case in accordance with any applicable
securities laws of any state of the United States, (B) the purchaser
will, and each subsequent holder is required to, notify any purchaser
of the Shares from it of the resale restrictions referred to in clause
(A) above, if then applicable, and (C) with respect to any transfer of
the Shares by an Institutional Accredited Investor, such holder will
deliver to the Company such certificates and other information as it
may reasonably require to confirm that the transfer by it complies
with the restrictions set forth in this paragraph (i);
(j) it understands and agrees that the notification requirement referred
to in paragraph (i) above will be satisfied by virtue of the fact that
the legend set out in Schedule A will be placed on the Shares unless
otherwise agreed by the Company;
(k) it understands and agrees that offers and sales of the Shares prior to
the expiration of a period of one year after the date of original
issuance of the Shares (the "Restricted Period") shall only be made in
compliance with the safe harbor provisions set forth in Regulation S,
pursuant to the registration provisions of the 1933 Act or an
exemption therefrom, and that all offers and sales after the
Restricted Period shall be made only in compliance with the
registration provisions of the 1933 Act or an exemption therefrom;
(l) it will not sell or otherwise transfer the Shares except as permitted
under the 1933 Act and applicable state securities laws or an
exemption therefrom;
(m) it (i) is able to fend for itself in the Subscription; (ii) has such
knowledge and experience in business matters as to be capable of
evaluating the merits and risks of its prospective investment in the
Shares; and (iii) has the ability to bear the economic risks of its
prospective investment and can afford the complete loss of such
investment;
(n) it understands and agrees that the legend set forth in paragraph (j)
above shall not be removed from any Shares purchased by it pursuant to
this Subscription unless there is delivered to the Company such
satisfactory evidence, which may include an opinion of counsel
licensed to practice law in one of the states of the United States of
America, as may be reasonably required by the Company, that such
Shares are not "restricted" within the meaning of Rule 144;
(o) if it is acquiring the Shares as a fiduciary or agent for one or more
investor accounts, it has sole investment discretion with respect to
each such account and it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of such
account;
<PAGE>
-5-
(p) it understands and agrees that the Company and others will rely upon
the truth and accuracy of the acknowledgments, representations and
agreements contained in sections 5 and 6 hereof and agrees that if any
of such acknowledgments, representations and agreements are no longer
accurate or have been breached, it shall promptly notify the Company;
(q) the Subscriber is not aware of any advertisement of the Shares;
(r) no person has made to the Subscriber any written or oral
representations:
(i) that any person will resell or repurchase any of the Shares;
(ii) that any person will refund the purchase price of any of the
Shares;
(iii) as to the future price or value of any of the Shares; or
(iv) that the Shares will be listed and posted for trading on any
stock exchange or automated dealer quotation system or that
application has been made to list and post the Shares of the
Company on any stock exchange or automated dealer quotation
system.
6.2 In this Subscription, the term "U.S. Person" shall have the meaning
ascribed thereto in Regulation S.
7. Acknowledgement and Waiver
7.1 The Subscriber has acknowledged that the decision to purchase the Shares
was solely made on the basis of publicly available information. The Subscriber
hereby waives, to the fullest extent permitted by law, any rights of withdrawal,
rescission or compensation for damages to which the Subscriber might be entitled
in connection with the distribution of the Shares.
8. Legending of Shares
8.1 The Subscriber hereby acknowledges that a legend may be placed on the
certificates representing the Shares to the effect that the securities
represented by such certificates are subject to a hold period and may not be
traded until the expiry of such hold period except as permitted by applicable
securities legislation.
9. Costs
9.1 The Subscriber acknowledges and agrees that all costs and expenses incurred
by the Subscriber (including any fees and disbursements of any special counsel
retained by the Subscriber) relating to the purchase of the Shares shall be
borne by the Subscriber.
10. Governing Law
10.1 This Subscription Agreement is governed by the laws of the state of Nevada
and the federal laws of the United States applicable herein. The Subscriber, in
its personal or corporate capacity and, if applicable, on behalf of each
beneficial purchaser for whom it is acting, irrevocably attorns to the
jurisdiction of the state of Nevada.
<PAGE>
-6-
11. Survival
11.1 This Subscription, including without limitation the representations,
warranties and covenants contained herein, shall survive and continue in full
force and effect and be binding upon the parties hereto notwithstanding the
completion of the purchase of the Shares by the Subscriber pursuant hereto.
12. Assignment
12.1 This Subscription is not transferable or assignable.
13. Execution
13.1 The Company shall be entitled to rely on delivery by facsimile machine of
an executed copy of this Subscription and acceptance by the Company of such
facsimile copy shall be equally effective to create a valid and binding
agreement between the Subscriber and the Company in accordance with the terms
hereof.
14. Severability
14.1 The invalidity or unenforceability of any particular provision of this
Subscription shall not affect or limit the validity or enforceability of the
remaining provisions of this Subscription.
15. Entire Agreement
15.1 Except as expressly provided in this Agreement and in the agreements,
instruments and other documents contemplated or provided for herein, this
Agreement contains the entire agreement between the parties with respect to the
sale of the Shares and there are no other terms, conditions, representations or
warranties, whether expressed, implied, oral or written, by statute or common
law, by the Company or by anyone else.
16. Notices
16.1 All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Subscriber shall be directed to the
address on page 1 and notices to the Company shall be directed to it at 2034
Western Avenue, Las Vegas, Nevada, 89102, attention of William Turner.
17. Counterparts
17.1 This Agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall constitute an original and all of
which together shall constitute one instrument.
IN WITNESS WHEREOF the Subscriber has duly executed this Subscription as of the
date first above mentioned.
DELIVERY INSTRUCTIONS
1. Delivery - please deliver the Share certificates to:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE>
-7-
Registration - registration of the certificates which are to be delivered
at closing should be made as follows:
--------------------------------------------------------------------------
(name)
--------------------------------------------------------------------------
(address)
3 The undersigned hereby acknowledges that it will deliver to the Company all
such additional completed forms in respect of the Subscriber's purchase of
the Shares as may be required for filing with the appropriate securities
commissions and regulatory authorities.
Lamplighter Investments Ltd.
--------------------------------------------
(Name of Subscriber - Please type or print)
/s/ [Illegible]
--------------------------------------------
(Signature and, if applicable, Office)
--------------------------------------------
(Address of Subscriber)
Dublin 2
--------------------------------------------
(City, State or Province, Postal Code of
Subscriber)
Ireland
--------------------------------------------
(Country of Subscriber)
Handwritten
- -----------
88 Ellis Rd
Crowthorne Berks
England
RG4 56PN
<PAGE>
-8-
A C C E P T A N C E
The above-mentioned Subscription in respect of the Shares is hereby accepted by
KODIAK GRAPHICS COMPANY
DATED at Vancouver, the 6th day of May, 1999.
KODIAK GRAPHICS COMPANY
Per: /s/William Turner, President
------------------------------------
Authorized Signatory
<PAGE>
-9-
SCHEDULE A - LEGEND
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE ONE YEAR ANNIVERSARY
OF THE ISSUANCE HEREOF OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY
AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN
EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT ("RULE 144A"), TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE 1933 ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4)
TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE 1933 ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT
IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND
A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE 1933 ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE 1933 ACT, OR (6)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, IN EACH CASE
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT
IT WILL FURNISH TO THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES
WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE 1933 ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2)
OF) RULE 902 UNDER REGULATION S UNDER THE 1933 ACT."
EXHIBIT 10.15
THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT RELATES TO AN OFFERING OF
SECURITIES IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS
DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT").
NONE OF THE SECURITIES TO WHICH THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
(THE "AGREEMENT") RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT, AND, UNLESS
SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S.
PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
(Foreign/Overseas Subscribers)
TO: KODIAK GRAPHICS COMPANY, a Nevada Corporation (the "Company")
2034 Western Avenue
Las Vegas, Nevada 89102
Purchase of Shares
1. Subscription
1.1 The undersigned (the "Subscriber") hereby irrevocably subscribes for and
agrees to purchase 555,555 shares (the "Shares") at a price of US$1.50 per Share
(such subscription and agreement to purchase being the "Subscription"), for the
total purchase price of US$833,332.50 (the "Subscription Proceeds"), which is
tendered herewith, on the basis of the representations and warranties and
subject to the terms and conditions set forth herein. This Subscription is part
of a private placement of up to US$2,500,000.
1.2 The Company hereby irrevocably agrees to sell, on the basis of the
representations and warranties and subject to the terms and conditions set forth
herein, to the Subscriber the Shares.
1.3 Subject to the terms hereof, the Subscription will be effective upon its
acceptance by the Company.
2. Payment
2.1 The Subscription Proceeds must accompany this Subscription and shall be
paid by certified cheque or bank draft drawn on a U.S. chartered bank made
payable to the Company. If the funds are wired to the Company or to its agent or
lawyers, those agents or lawyers are authorized to immediately deliver the funds
to the Company.
3. Documents Required from Subscriber
3.1 The Subscriber must complete, sign and return to the Company two (2)
executed copies of this Agreement.
3.2 The Subscriber shall complete, sign and return to the Company as soon as
possible on request by the Company any documents, questionnaires, notices and
undertakings as may be required by regulatory authorities, stock exchanges and
applicable law.
<PAGE>
-2-
4. Closing
4.1 Closing of the offering of the Shares (the "Closing") shall occur on May
15, 1999 or on such other date as may be determined by the Company (the "Closing
Date").
5. Acknowledgements of Subscriber
5.1 The Subscriber acknowledges and agrees that:
(a) the Shares have not been registered under the 1933 Act, or under any
state securities or "blue sky" laws of any state of the United States,
and, unless so registered, may not be offered or sold in the United
States or to U.S. Persons, as that term is defined in Regulation S
under the 1933 Act ("Regulation S"), except pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the 1933 Act;
(b) the decision to execute this Agreement and purchase the Shares agreed
to be purchased hereunder has not been based upon any oral or written
representation as to fact or otherwise made by or on behalf of the
Company and such decision is based entirely upon a review of the news
releases of the Company and any public information filed with the
Securities and Exchange Commission in compliance, or intended
compliance, with applicable securities legislation. If the Company has
presented a business plan to the Subscriber, the Subscriber
acknowledges that the business plan may not be achieved or be
achievable;
(c) by execution hereof the Subscriber has waived the need for the Company
to communicate its acceptance of the purchase of the Shares pursuant
to this Agreement;
(d) the Company is entitled to rely on the representations and warranties
and the statements and answers of the Subscriber contained in this
Agreement, and the Subscriber will hold harmless the Company from any
loss or damage it or they may suffer as a result of the Subscriber's
failure to correctly complete this Agreement;
(e) it will indemnify and hold harmless the Company and, where applicable,
its respective directors, officers, employees, agents, advisors and
shareholders from and against any and all loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and
all fees, costs and expenses whatsoever reasonably incurred in
investigating, preparing or defending against any claim, lawsuit,
administrative proceeding or investigation whether commenced or
threatened) arising out of or based upon any representation or
warranty of the Subscriber contained herein or in any document
furnished by the Subscriber to the Company in connection herewith
being untrue in any material respect or any breach or failure by the
Subscriber to comply with any covenant or agreement made by the
Subscriber to the Company in connection therewith;
(f) the issuance and sale of the Shares to the Subscriber will not be
completed if acceptance would be unlawful or if, in the discretion of
the Company, acting reasonably, acceptance is not in the best
interests of the Company;
(g) it has been advised to consult its own legal, tax and other advisors
with respect to the merits and risks of an investment in the Shares
and with respect to applicable resale restrictions and it is solely
responsible (and the Company is not in any way responsible) for
compliance with applicable resale restrictions;
(h) the Shares are not listed on any stock exchange or automated dealer
quotation system and no representation has been made to the Subscriber
that the Shares will become listed on any stock exchange or automated
dealer quotation system; except that currently certain market makers
make market in shares of the Company on the non-NASDAQ
Over-the-Counter Bulletin Board;
<PAGE>
-3-
(i) it is outside the United States when receiving and executing this
Subscription Agreement and is acquiring the Shares for its own
account, for investment purposes only, and not with a view to, or for,
resale, distribution or fractionalization thereof, in whole or in
part, and no other person has a direct or indirect beneficial interest
in such Shares; or, if not, it is an accredited investor as defined by
US securities laws;
(j) the Shares may not be offered or sold to a U.S. Person or for the
account or benefit of a U.S. Person (other than a distributor) prior
to the end of the Restricted Period (as defined herein), if
applicable;
(k) the Company is under no obligation to register or qualify the Shares
on behalf of the Subscriber or to assist the Subscriber in complying
with any exemption from registration and qualification under the 1933
Act and applicable state securities laws, or any form of exemption
therefrom;
(l) in the view of the Securities and Exchange Commission, the statutory
and regulatory basis for the exemption claimed for the offer and sale
of the Shares, although in technical compliance with Regulation S,
would nonetheless not be available if the offering is part of a plan
or scheme to evade the registration provisions of the 1933 Act;
(m) this Agreement is not enforceable by the Subscriber unless it has been
accepted by the Company; and
(n) the Company will pay a finders fee, in cash, equal to 2.8% of the
gross proceeds received by the Company from the sale of the Shares.
The subscriber further acknowledges that the finder and its officers,
directors, employees and affiliates may, from time to time, hold
positions in securities of the Company.
6. Representations, Warranties and Covenants of the Subscriber
6.1 The Subscriber hereby represents and warrants to and covenants with the
Company (which representations, warranties and covenants shall survive the
Closing) that:
(a) it is not a U.S. Person;
(b) it is not acquiring the Shares for the account or benefit of, directly
or indirectly, a U.S. Person;
(c) the Subscriber has the legal capacity and competence to enter into and
execute this Subscription and to take all actions required pursuant
hereto and, if the Subscriber is a corporation, it is duly
incorporated and validly subsisting under the laws of its jurisdiction
of incorporation and all necessary approvals by its directors,
shareholders and others have been obtained to authorize execution and
performance of this Subscription on behalf of the Subscriber;
(d) the entering into of this Subscription and the transactions
contemplated hereby do not result in the violation of any of the terms
and provisions of any law applicable to, or the constating documents
of, the Subscriber or of any agreement, written or oral, to which the
Subscriber may be a party or by which the Subscriber is or may be
bound;
(e) the Subscriber has duly executed and delivered this Subscription and
it constitutes a valid and binding agreement of the Subscriber
enforceable against the Subscriber;
(f) it is not an underwriter of, or dealer in, the securities of the
Company, nor is the Subscriber participating, pursuant to a
contractual agreement or otherwise, in the distribution of the Shares;
(g) it is purchasing the Shares for its own account or for an account with
respect to which it exercises sole investment discretion, and that it
or such account is an accredited investor as that term is defined in
Rule 501 under the 1933 Act (an "Accredited Investor") acquiring the
Shares for investment purposes and not for distribution;
<PAGE>
-4-
(h) it understands and agrees that none of the Shares has been registered
under the 1933 Act, and they may not be sold except as permitted in
paragraph (i) below;
(i) it understands and agrees (i) that the Shares are being offered only
in a transaction not involving any public offering within the meaning
of the 1933 Act, and (ii) that (A) if within one year after the date
of original issuance of the Shares, or if within three months after it
ceases to be an affiliate (within the meaning of Rule 144 under the
1933 Act ("Rule 144")) of the Company, it decides to resell, pledge or
otherwise transfer the Shares on which the legend as set forth below
appears, such Shares may be resold, pledged or transferred only (1) to
the Company, (2) so long as the Shares are eligible for resale
pursuant to Rule 144A under the 1933 Act ("Rule 144A"), to a person
whom the seller reasonably believes is a qualified institutional
investor buyer ("QIB") as that term is defined in Rule 144A(a)(1) that
purchases for its own account or for the account of a QIB to whom
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the
transferor on the certificate of transfer on the reverse of the
Shares), (3) in an offshore transaction in accordance with Regulation
S (as indicated by the box checked by the transferor on the
certificate of transfer on the reverse of the Shares), (4) to an
Institutional Accredited Investor (as indicated by the box checked by
the transferor on the certificate of transfer on the reverse of the
Shares) who has certified to the Company that such transferee is an
Institutional Accredited Investor and is acquiring such security for
investment purposes and not for distribution, (5) pursuant to an
exemption from registration provided by Rule 144 (if applicable) under
the 1933 Act, or (6) pursuant to an effective registration statement
under the 1933 Act, in each case in accordance with any applicable
securities laws of any state of the United States, (B) the purchaser
will, and each subsequent holder is required to, notify any purchaser
of the Shares from it of the resale restrictions referred to in clause
(A) above, if then applicable, and (C) with respect to any transfer of
the Shares by an Institutional Accredited Investor, such holder will
deliver to the Company such certificates and other information as it
may reasonably require to confirm that the transfer by it complies
with the restrictions set forth in this paragraph (i);
(j) it understands and agrees that the notification requirement referred
to in paragraph (i) above will be satisfied by virtue of the fact that
the legend set out in Schedule A will be placed on the Shares unless
otherwise agreed by the Company;
(k) it understands and agrees that offers and sales of the Shares prior to
the expiration of a period of one year after the date of original
issuance of the Shares (the "Restricted Period") shall only be made in
compliance with the safe harbor provisions set forth in Regulation S,
pursuant to the registration provisions of the 1933 Act or an
exemption therefrom, and that all offers and sales after the
Restricted Period shall be made only in compliance with the
registration provisions of the 1933 Act or an exemption therefrom;
(l) it will not sell or otherwise transfer the Shares except as permitted
under the 1933 Act and applicable state securities laws or an
exemption therefrom;
(m) it (i) is able to fend for itself in the Subscription; (ii) has such
knowledge and experience in business matters as to be capable of
evaluating the merits and risks of its prospective investment in the
Shares; and (iii) has the ability to bear the economic risks of its
prospective investment and can afford the complete loss of such
investment;
(n) it understands and agrees that the legend set forth in paragraph (j)
above shall not be removed from any Shares purchased by it pursuant to
this Subscription unless there is delivered to the Company such
satisfactory evidence, which may include an opinion of counsel
licensed to practice law in one of the states of the United States of
America, as may be reasonably required by the Company, that such
Shares are not "restricted" within the meaning of Rule 144;
(o) if it is acquiring the Shares as a fiduciary or agent for one or more
investor accounts, it has sole investment discretion with respect to
each such account and it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of such
account;
<PAGE>
-5-
(p) it understands and agrees that the Company and others will rely upon
the truth and accuracy of the acknowledgments, representations and
agreements contained in sections 5 and 6 hereof and agrees that if any
of such acknowledgments, representations and agreements are no longer
accurate or have been breached, it shall promptly notify the Company;
(q) the Subscriber is not aware of any advertisement of the Shares;
(r) no person has made to the Subscriber any written or oral
representations:
(i) that any person will resell or repurchase any of the Shares;
(ii) that any person will refund the purchase price of any of the
Shares;
(iii) as to the future price or value of any of the Shares; or
(iv) that the Shares will be listed and posted for trading on any
stock exchange or automated dealer quotation system or that
application has been made to list and post the Shares of the
Company on any stock exchange or automated dealer quotation
system.
6.2 In this Subscription, the term "U.S. Person" shall have the meaning
ascribed thereto in Regulation S.
7. Acknowledgement and Waiver
7.1 The Subscriber has acknowledged that the decision to purchase the Shares
was solely made on the basis of publicly available information. The Subscriber
hereby waives, to the fullest extent permitted by law, any rights of withdrawal,
rescission or compensation for damages to which the Subscriber might be entitled
in connection with the distribution of the Shares.
8. Legending of Shares
8.1 The Subscriber hereby acknowledges that a legend may be placed on the
certificates representing the Shares to the effect that the securities
represented by such certificates are subject to a hold period and may not be
traded until the expiry of such hold period except as permitted by applicable
securities legislation.
9. Costs
9.1 The Subscriber acknowledges and agrees that all costs and expenses incurred
by the Subscriber (including any fees and disbursements of any special counsel
retained by the Subscriber) relating to the purchase of the Shares shall be
borne by the Subscriber.
10. Governing Law
10.1 This Subscription Agreement is governed by the laws of the state of Nevada
and the federal laws of the United States applicable herein. The Subscriber, in
its personal or corporate capacity and, if applicable, on behalf of each
beneficial purchaser for whom it is acting, irrevocably attorns to the
jurisdiction of the state of Nevada.
<PAGE>
-6-
11. Survival
11.1 This Subscription, including without limitation the representations,
warranties and covenants contained herein, shall survive and continue in full
force and effect and be binding upon the parties hereto notwithstanding the
completion of the purchase of the Shares by the Subscriber pursuant hereto.
12. Assignment
12.1 This Subscription is not transferable or assignable.
13. Execution
13.1 The Company shall be entitled to rely on delivery by facsimile machine of
an executed copy of this Subscription and acceptance by the Company of such
facsimile copy shall be equally effective to create a valid and binding
agreement between the Subscriber and the Company in accordance with the terms
hereof.
14. Severability
14.1 The invalidity or unenforceability of any particular provision of this
Subscription shall not affect or limit the validity or enforceability of the
remaining provisions of this Subscription.
15. Entire Agreement
15.1 Except as expressly provided in this Agreement and in the agreements,
instruments and other documents contemplated or provided for herein, this
Agreement contains the entire agreement between the parties with respect to the
sale of the Shares and there are no other terms, conditions, representations or
warranties, whether expressed, implied, oral or written, by statute or common
law, by the Company or by anyone else.
16. Notices
16.1 All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Subscriber shall be directed to the
address on page 1 and notices to the Company shall be directed to it at 2034
Western Avenue, Las Vegas, Nevada, 89102, attention of William Turner.
17. Counterparts
17.1 This Agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall constitute an original and all of
which together shall constitute one instrument.
IN WITNESS WHEREOF the Subscriber has duly executed this Subscription as of the
date first above mentioned.
DELIVERY INSTRUCTIONS
1 Delivery - please deliver the Share certificates to:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE>
-7-
2. Registration - registration of the certificates which are to be delivered
at closing should be made as follows:
--------------------------------------------------------------------------
(name)
--------------------------------------------------------------------------
(address)
3 The undersigned hereby acknowledges that it will deliver to the Company all
such additional completed forms in respect of the Subscriber's purchase of
the Shares as may be required for filing with the appropriate securities
commissions and regulatory authorities.
Strathburn Investments Inc.
--------------------------------------------
(Name of Subscriber - Please type or print)
/s/ [Illegible] Authorized Signatory
--------------------------------------------
(Signature and, if applicable, Office)
3rd Floor, Norfolk House, Frederick Street
--------------------------------------------
(Address of Subscriber)
Nassau
--------------------------------------------
(City, State or Province, Postal Code of
Subscriber)
Bahamas
--------------------------------------------
(Country of Subscriber)
<PAGE>
-8-
A C C E P T A N C E
The above-mentioned Subscription in respect of the Shares is hereby accepted by
KODIAK GRAPHICS COMPANY
DATED at Vancouver, the 6th day of May, 1999.
KODIAK GRAPHICS COMPANY
KODIAK GRAPHICS COMPANY
Per: /s/William Turner, President
------------------------------------
Authorized Signatory
<PAGE>
-9-
SCHEDULE A - LEGEND
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE ONE YEAR ANNIVERSARY
OF THE ISSUANCE HEREOF OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY
AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN
EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT ("RULE 144A"), TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE 1933 ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4)
TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE 1933 ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT
IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND
A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE 1933 ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE 1933 ACT, OR (6)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, IN EACH CASE
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT
IT WILL FURNISH TO THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES
WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE 1933 ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2)
OF) RULE 902 UNDER REGULATION S UNDER THE 1933 ACT."
EXHIBIT 10.16
THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (THE "AGREEMENT") RELATES TO AN
OFFERING OF SECURITIES IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S.
PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").
NONE OF THE SECURITIES TO WHICH THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT, AND, UNLESS SO REGISTERED, NONE
MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED
HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
(Foreign/Overseas Subscribers)
TO: SPORTSPRIZE ENTERTAINMENT INC., a Nevada Corporation
(formerly KODIAK GRAPHICS COMPANY)
2034 Western Avenue
Las Vegas, Nevada 89102
Purchase of Shares
1. Subscription
1.1 The undersigned (the "Subscriber") hereby irrevocably subscribes for and
agrees to purchase 83,333 shares (the "Shares") at a price of US $4.00 per Share
(such subscription and agreement to purchase being the "Subscription"), for the
total purchase price of US $333,332 (the "Subscription Proceeds"), which is
tendered herewith, on the basis of the representations and warranties and
subject to the terms and conditions set forth herein. This Subscription is part
of a private placement of up to US $1,000,000.
1.2 The Company hereby irrevocably agrees to sell, on the basis of the
representations and warranties and subject to the terms and conditions set forth
herein, to the Subscriber the Shares.
1.3 Subject to the terms hereof, the Subscription will be effective upon its
acceptance by the Company.
2. Payment
2.1 The Subscription Proceeds must accompany this Subscription and shall be
paid by certified cheque or bank draft drawn on a U.S. chartered bank made
payable to the Company. If the funds are wired to the Company or to its agent or
lawyers, those agents or lawyers are authorized to immediately deliver the funds
to the Company.
3. Documents Required from Subscriber
3.1 The Subscriber must complete, sign and return to the Company two (2)
executed copies of this Agreement.
3.2 The Subscriber shall complete, sign and return to the Company as soon as
possible on request by the Company any documents, questionnaires, notices and
undertakings as may be required by regulatory authorities, stock exchanges and
applicable law.
4. Closing
4.1 Closing of the offering of the Shares (the "Closing") shall occur on August
31, 1999 or on such other date as may be determined by the Company (the "Closing
Date").
<PAGE>
-2-
5. Acknowledgements of Subscriber
5.1 The Subscriber acknowledges and agrees that:
(a) the Shares have not been registered under the 1933 Act, or under any
state securities or "blue sky" laws of any state of the United States,
and, unless so registered, may not be offered or sold in the United
States or to U.S. Persons, as that term is defined in Regulation S
under the 1933 Act ("Regulation S"), except pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the 1933 Act;
(b) the decision to execute this Agreement and purchase the Shares agreed
to be purchased hereunder has not been based upon any oral or written
representation as to fact or otherwise made by or on behalf of the
Company and such decision is based entirely upon a review of the news
releases of the Company and any public information filed with the
Securities and Exchange Commission in compliance, or intended
compliance, with applicable securities legislation. If the Company has
presented a business plan to the Subscriber, the Subscriber
acknowledges that the business plan may not be achieved or be
achievable;
(c) by execution hereof the Subscriber has waived the need for the Company
to communicate its acceptance of the purchase of the Shares pursuant
to this Agreement;
(d) the Company is entitled to rely on the representations and warranties
and the statements and answers of the Subscriber contained in this
Agreement, and the Subscriber will hold harmless the Company from any
loss or damage it or they may suffer as a result of the Subscriber's
failure to correctly complete this Agreement;
(e) it will indemnify and hold harmless the Company and, where applicable,
its respective directors, officers, employees, agents, advisors and
shareholders from and against any and all loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and
all fees, costs and expenses whatsoever reasonably incurred in
investigating, preparing or defending against any claim, lawsuit,
administrative proceeding or investigation whether commenced or
threatened) arising out of or based upon any representation or
warranty of the Subscriber contained herein or in any document
furnished by the Subscriber to the Company in connection herewith
being untrue in any material respect or any breach or failure by the
Subscriber to comply with any covenant or agreement made by the
Subscriber to the Company in connection therewith;
(f) the issuance and sale of the Shares to the Subscriber will not be
completed if acceptance would be unlawful or if, in the discretion of
the Company, acting reasonably, acceptance is not in the best
interests of the Company;
(g) it has been advised to consult its own legal, tax and other advisors
with respect to the merits and risks of an investment in the Shares
and with respect to applicable resale restrictions and it is solely
responsible (and the Company is not in any way responsible) for
compliance with applicable resale restrictions;
(h) the Shares are not listed on any stock exchange or automated dealer
quotation system and no representation has been made to the Subscriber
that the Shares will become listed on any stock exchange or automated
dealer quotation system; except that currently certain market makers
make market in shares of the Company on the non-NASDAQ
Over-the-Counter Bulletin Board;
(i) it is outside the United States when receiving and executing this
Subscription Agreement and is acquiring the Shares for its own
account, for investment purposes only, and not with a view to, or for,
resale, distribution or fractionalization thereof, in whole or in
part, and no other person has a direct or indirect beneficial interest
in such Shares; or, if not, it is an accredited investor as defined by
US securities laws;
<PAGE>
-3-
(j) the Shares may not be offered or sold to a U.S. Person or for the
account or benefit of a U.S. Person (other than a distributor) prior
to the end of the Restricted Period (as defined herein), if
applicable;
(k) the Company is under no obligation to register or qualify the Shares
on behalf of the Subscriber or to assist the Subscriber in complying
with any exemption from registration and qualification under the 1933
Act and applicable state securities laws, or any form of exemption
therefrom;
(l) in the view of the Securities and Exchange Commission, the statutory
and regulatory basis for the exemption claimed for the offer and sale
of the Shares, although in technical compliance with Regulation S,
would nonetheless not be available if the offering is part of a plan
or scheme to evade the registration provisions of the 1933 Act;
(m) this Agreement is not enforceable by the Subscriber unless it has been
accepted by the Company; and
(n) the Company will pay a finders fee, in cash, equal to 2.5% of the
gross proceeds received by the Company from the sale of the Shares.
The subscriber further acknowledges that the finder and its officers,
directors, employees and affiliates may, from time to time, hold
positions in securities of the Company.
6. Representations, Warranties and Covenants of the Subscriber
6.1 The Subscriber hereby represents and warrants to and covenants with the
Company (which representations, warranties and covenants shall survive the
Closing) that:
(a) it is not a U.S. Person;
(b) it is not acquiring the Shares for the account or benefit of, directly
or indirectly, a U.S. Person;
(c) the Subscriber has the legal capacity and competence to enter into and
execute this Subscription and to take all actions required pursuant
hereto and, if the Subscriber is a corporation, it is duly
incorporated and validly subsisting under the laws of its jurisdiction
of incorporation and all necessary approvals by its directors,
shareholders and others have been obtained to authorize execution and
performance of this Subscription on behalf of the Subscriber;
(d) the entering into of this Subscription and the transactions
contemplated hereby do not result in the violation of any of the terms
and provisions of any law applicable to, or the constating documents
of, the Subscriber or of any agreement, written or oral, to which the
Subscriber may be a party or by which the Subscriber is or may be
bound;
(e) the Subscriber has duly executed and delivered this Subscription and
it constitutes a valid and binding agreement of the Subscriber
enforceable against the Subscriber;
(f) it is not an underwriter of, or dealer in, the securities of the
Company, nor is the Subscriber participating, pursuant to a
contractual agreement or otherwise, in the distribution of the Shares;
(g) it is purchasing the Shares for its own account or for an account with
respect to which it exercises sole investment discretion, and that it
or such account is an accredited investor as that term is defined in
Rule 501 under the 1933 Act (an "Accredited Investor") acquiring the
Shares for investment purposes and not for distribution;
(h) it understands and agrees that none of the Shares has been registered
under the 1933 Act, and they may not be sold except as permitted in
paragraph (i) below;
(i) it understands and agrees (i) that the Shares are being offered only
in a transaction not involving any public offering within the meaning
of the 1933 Act, and (ii) that (A) if within one year after the date
of original
<PAGE>
-4-
issuance of the Shares, or if within three months after it ceases to
be an affiliate (within the meaning of Rule 144 under the 1933 Act
("Rule 144")) of the Company, it decides to resell, pledge or
otherwise transfer the Shares on which the legend as set forth below
appears, such Shares may be resold, pledged or transferred only (1) to
the Company, (2) so long as the Shares are eligible for resale
pursuant to Rule 144A under the 1933 Act ("Rule 144A"), to a person
whom the seller reasonably believes is a qualified institutional
investor buyer ("QIB") as that term is defined in Rule 144A(a)(1) that
purchases for its own account or for the account of a QIB to whom
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the
transferor on the certificate of transfer on the reverse of the
Shares), (3) in an offshore transaction in accordance with Regulation
S (as indicated by the box checked by the transferor on the
certificate of transfer on the reverse of the Shares), (4) to an
Institutional Accredited Investor (as indicated by the box checked by
the transferor on the certificate of transfer on the reverse of the
Shares) who has certified to the Company that such transferee is an
Institutional Accredited Investor and is acquiring such security for
investment purposes and not for distribution, (5) pursuant to an
exemption from registration provided by Rule 144 (if applicable) under
the 1933 Act, or (6) pursuant to an effective registration statement
under the 1933 Act, in each case in accordance with any applicable
securities laws of any state of the United States, (B) the purchaser
will, and each subsequent holder is required to, notify any purchaser
of the Shares from it of the resale restrictions referred to in clause
(A) above, if then applicable, and (C) with respect to any transfer of
the Shares by an Institutional Accredited Investor, such holder will
deliver to the Company such certificates and other information as it
may reasonably require to confirm that the transfer by it complies
with the restrictions set forth in this paragraph (i);
(j) it understands and agrees that the notification requirement referred
to in paragraph (i) above will be satisfied by virtue of the fact that
the legend set out in Schedule "A" will be placed on the Shares unless
otherwise agreed by the Company;
(k) it understands and agrees that offers and sales of the Shares prior to
the expiration of a period of one year after the date of original
issuance of the Shares (the "Restricted Period") shall only be made in
compliance with the safe harbor provisions set forth in Regulation S,
pursuant to the registration provisions of the 1933 Act or an
exemption therefrom, and that all offers and sales after the
Restricted Period shall be made only in compliance with the
registration provisions of the 1933 Act or an exemption therefrom;
(l) it will not sell or otherwise transfer the Shares except as permitted
under the 1933 Act and applicable state securities laws or an
exemption therefrom;
(m) it (i) is able to fend for itself in the Subscription; (ii) has such
knowledge and experience in business matters as to be capable of
evaluating the merits and risks of its prospective investment in the
Shares; and (iii) has the ability to bear the economic risks of its
prospective investment and can afford the complete loss of such
investment;
(n) it understands and agrees that the legend set forth in paragraph (j)
above shall not be removed from any Shares purchased by it pursuant to
this Subscription unless there is delivered to the Company such
satisfactory evidence, which may include an opinion of counsel
licensed to practice law in one of the states of the United States of
America, as may be reasonably required by the Company, that such
Shares are not "restricted" within the meaning of Rule 144;
(o) if it is acquiring the Shares as a fiduciary or agent for one or more
investor accounts, it has sole investment discretion with respect to
each such account and it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of such
account;
(p) it understands and agrees that the Company and others will rely upon
the truth and accuracy of the acknowledgments, representations and
agreements contained in sections 5 and 6 hereof and agrees that if any
of such acknowledgments, representations and agreements are no longer
accurate or have been breached, it shall promptly notify the Company;
<PAGE>
-5-
(q) the Subscriber is not aware of any advertisement of the Shares;
(r) no person has made to the Subscriber any written or oral
representations:
(i) that any person will resell or repurchase any of the Shares;
(ii) that any person will refund the purchase price of any of the
Shares;
(iii) as to the future price or value of any of the Shares; or
(iv) that the Shares will be listed and posted for trading on any
stock exchange or automated dealer quotation system or that
application has been made to list and post the Shares of the
Company on any stock exchange or automated dealer quotation
system.
6.2 In this Subscription, the term "U.S. Person" shall have the meaning
ascribed thereto in Regulation S.
7. Acknowledgement and Waiver
7.1 The Subscriber has acknowledged that the decision to purchase the Shares
was solely made on the basis of publicly available information. The Subscriber
hereby waives, to the fullest extent permitted by law, any rights of withdrawal,
rescission or compensation for damages to which the Subscriber might be entitled
in connection with the distribution of the Shares.
8. Legending of Shares
8.1 The Subscriber hereby acknowledges that a legend may be placed on the
certificates representing the Shares to the effect that the securities
represented by such certificates are subject to a hold period and may not be
traded until the expiry of such hold period except as permitted by applicable
securities legislation.
9. Costs
9.1 The Subscriber acknowledges and agrees that all costs and expenses incurred
by the Subscriber (including any fees and disbursements of any special counsel
retained by the Subscriber) relating to the purchase of the Shares shall be
borne by the Subscriber.
10. Governing Law
10.1 This Subscription Agreement is governed by the laws of the state of Nevada
and the federal laws of the United States applicable herein. The Subscriber, in
its personal or corporate capacity and, if applicable, on behalf of each
beneficial purchaser for whom it is acting, irrevocably attorns to the
jurisdiction of the state of Nevada.
11. Survival
11.1 This Subscription, including without limitation the representations,
warranties and covenants contained herein, shall survive and continue in full
force and effect and be binding upon the parties hereto notwithstanding the
completion of the purchase of the Shares by the Subscriber pursuant hereto.
12. Assignment
12.1 This Subscription is not transferable or assignable.
<PAGE>
-6-
13. Execution
13.1 The Company shall be entitled to rely on delivery by facsimile machine of
an executed copy of this Subscription and acceptance by the Company of such
facsimile copy shall be equally effective to create a valid and binding
agreement between the Subscriber and the Company in accordance with the terms
hereof.
14. Severability
14.1 The invalidity or unenforceability of any particular provision of this
Subscription shall not affect or limit the validity or enforceability of the
remaining provisions of this Subscription.
15. Entire Agreement
15.1 Except as expressly provided in this Agreement and in the agreements,
instruments and other documents contemplated or provided for herein, this
Agreement contains the entire agreement between the parties with respect to the
sale of the Shares and there are no other terms, conditions, representations or
warranties, whether expressed, implied, oral or written, by statute or common
law, by the Company or by anyone else.
16. Notices
16.1 All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Subscriber shall be directed to the
address on page 6 and notices to the Company shall be directed to it at 2034
Western Avenue, Las Vegas, Nevada, 89102, attention of Mr. William Turner.
17. Counterparts
17.1 This Agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall constitute an original and all of
which together shall constitute one instrument.
IN WITNESS WHEREOF the Subscriber has duly executed this Subscription as of the
date first above mentioned.
DELIVERY INSTRUCTIONS
1. Delivery - please deliver the Share certificates to:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2. Registration - registration of the certificates which are to be delivered
at closing should be made as follows:
--------------------------------------------------------------------------
(name)
--------------------------------------------------------------------------
(address)
<PAGE>
-7-
3. The undersigned hereby acknowledges that it will deliver to the Company all
such additional completed forms in respect of the Subscriber's purchase of the
Shares as may be required for filing with the appropriate securities commissions
and regulatory authorities.
Lamplighter Investments Ltd.
--------------------------------------------
(Name of Subscriber - Please type or print)
/s/G. Decker
--------------------------------------------
(Signature and, if applicable, Office)
88 Ellis Road, Crowthorne Berks
--------------------------------------------
(Address of Subscriber)
England, RG4 56PN
--------------------------------------------
(City, State or Province, Postal Code of
Subscriber)
--------------------------------------------
(Country of Subscriber)
<PAGE>
-8-
A C C E P T A N C E
The above-mentioned Subscription in respect of the Shares is hereby accepted by
SPORTSPRIZE ENTERTAINMENT INC.
DATED at Vancouver, the 15th day of July, 1999.
SPORTSPRIZE ENTERTAINMENT INC.
Per: /s/Jeff Paquin, President
------------------------------------
Authorized Signatory
<PAGE>
-9-
SCHEDULE A - LEGEND
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE ONE YEAR ANNIVERSARY
OF THE ISSUANCE HEREOF OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY
AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN
EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT ("RULE 144A"), TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE 1933 ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4)
TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE 1933 ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT
IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND
A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE 1933 ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE 1933 ACT, OR (6)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, IN EACH CASE
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT
IT WILL FURNISH TO THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES
WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE 1933 ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2)
OF) RULE 902 UNDER REGULATION S UNDER THE 1933 ACT."
EXHIBIT 10.17
THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (THE "AGREEMENT") RELATES TO AN
OFFERING OF SECURITIES IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S.
PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").
NONE OF THE SECURITIES TO WHICH THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT, AND, UNLESS SO REGISTERED, NONE
MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED
HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
(Foreign/Overseas Subscribers)
TO: SPORTSPRIZE ENTERTAINMENT INC., a Nevada Corporation
(formerly KODIAK GRAPHICS COMPANY)
2034 Western Avenue
Las Vegas, Nevada 89102
Purchase of Shares
1. Subscription
1.1 The undersigned (the "Subscriber") hereby irrevocably subscribes for and
agrees to purchase 83,333 shares (the "Shares") at a price of US $4.00 per Share
(such subscription and agreement to purchase being the "Subscription"), for the
total purchase price of US $333,332 (the "Subscription Proceeds"), which is
tendered herewith, on the basis of the representations and warranties and
subject to the terms and conditions set forth herein. This Subscription is part
of a private placement of up to US $1,000,000.
1.2 The Company hereby irrevocably agrees to sell, on the basis of the
representations and warranties and subject to the terms and conditions set forth
herein, to the Subscriber the Shares.
1.3 Subject to the terms hereof, the Subscription will be effective upon its
acceptance by the Company.
2. Payment
2.1 The Subscription Proceeds must accompany this Subscription and shall be
paid by certified cheque or bank draft drawn on a U.S. chartered bank made
payable to the Company. If the funds are wired to the Company or to its agent or
lawyers, those agents or lawyers are authorized to immediately deliver the funds
to the Company.
3. Documents Required from Subscriber
3.1 The Subscriber must complete, sign and return to the Company two (2)
executed copies of this Agreement.
3.2 The Subscriber shall complete, sign and return to the Company as soon as
possible on request by the Company any documents, questionnaires, notices and
undertakings as may be required by regulatory authorities, stock exchanges and
applicable law.
4. Closing
4.1 Closing of the offering of the Shares (the "Closing") shall occur on August
31, 1999 or on such other date as may be determined by the Company (the "Closing
Date").
<PAGE>
-2-
5. Acknowledgements of Subscriber
5.1 The Subscriber acknowledges and agrees that:
(a) the Shares have not been registered under the 1933 Act, or under any
state securities or "blue sky" laws of any state of the United States,
and, unless so registered, may not be offered or sold in the United
States or to U.S. Persons, as that term is defined in Regulation S
under the 1933 Act ("Regulation S"), except pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the 1933 Act;
(b) the decision to execute this Agreement and purchase the Shares agreed
to be purchased hereunder has not been based upon any oral or written
representation as to fact or otherwise made by or on behalf of the
Company and such decision is based entirely upon a review of the news
releases of the Company and any public information filed with the
Securities and Exchange Commission in compliance, or intended
compliance, with applicable securities legislation. If the Company has
presented a business plan to the Subscriber, the Subscriber
acknowledges that the business plan may not be achieved or be
achievable;
(c) by execution hereof the Subscriber has waived the need for the Company
to communicate its acceptance of the purchase of the Shares pursuant
to this Agreement;
(d) the Company is entitled to rely on the representations and warranties
and the statements and answers of the Subscriber contained in this
Agreement, and the Subscriber will hold harmless the Company from any
loss or damage it or they may suffer as a result of the Subscriber's
failure to correctly complete this Agreement;
(e) it will indemnify and hold harmless the Company and, where applicable,
its respective directors, officers, employees, agents, advisors and
shareholders from and against any and all loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and
all fees, costs and expenses whatsoever reasonably incurred in
investigating, preparing or defending against any claim, lawsuit,
administrative proceeding or investigation whether commenced or
threatened) arising out of or based upon any representation or
warranty of the Subscriber contained herein or in any document
furnished by the Subscriber to the Company in connection herewith
being untrue in any material respect or any breach or failure by the
Subscriber to comply with any covenant or agreement made by the
Subscriber to the Company in connection therewith;
(f) the issuance and sale of the Shares to the Subscriber will not be
completed if acceptance would be unlawful or if, in the discretion of
the Company, acting reasonably, acceptance is not in the best
interests of the Company;
(g) it has been advised to consult its own legal, tax and other advisors
with respect to the merits and risks of an investment in the Shares
and with respect to applicable resale restrictions and it is solely
responsible (and the Company is not in any way responsible) for
compliance with applicable resale restrictions;
(h) the Shares are not listed on any stock exchange or automated dealer
quotation system and no representation has been made to the Subscriber
that the Shares will become listed on any stock exchange or automated
dealer quotation system; except that currently certain market makers
make market in shares of the Company on the non-NASDAQ
Over-the-Counter Bulletin Board;
(i) it is outside the United States when receiving and executing this
Subscription Agreement and is acquiring the Shares for its own
account, for investment purposes only, and not with a view to, or for,
resale, distribution or fractionalization thereof, in whole or in
part, and no other person has a direct or indirect beneficial interest
in such Shares; or, if not, it is an accredited investor as defined by
US securities laws;
<PAGE>
-3-
(j) the Shares may not be offered or sold to a U.S. Person or for the
account or benefit of a U.S. Person (other than a distributor) prior
to the end of the Restricted Period (as defined herein), if
applicable;
(k) the Company is under no obligation to register or qualify the Shares
on behalf of the Subscriber or to assist the Subscriber in complying
with any exemption from registration and qualification under the 1933
Act and applicable state securities laws, or any form of exemption
therefrom;
(l) in the view of the Securities and Exchange Commission, the statutory
and regulatory basis for the exemption claimed for the offer and sale
of the Shares, although in technical compliance with Regulation S,
would nonetheless not be available if the offering is part of a plan
or scheme to evade the registration provisions of the 1933 Act;
(m) this Agreement is not enforceable by the Subscriber unless it has been
accepted by the Company; and
(n) the Company will pay a finders fee, in cash, equal to 2.5% of the
gross proceeds received by the Company from the sale of the Shares.
The subscriber further acknowledges that the finder and its officers,
directors, employees and affiliates may, from time to time, hold
positions in securities of the Company.
6. Representations, Warranties and Covenants of the Subscriber
6.1 The Subscriber hereby represents and warrants to and covenants with the
Company (which representations, warranties and covenants shall survive the
Closing) that:
(a) it is not a U.S. Person;
(b) it is not acquiring the Shares for the account or benefit of, directly
or indirectly, a U.S. Person;
(c) the Subscriber has the legal capacity and competence to enter into and
execute this Subscription and to take all actions required pursuant
hereto and, if the Subscriber is a corporation, it is duly
incorporated and validly subsisting under the laws of its jurisdiction
of incorporation and all necessary approvals by its directors,
shareholders and others have been obtained to authorize execution and
performance of this Subscription on behalf of the Subscriber;
(d) the entering into of this Subscription and the transactions
contemplated hereby do not result in the violation of any of the terms
and provisions of any law applicable to, or the constating documents
of, the Subscriber or of any agreement, written or oral, to which the
Subscriber may be a party or by which the Subscriber is or may be
bound;
(e) the Subscriber has duly executed and delivered this Subscription and
it constitutes a valid and binding agreement of the Subscriber
enforceable against the Subscriber;
(f) it is not an underwriter of, or dealer in, the securities of the
Company, nor is the Subscriber participating, pursuant to a
contractual agreement or otherwise, in the distribution of the Shares;
(g) it is purchasing the Shares for its own account or for an account with
respect to which it exercises sole investment discretion, and that it
or such account is an accredited investor as that term is defined in
Rule 501 under the 1933 Act (an "Accredited Investor") acquiring the
Shares for investment purposes and not for distribution;
(h) it understands and agrees that none of the Shares has been registered
under the 1933 Act, and they may not be sold except as permitted in
paragraph (i) below;
(i) it understands and agrees (i) that the Shares are being offered only
in a transaction not involving any public offering within the meaning
of the 1933 Act, and (ii) that (A) if within one year after the date
of original
<PAGE>
-4-
issuance of the Shares, or if within three months after it ceases to
be an affiliate (within the meaning of Rule 144 under the 1933 Act
("Rule 144")) of the Company, it decides to resell, pledge or
otherwise transfer the Shares on which the legend as set forth below
appears, such Shares may be resold, pledged or transferred only (1) to
the Company, (2) so long as the Shares are eligible for resale
pursuant to Rule 144A under the 1933 Act ("Rule 144A"), to a person
whom the seller reasonably believes is a qualified institutional
investor buyer ("QIB") as that term is defined in Rule 144A(a)(1) that
purchases for its own account or for the account of a QIB to whom
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the
transferor on the certificate of transfer on the reverse of the
Shares), (3) in an offshore transaction in accordance with Regulation
S (as indicated by the box checked by the transferor on the
certificate of transfer on the reverse of the Shares), (4) to an
Institutional Accredited Investor (as indicated by the box checked by
the transferor on the certificate of transfer on the reverse of the
Shares) who has certified to the Company that such transferee is an
Institutional Accredited Investor and is acquiring such security for
investment purposes and not for distribution, (5) pursuant to an
exemption from registration provided by Rule 144 (if applicable) under
the 1933 Act, or (6) pursuant to an effective registration statement
under the 1933 Act, in each case in accordance with any applicable
securities laws of any state of the United States, (B) the purchaser
will, and each subsequent holder is required to, notify any purchaser
of the Shares from it of the resale restrictions referred to in clause
(A) above, if then applicable, and (C) with respect to any transfer of
the Shares by an Institutional Accredited Investor, such holder will
deliver to the Company such certificates and other information as it
may reasonably require to confirm that the transfer by it complies
with the restrictions set forth in this paragraph (i);
(j) it understands and agrees that the notification requirement referred
to in paragraph (i) above will be satisfied by virtue of the fact that
the legend set out in Schedule "A" will be placed on the Shares unless
otherwise agreed by the Company;
(k) it understands and agrees that offers and sales of the Shares prior to
the expiration of a period of one year after the date of original
issuance of the Shares (the "Restricted Period") shall only be made in
compliance with the safe harbor provisions set forth in Regulation S,
pursuant to the registration provisions of the 1933 Act or an
exemption therefrom, and that all offers and sales after the
Restricted Period shall be made only in compliance with the
registration provisions of the 1933 Act or an exemption therefrom;
(l) it will not sell or otherwise transfer the Shares except as permitted
under the 1933 Act and applicable state securities laws or an
exemption therefrom;
(m) it (i) is able to fend for itself in the Subscription; (ii) has such
knowledge and experience in business matters as to be capable of
evaluating the merits and risks of its prospective investment in the
Shares; and (iii) has the ability to bear the economic risks of its
prospective investment and can afford the complete loss of such
investment;
(n) it understands and agrees that the legend set forth in paragraph (j)
above shall not be removed from any Shares purchased by it pursuant to
this Subscription unless there is delivered to the Company such
satisfactory evidence, which may include an opinion of counsel
licensed to practice law in one of the states of the United States of
America, as may be reasonably required by the Company, that such
Shares are not "restricted" within the meaning of Rule 144;
(o) if it is acquiring the Shares as a fiduciary or agent for one or more
investor accounts, it has sole investment discretion with respect to
each such account and it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of such
account;
(p) it understands and agrees that the Company and others will rely upon
the truth and accuracy of the acknowledgments, representations and
agreements contained in sections 5 and 6 hereof and agrees that if any
of such acknowledgments, representations and agreements are no longer
accurate or have been breached, it shall promptly notify the Company;
<PAGE>
-5-
(q) the Subscriber is not aware of any advertisement of the Shares;
(r) no person has made to the Subscriber any written or oral
representations:
(i) that any person will resell or repurchase any of the Shares;
(ii) that any person will refund the purchase price of any of the
Shares;
(iii) as to the future price or value of any of the Shares; or
(iv) that the Shares will be listed and posted for trading on any
stock exchange or automated dealer quotation system or that
application has been made to list and post the Shares of the
Company on any stock exchange or automated dealer quotation
system.
6.2 In this Subscription, the term "U.S. Person" shall have the meaning
ascribed thereto in Regulation S.
7. Acknowledgement and Waiver
7.1 The Subscriber has acknowledged that the decision to purchase the Shares
was solely made on the basis of publicly available information. The Subscriber
hereby waives, to the fullest extent permitted by law, any rights of withdrawal,
rescission or compensation for damages to which the Subscriber might be entitled
in connection with the distribution of the Shares.
8. Legending of Shares
8.1 The Subscriber hereby acknowledges that a legend may be placed on the
certificates representing the Shares to the effect that the securities
represented by such certificates are subject to a hold period and may not be
traded until the expiry of such hold period except as permitted by applicable
securities legislation.
9. Costs
9.1 The Subscriber acknowledges and agrees that all costs and expenses incurred
by the Subscriber (including any fees and disbursements of any special counsel
retained by the Subscriber) relating to the purchase of the Shares shall be
borne by the Subscriber.
10. Governing Law
10.1 This Subscription Agreement is governed by the laws of the state of Nevada
and the federal laws of the United States applicable herein. The Subscriber, in
its personal or corporate capacity and, if applicable, on behalf of each
beneficial purchaser for whom it is acting, irrevocably attorns to the
jurisdiction of the state of Nevada.
11. Survival
11.1 This Subscription, including without limitation the representations,
warranties and covenants contained herein, shall survive and continue in full
force and effect and be binding upon the parties hereto notwithstanding the
completion of the purchase of the Shares by the Subscriber pursuant hereto.
12. Assignment
12.1 This Subscription is not transferable or assignable.
<PAGE>
-6-
13. Execution
13.1 The Company shall be entitled to rely on delivery by facsimile machine of
an executed copy of this Subscription and acceptance by the Company of such
facsimile copy shall be equally effective to create a valid and binding
agreement between the Subscriber and the Company in accordance with the terms
hereof.
14. Severability
14.1 The invalidity or unenforceability of any particular provision of this
Subscription shall not affect or limit the validity or enforceability of the
remaining provisions of this Subscription.
15. Entire Agreement
15.1 Except as expressly provided in this Agreement and in the agreements,
instruments and other documents contemplated or provided for herein, this
Agreement contains the entire agreement between the parties with respect to the
sale of the Shares and there are no other terms, conditions, representations or
warranties, whether expressed, implied, oral or written, by statute or common
law, by the Company or by anyone else.
16. Notices
16.1 All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Subscriber shall be directed to the
address on page 1 and notices to the Company shall be directed to it at 2034
Western Avenue, Las Vegas, Nevada, 89102, attention of Mr. William Turner.
17. Counterparts
17.1 This Agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall constitute an original and all of
which together shall constitute one instrument.
IN WITNESS WHEREOF the Subscriber has duly executed this Subscription as of the
date first above mentioned.
DELIVERY INSTRUCTIONS
Delivery - please deliver the Share certificates to:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2. Registration - registration of the certificates which are to be delivered
at closing should be made as follows:
--------------------------------------------------------------------------
(name)
--------------------------------------------------------------------------
(address)
<PAGE>
-7-
3. The undersigned hereby acknowledges that it will deliver to the Company all
such additional completed forms in respect of the Subscriber's purchase of
the Shares as may be required for filing with the appropriate securities
commissions and regulatory authorities.
Strathburn Investments Inc.
--------------------------------------------
(Name of Subscriber - Please type or print)
/s/ [Illegible] Authorized Signatory
--------------------------------------------
(Signature and, if applicable, Office)
3rd Floor, Norfolk House, Frederick Street
--------------------------------------------
(Address of Subscriber)
Nassau
--------------------------------------------
(City, State or Province, Postal Code of
Subscriber)
Bahamas
--------------------------------------------
(Country of Subscriber)
<PAGE>
-8-
A C C E P T A N C E
The above-mentioned Subscription in respect of the Shares is hereby accepted by
SPORTSPRIZE ENTERTAINMENT INC.
DATED at Vancouver, B.C. the 15th day of July, 1999.
SPORTSPRIZE ENTERTAINMENT INC.
Per: /s/Jeff Paquin, President
------------------------------------
Authorized Signatory
<PAGE>
SCHEDULE A - LEGEND
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE ONE YEAR ANNIVERSARY
OF THE ISSUANCE HEREOF OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY
AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN
EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT ("RULE 144A"), TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE 1933 ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4)
TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE 1933 ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT
IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND
A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE 1933 ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE 1933 ACT, OR (6)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, IN EACH CASE
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT
IT WILL FURNISH TO THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES
WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE 1933 ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2)
OF) RULE 902 UNDER REGULATION S UNDER THE 1933 ACT."
EXHIBIT 10.18
DATA AND SERVICE AGREEMENT
DATED THIS 26th DAY OF MAY, 1999
BETWEEN:
LAS VEGAS SPORTS CONSULTANTS, INC. (dba DBC Sports), A SUBSIDIARY
OF DATA BROADCASTING CORPORATION, 3955 Point Eden Way, Hayward,
California 94545 with an address in Las Vegas, Nevada at 675
Grier Drive, Suite 201.
("DBC Sports")
AND:
SPORTSPRIZE ENTERTAINMENT INC., a Nevada Corporation with a place
of business and address at 225 S. Sepulveda Boulevard, Suite 360,
Manhattan Beach, CA 90266
("Sportsprize")
WHEREAS:
A. Sportsprize is a sports entertainment community and information Site on the
Internet. Members earn discounts and prizes by correctly selecting trivia
formatted sports results.
B. DBC Sports provides a sports statistical data base and media information;
distributing headline news, scores, statistics and game information.
C. Sportsprize wishes to purchase the information and services provided by DBC
Sports.
THEREFORE, in consideration of the mutual promises contained in this Agreement,
the parties agree as follows:
1. GENERAL
A. Sportsprize's authorized representative is Jeffrey D. Paquin, President.
B. DBC Sports' authorized representative is Karol Lucan, who has full
authority to act as agent of DBC Sports in all matters pertaining to this
Agreement.
2. SERVICES AND INFORMATION PROVIDED
A. General: the majority of the information requested by Sportsprize (as set
out in this Agreement) for the Sportsprize Game is readily available
through DBC Sports' existing statistical content. If DBC Sports does not
have the data needed, its research team will use reasonable efforts to
develop the necessary relationships to gather it, i.e. which may include
but is not limited to such statistical information as how many putts
1
[Initials]
<PAGE>
a golfer may have after one round, or pit stop times for NASCAR, etc. DBC
Sports shall also provide:
B. All MLB player and team information reasonably requested by Sportsprize.
C. All NFL (and also college) player and team information reasonably requested
by Sportsprize, which may include, but is not limited to categories such
as:
i. Players:
Most receptions
Most pass attempts
Longest field goal made
Shortest field goal made
ii. Teams:
Longest TD score
Shortest TD score
Most points in the 1st or 3rd quarter
D. All NBA (and also college) player and team information reasonably requested
by Sportsprize. Some results will be available the day after the event.
E. All NHL player and team information reasonably requested by Sportsprize.
3. ADDITIONAL DATA
The following sports require additional research to be provided by DBC Sports
staff or assistance directly from the individual sports headquarters:
A. Tennis. DBC Sports now has "most money won during tournament" and it is
available the day after any tournament. However, all other propositions, as
set out in this Agreement are not readily available through DBC Sports'
systems. DBC Sports' staff will use reasonable efforts to develop the
necessary relationships with the individual sports leagues to receive this
information.
B. Golf. DBC Sports has "most money won during tournament" and it is available
the day after any tournament. "Most birdies," "most bogies" and "least
strokes" would require additional research through the Internet or by
contacting sports headquarters. DBC Sports dos not currently have access
for obtaining "least putts," "longest drive" or "best fairway accuracy."
DBC Sports' staff will use reasonable efforts to develop the necessary
relationships to receive this information, as well as the following:
i. Lowest round
ii. Highest round
iii. Best score on a particular day
C. Auto racing. DBC Sports shall use reasonable efforts to obtain through the
Internet or directly from sports headquarters all of Sportsprizes'
requests.
D. Soccer: as a Tier II event, DBC Sports has not researched this area. DBC
Sports will use reasonable efforts to obtain the necessary content upon
implementation of this area.
2
[Initials]
<PAGE>
4. EXPANSION OF SPORTING INFORMATION
A. The above information in paragraph 3 and additional propositions are based
on limited review. DBC Sports shall use reasonable efforts to continually
work with Sportsprize to offer new propositions and increase the variety
for each of the sports around the world.
5. SPORTS CONTENT FOR THE WEBSITE
A. DBC Sports shall provide Sportsprize with the necessary real time
statistics, such as standings, category leaders, boxscores, news, results,
injuries, transactions, schedules, game summaries and previews for all the
major U.S. sports which includes: pro football, college football, pro
basketball, college basketball, pro baseball, pro hockey, golf and NASCAR.
B. DBC Sports has some limitations for tennis, golf and auto racing at this
time. DBC Sports' staff will use reasonable efforts to develop the
necessary relationships to receive this information in a timely fashion.
WEEKLY SCHEDULES AND GAME EVENT SELECTIONS
A. DBC Sports shall provide a minimum of 100 proposition events with four
players or teams per event each week. This amount will vary depending on
the current event schedules, season, etc. and can increase significantly.
B. Events to be furnished to Sportsprize by DBC Sports each Tuesday for events
starting Wednesday. Event week will be Wednesday through Tuesday.
C. Events will be forwarded by DBC Sports to Sportsprize via a mutually
acceptable file format and method.
D. DBC Sports shall insure that each sports category will initially maintain
10 propositions. Depending on the public demand as obtained by Sportsprize,
certain sports may eventually be combined or additional events added as the
customer base dictates. In addition, DBC Sports shall make recommendations
regarding various proposition additions and deletions based on its
experience with the events.
E. Results of propositions shall be furnished by DBC Sports as soon as
possible after the events are over. This data shall be forwarded via a
mutually acceptable format to Sportsprize. Certain event results may be
delayed due to compilation of the information and appropriate formatting
and possible delays from DBC Sports' sources. DBC Sports will use
reasonable efforts to provide interim results. Sportsprize may offer these
results on its site with appropriate disclaimers indicating that these are
"unofficial" results until final information is obtained and verified by
both DBC Sports and Sportsprize.
F. DBC Sports shall notify Sportsprize of all news of which it is aware and
which DBC Sports determines may affect any of the participants in any
proposition. All news
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<PAGE>
should be forwarded as soon as received to Sportsprize via mutually
acceptable transmission (telephone, fax, e-mail, etc.).
G. DBC Sports shall provide statistics, news, scores and general sports
information which shall be provided for the Sportsprize web site via PLS,
FTP, or through our Instant Odds software. Scores and statistics shall be
real-time as available. Certain types of statistical content are available
each evening after all events are over. Others, such as boxscores and
recaps are generally available within one hour after the end of each event.
Sportsprize shall receive the information via mutually agreed upon formats
and will program accordingly to distribute on its web site.
6. TIMING
A. DBC Sports shall be ready to provide all data by June 15, 1999 when
Sportsprize anticipates launching the site for test purposes.
7. FEES FOR SERVICES
A. Sportsprize shall pay a monthly fee to DBC Sports, in advance, during the
term on the 1st day of each month without notice or demand from DBC Sports
for its services. The fee schedule shall be:
MONTHLY FEE STARTING DATE
----------- -------------
$ 8,500 June 1, 1999
$11,000 September 1, 1999
$15,000 December 1, 1999
$20,000 April 1, 2000, through
remainder of agreement
B. The initial term of the agreement shall be for three years, commencing June
1, 1999. This agreement will be automatically renewed for an additional
one-year term under the same conditions unless either party hereto provides
written notice to the other party of its intent not to renew at least 60
days prior to the end of the initial term,
8. SUCCESSORS AND ASSIGNS
A. Sportsprize or DBC Sports may not assign this agreement without the written
consent of the other party.
B. In the event of a merger of DBC Sports into another person, a sale of the
stock of DBC Sports resulting in the ownership of more than fifty percent
(50%) of the outstanding stock of DBC Sports by any person other than Data
Broadcasting Corporation or a sale of substantially all of the asserts of
DBC Sports (each a "change in control"), DBC Sports shall use commercially
reasonable efforts to assign the Agreement to the surviving entity or
purchaser of the stock or assets and have such person assume this Agreement
and DBC Sports' rights and liabilities hereunder. In the event, DBC Sports
is unable to have this Agreement assumed as set forth in the
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preceding sentence, DBC Sports shall be allowed to terminate this Agreement
upon a change in control without penalty or liability by providing
Sportsprize with six (6) months prior notice of its intention to terminate.
9. CONFIDENTIALITY, ACCESS TO SPORTSPRIZE INFORMATION
A. Sportsprize will be providing DBC Sports and it's affiliates with copies of
documents, proprietary game, marketing and promotional information. DBC
Sports shall take all reasonable steps to ensure that no information or
documents provided by Sportsprize (or its contractors) will be made public
or will be provided to any person by any means unless authorized in writing
by Sportsprize.
10. TERMINATION
A. Sportsprize may terminate this agreement at any time upon the breach of
this Agreement by DBC Sports provided however, that Sportsprize shall first
give DBC Sports written notice of its intention to terminate and reasons
therefore. DBC Sports shall have 30 days from receipt of said notice to
cure any breach.
In the event of a breach of this Agreement by DBC Sports, the parties
hereto agree that the sum of $60,000, shall be deemed to be liquidated
damages, to be delivered to Sportsprize as satisfaction of all claims of
the nondefaulting party and as the exclusive remedy for such breach which
sum the parties hereto agree is a reasonable sum considering all of the
circumstances on the effective date of this agreement, including the
relationship of such amount to the range of harm to Sportsprize that
reasonably could be anticipated and the anticipation that the actual damage
would be difficult or inconvenient to prove. In no event shall DBC Sports
be liable for any special, incidental, consequential, or punitive damages
including but not limited to loss of income or profit, whether or not
foreseen which may be incurred by Sportsprize.
B. DBC Sports may terminate this Agreement at any time should Sportsprize
breach this Agreement or fail to pay any amount due under this agreement
within 30 days of the date which payment is due. DBC Sports will have no
obligations under Paragraph 10(A) in the event of termination pursuant to
this paragraph for non-payment by Sportsprize.
11. EFFECTIVE DATE
A. This Agreement comes into force on the date on which the Parties sign it.
12. GOVERNING JURISDICTION
A. The laws of the State of Nevada shall govern this Agreement and any dispute
arising therefrom shall be heard in the appropriate court located in Clark
County, Nevada.
B. Sportsprize hereby indemnifies and holds DBC Sports harmless and undertakes
to defend DBC Sports, its directors, employees and agents against any and
all liabilities,
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actions, claims, suits, losses, damages, costs and expenses (including, but
not limited to, reasonable attorney fees and costs) arising out of
Sportsprize's breach of any representations, warranties and obligations
hereunder.
IN WITNESS of the forgoing this Agreement has been signed by the authorized
signatories for Sportsprize and DBC Sports on the dates noted below.
DATED THIS 26th DAY MAY, 1999
/s/ Jeffrey Paquin
- ---------------------------------
JEFFREY PAQUIN, PRESIDENT
SPORTSPRIZE ENTERTAINMENT INC.
/s/ Karol Lucan
- ---------------------------------
KAROL LUCAN
DBC SPORTS
6
EXHIBIT 10.19
AGREEMENT AND CONTRACT FOR SERVICES
EFFECTIVE DATE: June 17, 1999
BETWEEN:
SPORTSPRIZE ENTERTAINMENT INC., a company carrying on
business at 225 S. Sepulveda Blvd., Suite 360,
Manhattan Beach, California, U.S.A. 90266
(hereinafter called "Sportsprize")
MICHAEL WIEDDER, who resides at 950 2nd Street,
Santa Monica, California, U.S.A. 90403
(hereinafter called "Wiedder")
WHEREAS:
A. Wiedder is an expert in Internet Marketing, Promotions and Start-up
Websites.
B. SportsPrize wishes to utilize this expertise to quickly and efficiently
develop the marketing, sales and promotion of the Sportsprize Entertainment
Inc.
In exchange of mutual consideration and promise contained herein, Wiedder agrees
to provide consulting and management services to Sportsprize for a period of six
months, beginning June 17th, 1999 and ending December 17th, 1999. At the end of
the six months, an additional one year agreement may be negotiated if mutually
agreed upon by both parties.
Wiedder will provide the following services for Sportsprize:
1. Implement and execute the soft and hard launch strategy and execution of
Sportsprize.
2. Develop e-commerce partnerships, strategic alliances and cross promotions,
which enhance the web-site and improve the corporate revenue model.
3. Oversee, develop and implement the affiliate marketing program and
sponsorship programs for Sportsprize, working closely with the Company's
marketing consultants, Interactive Marketing Inc. and Kaleidoscope Ltd.
4. Wiedder will accept appointment as the officer of VP Marketing. In his
capacity as VP Marketing, Wiedder is expected to assist, strategize and
help implement in other areas of the business on an as needed basis, as if
Wiedder was going the company as a full time executive. This could include
assisting in securing additional employees in marketing and other divisions
of the company, location of office space, merchandise supply relationships,
and other general business matters, which would be part of the general
management team.
[Initials]
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COMPENSATION
Wiedder will be compensated as follows:
1. FEES: $12,500 USD with no deductions per month starting and payable on July
1, 1999 and then $12,500 USD per month, payable on the first of each month,
beginning August 1, 1999 and ending with the final $12,500 USD payment on
December 1st. If both parties decide to renew the agreement for an
additional year the payment will continue on the 1st of each month at the
$12,500 USD rate.
2. EXPENSES: Wiedder will also receive expense reimbursements for phone, fax,
mail, company travel, entertainment and Secretarial services as needed.
Administrative expense reimbursements will be paid on the last day of each
month, beginning July of 1999. Travel, hotel and entertainment expenses
will be reimbursed immediately.
3. SHARES: Wiedder will also receive as compensation 50,000 free-trading
(Subject to SEC Rules & Regulations) options to purchase common stock at a
price of .50 cents per share exercisable in increments of 8,333 shares per
month for the six month term of this contract. These options will expire
after 36 months from the date of this agreement.
It is intended that the options are immediately exercisable at the end of each
month starting in July of 1999 subject to the company filing an options plan
with proper authorization that will qualify options to be exercisable, and
subject to the rules of the SEC regarding exercise and sale of options and
shares.
MERGERS AND ACQUISITIONS
In the event of a company merger and/or (handwritten & initialed) acquisition
during the initial 6-month period or during the extended period if still under
contract then all (400,000) of the options will vest immediately.
RENEWAL
If both parties agree to renew the contract for an additional year, Wiedder will
receive additional 350,000 free-trading (subject to SEC Rules &B Regulations)
options to purchase common stock at the market price at the time of the new
agreement but priced no higher than USD $4.00 per shares. The options would be
subject to an equal monthly vesting period over 18 months (@ a rate of 19,445
shares per month).
These options will expire after 36 months from the date the contract is renewed.
All options will be subject to adjustment if the company does a split or reverse
split of its common shares.
ASSIGNMENT
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Wiedder may also assign the stock to a corporation or other entity subject to
his own tax liability, and any applicable Rules and Regulations.
CONFIDENTIAL INFORMATION
The parties hereto acknowledge and agree that Wiedder by virtue of his contract
with Sportsprize will have access to confidential information and therefore
Wiedder agrees that during the term of this Agreement and on termination or
expiry of the same, for any reason whatsoever, he will divulge or utilize to the
detriment of the company any such confidential or secret information so
obtained.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
18th day of June 1999.
THE COMMON SEAL OF
SPORTSPRIZE ENTERTAINMENT, INC.
Was hereto affixed in the presence of:
/s/ [Illegible] /s/ Jeffrey D. Paquin
- --------------------------------- -----------------------------------
Witness JEFFREY D. PAQUIN
SIGNED, SEALED AND DELIVERED
By MICHAEL WIEDDER In the presence of:
/s/ [Illegible] /s/ Michael Wiedder
- --------------------------------- -----------------------------------
Witness MICHAEL WIEDDER
EXHIBIT 10.20
AGREEMENT AND CONTRACT FOR SERVICES
EFFECTIVE DATE: July 1, 1999
BETWEEN:
SPORTSPRIZE ENTERTAINMENT INC., a company carrying on business at 225
S. Sepulveda Blvd., Suite 360, Manhattan Beach, California, U.S.A.
90266
(Hereinafter called "Sportsprize")
RONALD SHERIDAN, who resides at 7515 Range Avenue, Play Del Rey
California 90293
(Hereinafter called "Sheridan")
WHEREAS:
A. Sheridan has considerable experience in Internet Marketing, Promotions and
Start-up Websites.
B. Sportsprize wishes to utilize this expertise to assist the Vice President
of Marketing in his efforts to quickly and efficiently develop the
marketing and promotion of Sportsprize acting as the "Affiliate Marketing
Manager".
In exchange of mutual consideration and promise contained herein, Sheridan
agrees to provide consulting and management services to Sportsprize for a period
of six months, beginning July 1, 1999 and ending January 1, 2000. At the end of
the six months, an additional one -year agreement may be negotiated if mutually
agreed upon by both parties.
SERVICES
Sheridan, acting as Affiliate Marketing Manager, will provide the VP of
Marketing for Sportsprize with assistance with the following:
1. Implement and execute the soft and hard launch marketing strategy of the
Sportsprize.com web site.
2. Develop e-commerce partnerships, strategic alliances and cross promotions,
which enhance the web site and improve the corporate revenue model.
3. Oversee, develop and implement the affiliate marketing program and
sponsorship programs for Sportsprize, working closely with the Company's
marketing consultants, Interactive Marketing Inc. and Kaleidoscope Ltd.
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4. In his capacity as Affiliate Marketing Manager, Sheridan is expected to
assist, strategize and help the VP of Marketing implement in other areas of
the business on an as needed basis. This could include assisting in
securing additional merchandise supply relationships and other general
business matters, which would be part of the general management team.
COMPENSATION
Sheridan will be compensated as follows:
1. SALARY: $6,667 USD with no deductions per month, starting and payable one
half ($3,333.50) on July 15, 1999, then on the first and fifteenth of each
month ending with the final $3,333.50 USD payment on January 1. If both
parties decide to renew the agreement for an additional year the payment
will continue on the 1st of each month at the $6,667 USD rate.
2. EXPENSES: Expense reimbursements for phone, fax, mail, company travel,
entertainment and secretarial services as needed. Administrative expense
reimbursements will be paid on the last day of each month, beginning August
of 1999. Travel, hotel and entertainment expenses will be reimbursed
immediately.
3. STOCK OPTIONS: Sheridan will also receive as compensation 100,000
free-trading (Subject to SEC Rules & Regulations) options to purchase
common stock at a price of $2.00 per share exercisable in increments of
2,777 shares per month for 36 months. These options will expire after 36
months from the date of the Option Agreement.
It is intended that the options are immediately exercisable at the end of each
month starting in August of 1999, subject to Sportsprize filing an Options Plan
that will qualify options to be exercisable, and subject to the rules of the SEC
regarding exercise and sale of options and shares.
MERGER OR ACQUISITION
In the event of a company merger or acquisition during the initial 6-month
period or during the extended one-year period, then as long as Sheridan is still
employed, all the options will vest immediately.
All options will be subject to adjustment if the Company does a split or reverse
split of its common shares.
CONFIDENTIAL INFORMATION
The parties hereto acknowledge and agree that Sheridan by virtue of employment
with Sportsprize will have access to confidential and secret information or
expiry of the same, for any reason whatsoever, he will not divulge or utilize to
the detriment of the Company and such confidential or secret information so
obtained.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the 8th day of July 1999.
THE COMMON SEAL OF
SPORTSPRIZE ENTERTAINMENT, INC.
Was hereto affixed in the presence of:
/s/ Jeffrey D. Paquin
- ------------------------------ ----------------------------------
Witness JEFFREY D. PAQUIN, PRESIDENT
SIGNED, SEALED AND DELIVERED
By RONALD SHERIDAN In the presence of:
/s/Witness /s/ Ronald Sheridan
- ------------------------------ ----------------------------------
Witness RONALD SHERIDAN
EXHIBIT 10.21
[COMPANY LOGO]
INTERSHOP
COMMUNICATIONS
June 24th, 1999
Clive Barwin
Sportsprize Entertainement, Inc.
101 West 5th Ave
Vancouver, BC V5Y 1H9
Re: Quote for Services
Mr. Barwin:
Thank you for your interest in Intershop products. We appreciate your
consideration. Intershop hereby offers the following products and prices,
subject to the terms of this letter.
Items Cost
-------- ------------------------------------------------------ --------------
Intershop Professional Services:
-------- ------------------------------------------------------ --------------
1 Solution Definition (on-site*):
2 days, 2 engineer @ $2,000/day/engineer $ 8,000
-------- ------------------------------------------------------ --------------
2 Solution Definition (off-site):
1.5 days, 2 engineers @ $2,000/day/engineer $ 6,000
-------- ------------------------------------------------------ --------------
Estimated development and implementation
3 (to be determined during solution definition):
20 days @ $ 1,600/day $32,000
-------- ------------------------------------------------------ --------------
Estimated Total $46,000
-------- ------------------------------------------------------ --------------
* Reasonable Travel and living expenses while on-site are the
responsibility of the client.
This quote is valid until June 25th, 1999.
To accept the above pricing, Sportsprize Entertainment must prior to 5:00 PM PDT
no later than Thursday, June 24
(i) Counter sign and return to me this letter;
(ii) Submit to Intershop a valid purchase order for the products listed above;
and
(iii) Accept delivery of the products by Wednesday, June 30th, 1999.
Use of the software will be governed by the standard end-user license
agreements contained with the software; the maintenance and technical support
will be provided pursuant to Intershop's current technical support policy and
associated agreement.
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[COMPANY LOGO]
INTERSHOP
COMMUNICATIONS
Professional services, including the solution definition, will be provided
under the Professional Services Consulting attached to this letter as Exhibit A
Please let me know if you have any questions or concerns. I can be reached
at (416) 566-5092. Thanks again for your interest in Intershop and we looking
forward to making this a very successful project and long-term relationship.
Sincerely yours,
/s/Naresh Shah
- -----------------------------------
Naresh Shah
VAR Territory Manager, Canada
Accepted for Sportsprize Entertainment, Inc.
/s/Bob MacKay
- -----------------------------------
Signed
June 24, 1999
- -----------------------------------
Dated
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<PAGE>
[COMPANY LOGO]
INTERSHOP
COMMUNICATIONS
Exhibit A
Professional Services Consulting Agreement
INTERSHOP Communications, Inc. ("Intershop") and Client agree as follows:
1 Scope of Services/Software.
Intershop will perform the professional services (the "Services") for
Client in support of certain specific and discrete projects (each a "Project")
as described in the attached work order(s) ("Exhibit(s)"), commencing with
Exhibit B. Intershop will use its commercially reasonable efforts to complete
any such Services and/or any project programming and materials ("Software")
described in the related Exhibit in accordance with the terms and conditions of
this Agreement. Each Project performed by Intershop for Client will be
documented in a related Exhibit which will be governed by this Agreement and
will be signed by authorized representatives of both parties. Each Exhibit will
set forth, at a minimum, the work to be done, the duration of each Project, and
the fees for the work to be performed.
2 Performance
2.1 Method. All work will be performed in a workmanlike and professional
manner by employees and contractors of Intershop. Intershop will have the right
to determine the method, details, and means of performing the work to be done
for Client. Client will have no right to, and will not, control the manner or
determine the method of accomplishing Intershop's services. Client may, however,
require Intershop's personnel at all times to observe Client's reasonable
security and safety policies. Intershop's personnel will perform their work for
Client primarily at Intershop's premises.
2.2 Acceptance. For each Project described in the related Exhibit performed
under this Agreement, Client will have a 5 day "Acceptance Period" beginning on
the date that such Software and/or Service is delivered. During the Acceptance
Period, Client will notify Intershop in writing adequately detailing any
material nonconformance of such Software and/or Service to the specifications as
set forth in the related Exhibit. If Intershop receives no notice of
nonconformity, the Software and/or Service will be deemed accepted by Client at
the end of the Acceptance Period. In the event that Client deliver Intershop
written notice of nonconformance of Software and/or Service, Intershop will cure
such material nonconformance in accordance with the Description of Work and
deliver Software or Service to Client within 10 days of receipt of nonconforming
notification.
2.3 Project Documentation. Within 10 days of delivery of Software and/or
Service, Intershop will deliver to Client related Project documentation, if
applicable.
3 Fees, Expenses, Additional Work
3.1 Fees. Client will pay Intershop fees set forth in the related Exhibit
for Services and/or Software.
3.2 Expenses. In addition to the foregoing, Client will pay Intershop its
actual out-of-pocket expenses, including travel and living, as reasonably
incurred by Intershop in furtherance of its performance hereunder.
3.3 Additional Work. The fees and charges for any follow-up, installation,
troubleshooting and/or additional work not described in the applicable exhibit
will be performed at Intershop's then-current rates for such work, if such
additional work was not caused by Intershop's negligence.
4 Ownership
4.1 Ownership. As between Client and Intershop, except as set forth below
in Section 4.2, all right, title, and interest, including copyright interests
and any other intellectual property, in and to the Software produced or provided
by Intershop for Services will be the property of Intershop. To the extent, for
any reason, any interest accrues to Client therein, Client agree to assign and,
upon its creation, automatically assign to Intershop the ownership of such
Software, including copyright interests and any other intellectual property
therein, without the necessity of any further consideration.
4.2 Client's License. Effective upon completion of the Services and/or
Software set forth in the applicable exhibit and payment by Client of the fees
and expenses invoiced by Intershop for such Services and/or Software, Client
will have a nonexclusive, nontransferable royalty-free perpetual license to use
the Software in the machine-readable form as delivered to Client for so long as
Client do not violate any provisions in this Agreement or any the related
Software License Agreement which accompanies Intershop Software.
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[COMPANY LOGO]
INTERSHOP
COMMUNICATIONS
4.3 Prohibited Activities. Client will not derive or attempt to derive the
source code or structure of all or any portion of the Software by reverse
engineering, disassembly, decompilation or any other means. Client will not
duplicate, manufacture, copy or reproduce any Software, or any portion thereof,
except as expressly permitted by Intershop.
4.4 Third-Party Interests. Client's interest in and obligations with
respect to any programming, materials, or data to be obtained from third-party
vendors, regardless of whether obtained with the assistance of Intershop, will
be determined in accordance with the agreements and policies of such vendors.
5 Intershop Proprietary Information
Client acknowledges that in order to provide the Services, it may be
necessary for Intershop to disclose to Client certain proprietary information
(scientific or technical data, information, design, process, procedure, formula,
script, software or improvement that is commercially valuable to Intershop) that
has been developed by Intershop at great expense and that have required
considerable effort of skilled professionals ("Proprietary Information"). Client
further acknowledges that the Software will of necessity incorporate such
Proprietary Information. Client agrees that it will not disclose, transfer, use,
copy, or allow access to any such Proprietary Information to any employees or to
any third parties, excepting those who have a need to know such Proprietary
Information in order to give effect to Client's rights hereunder and who have
bound themselves to respect and protect the confidentiality of such Proprietary
Information. In no event will Client disclose any such Proprietary Information
to any competitors of Intershop.
6 Warranties
6.1 Intershop warrants that:
6.1.1 Intershop's providing of the Services and/or Software described
herein does not violate any applicable law, rule, or regulation; any
contracts with third parties; or any third-party rights in any U.S. patent,
copyright, or trade secret right; and
6.1.2 Intershop has sufficient right, title, and interest in and to
the Software, exclusive of rights respecting programs, data, and materials
identified as furnished to Client by third-party vendors, to grant and
convey the rights accorded to Client under Section 4.2 hereof.
6.2 INTERSHOP MAKES NO REPRESENTATION, EXPRESS OR IMPLIED, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7 LIMITATION OF LIABILITY
INTERSHOP'S LIABILITY HEREUNDER IS LIMITED TO THE AMOUNTS PAID BY CLIENT
DURING THE TERM OF THIS AGREEMENT FOR THE INTERSHOP PROFESSIONAL SERVICES. IN NO
EVENT WILL INTERSHOP HAVE ANY LIABILITY FOR ANY SPECIAL, INDIRECT, OR
CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS,
LOSS OF DATA, OR INTERRUPTION OF BUSINESS ARISING IN ANY WAY HEREUNDER UNDER ANY
THEORY OF LIABILITY, WHETHER OR NOT INTERSHOP HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
8 Termination
8.1 Termination. The Agreement may be terminated by either party upon 30
days' written notice, if the other party breaches any obligation provided
hereunder and the breaching party fails to cure such breach within the 30 day
period; provided that the cure period for any failure by Client to pay fees and
charges due hereunder will be 15 days from the date of receipt by Client of
notice of such failure.
8.2 Remaining Payments. Within 30 days of termination of this Agreement for
any reason, Intershop will submit to Client an itemized invoice for any fees or
expenses theretofore accrued under this Agreement. Client, upon payment of
accrued amounts so invoiced, will thereafter have no further liability or
obligation to Intershop whatsoever for any further fees or expenses arising
hereunder. In the event Intershop terminates this Agreement because of the
breach by Client, Intershop will be entitled to a pro rata payment for work in
progress based on the percentage of work then completed, plus the full amount of
payment attributable to programming and materials already furnished by
Intershop.
9 Independent Contractors
The parties are and will be independent contractors to one another, and
nothing herein will be deemed to cause the creation of an agency, partnership,
or joint venture between the parties. Nothing herein will be interpreted or
construed as creating or establishing the relationship of employer and employee
between Client and either Intershop or any employee or agent of Intershop.
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[COMPANY LOGO]
INTERSHOP
COMMUNICATIONS
10 Miscellaneous
This Agreement will be governed by and constructed in accordance with the
substantive laws of the State of Ohio. THE PARTIES AGREE THAT THE U.N.
CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO
THIS AGREEMENT. The Agreement will not be construed or interpreted against the
party causing this Agreement to be drafted. This is the entire Agreement between
the parties hereto relating to the Services and supersedes any prior purchase
order, communications, advertising or representations concerning the contents of
the Services. All exhibits attached hereto are incorporated herein by this
reference. No change or modification will be valid unless it is in writing and
is signed by the parties hereto.
Accepted by Client
Name SPORTSPRIZE ENTERTAINMENT, INC.
Signed /s/ Bob MacKay
--------------------------------
Donald Robert MacKay
Date June 24, 1999
Accepted for Intershop
Name Thomas Luckenbach
Director of Prof Services
Signed /s/ Thomas Luckenbach
--------------------------------
Date 8/6/99
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Professional Services Consulting Agreement
Exhibit B
Solution Definition: Project Description and Fees
The following is the Project work order which defines the Project/Scope of Work
to be provided by Intershop to Client in accordance with the Professional
Services Agreement.
- --------------------------------------------------------------------------------
The delivery of the Description of Work is based on the following assumptions:
1. Billing for reasonable required travel costs, time, and related expenses
will be billed separately by Intershop and are the responsibility of the
Client.
2. Intershop will be provided with suitable and stable integration APIs for
the integration into any systems such as third party systems.
3. Client will be responsible for all co-location and hosting fees.
4. Client assures timely and functional delivery of all portions of the
project for which Client undertakes responsibility.
Description of Work - Solution Definition
IPS will provide a Solution Definition service for Client as part of this
description of work. The Solution Definition is equivalent to the Phase 1 of the
published IPS process of delivering custom solutions to clients. During Solution
Definition, IPS will conduct workshops with Client to identify the specific
needs of Client required of the Intershop technology. The customization,
development, and integration work necessary to meet Client specific requirements
and related pricing will be documented as part of the Solution Definition
activity. Note: This project phase does not include the actual customization of
Intershop technology.
Phase 1: Solution Definition: During Solution Definition, IPS will provide the
following document-based deliverables.
o Project Purpose and Vision
o High Level System Architecture Diagrams (Physical and Operational
Views)
o Functional Scope Matrix
o Project Plan for Phases 2-5, including a detailed description of the
Software (and/or any necessary Software customization) to be developed
along with a timeline with specific milestone deliverables for review
(hereafter, "Project Plan")
o Final Proposal (and Prices) for Phases 2-5 for all work identified
in the Project Plan
o Hardware/Software Requirements
o Success Criteria
o Meeting Minutes
Fees
Client will pay Intershop $2000 per staff-day per person, (a staff-day is one
engineer working for 8 hours.) In accordance with paragraph 2.3, Client will pay
reasonable travel and living for Intershop personnel while
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working on this project. Intershop will invoice Client at the end of each month
for time expended during the month and payment is due upon receipt.
The estimated scope of work is a total of 6 staff days: 4 staff-days of onsite
work and 3 staff-days of off-site work. Intershop agrees to provide the solution
definition for a fixed price of $14,000 (plus reasonable travel and living for
Intershop personnel while working on this project) under payment terms set forth
above.
Intershop will invoice Client on a monthly basis for work completed to date. The
parties hereby confirm that this Project as set forth above is to be completed
in accordance with the terms and conditions of the Agreement entered into by the
parties as of the Effective Date of such Agreement.
INTERSHOP Communications, Inc. Client: Sportsprize Entertainment Inc.
By: /s/ Thomas Luckenbach By: /s/ Bob MacKay
---------------------------- -------------------------------
Title: Director of Prof Services Title: CEO
EXHIBIT 10.22
FRONTIER GLOBALCENTER FRONTIER
MASTER SERVICE AGREEMENT NO GLOBALCENTER
This Master Service Agreement (this "Agreement") is entered into on the 22nd day
of July, 1999 ("Effective Date") by and between Sportsprize Entertainment Inc.
on behalf of itself and the subsidiary, affiliate, division and/or business unit
("Client") indicated on the Service Order Form attached hereto, with an office
at the address listed on the Service Order Form, and Frontier GlobalCenter, a
corporation with offices at 1154 East Arques Avenue, Sunnyvale, CA 94086, to set
forth the terms and conditions pursuant to which Frontier GlobalCenter shall
provide to Client certain Services (as defined in the Service Order). The entire
contract between the parties shall consist of this Agreement and one or more
Service Order(s). Unless otherwise agreed to by both parties, all future Service
Orders entered into between the Client and Frontier GlobalCenter will be bound
by this Agreement.
In consideration of the mutual promises and upon the terms and conditions set
forth below, the parties agree as follows:
1. NATURE OF AGREEMENT
Pursuant to this Agreement, Frontier GlobalCenter shall sell and provide to
Client, in consideration for the applicable fees as set forth in a Service Order
the following: (i) Internet connectivity services (the "Bandwidth"); (ii) the
lease (if so indicated on the Service Order) or purchase by Client of equipment
to provide such services (the "Hardware") and the installation of such
equipment; (iii) the lease of space to store and operate such Hardware
("Space"); (iv) management, planning and consulting resources to support these
services, including maintenance and operation of the Hardware ("Support"); (v)
the licensing of software to provide such Services (the "Software"), including,
without limitation, monitoring software, billing software, trouble ticketing
software, data collection and process control software, which together,
including all telecommunication and digital transmission connections and links,
all electrical and physical requirements, comprise an Internet connectivity and
co-location package to support Client's web site(s) ("Client's Web Sites") under
this Agreement and are referred to hereinafter as the "Services".
The Services shall be provided in accordance with the specifications set forth
on the Service Specification attached to this Agreement and in the Service
Order(s) hereto and made a part thereof.
2. SERVICE ORDERS
2.1 Orders. Client and Frontier GlobalCenter may execute one or more Service
Orders describing the Services that Client desires to purchase from Frontier
GlobalCenter. Each Service Order shall set forth the Services to be provided by
Frontier GlobalCenter, the specifications applicable to each item, the prices
and payment schedule, the initial term of such Services (the "Initial Service
Term") and other information the parties may mutually agree upon. No Service
Order shall be effective until executed by Frontier GlobalCenter. All Service
Orders will be subject to the terms and conditions of this Agreement, provided
however, that in the event of conflict between the terms contained in any
Service Order and terms of this Agreement, the terms contained in the Service
Order shall control.
2.2 In the event of conflict between terms in this Agreement and Service Order,
and any terms contained in client-issued order form or purchase order, the terms
of this Agreement and Service Order shall supersede any terms and conditions
that may appear in such client-issued order form or purchase order.
2.3 Cancellation. In the event that Client cancels or terminates a Service Order
at any time for any reason, other than expiration of a Service Order or a
Service Interruption (as defined below), Client agrees to pay Frontier
GlobalCenter all Monthly Recurring Charges specified in the Service Order for
the balance of the term therefore, which shall become due and owing as of the
effective date of cancellation or termination. Upon the cancellation or
termination of a Service Order by Client, Frontier GlobalCenter, shall upon
Client's written request and at no additional cost, give full cooperation and
assistance to Client to assure an orderly and efficient transition.
2.4 IP Addresses. Frontier GlobalCenter will assign on a temporary basis a
reasonable number of Internet Protocol Addresses ("IP Addresses") from the
address space assigned to the Frontier GlobalCenter by InterNIC. Client
acknowledges that the IP Addresses are the sole property of Frontier
GlobalCenter, are assigned to Client as part of the Service, and are not
"portable," as such term is used by InterNIC. Frontier GlobalCenter reserves the
right to change IP Address assignments at any time; however, Frontier
GlobalCenter shall use reasonable efforts to avoid any disruption to Client
resulting from such renumbering requirement. Frontier GlobalCenter will give
Client reasonable notice of any such renumbering. Client agrees that it will
have no right to IP Addresses upon termination of this Agreement, and that any
renumbering required by Client after termination shall be the sole
responsibility of Client.
2.5 Staffing. Except as otherwise agreed in any Service Order, Frontier
GlobalCenter shall be responsible for staffing decisions with respect to its
personnel and the provision of any Services under this Agreement, and shall have
the right to remove or replace any of its personnel assigned to perform Services
under this Agreement. Frontier GlobalCenter shall use reasonable efforts to
maintain the continuity of its personnel assigned to perform Services under this
Agreement.
3. SOFTWARE LICENSE AND RIGHTS
3.1 License. During the term of the applicable Service Order, Frontier
GlobalCenter grants Client a non-transferable, nonexclusive license to use the
Software in object code form only, solely on the Hardware, or Frontier
GlobalCenter equipment, in conjunction with the Services.
3.2 Proprietary Rights. This Agreement transfers to Client neither title nor any
proprietary or intellectual property rights to the Software, documentation, or
any copyrights, patents, or trademarks, embodied or used in connection
therewith, except for the rights expressly granted herein.
3.3 License Restrictions. Client agrees that it will not itself, or through any
parent, subsidiary, affiliate, agent or other third party,
3.3.1 Copy the Software except as expressly allowed under this Agreement. In the
event Client makes any copies of the Software, Client shall reproduce all
proprietary notices of Frontier GlobalCenter on any such copies;
3.3.2 reverse engineer, decompile, disassemble, or otherwise attempt to derive
source code from the software;
3.3.3 sell, lease, license or sublicense the Software or the documentation;
3.3.4 write or develop any derivative software or any other software program
based upon the Software or any Confidential Information (as defined below); or
3.3.5 use the Software to provide processing services to third parties, or
otherwise use the Software on a "service bureau" basis.
3.4 Software Representations and Warranties. Frontier GlobalCenter represents
and warrants that (i) it has the right, power and authority to license the
Software to Client pursuant to this Agreement free of all liens, encumbrances
and other restrictions; (ii) the Software shall operate and run in accordance
with the Service Specifications indicated in the Agreement or referenced in the
Service Order; (iii) the license furnished by Frontier GlobalCenter hereunder
and/or the use of the Software by Client in accordance with the terms and
conditions herein or in any Service Order, will not infringe upon nor violate
any patent, copyright, trade secret, or other proprietary right of any third
party; (iv) Client's use and possession of the Software consistent
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with the terms of this Agreement, shall not be adversely affected, interrupted
or disturbed by Frontier GlobalCenter or any entity asserting a claim under or
through Frontier GlobalCenter; (v) the installation and use of the Software and
any Upgrades shall not degrade, impair or otherwise adversely affect the
performance or operation of the Hardware.
4. HARDWARE TERMS AND CONDITIONS
4.1 Installation. If so indicated on the Service Order, Frontier GlobalCenter
will use commercially reasonable efforts to install the Hardware as the Hardware
is shipped to Frontier GlobalCenter. Frontier GlobalCenter will work with the
Client on an installation plan to define installation time frame and
requirements.
4.2 Purchase and Title of Hardware. If so indicated on the Service Order, Client
shall purchase the Hardware and deliver, at Client's expense, the Hardware to
the Space. Client agrees that the Hardware shall reside at the Space during the
term of this Agreement.
4.3 Lease of Hardware. If so indicated on the Service Order, Client shall lease
the Hardware, and Frontier GlobalCenter shall obtain and deliver the Hardware to
the Space. In the event Client leases the Hardware, the following terms and
conditions shall apply: The Hardware is and shall remain the property of
Frontier GlobalCenter. Client shall not have taken, or attempt to take, any
right, title or interest therein or permit any third party to take any interest
therein. Client will not transfer, sell, assign, sublicense, pledge, or
otherwise dispose of, encumber or suffer a lien or encumbrance upon or against
the Hardware or any interest in the Hardware. Client will use the Hardware only
at the Space. Client will not move the Hardware from that facility without
Frontier GlobalCenter's prior written permission. Client shall be responsible
for any damage to the Hardware caused by Client negligent or willful acts or
omissions. Client will use the Hardware only for the purpose of exercising its
rights under this Agreement.
4.4 Rent to Own. If so indicated on the Service Order, Client shall lease the
Hardware on a "rent to own" plan. In such event, all of the terms and conditions
in Section 4.3 shall apply, and the following terms and conditions shall also
apply. At the end of the term of the Service Order, providing Client is not in
breach of this Agreement, Client shall have the option to purchase the Hardware.
The purchase price shall be as indicated on the Service Order. Upon payment by
Client of the purchase price, title of the Hardware shall pass to Client at the
Space. Unless the Service Order is extended by mutual Agreement, Client shall
immediately delete, or shall allow Frontier GlobalCenter to delete all copies of
the Software and associated documentation owned by Frontier GlobalCenter, or any
other materials of Frontier GlobalCenter resident on the Hardware.
5. SPACE
5.1 Frontier GlobalCenter represents and warrants that (i) it has obtained all
necessary approvals to lease the Space to Client and to allow Client to occupy
and have access to the Space for the purpose of receiving the Services set forth
in the Service Order; (ii) it has the authority to grant Client a royalty-free,
non-transferable, non-exclusive license to occupy and have access to the Space,
and that the grant of such license shall not constitute a violation of the lease
or separate Agreement to which Frontier GlobalCenter is a party and/or by which
it is bound; and (iii) the Space shall conform with the Service Specifications
set forth in this Agreement or any Service Order.
5.2 License to Occupy. Frontier GlobalCenter grants to Client a non-exclusive
license to occupy the Space. Client acknowledges that it has been granted only a
license to occupy the Space and that it has not been granted any real property
interests in the Space. Frontier GlobalCenter represents and warrants that it
has obtained all approvals necessary, including but not limited to, permissions
from the landlord and any regulatory authorities, to operate the facility in
this manner contemplated by this Agreement.
5.3 Material and Changes. Client shall not make any construction changes or
material alterations to the interior or exterior portions of the Space,
including any material alteration to cabling or power supplies for the Hardware,
without obtaining Frontier GlobalCenter's prior written approval for Client to
have the work performed. Alternatively, Client may request Frontier GlobalCenter
to perform the work. Frontier GlobalCenter reserves the right to perform and
manage any construction or alterations within the Space areas at rates to be
negotiated between the Parties hereto, so long as the rates are commercially
reasonable. Client agrees not to erect any signs or devices to the exterior
portion of the Space without submitting the request to Frontier GlobalCenter and
obtaining Frontier GlobalCenter's prior written approval.
5.4 Damage. Client agrees to reimburse Frontier GlobalCenter for all reasonable
repair or restoration costs associated with damage or destruction in the Space
directly caused by the negligence or willful misconduct of Client's personnel.
Client's agents, Client's suppliers/contractors, or Client's visitors to he
Space during the term or as a consequence of Client's removal of the Hardware or
property installed in the Space, provided that Client shall not be liable for
any damage or destruction occurring from or out of any negligent act or omission
of Frontier GlobalCenter, its officers, directors, agents and employees.
5.5 Insurance. Unless otherwise agreed, Client agrees to maintain, at Client's
expense, for each Space, (i) Comprehensive General Liability Insurance in an
amount not less than One Million Dollars ($1,000,000) per occurrence for bodily
injury or property damage, (ii) Employer's Liability in an amount not less than
Five Hundred Thousand Dollars ($500,000) per occurrence, and (iii) Worker's
Compensation in an amount not less than that prescribed by statutory limits.
Upon reasonable request of Frontier GlobalCenter, Client shall furnish Frontier
GlobalCenter with certificates of insurance which evidence these minimum levels
of insurance.
5.6 Regulations. Client shall use its best efforts to comply with and not
violate Frontier GlobalCenter's Safety, Health and Operation Rules and
regulations relating to use of it's premises and facilities, so long as those
regulations are provided to client in writing. Client's failure to comply
materially with Frontier GlobalCenter's rules and regulations shall constitute a
material default under this Agreement. Frontier GlobalCenter may, in its sole
discretion, limit Client's access to a reasonable number of authorized Client
employees or designees. Client shall not interfere with any other clients of
Frontier GlobalCenter, or such other clients' use of the Space.
5.7 Disclaimer. Except as expressly stated herein, Frontier GlobalCenter does
not make any representation or warranty as to the fitness of the Space for
Client's use.
6. SERVICE INTERRUPTIONS
6.1 99% Network Uptime Guarantee. In the event of Network Downtime (as defined
below), the monthly fee payable for the Bandwidth, defined in the Service Order,
shall be reduced as follows:
6.1.1 if the total Downtime in the calendar month is more than seven and two
tenths (7.2) hours, but does not exceed fourteen and four tenths (14.4) hours,
the monthly Bandwidth fee for that month shall be reduced by one-third (33.3%);
and
6.1.2 if the total Downtime in the calendar month is more than fourteen and four
tenth (14.4) hours, but does not exceed twenty-one and six tenths (21.6) hours,
the monthly Bandwidth fee for that month shall be reduced by two-thirds (66.6%);
and
6.1.3 if the total Downtime in the calendar month is more than twenty-one and
six-tenths (21.6) hours the monthly Bandwidth fee for that month shall be
reduced by three-quarters (75%).
6.2 Downtime Defined. For the purposes of this Section, Downtime shall mean any
interruption of sixty (60) seconds or more in the availability of, (i) the
connection between the Client's equipment and the Frontier GlobalCenter switch
fabric; (ii) the internetwork that connects Frontier GlobalCenter switch fabric
with the Internet. For
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purposes of this Section, the Internet is deemed to consist of services that
commence where Frontier GlobalCenter transmits a Client's content to Frontier
GlobalCenter's carrier(s) at the Frontier GlobalCenter border router port(s).
Such carriers provide Frontier GlobalCenter with private and dedicated
bandwidth. Frontier GlobalCenter undertakes no obligation for the circuit or
link between Frontier GlobalCenter's facilities and such carrier's services. If
router packet loss is in excess of fifty percent (50%) and is sustained for
sixty (60) seconds or more, Frontier GlobalCenter will classify this as an
"outage." If an "outage" continues for a time period of more than two (2)
minutes, then such outage will be deemed Downtime. If the latency across the
Frontier GlobalCenter national IP backbone exceeds one hundred twenty (120)
milliseconds, Frontier GlobalCenter will classify this as Downtime.
6.3. Maintenance Windows. Frontier GlobalCenter reserves three (3) regularly
scheduled maintenance windows per week, of three hour duration, in order to
maintain and upgrade the Frontier Global IP Backbone infrastructure. Outages or
performance degradation during scheduled maintenance windows as a result of
router, switch or server maintenance, are not considered Downtime for purposes
of this section. Frontier GlobalCenter shall make all commercially reasonable
efforts to provide the client with prior notification of all scheduled and
emergency maintenance procedures.
6.4. 100% Facility Uptime Guarantee. In the event of Facility Downtime (as
defined below), the Monthly Fee payable for the Co-location Services as set
forth in the applicable Service Order shall be reduced as follows:
6.4.1. If the total Facility Downtime in the calendar month is less than, or
equal to four minutes and thirty-two seconds (4.32) the monthly Co-location
service fee for that month shall be reduced by one-third (33.3%);
6.4.2. If the total Facility Downtime in the calendar month is more than four
minutes and thirty-two seconds (4.32) the monthly Co-location service fee for
that month shall be reduced by two-thirds (66.6%).
6.4.3. Downtime Defined. For the purposes of this Section, Facility Downtime
shall mean any service interruption, only if such interruption is either due to
a facility power failure or environmental control failure.
6.5. Investigation of Service Interruptions. At Client's request, Frontier
GlobalCenter will investigate any report of Downtime, and attempt to remedy any
Downtime expeditiously. If Frontier GlobalCenter reasonably determines that all
facilities, systems and equipment furnished by Frontier GlobalCenter are
functioning properly and that Downtime arose from some other cause, Frontier
GlobalCenter can continue to investigate the Downtime cause at the client's
request and expense for labor and materials cost for services actually performed
at the usual and customary rates for similar services provided by Frontier
GlobalCenter to clients in the same locality.
6.6. Termination. Client may terminate a Service Order in the event of Downtime
of either twenty-four (24) hours of cumulative time during any continuous twelve
(12) month period, or any continuous downtime of eight (8) or more hours.
6.7. Sole Remedy. The terms and conditions of this Section shall be Client's
sole remedy and Frontier GlobalCenter's sole obligation for any Downtime.
7. USER CONTENT
7.1. Client is solely responsible for the content of any postings, data, or
transmissions using the Services ("Content"), or any other use of the Services
by Client or by any person or entity Client permits to access the Services (a
"User"). Client represents and warrants that it and any User will not use the
services for unlawful purposes (including without limitation infringement of
copyright or trademark, misappropriation of trade secrets, wire fraud, invasion
of privacy, pornography, obscenity and libel), or to interfere with or disrupt
other network users, network services or network equipment. Disruptions include
without limitation distribution of unsolicited advertising or chain letters,
repeated harassment of other network users, wrongly impersonating another such
user, falsifying one's network identity for improper or illegal purposes,
sending unsolicited mass e-mailings, propagation of computer worms and viruses,
and using the network to make unauthorized entry to any other machine accessible
via the network. If Frontier GlobalCenter has reasonable grounds to believe that
Client or a User is utilizing the Services for any such illegal or disruptive
purpose, Frontier GlobalCenter may suspend or terminate Services immediately
upon notice to Client. Client shall defend, indemnify, hold harmless Frontier
GlobalCenter from and against all liabilities and costs (including reasonable
attorney's fees) arising from any and all claims by any person arising out of
Client's use of the Services, including without limitation any content.
7.2. Acceptable Use Policy. All Frontier GlobalCenter clients are responsible
for reviewing and complying with this Acceptable Use Policy. Frontier clients
who provide services to their own users must take steps to ensure compliance by
their users with this Acceptable Use Policy. This Policy is subject to change
without notice by publication at http://www.globalcenter.net/sup. Clients are
responsible for monitoring this web site for changes.
Frontier GlobalCenter customers may not use Frontier GlobalCenter's data
distribution network, machines, or services in any manner that violates any
applicable law, regulation, treaty, or tariffs. Also customers are prohibited
from activity that includes, but is not limited to unauthorized use (or
attempted unauthorized use) of any machines or networks, denial of service
attacks, falsifying header information or user identification information,
monitoring or scanning the networks of others without prior written permission
from Frontier GlobalCenter.
7.2.1. Email. Sending unsolicited bulk email is prohibited. Sending unsolicited
bulk email from another provider advertising or implicating the use of any
service hosted by Frontier, including without limitation email, web, FTP, and
DNS services, is prohibited and is grounds for termination of those services to
users who engage in the practice. Users who send unsolicited bulk email from
Frontier accounts will be charged the cost of labor to respond to complaints.
Continuing to send someone email after being asked to stop is considered
harassment and is prohibited. Using email to disrupt (e.g., mail bombing,
"flashing," etc.) is prohibited. Sending email with falsified header information
is prohibited. Chain letters, pyramid schemes, and hoaxes are prohibited.
7.2.2. Usenet Newsgroups. Frontier GlobalCenter places no content restrictions
on newsgroup postings by its users except that (a) no illegal content, including
pyramid/Ponzi schemes, is permitted and (b) all postings should conform to the
various conventions, guidelines and local culture found in each respective
newsgroup and Usenet as a whole.
7.2.3. Posting 20 or more copies of the same article in a 45-day period
("spamming") or continued posting of off-topic articles after being warned is
prohibited. Users who engage in spamming using Frontier GlobalCenter accounts
will be charged the cost of labor to issue cancellations and respond to
complaints. Users who engage in spamming from another provider advertising or
implicating the use of any service hosted by Frontier GlobalCenter, including
without limitation email, web, FTP, and DNS services, is prohibited and is
grounds for termination of those services to those users.
7.2.4. Excessive crossposting (Breidbart Index of 20 or greater in a 45-day
period) is prohibited. The Breidbart Index (BI) is calculated by taking the sum
of the square roots of the number of newsgroups each copy of an article is
crossposted to. If two articles are posted, one crossposted to 9 newsgroups and
the other crossposted to 16 newsgroups, the BI = sqrt(9)+sqrt(16)=3+4=7.
Crossposting articles to newsgroups where they are off-topic is prohibited.
7.2.5. Posting articles with falsified header information is prohibited.
"Munging" header information to foil email address harvesting by "spammers" is
acceptable provided that a reasonable means of replying to the message
originator is given. Use of anonymous remailers is acceptable, so long as the
use is not otherwise a violation of
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this policy.
7.2.6. Users may not issue cancellations for postings except those, which they
have posted themselves, those which have headers falsified so as to appear to
come from them or in newsgroups where they are the official moderators.
8. PRICING AND PAYMENT TERMS
8.1. Payment Terms. Client shall pay the fees set forth in the Services Order
Form according to the terms set forth therein. Client agrees to pay a late
charge of two percent (2%) above the prime rate as reported by the Wall Street
Journal at the time of assessment or the maximum lawful rate, whichever is less,
for all undisputed amounts not paid within thirty (30) days of receipt of
invoice.
8.2. Late Payments. In the event of non-payment by Client of sums over-due
hereunder for more than forty-five (45) days, Frontier GlobalCenter may upon
written notice to Client either retain any equipment or other assets of Client
then in Frontier GlobalCenter's possession and sell them in partial satisfaction
of such unpaid sums, or request Client to remove equipment from Frontier
GlobalCenter's premises within ten (10) days. If Client fails to so remove,
Frontier GlobalCenter may deliver the equipment to Client at the latter's
address for notices at Client's expense for shipment and insurance, and Client
shall be obligated to accept such delivery.
8.3. Price Increases. Frontier GlobalCenter shall not increase the prices for
services during the initial term of any Service Order, but may thereafter change
prices upon sixty (60) days written notice.
9. MAINTENANCE AND SUPPORT
Frontier GlobalCenter shall provide Client with maintenance and support of the
Software and Hardware, if any ("Maintenance and Support") as specified in the
Service Specification.
9.1. Exclusions. Maintenance and Support shall not include services for problems
arising out of (a) modification, alteration or addition or attempted
modification, alteration or addition of the Hardware or Software undertaken by
persons other than Frontier GlobalCenter or Frontier GlobalCenter's authorized
representatives; or (b) programs or hardware supplied by Client.
9.2. Client Duties. Client shall document and promptly report all errors or
malfunctions of the Hardware or Software to Frontier GlobalCenter. Client shall
take all steps necessary to carry out procedures for the rectification of errors
or malfunctions within a reasonable time after such procedures have been
received from Frontier GlobalCenter. Client shall maintain a current backup copy
of all programs and data. Client shall properly train its personnel in the use
and application of the Hardware and Software.
10. TERM AND TERMINATION
10.1. Term. The term of this Agreement shall commence on the Effective Date and
continue indefinitely unless terminated in accordance with this Section 10 or
the provisions contained in Section 6.6. The initial term of each Service Order
shall be as indicated therein.
10.2. Termination Upon Default. Either party may terminate this Agreement in the
event that the other party materially defaults in performing any obligation
under this Agreement and such default continues unremedied for a period of
thirty (30) days following written notice of default. In the event this
Agreement is terminated due to Frontier GlobalCenter's breach, Frontier
GlobalCenter shall refund to Client any Services fees on a straight-line
prorated basis.
10.3. Termination Upon Insolvency. This Agreement shall terminate, effective
upon delivery of written notice by a party, (i) upon the institution of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of debts of the other party; (ii) upon the making of an
assignment for the benefit of creditors by the other party; or (iii) upon the
dissolution of the other party.
10.4. Effect of Termination. The provisions of Sections 1, 2.3, 3.2, 3.4, 7,
10.4 11, 12, 13 and 14 shall survive termination of this Agreement. All other
rights and obligations of the parties shall cease upon termination of this
Agreement. The term of any license granted hereunder shall expire upon
expiration or termination of this Agreement.
11. CONFIDENTIAL INFORMATION
All information identified disclosed by either party ("Disclosing Party") to the
other party ("Receiving Party"), if disclosed in writing, labeled as proprietary
or confidential, or if disclosed orally, reduced to writing within thirty (30)
days and labeled as proprietary or confidential ("Confidential Information")
shall remain the sole property of Disclosing Party. Except for the specific
rights granted by this Agreement, Receiving Party shall not use any Confidential
Information of Disclosing Party for its own account. Receiving Party shall use
the highest commercially reasonable degree of care to protect Disclosing Party's
Confidential Information. Receiving Party shall not disclose Confidential
Information to any third party without the express written consent of Disclosing
Party (except solely for Receiving Party's internal business needs, to employees
or consultants who are bound by a written Agreement with Receiving Party to
maintain the confidentiality of such Confidential Information in a manner
consistent with this Agreement). Confidential Information shall exclude
information (i) available to the public other than by a breach of this
Agreement; (ii) rightfully received from a third party not in breach of an
obligation of confidentiality; (iii) independently developed by Receiving Party
without access to Confidential Information; (iv) known to Receiving Party at the
time of disclosure; or (v) produced in compliance with applicable law or a court
order provided Disclosing Party is given reasonable notice of such law or order
and an opportunity to attempt to preclude or limit such production. Subject to
the above, Receiving Party agrees to cease using any and all materials embodying
Confidential Information, and to promptly return such materials to Disclosing
Party upon request.
12. LIMITATION OF LIABILITY
FRONTIER GLOBALCENTER'S LIABILITY FOR ALL CLAIMS ARISING OUT OF THIS AGREEMENT
SHALL BE LIMITED TO THE AMOUNT OF FEES PAID BY CLIENT TO FRONTIER GLOBALCENTER
UNDER THIS AGREEMENT. IN NO EVENT SHALL FRONTIER GLOBALCENTER BE LIABLE FOR ANY
LOSS OF DATA, LOSS OF PROFITS, COST OF COVER OR OTHER SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR INDIRECT DAMAGES ARISING FROM OR IN RELATION TO THIS AGREEMENT
OR THE USE OF THE SERVICES, HOWEVER CAUSED AND REGARDLESS OF THEORY OF
LIABILITY. THIS LIMITATION WILL APPLY EVEN IF FRONTIER GLOBALCENTER HAS BEEN
ADVISED OR IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
13. DISCLAIMER OF WARRANTIES
EXCEPT AS OTHERWISE STATED HEREIN, FRONTIER GLOBALCENTER SPECIFICALLY DISCLAIMS
ALL WARRANTIES EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NON-INFRINGEMENT OF THE SYSTEM OR SERVICES PROVIDED BY FRONTIER GLOBALCENTER
HEREUNDER.
14. MISCELLANEOUS
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14.1. Independent Contractor. The relationship of Frontier GlobalCenter and
Client established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed to (i) give either party
the power to direct and control the day-to-day activities of the other; (ii)
constitute the parties as partners, joint ventures, co-owners or otherwise as
participants in a joint undertaking; or (iii) allow either party to create or
assume any obligation on behalf of the other party for any purpose whatsoever.
14.2. Notices. Any notice required or permitted hereunder shall be in writing
and shall be given by registered or certified mail addressed to the addresses
first written above. Such notice shall be deemed to be given upon the earlier of
actual receipt or three (3) days after it has been sent, properly addressed and
with postage prepaid. Either party may change its address for notice by means of
notice to the other party given in accordance with this Section.
14.3. Assignment. Neither party may assign this Agreement, in whole or in part,
either voluntarily or by operation of law without express written consent of the
other party, and any attempt to do so shall be a material default of this
Agreement and shall be void.
14.4. Governing Law. This Agreement shall be interpreted according to the laws
of the State of California without regard to or application of choice-of-law
rules or principles.
14.5. Entire Agreement and Waiver. This Agreement, including all appendices,
attachments and Service Orders, shall constitute the entire Agreement between
Frontier GlobalCenter and Client with respect to the subject matter hereof and
all prior Agreements, representations, and statement with respect to such
subject matter are superseded hereby. This Agreement may be changed only by
written Agreement signed by both Frontier GlobalCenter and Client. No failure of
either party to exercise or enforce any of its rights under this Agreement shall
act as a waiver of subsequent breaches; and the waiver of any breach shall not
act as a waiver of subsequent breaches.
14.6. Severability. In the event any provision of this Agreement is held by a
court of other tribunal of competent jurisdiction to be unenforceable, that
provision will be enforced to the maximum extent permissible under applicable
law, and the other provisions of this Agreement will remain in full force and
effect.
14.7. Non-Solicitation. During the term of this Agreement and for a period of
one (1) year thereafter, client shall not directly solicit, nor directly attempt
to solicit the services, of any employee or subcontractor of Frontier
GlobalCenter without the prior written consent of the other party.
14.8. Substitution. Frontier GlobalCenter may substitute, change or modify the
Software or Hardware at any time, but shall not thereby alter the technical
parameters of the Services.
Frontier GlobalCenter
1154 East Arques Avenue
Sunnyvale, CA 94086
By ------------------------------------
Title ---------------------------------
Date ----------------------------------
Client:
By ------------------------------------
Title ---------------------------------
Date ----------------------------------
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SERVICE SPECIFICATION
Co-location Service
Frontier GlobalCenter will provide a level of service, which includes the
following features and options:
General Features
Maintenance of the Space (Including Janitorial Services):
In connection with the Space made available hereunder, Frontier GlobalCenter or
its landlord shall perform services that support the overall operation of each
Space at no additional charge to Client. Those services include the following:
o Janitorial Services
o 24 x 7 Access to the Space
o Authorized Security System Access to Raised Floor Collocation Space
o Primary A/C 110 volt Power to the Space
o Backup Power - UPS Systems & Battery Plant (30 - 60 minute
survivability objective)
o Generator Back-up (Sustained backup power)
o HVAC Systems for facility air conditioning
o Fire Control Systems
o Network Monitoring Systems
o Redundant Network Connectivity and Hardware
o 19" Rack Spaces for installation of Hardware
o Custom configurations of space to accommodate cabinets
o Lockable private caged customer areas
o 10-base-T or 100-base-T switched port with direct high speed Internet
backbone connection.
24x7 NOC support: Will provide proactive site monitoring with ExpressLane(TM)
statistics on Client information base; including bandwidth usage, statistics and
network availability reporting, host monitoring and management interface, access
to Frontier GlobalCenter incident tracking system to expedite fault resolution
and remote server reboot.
Escalation Plan and Procedures: To be provided by Frontier GlobalCenter in the
Welcome Package 5-10 days after the contract is signed.
Right-of-way and Access
Frontier GlobalCenter will allow 24 x 7 access and right-of-way to Client
Hardware located in Frontier GlobalCenter facility at no charge. Clients will be
escorted at all times while in the facility. Access to the facilities will not
be unreasonably withheld by Frontier GlobalCenter to Clients for performing
appropriate procedures and maintenance of Hardware, facilities, and systems.
MSA Rev. 2.5 April 1999
Page 6 of 6
EXHIBIT 10.23
SONORA CAPITAL
Suite 1000-355 Burrard Street
Vancouver, BC
V6C 2G8
May 7, 1999
Kodiak Graphics Company
2034 Western Avenue
Las Vegas, Nevada
89102
Attention: Jeff Paquin
Dear Sirs:
Re: Private Placement of Common Shares
We, Sonora Capital Corporation ("Sonora") understand that Kodiak Graphics
Company ("Kodiak") proposes to undertake three (3) private placement of common
shares during 1999 (the "Financings"). Each Financing is in the amount of
USD$840,000 on the following terms:
(a) the first Financing is to close by the end of July, 1999 at a price
which is the greater of $3.00 per share or 75% of the ten (10) day
average closing price of Kodiak's common shares on the OTC Bulletin
Board for the ten (10) days prior to the closing of the first
Financing; (a)
(b) the second Financing is to close by the end of October, 1999 at a
price which is the greater of $4.00 or 75% of the ten (10) day average
closing price of Kodiak's common shares on the OTC Bulletin Board for
the ten (10) days prior to the closing of the second Financing;
(c) the third Financing is to close by the end of December, 1999 at a
price which is the greater of $5.00 or 75% of the ten (10) day average
closing price of Kodiak's common shares on the OTC Bulletin Board for
the ten (10) days prior to the closing of the third Financing;
This letter is our agreement as follows:
<PAGE>
-2-
1. Sonora will act as agent of Kodiak to arrange for purchasers ("Purchasers")
of the Financings outside of Canada and the United States in such other
jurisdictions as may be agreed upon by Sonora and Kodiak;
2. The sale of shares to Purchasers where such sale would constitute a
distribution in any of the agreed jurisdictions will be effective pursuant
to exemptions in each of the said jurisdictions from applicable securities
legislation;
3. Upon closing of the Financings, Kodiak will pay to Sonora a commission
equal to 2.5% of the aggregate gross proceeds derived from the sale of the
shares in the Financings, provided that the Financings are fully completed
with the gross proceeds of a minimum of USD$2,500,000;
4. Kodiak acknowledges that Sonora is not a registered broker dealer and may
only arrange for Purchasers as a finder pursuant to exemptions to
applicable securities legislation;
5. Kodiak agrees to accept subscriptions from those Purchasers introduced by
Sonora, so long as the terms of the Financing are as indicated above or
reasonably amended pursuant to an agreement between Sonora and Kodiak;
6. Kodiak agrees that it will provide Sonora with updated information with
respect to its business and business plan together with any documents
necessary for the Financings (ie: subscription agreements, offering
memoranda, etc. upon request by Sonora). Until the Financings are closed,
Kodiak will provide Sonora with information relating to any material change
in its affairs within two (2) days of such material change occurring;
7. The obligations of this agreement shall be conditional upon fulfilment of
the following:
(a) Kodiak will have made all necessary filings with and obtain all
necessary approvals, consents and acceptances of the regulatory
authorities having jurisdiction so as to permit Kodiak to offer, sell,
issue and deliver Kodiak's common shares to the Purchasers;
(b) Kodiak having complied with all applicable securities legislation with
respect to the sale of the shares to the Purchasers; and
(c) Kodiak making its commercial best efforts to carry out its business
plan as presented to Sonora.
8. The closing of each of the Financings shall be completed at the offices of
Sonora on such dates to be advised by Sonora by providing Kodiak with five
(5) business days notice;
9. All shares issued to the Purchasers will have such hold periods as may be
required pursuant to applicable securities legislation;
<PAGE>
-3-
10. This agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein;
11. Each of the parties hereto should do or cause to be done all such acts and
things and shall execute or cause to be executed all such documents,
agreements and other instruments as may reasonably be necessary or
desirable for the purpose of carrying out their provisions and attend to
this agreement; and
12. This agreement may be executed by facsimile and in several counterparts,
each of which shall be deemed to be an original and all of which shall
together constitute one and the same instrument.
If the above is in accordance with the understanding please sign and return
to Sonora a copy of this letter whereupon this letter and your acceptance shall
constitute a binding agreement between Kodiak and Sonora.
SONORA CAPITAL
Per: /s/ Illegible
----------------------------------------
Authorized Signatory
The above offer is hereby accepted and agreed to as at the date first set out
above.
KODIAK GRAPHICS COMPANY
Per: /s/ Illegible
------------------------------
Authorized Signatory
EXHIBIT 10.24
SPORTSPRIZE ENTERTAINMENT INC.
101 West 5th Avenue
Vancouver, B.C.
V5Y 4A5
Tel: (604) 874-2766
May 21, 1999
Sonora Capital Corp.
1000 - 355 Burrard Street
Vancouver, B.C.
V6C 2G8
Dear Sir:
re: Corporate Affairs and Investor Relations
This letter will confirm the terms and conditions of the agreement reached
between Sonora Capital Corp. (the "Consultant") and Sportsprize Entertainment
Inc. (the "Company") as follows:
1. Duties
The Company hereby engages the Consultant for the purpose of assisting the
Company with corporate affairs and carrying out investor relations activities on
behalf of the Company, including, among other matters:
(a) assisting management with general corporate matters relating to
the development of the Company;
(b) assisting management of the Company in the preparation of
promotional brochures, booklets, corporate updates and other material;
(c) representing the Company in connection with its shareholder and
investor relations; and
(d) initiating and maintaining a regular program of contacting
stockbrokers, investment counselors and advisors with information
about the Company.
2. Term
Commencing May 1, 1999, the services of the Consultant will be rendered to
the Company on a month-to-month basis unless terminated in accordance with terms
and provisions hereof.
<PAGE>
2
3. Remuneration
The Company agrees to pay to the Consultant the sum of U.S.$20,000 per
month or such other amount as may be agreed between the parties hereto.
4. Confidential Information
The parties hereto acknowledge and agree that the Consultant will have
access to confidential and secret information and therefore the Consultant
agrees that during the terms of this agreement and on termination or expiry of
the same, for any reason whatsoever, it will not divulge or utilize to the
detriment of the Company any of such confidential or secret information so
obtained.
5. Termination
It is understood and agreed by and between the parties hereto that either
party may terminate this agreement in its entirety by giving the other party
written notice of termination.
Yours very truly,
SPORTSPRIZE ENTERTAINMENT INC.
Per: /s/ [Illegible]
--------------------------(signature)
/s/ [Illegible]
------------------(name - please print)
Authorized signatory
AGREED TO AND ACCEPTED
this 21st day of May, 1999
SONORA CAPITAL CORP.
Per: /s/ [Illegible]
-------------------------(signature)
/s/ [Illegible]
------------------(name - please print)
Authorized signatory
EXHIBIT 10.25
July 27, 1999
Mr. Jeff Paquin, President
Sportsprize Entertainment Incorporated
25 South Sepulveda Boulevard
Manhattan Beach, CA
Dear Mr. Paquin,
This letter agreement is between Sportsprize Entertainment Inc. (the "Company")
and FOCUS Partners LLC ("FOCUS Partners") and, in that regard, the parties agree
as follows:
1. This letter agreement will commence on August 1, 1999, and expire on, July
31, 2000. However, the Company may terminate this letter agreement in
writing at any time, provided that any such termination is after the first
three (3) months of the term and that sixty (60) days' prior written notice
is provided in writing to FOCUS Partners.
2. The Company will pay FOCUS Partners a fee of $6,000 per month (the "Fee")
and 25,000 restricted options for implementation of its Investor Relations
("IR") Program. In addition, the Company shall be responsible for all
reasonable and necessary disbursements made by FOCUS Partners on its
behalf.
3. FOCUS Partners' invoices are sent at the beginning of each month, for the
following month's fee, with payment to be remitted within 25 days of
receipt. FOCUS Partners requires a two-month retainer to commence work for
the Company. This amount will cover the first and second month.
4. FOCUS Partners, in consideration of the Fee, will perform the following
services for the Company; however, such services will be subject to the
Company's written or oral approval:
A. Arrange an initial visit between the FOCUS Partners' team and
Management to discuss the Company, FOCUS Partners' IR Program,
investor relation goals and objectives, and themes to be stressed in
the implementation of the program.
B. Prepare a Corporate Fact Sheet, a document that encapsulates the
Company's information and its most recent financial results. The
Corporate Fact Sheet will
<PAGE>
be sent to targeted investment professionals and will be followed up
with phone calls as an initial screening tool to determine the
recipients' interest in meeting with the Company. All responses will
be entered into FOCUS Partners' database (the "Hit List") in order
that Company information can be furnished to them in the future.
C. We recommend that the Fact Sheet be sent to current shareholders, a
proprietary list of approximately 3,000 retail investors and a
targeted institutional investor list.
D. Compile an "IR Kit", including the Corporate Fact Sheet, case studies,
media backgrounders, press releases, press clippings, existing annual
report and/or brochure, recent SEC documents and other materials
regarding the Company.
E. Upon completion of the foregoing, review and critique Management's
intended presentations to the financial and media community.
F. Arrange periodic meetings with interested buy-side and sell-side
analysts, retail brokers, fund managers and investment advisors,
including telephone follow-ups.
G. Prepare and disseminate press release materials to the financial
community and media to ensure full and timely disclosure, including
telemarketing releases to investment and media professionals.
H. Prior to press release issuance, the release must be approved by the
Company's authorized investor relations contact to ensure
authorization of release. It is the Company's responsibility to obtain
all necessary clearances and approvals (including legal) prior to
issuance of all releases.
I. Establish lines of communication with Nasdaq market makers, informing
them of recent Company developments.
J. Coordinate conference calls between Management and key investment
professionals after earnings or other releases that require
explanation. Prior to those calls, FOCUS Partners will consult with
Management and prepare an outline covering the subjects to be
discussed and/or questions that might arise. FOCUS Partners recommends
that members of the media be excluded from participating in the
conference call.
K. Administer all telephone and/or written financial inquiries regarding
the Company. FOCUS Partners will supply inquirers with a
Company-approved Due Diligence Kit.
2
<PAGE>
L. Review the Company's present web site and make recommendations for its
improvement and/or reconstruction; design the Investor Relations
portion.
M. Build and maintain the Company's Investor Database, which will include
interested brokers, retail shareholders, members of the media and
other interested parties. The Investor Database will receive all press
announcements issued by the Company, articles written about the
Company, and any other items FOCUS Partners and the Company deem
appropriate.
N. Maintain the Company's fax and conference call list. Participants will
be faxed announcements the day they are issued and polled regularly to
join quarterly investment conference calls.
O. Regularly inspect the Company descriptions and coverage to assure
accuracy in Electronic Bulletins, Bloomberg and Dow Jones.
P. Compose or reconfigure an informational slide presentation that
Management can use for road shows and investor meetings. This
presentation can be printed and included in the Company's Due
Diligence Kit.
5. To initiate our activities the Company will provide: Recent SEC filings
Slide Presentation Copy of fax list List of competitors and/or comps Logo
on disk or e-mailed One ream of stationary Home/fax & cell phone numbers of
senior management contacts that we will be dealing with
6. FOCUS Partners also helps clients create their annual reports through its
association with several annual report companies. FOCUS Partners
coordinates their layout, design and production work with the development
and drafting of the report's narrative sections by its in-house financial
writer. This service is not included in the Fee and, should the Company
request annual report assistance, FOCUS Partners and the Company will
negotiate a separate fee.
7. Should the Company require additional financing, FOCUS Partners has
relationships with merchant and investment banks, private placement
professionals and other intermediaries which it would make available to the
Company for solicitation of funds.
3
<PAGE>
8. In disseminating Company information and/or materials, FOCUS Partners will
rely upon the Company's assurances that such information is complete and
accurate and, prior to dissemination of such information and/or materials,
will submit same to the Company for approval.
9. In performing the activities described in this letter agreement, FOCUS
Partners' and the Company's actions will comply with all SEC and applicable
State laws, rules and regulations.
10. The Company will indemnify and defend FOCUS Partners against all claims,
proceedings, suits or other matters that might be asserted against FOCUS
Partners' activities by reason of this letter agreement and the Company
will pay FOCUS Partners' reasonable attorneys' fees and expenses in
connection with such matters; however, the Company's indemnification of
FOCUS Partners is conditioned upon the following:
A. FOCUS Partners must act within the scope of this letter agreement;
B. FOCUS Partners must act in accordance with the Company instructions;
C. FOCUS Partners is not negligent;
D. FOCUS Partners must submit information and materials to the Company for
approval prior to dissemination.
11. Confidential Information. FOCUS Partners acknowledges that it will gain
knowledge of information of substantial value to the Company regarding the
the Company's business which is not generally known and which gives the
Company an advantage over competitors who do not know, or use, such
information, including, but not limited to, know-how, trade secrets,
techniques, designs, sales and customer information, and business and
financial information relating to the business, products, services,
practices or techniques of the Company's plans for future products or
developments ("Confidential Information").
FOCUSPartners agrees to, at all times, regard and preserve as confidential
such Confidential Information, and to refrain from publishing or disclosing
any part of it by using, copying or duplicating it in any way or by any
means, whatsoever.
FOCUS Partners further agrees that such Confidential Information will not
be disclosed by it to any person or entity without the prior written
consent of the Company. Finally, FOCUS Partners agrees to refrain at all
times from any other act or omission that would reduce the value of the
Confidential Information to the Company.
12. Notices. All notices, requests, demands or other communications required or
authorized or contemplated to be given by this Agreement shall be in
writing and shall be deemed to have been duly given if hand delivered, sent
by
4
<PAGE>
commercial overnight courier or sent by certified or registered mail. A
facsimile transmission, when received, shall be considered delivery of
written notice.
13. Expenses. Extraordinary expenses -- i.e., printing, photography, typography
and design -- are charged at net cost plus the standard industry commission
of 17.65%. We may bill you in advance for major suppliers; in other events,
we will bill you as soon as reasonably practicable after the purchase,
expenditure or disbursement. No major undertakings or commitments will be
made without your prior approval. All invoices are due and payable upon
receipt. The Company will, upon request, receive all copies of all invoices
from vendors. FOCUS Partners will provide documentation in the form of
receipts and back up for all expenses incurred by third-party vendors
utilized on the Company's behalf, when requested. The following is an
explanation of in-house expenses, including photocopying, local telephone,
and monthly expenses incurred by FOCUS Partners on the Company's behalf for
which documentation is not provided in monthly invoices.
Photocopying
Photocopying costs are charged to clients at the rate of $0.20 per sheet.
This rate covers the costs of paper, machinery and photocopier operator
utilized in the production of client informational kits, distribution of
press releases, press articles, etc.
Faxing
Telephone charges only.
Local Telephone
Local telephone and Internet costs are charged to clients on a prorated
weighted basis. The client's weighting of the average is determined by the
client's activity during the billing period. These activities pertain to
investor inquiries, telemarketing press releases, and conference call
marketing and investor meetings.
Bloomberg Business News Service
Prorated among full-service customers - approximate monthly fee $300.
14. This letter agreement will be governed by the laws of the State of New York
applicable to contracts made and to be performed in that State.
15. Entire agreement; no amendment except in writing. The provisions of this
letter agreement set forth the entire binding agreement between the parties
and supersede all prior written and oral communications, discussions, and
negotiations between the parties concerning the proposed transaction. The
terms
5
<PAGE>
of this letter agreement may be amended only in writing and when signed by
both parties.
If the foregoing correctly states our understanding, please execute the enclosed
copies of this letter in the spaces provided below and return a duplicate to the
undersigned and the two month payment. We look forward to working with
SportsPrize Entertainment Inc. and to a long and mutually successful
relationship.
Very truly yours,
/s/ Harvey A. Goralnick
- --------------------------------
Harvey A. Goralnick
President, FOCUS Partners LLC
Date: August 2, 1999
Agreed to and approved:
SportsPrize Entertainment Inc.
By: /s/ [Illegible]
-----------------------------
Title: President
-------------------------
Date: Aug. 3/99
EXHIBIT 10.26
INTERNET DISTRIBUTION AND MARKETING AGREEMENT
This DISTRIBUTION AND MARKETING AGREEMENT ("Agreement") is entered into
this 6th day of August, 1999, ("Effective Date") by and between Dreams Products,
Inc., a Utah corporation ("DPI") and Sportsprize Entertainment, Inc., a Nevada
corporation ("Distributor").
RECITALS:
WHEREAS, DPI creates, produces, buys, warehouses, markets and sells sports
and celebrity memorabilia and collectibles, and services and promotions related
to the sports memorabilia and collectibles ("Merchandise");
WHEREAS, from time to time DPI may create products specifically for
Distributor which products will be available only to Distributor.
WHEREAS, Distributor provides retail sales on the internet of sports
memorabilia and collectibles and related services; and
WHEREAS, DPI desires to distribute the Merchandise offered from time to
time in its available inventory and to sell to the retail market the services,
promotions and special events offered from time to time by DPI ("Catalog") on a
non-exclusive basis through the Internet website location owned and operated by
Distributor ("Website").
THEREFORE, in consideration of the mutual covenants, promises, agreements
and provisions contained herein and subject to the satisfaction of the terms and
conditions set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE 1
GRANT OF DISTRIBUTION RIGHTS
Subject to the provisions of this Agreement, DPI hereby grants to
Distributor, and Distributor hereby accepts the following rights:
1.1 Internet Distribution Rights . Subject to the terms set forth herein,
DPI hereby grants to Distributor a non-exclusive, non-assignable, royalty-free
right and license during the term of this Agreement to market, promote and sell
over the Internet the Merchandise contained in DPI's Catalog, including the
right to: (i) offer the Merchandise to the public through the electronic medium
commonly known as the "Internet"; (ii) to take all Internet orders from
customers for the Merchandise in the DPI Catalog through the use of the Website;
(iii) maintain the database containing information regarding customer orders
over the Internet; (iv) bill and collect from such customers the retail price
for all orders for the Merchandise placed over the Internet; and (v) fulfill all
orders for the Merchandise made by use of the Internet by delivering or
arranging for delivery of the Merchandise ordered by customers over the
Internet. Distributor shall have the sole rights to
<PAGE>
the information contained in the database compiled by it through use of the
Website ("Database"), including the full right to assign, transfer or sell the
rights and information contained therein. DPI shall have no rights in or to the
Database except that if Distributor should offer the Database to any third
party, Distributor shall offer the Database to DPI on the most favorable terms
it has offered it to any other party. DPI shall have the right to enter into
agreements of all kinds with other Internet distributors including without
limitation, agreements similar in nature to this Agreement.
1.2 [RESERVED]
1.3 Catalog Updates . From time to time during the term of this Agreement,
DPI shall as it notifies its other distributors, attempt to notify Distributor
in writing of any corrections, enhancements, revisions, updates, upgrades and
similar changes to the DPI Catalog. Upon such notification, Distributor, may at
its sole discretion, offer any such newly added Merchandise to customers through
its Website. The parties acknowledge and agree that DPI may, at its sole
discretion, make corrections, enhancements, revisions, updates, or other similar
changes to the DPI Catalog, and that such changes shall become a part of the DPI
Catalog as offered to DPI customers from time to time.
1.4 Shipping/Invoicing. Subject to the availability of inventory and
subject to satisfaction of payment terms, upon placement of an order for
Merchandise by Distributor, DPI agrees to immediately ship the ordered
Merchandise to Distributor, or such other party as Distributor shall designate
on terms FOB-DPI's warehouse.
1.5 Publicity and Promotion of Distributor. DPI agrees to allow Distributor
to publicize the existence of the distribution and marketing relationship
created by this Agreement, and to allow Distributor to use the "Mounted
Memories" name, but only in the manner set out below, on its Website, on any
promotional materials or at any promotional events as Distributor shall
reasonably request, subject to the standards and terms set forth in Section 2.4
and 2.6 hereof . Additionally, DPI agrees to use its best efforts to assist
Distributor at Distributor's expense reasonably cooperate within the promotion
of the Website. Distributor shall only use the Mounted Memories name and
trademark to identify Merchandise as produced by Mounted Memories and to
identify Distributor as an authorized dealer of Mounted Memories products and
for no other purpose.
ARTICLE 2
DISTRIBUTOR'S OBLIGATIONS
2.1 Payment. Distributor will pay for merchandise pursuant to the invoice
terms proposed by DPI. Distributor will promptly supply credit information as
requested. The prices to be charged Distributor for orders placed shall be such
amounts and upon such terms as shall be negotiated between the parties at the
time any order is placed.
2.2 Best Efforts. Throughout the term of this Agreement, Distributor shall
use its commercially reasonable best efforts to market, promote and maximize the
sale of the Merchandise through its Website.
2
<PAGE>
2.3. Promotion of the Merchandise by Distributor. Distributor shall
diligently and adequately: (a) engage in market research for the purpose of
identifying optimum marketing and distribution strategies; (b) advertise and
promote the Merchandise to potential customers through the promotion of its
Website, including establishing links to the Website on other Internet sites
that appeal to the optimum target market for the Merchandise; (c) advertise and
promote the Merchandise to potential customers, (d) employ staff or consultants
having adequate knowledge and training with respect to the Merchandise and the
distribution of the Merchandise; and (e) coordinate sales analyses and inventory
management information with DPI.
2.4 Marketing Practices. Distributor shall: (a) conduct its business in a
manner that reflects favorably at all times on the Merchandise and the good
name, goodwill and reputation of DPI; (b) avoid deceptive, misleading or
unethical practices that are or might be detrimental to DPI, the Product, or the
public, including without limitation disparagement of DPI or the Merchandise;
and (c) make no false or misleading representations or statements with regard to
DPI, the Merchandise, or any other products or services provided by Distributor
to its customers.
2.5 Website Maintenance. Distributor shall maintain the Website at such
Uniform Resource Locator ("URL") as Distributor shall choose. Distributor shall
operate and maintain the Website in accordance with the standards set forth in
Section 2.4 hereof. However, the URL shall not be or anything similar thereto.
Distributor shall notify DPI of any significant changes to the content or
structure of the Website within five (5) days following such change. Distributor
shall cooperate with DPI to resolve any concerns expressed by DPI that such a
change in the Website content or structure is adverse to the interests or
reputation of DPI.
2.6 Trademark Agreement. Distributor acknowledges the substantial value
associated with the trademark "Mounted Memories" (the "Mark") and the
substantial goodwill associated therewith. Accordingly, Distributor agrees only
to use the Mark on its website in the manner described in Section 1.5 above and
all uses of the Mark will be of the highest quality standards and of such style,
appearance and quality as to protect the Mark and all of DPI's interest in the
Mark. Further, Distributor shall only use the Mark in accordance with the
quality standards maintained by DPI (as they may change from time to time) and
Distributor shall submit to DPI all proposed uses of the Mark and DPI shall, in
its reasonable discretion approve or disapprove of any proposed use. Distributor
shall do nothing to disparage the Mark or cause the Mark to be less valuable,
including, without limitation, using the Mark on any page or site that contains
items or material which, if associated with the Mark, would cause any
disparagement of the Mark.
The parties agree that DPI has not prescribed and shall not provide
Distributor with any marketing plan or system relating to the business to be
conducted by Distributor, nor shall DPI provide any services or assistance to
Distributor in connection therewith. Distributor shall be free
3
<PAGE>
to operate its businesses in accordance with its own advertising, marketing and
operational systems, techniques, methods and plans, subject only to the limited
controls set forth herein, which the parties acknowledge are necessary in order
for DPI to protect its interests in its trademarks, service marks, and
copyrights.
No action, omission or statement by DPI or Distributor shall in any way
extend or grant to Distributor: (a) any rights of ownership with respect to the
Mark; or (b) any other rights in the Mark other than the license expressly
created by this Agreement. Distributor shall have no rights whatsoever, other
than the limited license herein granted, in either the Mark, any modification or
additions to the Mark, or any copyrights, trademarks, trade names, or service
marks which are in whole or in part derivative of the Mark, whether created by
Distributor, DPI or otherwise, all of which shall be the sole and exclusive
property of DPI. Distributor hereby assigns and transfers to DPI all of
Distributor's right, title and interest, throughout the universe in perpetuity,
in all copyrights and goodwill in and to the Mark, artwork, literary text,
instructions, cartons, containers, packing and wrapping material, tags, labels,
devices, and advertising and display materials created in connection with and
which items specifically and solely include the Mark, now in existence or
hereafter created by Distributor; and (b) all trademarks, trade names, and/or
service marks solely relating to the Mark created as a direct result of
Distributor's use of the Mark. Upon the request of DPI, Distributor shall sign
and deliver to DPI documentation in form and substance satisfactory to DPI
confirming and effecting the foregoing. Distributor agrees that it shall have no
rights to use and shall not use the trademark "Field of Dreams(R)".
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Each party represents and warrants to the other that: (a) it has the right,
power and authority to enter into and perform its obligations under this
Agreement; (b) the individual executing this Agreement is authorized to do so;
(c) neither the execution nor the performance of this Agreement will result in
any breach of any of such party's other contracts or obligations; (d) it has
sufficient rights and interests to grant the rights granted by it herein; (e)
neither the grant by such party nor the use by the other party of such rights
infringe or misappropriate the intellectual or proprietary rights of any third
party; and (f) it is sufficiently staffed and equipped to fulfill its
obligations under this Agreement. Additionally, DPI represents and warrants to
Distributor that the Merchandise is of an authentic nature, and is of such a
quality as to be fit for sale to the public as authentic memorabilia and
collectibles.
ARTICLE 4
CONFIDENTIALITY
4.1 Definition. "Confidential Information" means any and all information
disclosed by one party ("Owner") to the other party ("Recipient") that is
identified as "confidential" or "proprietary," either by legend on written or
electronically stored material, or in advance if disclosed
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verbally. Confidential Information includes, without limitation, research and
development, know-how, inventions, trade secrets, software, and market analysis,
research, strategies, projections and forecasts. Confidential Information also
includes, without limitation, information disclosed by Owner with permission
from a third party, and combinations of or with publicly known information where
the nature of the combination is not publicly known.
4.2. Protection of Confidential Information. Neither Distributor nor DPI
shall, with respect to any Confidential Information of the other of which one of
them is a Recipient, at any time, without the express prior written consent of
Owner, disclose or otherwise make known or available to any entity other than
Owner, or use for Recipient's own account, any of Owner's Confidential
Information. Recipient shall utilize all reasonable procedures to safeguard
Owner's Confidential Information, including limiting the release of Owner's
Confidential Information to Recipient's employees and consultants on a
"need-to-know" basis.
4.3 Publicity. Neither party shall originate or allow to be issued any
publicity or news release or otherwise make any public announcement or
statements, written or oral, with respect to this Agreement or the terms hereof
or the transactions contemplated hereby unless mutually agreed by the parties in
writing, which release shall not be unreasonably withheld, except as required
under securities laws or other applicable laws (including in connection with an
initial public offering). Neither party shall use the name of the other party or
any adaptation thereof or any of such other party's intellectual property in any
advertising, promotional or sales literature, or in any other form of publicity
without prior written consent (which consent will not be unreasonably withheld
or delayed) obtained from the other party in each case.
4.4 Use of Names. Each party agrees to protect from disclosures to any
third party any and all information received from the other party that
identifies an individual customer, including but not limited to names, telephone
numbers, e-mail addresses, and postal addresses. Each party agrees to remove,
upon request by the other party, from its databases and all other records,
electronic or otherwise, such customer identifying information.
ARTICLE 5
TERM AND TERMINATION
5.1 Term. This Agreement shall commence upon the Effective Date and,
subject to early termination pursuant to Section 5.2, shall continue in effect
until the third anniversary of the Effective Date ("Initial Term") and shall be
automatically renewed for successive one-year periods after the expiration of
the Initial Term unless either party provides the other party with written
notice of its intent not to renew this Agreement at least ninety (90) days prior
to the expiration of the then current term.
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5.2 Termination.
(a) Either party may terminate this Agreement upon thirty (30) days'
written notice to the other party.
(b) DPI may terminate this Agreement immediately if (i) Distributor
shall use the "Mounted Memories(TM)" or "Field of Dreams(R)" trademarks in
violation of this Agreement; or if Distributor shall materially
mischaracterize any of the Merchandise sold or offered for sale by
Distributor.
5.3 Effect of Termination .
(a) Upon termination of this Agreement, the provisions of Articles 1
and 2 regarding the rights and obligations of each party shall terminate,
provided however, that the parties will continue to perform all obligations
on pending orders of the purchase of Merchandise in accordance with the
terms of this Agreement.
(b) Promptly after all obligations to existing customers are performed
pursuant to clause (a) hereof, each party shall return to the other party
or certify in writing to the other party that it has destroyed all
documents and other tangible items it or its employees or agents have
received or created pertaining, referring or relating to the Confidential
Information of the other party.
(c) The provisions of Section 4 (Confidentiality), Section 5
(Termination), Section 6 (Indemnification) and Section 7 (Miscellaneous)
shall survive any expiration or termination of this Agreement.
ARTICLE 6
INDEMNIFICATION
6.1 Obligation. Subject to the provisions of this Article 6 each party
(each an "Indemnitor") hereby agrees to indemnify, defend and hold the other
party and its affiliates, directors, officers, employees, contractors and agents
(each an "Indemnitee") harmless, from, against and in respect of any and all
assessments, damages, deficiencies, judgments, losses, obligations and
liabilities, including costs of collection and reasonable attorneys' fees and
expenses (collectively, "Losses") incurred by the Indemnitee(s) arising from or
directly related to any breach by Indemnitor under this Agreement.
6.2 Defense of Claims. Indemnitor may assume the defense of any claim for
Losses. If Indemnitor assumes the defense of any claim for Losses, then, at
Indemnitor's expense, the Indemnitee and its counsel shall cooperate fully in
the defense against, or compromise of, at Indemnitor's option, such asserted
liability. The Indemnitee shall have the right to employ separate
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counsel in any such action or claim, but the fees and expenses of such counsel
shall not be an expense of Indemnitor unless employment of such counsel has been
specifically authorized by Indemnitor. If there is a final judgment in any such
action, or if there is a settlement of any such action effected with the consent
of Indemnitor, Indemnitor shall indemnify and hold harmless the Indemnitee from
and against any loss or liability by reason of such judgment or settlement.
6.3 Dispute Resolution.
(a) Mediation. Any dispute among or between the parties or any of them
arising under or in connection with this Agreement and the transactions and
relationship between the parties contemplated hereby will first be mediated
by a telephone conference or meeting, in which counsel for the respective
parties will attempt to aid the parties in negotiating a mutually
acceptable resolution.
(b) Arbitration. If mediation pursuant to the foregoing paragraph
fails to resolve any dispute arising or in connection with this Agreement
and the transactions and relationship between the parties contemplated
hereby, either party may provide 30 days prior written notification to the
other party of such failure to resolve the dispute. Upon such notification,
the parties shall enter into arbitration pursuant to this Section 6.3(b).
Such dispute will be finally settled by a single arbitrator, having at
least five years of experience as an arbitrator and otherwise mutually
acceptable to the parties to such dispute, in arbitration administered by
American Arbitration Association in accordance with its commercial
arbitration rules then in effect and the internal laws of the State of
Colorado. Any demand for arbitration hereunder must be made before the
running of the legal statute of limitations applicable to the claim at
issue. Any such arbitration will take place in the State of Florida, unless
otherwise agreed by the parties. The arbitrator will not have any right,
power, or authority to award any punitive or exemplary damages or other
damages in excess of purely compensatory damages. Each of the disputing
parties will be responsible for an equal portion of the fees and expenses
of the arbitrator, and all of such party's own costs and expenses, in
connection with any such arbitration. Judgment upon any award rendered by
the arbitrator, if such award is in accordance with applicable law and the
terms of this Agreement, may be entered in any court of competent
jurisdiction.
ARTICLE 7
MISCELLANEOUS
7.1 Independent Contractors . For all purposes of this Agreement, each
party shall be and act as an independent contractor or and not as partners,
joint venturers, employees or agents of the other. No franchise is created
hereby. Neither party shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of the other party
or to bind the other party to any other contract, agreement or undertaking with
any third party except as specifically provided for herein.
7.2 Force Majeure . Neither party shall be liable or responsible in any
manner for failure or delay in performance of any obligation under this
Agreement when such failure or delay is due
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to the result, in whole or in substantial part, to any cause beyond the
reasonable control of the party whose performance is delayed or rendered
impossible thereby if reasonable steps are taken to resolve the reason for such
failure or delay and the reason for such failure or delay is promptly
transmitted to the other party. If the delay exceeds one hundred twenty (120)
days from the initial occurrence each party shall have the right to terminate
this agreement upon 30 days prior written notice to the other party.
7.3 Assignment. This Agreement and the provisions hereof shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their successors and assigns. Neither party may assign, transfer, or sublicense
its rights or obligations under this Agreement without the prior written consent
of the other party (which consent shall not be unreasonably withheld or delayed.
7.4 Notices. Any notices, waivers and other communications required or
permitted hereunder shall be in writing and shall be deemed to be fully given
when delivered by hand or dispatched (with reasonable evidence of receipt) by
telex, telegraph or other means of facsimile transmission, or twenty-four (24)
hours after being dispatched by recognized overnight courier or mail service,
addressed to the party to whom the notice is intended to be given at the
following or such other address as either party may designate by like notice:
DPI:
DPI
Attention: Ross Tannenbaum, President
5017 Hiatus Road
Sun Rise, Florida 33351
COPY TO:
J. Scott Hunter, Esq.
Hunter & Brown
201 South Main Street, #1300
Salt Lake City, Utah 84111
Distributor:
Sportsprize Entertainment, Inc.
101 West 5th Avenue
Vancouver, B.C., Canada
V5Y 1H9
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7.5 Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Utah, without regard for any choice or conflict of law rule
or principle that would result in the application of the substantive law of any
other jurisdiction.
7.6 Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provisions to persons or circumstances other than those as to which it
is held invalid or unenforceable shall not be affected, and each term and
provision of this Agreement shall be valid and be enforced to the fullest extent
permitted by law.
7.7 No Third-Party Beneficiaries. No person(s) not a party to this
Agreement is an intended beneficiary of this Agreement, and no person(s) not a
party to this Agreement shall have any right to enforce any term of this
Agreement.
7.8 Waiver. No provision of this Agreement shall be deemed to have been
waived unless such waiver is in writing signed by the waiving party. No failure
by any party to insist upon the strict performance of any provision of this
Agreement, or to exercise any right to remedy consequent upon a breach thereof,
shall constitute a waiver of any other provision of this Agreement or a waiver
of such provision with respect to any subsequent breach, unless expressly
provided in writing.
7.9 Entire Agreement. This Agreement contains the entire understanding
between the parties relating to the subject matter hereof and supersedes all
prior or contemporaneous oral or written agreements on the same subject matter.
This Agreement may not be amended, supplemented, or otherwise modified except by
an agreement in writing signed by both parties.
7.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
7.11 Further Assurances. Each of the party's covenants and agrees that,
subsequent to the execution and delivery of this Agreement and without any
additional consideration, it will execute and deliver any further legal
instruments and perform any acts which are or may become reasonably necessary to
effectuate the purposes of this Agreement.
7.12 Captions. Titles and headings in this Agreement are for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
7.13 Attorney's Fees. In the event any action or proceeding is brought by
either party against the other under this Agreement, the prevailing party shall
be entitled to recover attorney's fees and costs in such amount as the court may
adjudge reasonable.
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7.14 Equitable Remedies. The parties agree that monetary damages may not be
a sufficient remedy in all instances of breach of this Agreement and the parties
agree that equitable remedies of any kind, including without limitation,
permanent and temporary injunction, shall be available to the party seeking
enforcement of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective
DREAMS PRODUCTS, INC.
a Utah corporation
By: /s/ [Illegible]
---------------------------------------
Name: Ross [Illegible]
-------------------------------------
Title: President
DISTRIBUTOR:
SPORTSPRIZE ENTERTAINMENT, INC.
a Nevada corporation
By: /s/ [Illegible]
---------------------------------------
Name: Jeffrey Paquin
Title: President
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EXHIBIT 10.27
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into as of September 16, 1999, between Sportsprize Entertainment Inc. (the
"Company"), a Nevada corporation, and Bruce R. Cameron (the "Executive"), a
resident of Pacific Palisades, California.
WHEREAS, the Company wishes to employ the Executive to perform services for
the Company on the terms and conditions set forth in this Agreement, and the
Executive wishes to be retained and employed by the Company on such terms and
conditions.
NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth below and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
1. Employment. The Company hereby employs the Executive, and the Executive
accepts such employment and agrees to perform services for the Company, for the
period and upon the other terms and conditions set forth in this Agreement.
2. Term. Unless terminated at an earlier date in accordance with Section 9
of this Agreement, the term of the Executive's employment hereunder shall be for
a period of two years, commencing on September 16, 1999. Thereafter, the term of
this Agreement shall be automatically extended for successive one-year periods
unless either party objects to such extension by written notice to the other
party at least 90 days prior to the expiration of the initial term or any
extension term.
3. Position and Duties.
(a) Service with Company. During the term of the Executive's employment,
the Executive agrees to perform reasonable employment duties as the Board of
Directors of the Company shall assign to him from time to time which are
normally and customarily vested in the offices of President and Chief Financial
Officer of a corporation, including but not limited to, guiding the Company from
an executive management level, and being specifically responsible for content,
technology, e-commerce operational activities, financial affairs, human
resources and administration. The Executive also agrees to serve, for any period
for which he is elected, as a director of the Company; provided, however, that
the Executive shall not be entitled to any additional compensation for serving
as a director. The Executive's initial title shall be "President and Chief
Financial Officer". The Executive acknowledges that as "Chief Financial
Officer", he also will be "Treasurer" of the Company.
The Executive acknowledges that the Company intends to hire a Chairman of
the Board and Chief Executive Officer ("CEO") in the near future. In the event
that a CEO is hired by the Company, Executive shall report directly to the CEO.
Throughout the term of this Agreement, except for the CEO, the Executive shall
be the most senior operational and financial executive at the Company, with
responsibility for content, technology, e-commerce operations, financial
affairs, human resources and administration. However, in the event that the
Company grows significantly
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to a size that would necessitate the separation and/or reassignment of a portion
of Executive's operational and financial duties and responsibilities, then the
Board, CEO and Executive will work together cooperatively in good faith and
delegate Executive's financial duties to another Executive. At such time,
Executive's title shall change to President and Chief Operating Officer.
(b) Performance of Duties. The Executive agrees to serve the Company
faithfully and to the best of his ability and to devote his full business time,
attention and efforts to the business and affairs of the Company during his
employment by the Company. The Executive hereby confirms that he is under no
contractual commitments inconsistent with his obligations set forth in this
Agreement, and that during the term of this Agreement, he will not perform
services for any other corporation, firm, entity or person which are
inconsistent with the provisions of this Agreement. While he remains employed by
the Company, the Executive may participate in reasonable charitable activities
and personal investment activities so long as such activities do not interfere
with the performance of his obligations under this Agreement. Additionally, the
Executive shall be permitted to hold one or two outside directorships in
companies not directly competitive with the business of the Company.
(c) Location of Service. Throughout the term of this Agreement, except for
travel incident to the business of the Company, the Executive shall perform his
duties and responsibilities under this Agreement principally from an office
provided by the Company in Los Angeles County, California.
4. Compensation.
(a) Base Salary. As compensation for all services to be performed by the
Executive under this Agreement, the Company shall pay to the Executive a monthly
base salary of $14,583.33, less any applicable deductions and withholdings. Such
salary shall be paid in arrears on a semi-monthly basis in accordance with the
Company's normal payroll procedures and policies. Effective on September 1,
2000, and at the beginning of each subsequent year of Executive's employment
with the Company, the Executive's monthly base salary shall be increased by at
least 15%.
(b) Incentive Compensation. In addition to the base salary, the Executive
shall be eligible to participate in any bonus or incentive compensation plans
that may be established by the Board of Directors of the Company from time to
time applicable to the Executive or other senior executives at the Company.
(c) Participation in Benefit Plans. While he is employed by the Company,
the Executive shall be eligible to participate in all employee benefit plans or
programs (including Company paid medical and dental coverage) of the Company to
the extent that the Executive meets the requirements for each individual plan.
The Company provides no assurance as to the adoption or continuance of any
particular employee benefit plan or program, and the Executive's participation
in any such plan or program shall be subject to the provisions, rules and
regulations applicable thereto.
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(d) Vacations/Holidays. The Executive shall be entitled to 15 days of paid
vacation for each year of employment. Additionally, the Executive shall be
entitled to ten paid holidays for each year of employment. The Company hereby
acknowledges that during the month of August 1999, Executive worked a total of
12 days as a Consultant for the Company. As compensation for his services during
this period, Executive shall be entitled to an additional 12 days of paid time
off during 1999.
(e) Expenses. The Company will pay or reimburse the Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the Company's normal
policies for expense reporting and verification.
(f) Issuance of Stock Option. Concurrently with the execution of this
Agreement, the Company is granting to the Executive an option to purchase up to
600,000 shares of the Company's common stock pursuant to the Company's Stock
Option Plan. Such option shall be subject to the vesting schedule and terms and
conditions set forth in the form of stock option agreement attached as Exhibit A
hereto.
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors or Chief Executive Officer, during the term of his
employment and for a period of two years thereafter, the Executive 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 the Executive has acquired or
become acquainted with or will acquire or become acquainted with prior to the
termination of his employment by the Company whether developed by himself or by
others, concerning any trade secrets, confidential or secret designs, processes,
formulae, 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. The Executive
acknowledges that the above-described knowledge or information constitutes a
unique and valuable asset of the Company and represents a substantial investment
of time and expense by the Company, 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. During the term of his
employment and for a period of two years thereafter, the Executive will refrain
from any acts that would reduce the value of such knowledge or information to
the Company. The foregoing obligations of confidentiality shall not apply to any
knowledge or information that 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 the
Executive.
6. Ventures. If, during the term of his employment, the Executive is
engaged in or associated with the planning or implementing of any project,
program or venture involving the Company and a third party or parties, all
rights in such project, program or venture shall belong to the Company. Except
as approved by the Company's Board of Directors or Chief Executive Officer, the
Executive shall not be entitled to any interest in such project, program or
venture or to any commission, finder's fee or other compensation in connection
therewith other than the compensation
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to be paid to the Executive as provided in this Agreement. The Executive shall
have no interest, direct or indirect, in any vendor or customer of the Company.
7. Noncompetition Covenant.
(a) Agreement Not to Compete. During the term of his employment with the
Company, the Executive, for a period of one year after the termination of such
employment (where such termination is pursuant to clause (iii) or (v) of Section
9(a)), shall not, directly or indirectly, engage in competition with the Company
in any manner or capacity (e.g., as an advisor, principal, agent, partner,
officer, director, stockholder, employee, member of any association or
otherwise) in any phase of the business which the Company is conducting with
respect to similar sports-related entertainment games for the Internet during
the term of this Agreement, including the design, development, distribution, and
marketing related to the sports-related entertainment games for the Internet
being sold by the Company or hire any current employee of the Company.
(b) Geographic Extent of Covenant. The obligations of the Executive under
Section 7(a) shall apply to any geographic area in which the Company (i) has
engaged in business during the term of this Agreement through production,
promotional, sales or marketing activity, or otherwise, or (ii) has otherwise
established any customer or supplier relations.
(c) Limitation of Covenant. Ownership by the Executive, as a passive
investment, of the capital stock of any corporation listed on a national
securities exchange or publicly traded on Nasdaq shall not constitute a breach
of this Section 7.
(d) Indirect Competition. The Executive will not, directly or indirectly,
assist or encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this Section 7
if such activity were carried out by the Executive, either directly or
indirectly. In particular the Executive agrees that he will not, directly or
indirectly, induce any employee of the Company to carry out, directly or
indirectly, any such activity.
(e) Acknowledgment. The Executive agrees that the restrictions and
agreements contained in this Section 7 are reasonable and necessary to protect
the interests of the Company and that any violation of this Section 7 will cause
substantial and irreparable harm to the Company that would not be quantifiable
and for which no adequate remedy would exist at law and accordingly injunctive
relief shall be available for any violation of this Section 7.
(f) Blue Pencil Doctrine. If the duration or geographical extent of, or
business activities covered by, this Section 7 are in excess of what is valid
and enforceable under applicable law, then such provision shall be construed to
cover only that duration, geographical extent or activities that are valid and
enforceable. The Executive acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
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8. Patent and Related Matters.
(a) Disclosure and Assignment. Upon request, the Executive will promptly
disclose in writing to the Company complete information concerning each and
every invention, discovery, improvement, device, design, apparatus, practice,
process, method or product, whether patentable or not, made, developed,
perfected, devised, conceived or first reduced to practice by the Executive,
either solely or in collaboration with others, during the term of this
Agreement, during regular working hours, relating either directly or indirectly
to the business, products, practices or techniques of the Company
("Developments"). The Executive, to the extent that he has the legal right to do
so, hereby acknowledges that any and all of the Developments are the property of
the Company and hereby assigns and agrees to assign to the Company any and all
of the Executive's right, title and interest in and to any and all of the
Developments. At the request of the Company, the Executive will confer with the
Company and its representatives for the purpose of disclosing all Developments
to the Company as the Company shall reasonably request during the period ending
one year after termination of the Executive's employment with the Company.
(b) Future Developments. As to any future Developments made by the
Executive that relate to the business, products or practices of the Company and
that are first conceived or reduced to practice during the term of this
Agreement, but which are claimed for any reason to belong to an entity or person
other than the Company, the Executive will promptly disclose the same in writing
to the Company and shall not disclose the same to others if the Company, within
20 days thereafter, shall claim ownership of such Developments under the terms
of this Agreement. If the Company makes no such claim, the Executive hereby
acknowledges that the Company has made no promise to receive and hold in
confidence any such information disclosed by the Executive.
(c) Limitation on Sections 8(a) and 8(b). The provisions of Section 8(a)
and 8(b) shall not apply to any Development meeting the following conditions:
(i) such Development was developed entirely on the Executive's
own time;
(ii) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information;
(iii) such Development does not relate (A) directly to the
business of the Company or (B) to the Company's actual or demonstrably
anticipated research or development; and
(iv) such Development does not result from any work performed by
the Executive for the Company.
(d) Assistance of the Executive. During the term of this Agreement, upon
request and without further compensation therefor, but at no personal expense to
the Executive, the Executive will do all lawful acts, including but not limited
to, the execution of papers and lawful oaths and the giving of testimony, that
in the opinion of the Company, may be necessary or desirable in obtaining,
sustaining, reissuing, extending and enforcing United States and foreign
copyrights and Letters Patent, including but not limited to, design patents, on
the Developments, and for perfecting,
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affirming and recording the Company's complete ownership and title thereto, and
to cooperate otherwise in all proceedings and matters relating thereto.
(e) Records. The Executive will keep complete, accurate and authentic
accounts, notes, data and records of the Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon its request, the Executive will promptly
surrender same to it or, if not previously surrendered upon its request or
otherwise, the Executive will surrender the same, and all copies thereof, to the
Company upon the conclusion of his employment.
(f) Obligations, Restrictions and Limitations. The Executive understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived or developed by employees, consultants or other agents rendering
services to it. The Executive shall be bound by all such obligations,
restrictions and limitations applicable to any such invention conceived or
developed by him while he is employed by the Company and shall take any and all
further action which may be required to discharge such obligations and to comply
with such restrictions and limitations.
(g) Copyrightable Material. All right, title and interest in all
copyrightable material that the Executive 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 by this Agreement
assigned to the Company along with ownership of any and all copyrights in the
copyrightable material. Upon request and without further compensation therefor,
but at no expense to the Executive, the Executive shall 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 the Executive for the Company in performing his
responsibilities under this Agreement shall be considered "works made for hire,"
as defined in the U.S. Copyright Act.
(h) Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by the Executive that arises out of the performance of
his obligations or responsibilities under this Agreement or any related material
or information shall be the property of the Company, and all rights therein are
assigned to the Company by this Agreement.
9. Termination of Employment.
(a) Grounds for Termination. The Executive's employment shall terminate
prior to the expiration of the initial term set forth in Section 2 or any
extension thereof in the event that at any time:
(i) The Executive dies,
(ii) The Executive becomes "disabled," so that he cannot perform
the essential functions of his position with reasonable accommodation,
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(iii) The Board of Directors of the Company elects to terminate
this Agreement for "cause" and notifies the Executive in writing of such
election,
(iv) The Board of Directors of the Company elects to terminate
this Agreement without "cause" and notifies the Executive in writing of
such election, or
(v) The Executive elects to terminate this Agreement and
notifies the Company in writing of such election.
If this Agreement is terminated pursuant to clause (i), (ii) or (iii) of
this Section 9(a), such termination shall be effective immediately. If this
Agreement is terminated pursuant to clause (iv) or (v) of this Section 9(a),
such termination shall be effective 30 days after delivery of the notice of
termination.
(b) "Cause" Defined. "Cause" means:
(i) The Executive has breached the provisions of Section 5, 7 or
8 of this Agreement in any material respect,
(ii) The Executive has engaged in willful and material
misconduct, including willful and material failure to perform the
Executive's duties as an officer or employee of the Company and has failed
to cure such default within 30 days after receipt of written notice of
default from the Company,
(iii) The Executive has committed fraud, misappropriation or
embezzlement in connection with the Company's business, or
(iv) The Executive has been convicted of a felony offense.
In the event that the Company terminates the Executive's employment for
"cause" pursuant to clause (i),(ii) of this Section 9(b) or pursuant to clause
(iii) with respect to "misappropriation" only of this Section 9(b), and the
Executive objects in writing to the Board's determination that there was proper
"cause" for such termination within 30 days after the Executive is notified of
such termination, the matter shall be resolved by arbitration in accordance with
the provisions of Section 10(a). If the Executive fails to object to any such
determination of "cause" in writing within such 30-day period, he shall be
deemed to have waived his right to object to that determination. If such
arbitration determines that there was not proper "cause" for termination, such
termination shall be deemed to be a termination pursuant to clause (iv) of
Section 9(a) and the Executive's sole remedy shall be to receive the wage
continuation benefits contemplated by Section 9(f).
(c) Effect of Termination Notwithstanding any termination of this
Agreement, the Executive, in consideration of his employment hereunder to the
date of such termination, shall remain bound by the provisions of this Agreement
which specifically relate to periods, activities or obligations upon or
subsequent to the termination of the Executive's employment.
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<PAGE>
(d) "Disabled" Defined. "Disabled" means any mental or physical condition
that renders the Executive unable to perform the essential functions of his
position, with reasonable accommodation, for a period in excess of three
consecutive months in any twelve month period.
(e) Surrender of Records and Property. Upon termination of his employment
with the Company, the Executive shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof that relate in
any way to the business, products, practices or techniques of the Company, and
all other property, trade secrets and confidential information of the Company,
including, but not limited to, all documents that in whole or in part contain
any trade secrets or confidential information of the Company, which in any of
these cases are in his possession or under his control.
(f) Salary Continuation. If the Executive's employment by the Company is
terminated by the Company pursuant to Section 9(a)(iii) or (v), the Executive's
right to base salary and benefits shall immediately terminate, except as may
otherwise be required by applicable law. In the event that the Executive's
employment is terminated in accordance with Section 9(a)(i), (ii) or (iv), then
the Company shall continue to make the normal base salary payments throughout
the remaining term of the Agreement net of any life insurance payments or
disability payments made to the Executive as part of the Company's benefit
plans.
In either event, if the Executive's employment by the Company terminates,
the Executive also shall be entitled to receive a pro rata portion (based on the
number of days of employment during that fiscal year) of any bonus payment that
would have been payable to him for that fiscal year pursuant to Section 4(b) as
if the Executive had been in the employ of the Company for the full fiscal year.
No bonus will be payable to the Executive with respect to any fiscal year in
which the Executive was employed by the Company for less than six months or with
respect to any fiscal year after the fiscal year in which the Executive's
employment terminated.
10. Settlement of Disputes.
(a) Arbitration. Except as provided in Section 10(b), any claims or
disputes of any nature between the Company and the Executive arising from or
related to the performance, breach, termination, expiration, application or
meaning of this Agreement or any matter relating to the Executive's employment
and the termination of that employment by the Company shall be resolved
exclusively by arbitration in Los Angeles, California, in accordance with the
applicable rules of the American Arbitration Association. In the event of
submission of any dispute to arbitration, each party shall, not later than 30
days prior to the date set for hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely at the
hearing and a list of all persons each party intends to call at the hearing. The
fees of the arbitrator(s) and other costs incurred by the Executive and the
Company in connection with such arbitration shall be paid by the party that is
unsuccessful in such arbitration.
The decision of the arbitrator(s) shall be final and binding upon both
parties. Judgment of the award rendered by the arbitrator(s) may be entered in
any court of competent jurisdiction.
8
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(b) Resolution of Certain Claims--Injunctive Relief. Section 10(a) shall
have no application to claims by the Company asserting a violation of Section 5,
7, 8 or 9(e) or seeking to enforce, by injunction or otherwise, the terms of
Section 5, 7, 8 or 9(e). Such claims may be maintained by the Company in a
lawsuit subject to the terms of Section 10(c). The Executive acknowledges that
it would be difficult to fully compensate the Company for damages resulting from
any breach by him of the provisions of this Agreement. Accordingly, the
Executive agrees that, in addition to, but not to the exclusion of any other
available remedy, the Company shall have the right to enforce the provisions of
Sections 5, 7, 8 and 9(e) by applying for and obtaining temporary and permanent
restraining orders or injunctions from a court of competent jurisdiction without
the necessity of filing a bond therefor, and without the necessity of proving
actual damages, and the Company shall be entitled to recover from the Executive
its reasonable attorneys' fees and costs in enforcing the provisions of Sections
5, 7, 8 and 9(e).
(c) Venue. Any action at law, suit in equity or judicial proceeding arising
directly, indirectly, or otherwise in connection with, out of, related to or
from this Agreement, or any provision hereof, shall be litigated only in the
courts of the State of California. The Executive and the Company consent to the
jurisdiction of such courts over the subject matter set forth in Section 10(b).
11. Miscellaneous.
(a) Entire Agreement. This Agreement (including the 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.
(b) 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.
(c) 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. In furtherance and not in limitation of the foregoing, should
the duration or geographical extent of, or business activities covered by, any
provision of this Agreement be in excess of that which is valid and enforceable
under applicable law, then such provision shall be construed to cover only that
duration, extent or activities which may validly and enforceably be covered. The
Executive acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement be given the construction which renders its
provision valid and enforceable to the maximum extent (not exceeding its express
terms) possible under applicable law.
(d) 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.
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(e) Assignability. Neither this Agreement nor any right, remedy, obligation
or liability arising hereunder or by reason hereof shall be assignable
(including by operation of law) by either party without the prior written
consent of the other party to this Agreement, except that the Company may,
without the consent of the Executive, assign its rights and obligations under
this Agreement to any corporation, firm or other business entity with or into
which the Company may merge or consolidate, or to which the Company may sell or
transfer all or substantially all of its assets, or of which 50% or more of the
equity investment and of the voting control is owned, directly or indirectly,
by, or is under common ownership with, the Company. After any such assignment by
the Company, the Company shall be discharged from all further liability
hereunder and such assignee shall thereafter be deemed to be the Company for the
purposes of all provisions of this Agreement including this Section 11.
(f) 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. 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 the Executive shall constitute a waiver of
any other right or breach by the Executive.
(g) 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 or electronic facsimile addressed to
the receiving party at the address set forth herein. All such communications
shall be effective when received.
Bruce R. Cameron
1720 Michael Lane
Pacific Palisades, California
90272
Phone No. (310) 230-0508
Fax No.: (310) 573-7936
SportsPrize Entertainment Inc.
225 S. Sepulveda Blvd., Suite 360
Manhattan Beach, California
90266
Phone No. (310) 374-1898
Fax No.: (310) 374-4233
Any party may change the address set forth above by notice to each other
party given as provided herein.
(h) 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.
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(i) 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 CALIFORNIA, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW PROVISIONS THEREOF.
(j) 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.
(k) Withholding Taxes. The Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph.
SPORTSPRIZE ENTERTAINMENT INC.
By -------------------------------------
Its -----------------------------------
---------------------------------------
Bruce R. Cameron
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Exhibit A
STOCK OPTION AGREEMENT
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
1999 STOCK OPTION PLAN
THIS AGREEMENT is entered into as of the 16th day of September, 1999 ("Date
of Grant") between Sportsprize Entertainment Inc., a Nevada corporation (the
"Company"), and Bruce R. Cameron (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has approved
and adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board
is authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
WHEREAS, the Plan provides for the granting of stock options that either
(i) are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options");
WHEREAS, the Board has authorized the grant to Optionee of options to
purchase a total of 600,000 shares of Common Stock (the "Options"), which
Options are intended to be (select one):
--------- Incentive Stock Options
X Non-Qualified Stock Options;
---------
NOW, THEREFORE, the Company agrees to offer to the Optionee the option to
purchase, upon the terms and conditions set forth herein and in the Plan,
600,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
1. Exercise Price. The exercise price of the options shall be $0.50 per
share for 200,000 shares of Common Stock, $1.00 per share for 200,000 shares of
Common Stock and $2.00 per share for 200,000 shares of Common Stock.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 25,000 of the $0.50 Options will vest immediately and 25,000 of the
$0.50 Options will vest each month thereafter for the 7 months following
the Date of Grant;
<PAGE>
(b) 25,000 of the $1.00 Options will vest 8 months from the Date of Grant
and 25,000 of the $1.00 Options will vest each month thereafter;
(c) 25,000 of the $2.00 Options will vest 16 months from the Date of Grant
and 25,000 of the $2.00 Options will vest each month thereafter.
Once the Options are vested, the Optionee shall have the right to exercise
any or all of the vested Options at his discretion.
All of the unvested Options shall vest immediately on completion of the
acquisition of the Company by way of a Change of Control.
Definition of Change in Control. As used in this Agreement, "Change in
Control" means the occurrence of any of the following events during the term of
this Agreement:
(a) The sale to any purchaser of (i) all or substantially all of the
assets of the Company or (ii) capital stock representing more than 50% of
the stock of the Company entitled to vote generally in the election of
directors of the Company; or
(b) The merger or consolidation of the Company with another
corporation if, immediately after such merger or consolidation, less than a
majority of the combined voting power of the then-outstanding securities
entitled to vote generally in the election of directors of the surviving or
resulting corporation in such merger or consolidation is held, directly or
indirectly, in the aggregate by the holders immediately prior to such
transaction of the outstanding securities of the Company; or
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form, or report or item therein), each promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d) (2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing 50% or more of the combined voting power of
the voting stock of Company; or
(d) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any successor schedule, form, or report or
item therein) that a Change in Control of the Company has occurred or will
occur in the future pursuant to any then existing contract or transaction.
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family
2
<PAGE>
members of the Optionee or to trusts or partnerships established exclusively for
the benefit of the Optionee and the Optionee's immediate family members. Upon
any attempt to transfer, pledge, hypothecate or otherwise dispose of any Option
or of any right or privilege conferred by the Plan contrary to the provisions
thereof, or upon the sale, levy or attachment or similar process upon the rights
and privileges conferred by the Plan, such Option shall thereupon terminate and
become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(i) Expiration: Ten (10) years.
(ii) Termination for Cause: The expiration of thirty (30) days from the
date of an Optionee's termination of employment or contractual relationship
with the Company or any Related Corporation for cause.
(iii) Termination Due to Death or Disability: The expiration of one (1)
year from the date of the death of the Optionee or cessation of an
Optionee's employment or contractual relationship by reason of Disability
(as defined in Section 5(g) of the Plan). If an Optionee's employment or
contractual relationship is terminated by death, any Option held by the
Optionee shall be exercisable only by the person or persons to whom such
Optionee's rights under such Option shall pass by the Optionee's will or by
the laws of descent and distribution.
(iv) Termination Due to Cessation of Employment: The expiration of ninety
(90) days from the date an Optionee ceases to be employed by the Company.
(v) Termination for Any Other Reason: The expiration of three (3) months
from the date of an Optionee's termination of employment with the Company
or any Related Corporation for any reason whatsoever other than cause,
death or Disability (as defined in Section 5(g) of the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment with the Company for any reason
whatsoever, including death or Disability unless vesting is accelerated in
accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock
3
<PAGE>
or other security underlying an Option during the six (6) months immediately
following the grant of that Option. 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)
of the Plan) 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.
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 Secretary of the Company at its principal executive office, specifying the
number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(i) by delivering to the Company shares of Common Stock previously held by
such person 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
purchase price to be paid by the Optionee upon such exercise;
(ii) by delivering a properly executed exercise notice together with
irrevocable 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
(iii) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
9. Holding Period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into and one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of such shares prior
to the above determined date to the Company within one (1) business day after
such sale is concluded. The Optionee also agrees to pay to the Company, within
five (5) business days after such sale is concluded, the amount necessary for
the Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(l)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom, or that such
registration or exemption will be available at any specified time.
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<PAGE>
10. Subject to 1999 Stock Option Plan . The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
this Agreement.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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,
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: SportsPrize Entertainment Inc.
225 S. Sepulveda Blvd., Suite 360
Manhattan Beach, California
90266
Attention: Board of Directors or Chief
Executive Officer
The Optionee: Bruce R. Cameron
1720 Michael Lane
Pacific Palisades, California
90272
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<PAGE>
Sportsprize Entertainment Inc.
By: -------------------------- -----------------------------------
Bruce R. Cameron
Its:--------------------------
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
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EXHIBIT A
---------
Notice of Election to Exercise
------------------------------
This Notice of Election to Exercise shall constitute proper notice pursuant
to Section 5(h) of the SportsPrize Entertainment Inc. 1999 Stock Option Plan
(the "Plan") and Section 8 of that certain Stock Option Agreement (the
"Agreement") dated as of the ----- day of -------, 1999 between SportsPrize
Entertainment Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to purchase
- -------- shares of the common stock of the Company at a price of $-----------
per share, for aggregate consideration of $---------, on the terms and
conditions set forth in the Agreement and the Plan. Such aggregate
consideration, in the form specified in Section 8 of the Agreement, accompanies
this notice.
The undersigned has executed this Notice this ----- day of ------, 19--.
------------------------------------
Signature
------------------------------------
Name (typed or printed)
EXHIBIT 10.28
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") dated as of August 15, 1999,
between Sportsprize Entertainment Inc. (the "Company"), a Nevada corporation,
and Robert Hunziker (the "Employee"), a resident of Venice, California.
WHEREAS, the Company wishes to employ the Employee to render services for
the Company on the terms and conditions set forth in this Agreement, and the
Employee wishes to be retained and employed by the Company on such terms and
conditions.
NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth below and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
1. Employment. The Company hereby employs the Employee, and the Employee
accepts such employment and agrees to perform services for the Company, for the
period and upon the other terms and conditions set forth in this Agreement.
2. Term. Unless terminated at an earlier date in accordance with Section 9
of this Agreement, the term of the Employee's employment hereunder shall be for
a period of six months, commencing on the date hereof. Thereafter, the term of
this Agreement shall be automatically extended for successive six month periods
unless either party objects to such extension by written notice to the other
party at least 30 days prior to the expiration of the initial term or any
extension term.
3. Position and Duties.
(a) Service with Company. During the term of the Employee's employment, the
Employee agrees to perform such reasonable employment duties as the Board of
Directors or Chief Executive Officer of the Company shall assign to him from
time to time including presenting and exposing the Company to the investment
community, raising additional funds for the expansion of the Company either
through a public offering or a private financing and having overall
responsibility of the Company's business plan and management of investor
relations. The Employee also agrees to serve, for any period for which he is
elected, as a director of the Company; provided, however, that the Employee
shall not be entitled to any additional compensation for serving as a director.
The Employee's title shall be "Senior Vice-President, Corporate Development".
(b) Performance of Duties. The Employee agrees to serve the Company
faithfully and to the best of his ability and to devote his full time, attention
and efforts to the business and affairs of the Company during his employment by
the Company. The Employee hereby confirms that he is under no contractual
commitments inconsistent with his obligations set forth in this Agreement and
that during the term of this Agreement, he will not render or perform services
for any other
<PAGE>
corporation, firm, entity or person which are inconsistent with the provisions
of this Agreement. While he remains employed by the Company, the Employee may
participate in reasonable charitable activities and personal investment
activities so long as such activities do not interfere with the performance of
his obligations under this Agreement.
4. Compensation.
(a) Base Salary. As compensation in full for all services to be rendered by
the Employee under this Agreement, the Company shall pay to the Employee a base
salary of $10,000, less deductions and withholdings, which salary shall be paid
on a monthly basis in arrears in accordance with the Company's normal payroll
procedures and policies.
(b) Incentive Compensation. In addition to the base salary, the Employee
shall be eligible to participate in any bonus or incentive compensation plans
that may be established by the Board of Directors of the Company from time to
time applicable to the Employee.
(c) Participation in Benefit Plans. While he is employed by the Company,
the Employee shall also be eligible to participate in all employee benefit plans
or programs (including medical and dental coverage) of the Company to the extent
that the Employee meets the requirements for each individual plan. The Company
provides no assurance as to the adoption or continuance of any particular
employee benefit plan or program, and the Employee's participation in any such
plan or program shall be subject to the provisions, rules and regulations
applicable thereto.
(d) Expenses. The Company will pay or reimburse the Employee for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the Company's normal
policies for expense verification.
(e) Issuance of Stock Option. Concurrently with the execution of this
Agreement, the Company is granting to the Employee an option to purchase up to
400,000 shares of the Company's common stock pursuant to the Company's Stock
Option Plan. Such option shall be subject to the vesting schedule and terms and
conditions set forth in the form of stock option agreement attached as Exhibit A
hereto.
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors or Chief Executive Officer, during the term of his
employment or at any time thereafter, the Employee 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 the Employee has acquired or become acquainted
with or will acquire or become acquainted with prior to the termination of the
period of his employment by the Company (including employment by the Company or
any affiliated companies prior to the date of this Agreement), whether developed
by himself or by others, concerning any trade secrets, confidential or secret
designs, processes, formulae, 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. The
Employee acknowledges that the above-described knowledge or information
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<PAGE>
constitutes a unique and valuable asset of the Company and represents a
substantial investment of time and expense by the Company, 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 of his employment, the Employee 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
shall not apply to any knowledge or information that 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 the Employee.
6. Ventures. If, during the term of his employment the Employee is engaged
in or associated with the planning or implementing of any project, program or
venture involving the Company and a third party or parties, all rights in such
project, program or venture shall belong to the Company. Except as approved by
the Company's Board of Directors or Chief Executive Officer, the Employee shall
not be entitled to any interest in such project, program or venture or to any
commission, finder's fee or other compensation in connection therewith other
than the compensation to be paid to the Employee as provided in this Agreement.
The Employee shall have no interest, direct or indirect, in any vendor or
customer of the Company.
7. Noncompetition Covenant.
(a) Agreement Not to Compete. During the term of his employment with the
Company and for a period of two years after the termination of such employment
(whether such termination is with or without cause, or whether such termination
is occasioned by the Employee or the Company), he shall not, directly or
indirectly, engage in competition with the Company in any manner or capacity
(e.g., as an advisor, principal, agent, partner, officer, director, stockholder,
employee, member of any association or otherwise) in any phase of the business
which the Company is conducting with respect to similar sports-related
entertainment games for the Internet during the term of this Agreement,
including the design, development, distribution and marketing of sports-related
entertainment games for the Internet being sold by the Company or hire any
current or former employee of the Company.
(b) Geographic Extent of Covenant. The obligations of the Employee under
Section 7(a) shall apply to any geographic area in which the Company (i) has
engaged in business during the term of this Agreement through production,
promotional, sales or marketing activity, or otherwise, or (ii) has otherwise
established its goodwill, business reputation or any customer or supplier
relations.
(c) Limitation of Covenant. Ownership by the Employee, as a passive
investment, of less than two percent of the outstanding shares of capital stock
of any corporation listed on a national securities exchange or publicly traded
on Nasdaq shall not constitute a breach of this Section 7.
(d) Indirect Competition. The Employee will not, directly or indirectly,
assist or encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this Section 7
if such activity were carried out by the Employee, either directly or
indirectly. In particular the Employee agrees that he will not, directly or
indirectly, induce any employee of the Company to carry out, directly or
indirectly, any such activity.
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<PAGE>
(e) Acknowledgment. The Employee agrees that the restrictions and
agreements contained in this Section 7 are reasonable and necessary to protect
the legitimate interests of the Company and that any violation of this Section 7
will cause substantial and irreparable harm to the Company that would not be
quantifiable and for which no adequate remedy would exist at law and accordingly
injunctive relief shall be available for any violation of this Section 7.
(f) Blue Pencil Doctrine. If the duration or geographical extent of, or
business activities covered by, this Section 7 are in excess of what is valid
and enforceable under applicable law, then such provision shall be construed to
cover only that duration, geographical extent or activities that are valid and
enforceable. The Employee acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
8. Patent and Related Matters.
(a) Disclosure and Assignment. The Employee will promptly disclose in
writing to the Company complete information concerning each and every invention,
discovery, improvement, device, design, apparatus, practice, process, method or
product, whether patentable or not, made, developed, perfected, devised,
conceived or first reduced to practice by the Employee, either solely or in
collaboration with others, during the term of this Agreement, or within six
months thereafter, whether or not during regular working hours, relating either
directly or indirectly to the business, products, practices or techniques of the
Company ("Developments"). The Employee, to the extent that he has the legal
right to do so, hereby acknowledges that any and all of the Developments are the
property of the Company and hereby assigns and agrees to assign to the Company
any and all of the Employee's right, title and interest in and to any and all of
the Developments. At the request of the Company, the Employee will confer with
the Company and its representatives for the purpose of disclosing all
Developments to the Company as the Company shall reasonably request during the
period ending one year after termination of the Employee's employment with the
Company.
(b) Future Developments. As to any future Developments made by the Employee
that relate to the business, products or practices of the Company and that are
first conceived or reduced to practice during the term of this Agreement, or
within six months thereafter, but which are claimed for any reason to belong to
an entity or person other than the Company, the Employee will promptly disclose
the same in writing to the Company and shall not disclose the same to others if
the Company, within 20 days thereafter, shall claim ownership of such
Developments under the terms of this Agreement. If the Company makes no such
claim, the Employee hereby acknowledges that the Company has made no promise to
receive and hold in confidence any such information disclosed by the Employee.
(c) Limitation on Sections 8(a) and 8(b). The provisions of Section 8(a)
and 8(b) shall not apply to any Development meeting the following conditions:
(i) such Development was developed entirely on the Employee's own
time;
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<PAGE>
(ii) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information;
(iii) such Development does not relate (A) directly to the business of
the Company or (B) to the Company's actual or demonstrably anticipated
research or development; and
(iv) such Development does not result from any work performed by the
Employee for the Company.
(d) Assistance of the Employee. Upon request and without further
compensation therefor, but at no expense to the Employee, the Employee will do
all lawful acts, including but not limited to, the execution of papers and
lawful oaths and the giving of testimony, that in the opinion of the Company,
may be necessary or desirable in obtaining, sustaining, reissuing, extending and
enforcing United States and foreign copyrights and Letters Patent, including but
not limited to, design patents, on the Developments, and for perfecting,
affirming and recording the Company's complete ownership and title thereto, and
to cooperate otherwise in all proceedings and matters relating thereto.
(e) Records. The Employee will keep complete, accurate and authentic
accounts, notes, data and records of the Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon its request, the Employee will promptly
surrender same to it or, if not previously surrendered upon its request or
otherwise, the Employee will surrender the same, and all copies thereof, to the
Company upon the conclusion of his employment.
(f) Obligations, Restrictions and Limitations. The Employee understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived or developed by employees, consultants or other agents rendering
services to it. The Employee shall be bound by all such obligations,
restrictions and limitations applicable to any such invention conceived or
developed by him while he is employed by the Company and shall take any and all
further action which may be required to discharge such obligations and to comply
with such restrictions and limitations.
(g) Copyrightable Material. All right, title and interest in all
copyrightable material that the Employee 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 by this Agreement
assigned to the Company along with ownership of any and all copyrights in the
copyrightable material. Upon request and without further compensation therefor,
but at no expense to the Employee, the Employee shall 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 the Employee for the Company in performing his
responsibilities under this Agreement shall be considered "works made for hire,"
as defined in the U.S. Copyright Act.
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<PAGE>
(h) Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by the Employee that arises out of the performance of
his obligations or responsibilities under this Agreement or any related material
or information shall be the property of the Company, and all rights therein are
by this Agreement assigned to the Company.
9. Termination of Employment.
(a) Grounds for Termination. The Employee's employment shall terminate
prior to the expiration of the initial term set forth in Section 2 or any
extension thereof in the event that at any time:
(i) The Employee dies,
(ii) The Employee becomes "disabled," so that he cannot perform the
essential functions of his position with or without reasonable
accommodation,
(iii) The Board of Directors of the Company elects to terminate this
Agreement for "cause" and notifies the Employee in writing of such
election,
(iv) The Board of Directors of the Company elects to terminate this
Agreement without "cause" and notifies the Employee in writing of such
election, or
(v) The Employee elects to terminate this Agreement and notifies the
Company in writing of such election.
If this Agreement is terminated pursuant to clause (i), (ii) or (iii) of
this Section 9(a), such termination shall be effective immediately. If this
Agreement is terminated pursuant to clause (iv) or (v) of this Section 9(a),
such termination shall be effective 60 days after delivery of the notice of
termination.
(b) "Cause" Defined. "Cause" means:
(i) The Employee has breached the provisions of Section 5, 7 or 8 of
this Agreement in any material respect,
(ii) The Employee has engaged in willful and material misconduct,
including willful and material failure to perform the Employee's duties as
an officer or employee of the Company and has failed to cure such default
within 30 days after receipt of written notice of default from the Company,
(iii) The Employee has committed fraud, misappropriation or
embezzlement in connection with the Company's business, or
(iv) The Employee has been convicted or has pleaded nolo contendere to
criminal misconduct (except for parking violations and occasional minor
traffic violations).
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In the event that the Company terminates the Employee's employment for "cause"
pursuant to clause (ii) of this Section 9(b) and the Employee objects in writing
to the Board's determination that there was proper "cause" for such termination
within 20 days after the Employee is notified of such termination, the matter
shall be resolved by arbitration in accordance with the provisions of Section
10(a). If the Employee fails to object to any such determination of "cause" in
writing within such 20-day period, he shall be deemed to have waived his right
to object to that determination. If such arbitration determines that there was
not proper "cause" for termination, such termination shall be deemed to be a
termination pursuant to clause (iv) of Section 9(a) and the Employee's sole
remedy shall be to receive the wage continuation benefits contemplated by
Section 9(f).
(c) Effect of Termination Notwithstanding any termination of this
Agreement, the Employee, in consideration of his employment hereunder to the
date of such termination, shall remain bound by the provisions of this Agreement
which specifically relate to periods, activities or obligations upon or
subsequent to the termination of the Employee's employment.
(d) "Disabled" Defined. "Disabled" means any mental or physical condition
that renders the Employee unable to perform the essential functions of his
position, with or without reasonable accommodation, for a period in excess of
one month.
(e) Surrender of Records and Property. Upon termination of his employment
with the Company, the Employee shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof that relate in
any way to the business, products, practices or techniques of the Company, and
all other property, trade secrets and confidential information of the Company,
including, but not limited to, all documents that in whole or in part contain
any trade secrets or confidential information of the Company, which in any of
these cases are in his possession or under his control.
(f) Salary Continuation. If the Employee's employment by the Company is
terminated by the Company pursuant to Section 9(a), the Employee's right to base
salary and benefits shall immediately terminate, except as may otherwise be
required by applicable law.
In either event, if the Employee's employment by the Company terminates
within six months of the end of any fiscal year of the Company, the Employee
shall also be entitled to receive a pro rata portion (based on the number of
days of employment during that fiscal year) of any bonus payment that would have
been payable to him for that fiscal year pursuant to Section 4(b) if the
Employee had been in the employ of the Company for the full fiscal year. No
bonus will be payable to the Employee with respect to any fiscal year in which
the Employee was employed by the Company for less than six months or with
respect to any fiscal year after the fiscal year in which the Employee's
employment terminated.
10. Settlement of Disputes.
(a) Arbitration. Except as provided in Section 10(b), any claims or
disputes of any nature between the Company and the Employee arising from or
related to the performance, breach, termination, expiration, application or
meaning of this Agreement or any matter relating to the Employee's employment
and the termination of that employment by the Company shall be resolved
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<PAGE>
exclusively by arbitration in Manhattan Beach, California, in accordance with
the applicable rules of the American Arbitration Association. In the event of
submission of any dispute to arbitration, each party shall, not later than 30
days prior to the date set for hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely at the
hearing and a list of all persons each party intends to call at the hearing. The
fees of the arbitrator(s) and other costs incurred by the Employee and the
Company in connection with such arbitration shall be paid by the party that is
unsuccessful in such arbitration.
The decision of the arbitrator(s) shall be final and binding upon both
parties. Judgment of the award rendered by the arbitrator(s) may be entered in
any court of competent jurisdiction.
(b) Resolution of Certain Claims--Injunctive Relief. Section 10(a) shall
have no application to claims by the Company asserting a violation of Section 5,
7, 8 or 9(e) or seeking to enforce, by injunction or otherwise, the terms of
Section 5, 7, 8 or 9(e). Such claims may be maintained by the Company in a
lawsuit subject to the terms of Section 10(c). The Employee acknowledges that it
would be difficult to fully compensate the Company for damages resulting from
any breach by him of the provisions of this Agreement. Accordingly, the Employee
agrees that, in addition to, but not to the exclusion of any other available
remedy, the Company shall have the right to enforce the provisions of Sections
5, 7, 8 and 9(e) by applying for and obtaining temporary and permanent
restraining orders or injunctions from a court of competent jurisdiction without
the necessity of filing a bond therefor, and without the necessity of proving
actual damages, and the Company shall be entitled to recover from the Employee
its reasonable attorneys' fees and costs in enforcing the provisions of Sections
5, 7, 8 and 9(e).
(c) Venue. Any action at law, suit in equity or judicial proceeding arising
directly, indirectly, or otherwise in connection with, out of, related to or
from this Agreement, or any provision hereof, shall be litigated only in the
courts of the State of Nevada. The Employee and the Company consent to the
jurisdiction of such courts over the subject matter set forth in Section 10(b).
The Employee waives any right the Employee may have to transfer or change the
venue of any litigation brought against the Employee by the Company.
11. Miscellaneous.
(a) Entire Agreement. This Agreement (including the 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.
(b) 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.
(c) 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
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<PAGE>
impaired thereby. In furtherance and not in limitation of the foregoing, should
the duration or geographical extent of, or business activities covered by, any
provision of this Agreement be in excess of that which is valid and enforceable
under applicable law, then such provision shall be construed to cover only that
duration, extent or activities which may validly and enforceably be covered. The
Employee acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement be given the construction which renders its
provision valid and enforceable to the maximum extent (not exceeding its express
terms) possible under applicable law.
(d) 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.
(e) Assignability. Neither this Agreement nor any right, remedy, obligation
or liability arising hereunder or by reason hereof shall be assignable
(including by operation of law) by either party without the prior written
consent of the other party to this Agreement, except that the Company may,
without the consent of the Employee, assign its rights and obligations under
this Agreement to any corporation, firm or other business entity with or into
which the Company may merge or consolidate, or to which the Company may sell or
transfer all or substantially all of its assets, or of which 50% or more of the
equity investment and of the voting control is owned, directly or indirectly,
by, or is under common ownership with, the Company. After any such assignment by
the Company, the Company shall be discharged from all further liability
hereunder and such assignee shall thereafter be deemed to be the Company for the
purposes of all provisions of this Agreement including this Section 11.
(f) 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. 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 the Employee shall constitute a waiver of
any other right or breach by the Employee.
(g) 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 or electronic facsimile addressed to
the receiving party at the address set forth herein. All such communications
shall be effective when received.
Robert Hunziker
245 Market Street
Venice, California
90291
Fax No.: (310) 452-3474
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Sportsprize Entertainment Inc.
360 - 225 S. Sepulveda Blvd.
Manhattan Beach, California
90266
Fax No.: (310) 374-4233
Any party may change the address set forth above by notice to each other party
given as provided herein.
(h) 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.
(i) 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.
(j) 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.
(k) Withholding Taxes. The Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph.
SPORTSPRIZE ENTERTAINMENT INC.
By -------------------------------------
Its -----------------------------------
---------------------------------------
Robert Hunziker
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Exhibit A
---------
STOCK OPTION AGREEMENT
----------------------
Sportsprize Entertainment Inc.
(formerly Kodiak Graphics Company)
1999 STOCK OPTION PLAN
THIS AGREEMENT is entered into as of the 15th day of August, 1999 ("Date of
Grant") between Sportsprize Entertainment Inc., a Nevada corporation (the
"Company"), and Robert Hunziker (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has approved
and adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board
is authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
WHEREAS, the Plan provides for the granting of stock options that either
(i) are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options");
WHEREAS, the Board has authorized the grant to Optionee of options to
purchase a total of 400,000 shares of Common Stock (the "Options"), which
Options are intended to be (select one):
--------- Incentive Stock Options
X Non-Qualified Stock Options;
---------
NOW, THEREFORE, the Company agrees to offer to the Optionee the option to
purchase, upon the terms and conditions set forth herein and in the Plan,
400,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
1. Exercise Price. The exercise price of the options shall be $0.50 per
share for 200,000 shares of Common Stock and $2.00 per share for 200,000 shares
of Common Stock.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
<PAGE>
(a) 100,000 of the $0.50 Options may be exercised immediately;
(b) 100,000 of the $0.50 Options may be exercised when the Company's
trading share price closes at $7.00 or higher or when the Company completes
a financing in excess of $10,000,000;
(c) in the event that 100,000 of the $0.50 Options set out in Section 3(b)
become exercisable as a result of the Company's trading price closing at a
price equal to or greater than $7.00 per share, then 50,000 of the $2.00
Options may be exercised immediately and 150,000 of the $2.00 Options may
be exercised when the Company completes a financing in excess of
$10,000,000; and
(d) in the event that 100,000 of the $0.50 Options set out in Section 3(b)
become exercisable as a result of the Company completing a financing in
excess of $10,000,000, then 50,000 of the $2.00 Options may be exercised
immediately and 150,000 of the $2.00 Options may be exercised when the
Company's trading price closes at a price equal to or greater than $7.00
per share.
4. Options not Transferable. This Option 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 if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family members of the Optionee or to trusts or partnerships
established exclusively for the benefit of the Optionee and the Optionee's
immediate family members. Upon any attempt to transfer, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by the
Plan contrary to the provisions thereof, or upon the sale, levy or attachment or
similar process upon the rights and privileges conferred by the Plan, such
Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(i) Expiration: Five (5) years.
(ii) Termination for Cause: 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) Termination Due to Death or Disability: The expiration of one (1)
year from the date of the death of the Optionee or cessation of an
Optionee's employment or contractual relationship by reason of Disability
(as defined in Section 5(g) of the Plan). If an Optionee's employment or
contractual relationship is terminated by death, any Option held by the
Optionee shall be exercisable only by the person or persons to whom such
Optionee's rights under such Option shall pass by the Optionee's will or by
the laws of descent and distribution.
(iv) Termination Due to Cessation of Service as a Director: The expiration
of
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<PAGE>
sixty (60) days from the date an Optionee ceases to serve as a director of
the Company.
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment or contractual relationship with the
Company for any reason whatsoever, including death or Disability unless vesting
is accelerated in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately following the grant
of that Option. 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) of the Plan) 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.
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 Secretary of the Company at its principal executive office, specifying the
number of shares of Common Stock 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 Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(i) by delivering to the Company shares of Common Stock previously held by
such person 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
purchase price to be paid by the Optionee upon such exercise;
(ii) by delivering a properly executed exercise notice together with
irrevocable 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
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<PAGE>
(iii) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
9. Holding Period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into and one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of such shares prior
to the above determined date to the Company within one (1) business day after
such sale is concluded. The Optionee also agrees to pay to the Company, within
five (5) business days after such sale is concluded, the amount necessary for
the Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(l)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom, or that such
registration or exemption will be available at any specified time.
10. Subject to 1999 Stock Option Plan . The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
the Plan, a copy of which has been delivered to the Optionee, and which is
available for inspection at the principal offices of the Company
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock 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 Optionee. Accordingly, the Optionee
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
Options for the Common Stock. Without limiting other matters to be considered,
the Optionee should consider whether upon the exercise of Options, the Optionee
will file an election with the Internal Revenue Service pursuant to Section
83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, 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,
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options
4
<PAGE>
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: SportsPrize Entertainment Inc.
225 S. Sepulveda Blvd., Suite 360
Manhattan Beach, California
90266
Attention: President
The Optionee: Robert Hunziker
245 Market Street
Venice, California
90291
Sportsprize Entertainment Inc.
By: -------------------------- -----------------------------------
Robert Hunziker
Its:--------------------------
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
5
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EXHIBIT A
---------
Notice of Election to Exercise
------------------------------
This Notice of Election to Exercise shall constitute proper notice pursuant
to Section 5(h) of the Sportsprize Entertainment Inc. 1999 Stock Option Plan
(the "Plan") and Section 8 of that certain Stock Option Agreement (the
"Agreement") dated as of the --- day of ----, 1999 between Sportsprize
Entertainment Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to purchase
- -------- shares of the common stock of the Company at a price of $-------- per
share, for aggregate consideration of $-------- , on the terms and conditions
set forth in the Agreement and the Plan. Such aggregate consideration, in the
form specified in Section 8 of the Agreement, accompanies this notice.
The undersigned has executed this Notice this ---- day of ---------, 19--.
------------------------------------
Signature
------------------------------------
Name (typed or printed)
EXHIBIT 10.29
ADDENDUM TO AGREEMENT
(Dated June 17, 1999)
BETWEEN
SPORTSPRIZE ENTERTAINMENT INC.,
AND
MICHAEL WIEDDER
WHEREAS:
A. The parties entered into an Agreement and Contract for Services effective
June 17, 1999.
B. The parties wish to amend the terms of the Agreement as set out below.
In exchange of mutual consideration of promises, the value of which is agreed
upon by the Parties, the following amendments to the original terms are binding.
OPTIONS
1. Price of Renewal Options; the strike price of the Renewal Options shall be
amended from $4.00 per share to $2.00 per share.
2. Amount of options for first six months; the amount of stock options that
Wiedder shall receive for the first six months of services shall be amended
as follows:
a. From 50,000 to 100,000 with a strike price of $0.50, however if the
offer to extend the contract is made to Wiedder at the end of the
first six months and Wiedder does not accept, then these additional
50,000 options shall be canceled.
b. If SportsPrize does not make the offer to extend to Wiedder then the
additional 50,000 options shall vest immediately at the end of the
six-month term.
3. Renewal options shall be reduced from 350,000 to 300,000 with vesting terms
to remain the same as set out in the Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Addendum as of the 30th
day of August, 1999.
/s/ illegible
- ------------------------------
SPORTSPRIZE ENTERTAINMENT INC.
/s/ Michael Wiedder
- ------------------------------
MICHAEL WIEDDER
EXHIBIT 10.30
ShopSports.com - SportsPrize Online Store Development and Implementation Project
September17, 1999
- --------------------------------------------------------------------------------
Overview 2
- --------------------------------------------------------------------------------
About ShopSports.com 3
- --------------------------------------------------------------------------------
Project Scope 4
- --------------------------------------------------------------------------------
Project Details 6
- --------------------------------------------------------------------------------
DEVELOPMENT AND IMPLEMENTATION OF THE SP/SSC ONLINE STORE 6
OPERATIONAL ELEMENTS 6
PRODUCT WAREHOUSING AND FULFILLMENT 6
SITE HOSTING 6
CUSTOMER SERVICE 7
ORDER PROCESSING 7
FINANCIAL REPORTING AND AUDIT SUPPORT 7
Project Schedule 9
- --------------------------------------------------------------------------------
Project Fee - Overview 10
- --------------------------------------------------------------------------------
Project Fee - Details 11
- --------------------------------------------------------------------------------
Project Conditions 12
- --------------------------------------------------------------------------------
Proposal Agreement 16
- --------------------------------------------------------------------------------
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ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
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OVERVIEW
SportsPrize Entertainment Inc. ("SP") is in the process of developing an
exclusive sports-based entertainment, information and e-commerce portal. SP has
asked ShopSports.com ("SSC") to propose a solution to develop and manage the
e-commerce component of SP's network. The project has been defined to develop an
environment designed to provide 3 categories of shopping experience:
1. Regular Superstore - Designed to be accessible from the www.sportsprize.com
site and to provide access for members and non-members to shop from a wide
selection of name brand sports equipment and apparel.
2. Winners Store - An exclusive shopping environment allowing different levels
of SP's Registered and Non-Registered Members individual pricing structures
and merchandising based on their success through the SP Web site.
3. Clearance Store - A clearing center for SP Registered Members to take
advantage of specially priced merchandise (e.g. out-of-season, clearance
and closeout items).
The project is designed to coincide with SP's comprehensive internal testing of
www.sportsprize.com commencing on September 28, 1999, the password protected
beta test of the SP Web site commencing on October 6, 1999, and the public beta
launch of the SP Web site on October 21, 1999. SSC's estimated completion of
this project will be 2-4 weeks from the date of execution of this Agreement
between SP and SSC. This proposal excludes the implementation of a "Clearance
Store" since currently SSC is in development of this functionality, which is
currently expected to be available in early 2000.
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ABOUT SHOPSPORTS.COM
ShopSports.com, based in San Luis Obispo, CA, has been a pioneer in integrated
e-commerce solutions for over 3 years. The ShopSports.com team represents a
breadth of experience in retail, systems development and online integration. The
members of ShopSports.com have developed integrated solutions for companies such
as Nike, Intel, AT&T, CareerMosaic, AltaVista and many more. The executive team
who will be dedicated to this project are seasoned and experienced professionals
and include:
Helio Fialho - CEO/President - Mr. Fialho's distinguished career has spanned
over twenty-five years in the retail industry. He has held various positions in
store, district, regional and senior management with both mass merchants and
specialty retailers such as Lucky Stores, Gemco Department Stores, Target and
The Customer Company. For the past eleven years, Mr. Fialho has been with
Copeland's Sports and pioneered Online Sports Retailing through AOL in 1996.
Since then Mr. Fialho has been a successful innovator in online e-commerce
solutions.
Patrick Dahl - Director of Operations - Mr. Dahl has been participating in
interactive projects since 1991 working with companies such as Microsoft, Intel,
AT&T, AltaVista, CareerMosaic and a host of others. Mr. Dahl brings 9 years of
professional interactive experience and a track record of developing operations,
sales and marketing programs.
Steve McArthur - Director of Distribution Services - Mr. McArthur is a veteran
executive with over 20 years of experience in transportation, distribution and
logistics management. Prior to joining Copeland Sports and ShopSports.com in
1992, Mr. McArthur held various management positions with United Parcel Services
and Viking Freight Systems.
Dave Miller - Director of Information Systems - Mr. Miller brings over 9 years
of programming experience within the retail industry including 5 years of
experience with Hind, Inc. where he was responsible for the administration and
warehouse management systems. Mr. Miller holds a degree in Computer Programming
and is responsible for the build out and maintenance of ShopSports.com's
electronic infrastructure.
Scott McClintock - Web Designer - Mr. McClintock has extensive experience in all
facets of Web design, production and site management. Scott has developed
integrated solutions and Web elements for StarMedia, MSNBC, Amazon and more.
The combined expertise of the outlined team, and the talented Production,
Merchandising and Customer Service resources of ShopSports.com, ensure the
successful and high quality project execution.
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ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
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PROJECT SCOPE
SSC will develop a co-branded shopping environment (both a "Winners Store" and
"Regular Superstore") accessible through the SP Web site. The SportsPrize Online
Store (SP/SSC Online Store) will provide the two shopping environments as
defined below:
o Winners Store - The co-branded "Winners Store" will provide SP
Registered and Non Registered Members selected access to a
predetermined collection of products (to be agreed upon by both SP and
SSC) at variable discounts based on success in the SP game
environment. The Winners Store will reward weekly winners with one
shopping experience at a percentage discount above 10%. Each winner
faces the following limitations, if the discount is above 10%:
o One shopping experience will be allowed per week to be defined as one
transaction or checkout through the SP/SSC Online Store shopping cart;
o A single quantity selection will be allowed for each SKU for each
shopping experience and;
o The complete weekly shopping experience for each qualified user will
NOT exceed $5000 (this level can change based on agreement by both SSC
and SP).
Regular Superstore - The co-branded "Regular Superstore" will offer SP Web
site users access to a select collection of products and features in the 8
Superstores and 5 Specialty shops found on www.shopsports.com. SP members
that have an Active Game on the SP Web site will be eligible for a global
discount of 5%.
SP will leverage SSC's Integrated e-Commerce Solution (IeCS), merchandise
already selected for www.ShopSports.com, and comprehensive services to support:
Development and Implementation of the SP/SSC Online Store
Operational Elements including:
Product Warehousing and Fulfillment
Site Hosting
Customer Service
Order Processing
Financial Reporting and Audit Support
The co-branded environment will communicate clearly to the customer that this is
the SportsPrize Online Store powered by SSC (to be phrased as "in partnership
with ShopSports.com"). The SP logo will be the dominant brand on pages in the
SP/SSC Online Store placed in the upper left hand corner with the SSC logo
represented at 25% of the dimensional size of the SP logo. Additionally, the SP
Registered and Non-Registered Members will be informed that the service is
fulfilled and supported by SSC through clear logo branding and written
statements throughout the SP/SSC Online Store including shopping cart pages and
all email and paper correspondence. SP Registered and Non-Registered Members
will be provided with access to the products found on www.shopsports.com.
Pricing structures and creative elements (within the left navigational and
masthead framesets) will be adjusted from time to time to conform to
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September 17, 1999
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the goals of the project as agreed upon by both SSC and SP and related
development costs will be presented to SP as requested.
This document was developed under, and is subject to, the conditions defined
under the Project Conditions section of this proposal.
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ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
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PROJECT DETAILS
The proposed project will address in this section each of the elements outlined
in the Project Scope pertaining to the SP/SSC Online Store launch.
DEVELOPMENT AND IMPLEMENTATION OF THE SP/SSC ONLINE STORE
SSC will develop a co-branded version of the current SSC Online Store
environment incorporating online shopping functionality and secure checkout
capabilities comparable to those currently found on www.ShopSports.com. SSC does
not intend to provide value added services including but not limited to Sports
Lounge, Brand Showcases, Partner Showcases, ClickRewards, e-Centives, coupon
technology, SSC contests and promotions and/or Free Shipping. SP will provide
approved creative elements that will be used to populate the left navigation
frame and the upper masthead frame of the co-branded Online Store. SSC will make
reasonable efforts to adapt creative elements for the application under the rate
structure defined under Project Fees included herewith.
OPERATIONAL ELEMENTS
The Operational Elements to be provided for the SP/SSC Online Store are defined
as Product Warehousing and Fulfillment, Site Hosting, Customer Service, Order
Processing and Financial Reporting and Audit Support.
Product Warehousing and Fulfillment
SSC will provide warehousing and fulfillment of SSC merchandise from its
facility in San Luis Obispo, CA. as they pertain to the operations of the
SP/SSC Online Store. These services include warehouse storage, receiving
and shipping, order handling and inventory management and shall be limited
to merchandise already selected for and available at www.ShopSports.com.
Packing information delivered to the customer will be conveyed on
ShopSports.com packing slips and have clear information about the SP/SSC
partnership. Services to provide specific SP selected merchandise can be
accommodated and will be bid on separately from this proposal.
Site Hosting
The SP/SSC Online Store will be hosted on and through the SSC server farm
based in San Luis Obispo, CA. Hosting services will include:
o Server Hosting and Bandwidth- Utilization of server facilities,
internet connectivity, disk storage space, electricity, backup
services and associated software as they relate to this project.
o Online Traffic and Transaction Monitoring - SSC will assess on a
monthly basis traffic levels directed to the SP/SSC Online Store from
www.sportsprize.com. Additional statistical information on traffic
will be provided as it pertains to page views, hits and sessions. SSC
will provide SP a detailed monthly report by the 15th of the month
following on sales transactions as defined under the Financial
Reporting and Audit Support section of this proposal. The final format
of this report will be established prior to project formal launch.
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SSC's current average uptime is approximately 99.7% supported by 24/7 and
on-call staff to address issues that arise during the course of business.
Although SSC does not guarantee the amount of server uptime during this
arrangement, SSC will maintain reasonable efforts to achieve an ongoing
commitment goal of at least 98% uptime. SSC does not assume any liability
for events outside the direct control of SSC, including but not limited to
service failure, Internet infrastructure downfalls, acts of third parties
and natural disasters. Should unforeseen circumstances increase server
downtime, SSC and SP will collaborate in an attempt to establish a proper
course of action to satisfy both parties' interests.
Customer Service
The SP/SSC Online Store customer service function will be provided by SSC
and operated out of the SSC facilities in San Luis Obispo, CA. These
responsibilities are expected to include:
o Handling customer phone and email inquiries.
o Recognizing and compiling customer issues and requests for future
SP/SSC Online Store development.
o Reviewing transactions and customer patterns to support: site
upgrades, fraud deterrence, process complications, etc.
The SSC Customer Service function will recognize SP as a partner and will
refer any SP technical or business related issues to an appropriate and
agreed upon resource at SP.
Order Processing
SSC will process product orders placed by customers who follow special
links from SP to the SP/SSC Online Store. SSC reserves the right to reject
orders that do not comply with requirements that SSC may establish to deter
fraud or any other inappropriate activity. SSC will be responsible for all
aspects of order processing and fulfillment. Among other things, SSC will
prepare co-branded order forms, process payments, cancellations, and
returns.
Financial Reporting and Audit Support
SSC will track sales made to customers who purchase products through the
SP/SSC Online Store and will provide monthly reports summarizing the sales
activity. Monthly reporting will include the: (i) Gross Revenue for all
products sold, (ii) Outgoing Freight and Handling charges (iii) Net Margin,
(iv) taxes if any and (v) Cost of Goods Sold. SSC will pay SP the Gross
Revenue for each month approximately 30 days following the end of each
calendar month. SSC will then immediately invoice SP for the Cost of Goods
Sold (COGS), Outgoing Freight and Handling charges charged to customer and
Overhead, and SP will pay this invoice 30 days from invoice date. SP will
be responsible for all legal, business and tax reporting including but not
limited to governmental reporting and all tax liabilities related to the
sales generated by the SP/SSC Online Store. SSC will provide reasonable
audit support related to the sales activity for the SP/SSC Online Store.
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By way of example, the amount paid by SP to SSC and by SSC to SP will be
made up as follows:
Selling price of goods $ 93.00
Out going freight and handling $ 5.00
Sales Taxes $ 2.00
Total Invoice (paid to SSC) $100.00
Amount paid by SSC to SP $100.00
COGS
Supplier cost less discount $ 60.00
Incoming Freight $ 1.00
Total Cost of Goods Sold (COGS) $ 61.00
Outgoing Freight and Handling charges $ 5.00
Overhead (50% Net Margin or ((100-5-2-61)/2) $ 16.00
Amount paid by SP to SSC $ 82.00
If a customer navigates to www.ShopSports.com independent of SP, SP will be
given credit for any related sales unless a customer in anyway overwrites
or removes the identifying Cookie in which case they are excluded from this
limitation.
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ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
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PROJECT SCHEDULE
The following is an estimate of the timing for the SP/SSC Online Store
Development and Implementation Project. This timing is based on approval of
contract terms and project commencement by September 20, 1999.
Project Delivery Estimated Delivery Dates
---------------- ------------------------
Project Commencement September 20, 1999
Winners Store Launch October 4, 1999
Regular Superstore Launch October 18, 1999
This timeline may vary based on scheduling conflicts, SP's ability to provide
necessary elements and information, and SP's participation. All commercially
best efforts will be made on the part of SSC to achieve the outlined timing.
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ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
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PROJECT FEE - OVERVIEW
ShopSports.com proposes the following budget for the development and operation
of the co-branded SP/SSC Online Store Development and Implementation Project to
be delivered within 2-4 weeks of both parties signing this Agreement.
Site Development and Implementation ................................. $29,800
The fee is payable in two payments during the 2-4 week project. The first
payment of $15,000 or approximately 50% of the set-up fees associated with the
SP/SSC co-branded site shall be due at the time of signing this proposal and the
remainder shall be due upon launch of the Regular Superstore.
Ongoing Fees
In addition to the Site Development and Implementation fee, SSC will invoice SP
on monthly basis pursuant to the terms set forth above under the Financial
Reporting and Audit Support section of this Agreement. SP will be responsible
for all legal, business and tax reporting including but not limited to
governmental reporting and all tax liabilities related to the sales generated by
the SP/SSC Online Store.
Payment terms are net 30 (thirty) days from the invoice date. ShopSports.com
reserves the right to modify the set-up fees for this project if significant
changes are made to the project's specifications, schedule or scope. If any such
additional services are necessary, upon SP's written approval, they will be
billed on a time and material (T&M) basis pursuant to the accompanying Project
Fee Schedule.
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ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
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<TABLE>
PROJECT FEE - DETAILS
SITE DEVELOPMENT and IMPLEMENTATION Cost
- ----------------------------------- ----
<S> <C>
Site Redesign and Development
Content and Creative Procurement and Organization $190
Design development and modification (assuming raw PhotoShop files from $570
Existing Host)
HTML/JavaScript Production $3,040
Subtotal $3,800
Site Review, QC, and Launch
Proof content and Review Design $1,200
Platform reconciliation $600
Subtotal $1,800
Programming
Standard Shopping Cart, ASP and Database Development $3,600
Custom Shopping Cart, ASP and Database Development $9,000
SSC's IeCS and EOM technology enterprise fee $8,000
Subtotal $20,600
Project Management
Information Architecture (Page Layout) $600
Site Architecture $600
Client and Project Supervision $2,400
Subtotal $3,600
Site Development Total $29,800
ShopSports.com Hourly Rates
Consulting and Project Management $150
Programming $125
Development and Design $95
Production/Administrative Services $85
</TABLE>
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ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
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PROJECT CONDITIONS
The following assumptions were made regarding the scope of SSC's involvement in
this project when determining the schedule and budget contained herein:
o Development Duration: This budget is based on development duration of
approximately 2-4 weeks.
o Agreement Duration and Review: The terms of this Agreement upon approval of
both parties will remain in effect for one (1) year from the date hereof
(Initial Term). This Agreement shall be automatically extended for
successive one year periods (each a Contract Year) unless either party
notifies the other in writing of its election to have the Agreement expire
at least sixty (60) days in advance of the end of the Initial Term or any
subsequent Contract Year. Either party may terminate this Agreement at any
time after the effective date hereof with cause, by giving the other party
90 days written notice of termination. From time to time SP and SSC each
will review this Agreement and evaluate the SP/SSC Online Store
functionality, operations and pricing structure.
o Nature of Work: SP will provide all creative elements to be used by SSC in
development of navigation, branding and other user interface elements
(graphics, navigation, interaction model) for the site. It is anticipated
that SSC will provide visual design and client-side functionality at the
interface-level of the site. For the purpose of this proposal,
"client-side" includes HTML, Javascript, ASP scripting, etc. SSC will make
commercially best efforts to facilitate integration with SP's backend user
database to sustain communication between the two companies systems as it
pertains to users recognition, permissions and pricing. SSC understands
that despite its best efforts, if the integration of the SP/SSC Online site
is unsuccessful (defined under Scope of Project) SP will have the
unilateral right to cancel the Agreement. SSC does not include systems
integration for any other SP existing systems or non-traditional Web
technologies (i.e. VRML, Shockwave, Flash), although we can provide these
services at an additional cost.
o SP Ownership: SP will have ownership of all SP specific images, copy and
HTML programming used to produce the site excluding product data, SSC
contributed content and related files. All customer information will be the
property of both SP and SSC. SSC acknowledges that the customers and sales
that are generated through the SP/SSC store will be due to traffic in the
SP Web site except as provided below. Accordingly, in the event the
Agreement is terminated, SSC agrees not to contact SP's customers for at
least one year after the Termination Date of the Agreement. SSC also agrees
not to contact, in electronic format, any customers directly attributed to
the SP/SSC Online Store during the term of the agreement. Not withstanding
anything else in this Agreement customers who navigate to
www.ShopSports.com independent of SP, regardless of previous connection to
SSC through SP, or in anyway overwrite or remove the identifying Cookie are
excluded from this limitation.
o SSC Ownership: The back-end shopping cart technology, inventory management
systems and distribution facilities will remain the property of SSC. The
Internet server, all equipment and lines used to host the site, and any
specific scripts used for extended functionality beyond standard HTML code
will remain the property of SSC. SSC shall make available the SSC shopping
cart technology for the duration of this contract.
o Budget: This budget was created under the assumption that SP, or its
designate(s) will provide all content (i.e. copy, text-based information
such as articles and original site creative). SSC can provide these
services for an additional fee and can provide an estimate based on the
rates defined under the Project Fee section of this Agreement.
o Responsibility for SP - SP will be solely responsible for the development,
operation, and maintenance of www.sportsprize.com and for all materials
that appear on www.sportsprize.com. For example, SP will be solely
responsible for: (a) the technical operation of the SP site, (a) all
related equipment used for creating and hosting of www.sportsprize.com, (c)
the accuracy and appropriateness of materials posted on the SP site
(including, among other things, all product-related materials), (d)
ensuring that materials posted on the SP site do not violate or infringe
upon the rights of any third party (including, for example, copyrights,
trademarks, privacy, or other personal or proprietary rights) and (e)
ensuring that materials posted on the SP site are not libelous or otherwise
illegal.
o Responsibility for SSC - SSC will be solely responsible for the
development, operation, and maintenance of www.shopsports.com and for all
materials that appear on the SP/SSC Online Store.
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For example, SSC will be solely responsible for: the technical operation of
www.shopsports.com and all related equipment creating and posting product
descriptions on the www.shopsports.com and linking those descriptions to
its catalog. For example, SSC will be solely responsible for: (a) The
accuracy and appropriateness of materials posted on the www.shopsports.com
(including, among other things, all product-related materials), (b)
ensuring that materials posted on the SSC site do not violate or infringe
upon the rights of any third party (including, for example, copyrights,
trademarks, privacy, or other personal or proprietary rights) (c) ensuring
that materials posted on the SSC site are not libelous or otherwise
illegal.
o Audit Rights: During the term of this Agreement and for a period of one (1)
year thereafter, SP shall have the right, not more than once per year, upon
thirty (30) days written notice, and only between April 1 - September 30 of
each year, and at its expense, to examine, audit and take extracts from
SSC's books and records related to the payments to vendors/suppliers as
they relate to Cost of Goods Sold (COGS). In the event any such examination
or audit reveals an over billing of amounts due, SSC shall promptly pay the
amounts owed.
o Limitation of Liability: SSC and SP will not be liable for indirect,
special, or consequential damages (or any loss of revenue, profits, or
data) arising in connection with this Agreement, even if SSC or SP have
been advised of the possibility of such damages. SSC and SP make no express
or implied warranties or representations regarding products, services
and/or information on the SP/SSC Online Store (including, without
limitation, implied warranties of merchantability, fitness for a particular
purpose, non-infringement, or any implied warranties arising out of a
course of performance, dealing, or trade usage). In addition, SSC and SP
make no representations that the operation of the SP/SSC Online Store will
be uninterrupted or error-free, and will not be liable for the consequences
of any interruptions or errors. SSC and SP disclaim any and all liability
for these matters.
o Confidentiality: Duty to Protect. Except as otherwise required by law or
the regulations of any securities exchange, each party agrees not to
disclose Confidential Information (as defined herein) of the other party
hereto to any third party other than their respective directors, officers,
employees and agents, advisors (including legal, financial and accounting
advisors) and other persons directly or indirectly engaged to do work
therefor. Each party agrees to protect Confidential Information disclosed
by the other party from unauthorized disclosure with at least the same
degree of care as it normally exercises to protect its own proprietary
information of a similar nature. Each party hereto further agrees to
restrict the use of Confidential Information hereunder to use solely for
the purposes contemplated by this Agreement. Definition. "Confidential
Information" means all non-public, confidential or proprietary information
that one party hereto or its Representatives make available to the other
party or its Representatives in connection with this Agreement.
"Confidential Information" includes, without limitation, the terms of this
Agreement as well as information related to the past, present and future
plans, ideas, business strategies, marketing programs, activities,
customers and suppliers of each party. "Confidential Information" shall not
include information that: (a) was, at the time of its disclosure hereunder
to the receiving party, already in the possession of the receiving party
free of obligation to the other party to keep it confidential; (b) is or
becomes generally available to the public other than as a result of breach
of this Agreement by the receiving party or its Representatives; (c)
becomes available to the receiving party on a non-confidential basis from a
source other than the disclosing party or its Representatives, provided
that such source is not to the knowledge of the receiving party bound by a
confidentiality agreement or other legal or fiduciary obligation of secrecy
to the disclosing party; or (d) is developed independently by the receiving
party. Right to Injunctive Relief In the event of any breach of this
Section, the non breaching party will be entitled, in addition to
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any other remedies that it may have at law or in equity, to seek injunctive
relief or an order of specific performance. The provisions of this Section
and the obligations of the parties hereunder shall survive the termination
of this Agreement for a period of two (2) years.
o No Joint Venture: The parties are independent contractors with respect to
each other. Each party is not and shall not be deemed to be an employee,
agent, partner or legal representative of the other for any purpose and
shall not have any right, power or authority to create any obligation or
responsibility on behalf of the other.
o Entire Agreement: This Agreement constitutes the complete, final and
exclusive understanding and agreement between the parties with respect to
the transactions contemplated herein, and supersedes any and all prior or
contemporaneous oral or written representation, understanding, agreement or
communication between the parties concerning the subject matter hereof.
o Miscellaneous: This Agreement will be governed by the laws of the United
States and the state of California, without reference to rules governing
choice of laws. Any action relating to this Agreement must be brought in
the federal or state courts located in and for the County of San Luis
Obispo, California, and SP and SSC each irrevocably consent to the
jurisdiction of such courts. SP may not assign this Agreement, by operation
of law or otherwise, without SSC's prior written consent of the other
party. Subject to that restriction, this Agreement will be binding on,
inure to the benefit of, and enforceable against the parties and their
respective successors and assigns. SSC's failure to enforce the strict
performance of any provision of this Agreement will not constitute a waiver
of SSC's right to subsequently enforce such provision or any other
provision of this Agreement.
o Pricing: The pricing of items in the SP/SSC Online Store will be
competitive with the prices of items listed in the SSC store.
Terms and Definitions
The following Terms and Definitions are used in this Agreement and are
understood to be defined as follows:
o Active Game: shall be defined as a member who has created one or more
tickets to play the game on the SP Web site during the current or previous
week.
o COGS shall be defined as the amount paid by SSC to the supplying
manufacturer or vendor for the product(s) sold plus distribution and
handling fees for products.
o Cookies: Cookies are a general mechanism which server side connections
(such as CGI scripts) can use to both store and retrieve information on the
client side of the connection. SSC uses Cookies to track the origin of
customers to the SSC servers in San Luis Obispo, CA. Cookies can be
manually removed or rejected by the customers and can also be reset when a
customer navigates to SSC through other SSC partners and links on the WWW.
o Gross Revenue or Gross Sales: The amount paid by the customer which will
include the selling price of the goods after discount if any, plus Outgoing
Freight and Handling and taxes if any.
o Integrated e-Commerce Solution (IeCS): SSC's term to define the
comprehensive e-commerce solution with services including but not limited
to: e-commerce shopping cart technology, electronic inventory/SKU
management tools, product warehousing, fulfillment, Web site hosting,
customer service, order processing, financial reporting and audit support
pertaining to sales directly related to the Agreement.
o Net Margin: The amount paid by the customer for the goods less Outgoing
Freight and Handling Charges charged to customer if any, and less taxes if
any, minus COGS.
o Non-Registered Members: Non-Registered Members are defined as visitors to
www.sportsprize.com who do not volunteer information required to receive a
login and password to gain access to Registered Members areas.
o Operational Elements: Product warehousing and fulfillment, site hosting,
customer service and Financial Reporting and Audit Services.
o Outgoing Freight and Handling Charges: The amount charged to the customer
at the point of purchase for services related to the delivery of purchased
goods (this amount is derived by adding calculated carrier charges plus
SSC's packaging and handling charges and is calculated at the time of
purchase based on current market conditions).
Page 14
<PAGE>
ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
- --------------------------------------------------------------------------------
o Overhead will be fees for other selling and overhead expenses and will be
computed and billed based on 50% of the Net Margin (as defined below) of
all products sold and fulfilled through the SP/SSC Online Store. Any
returned or exchanged merchandise will be credited to the monthly sales
report in the month following the month that the return or exchange is
consummated.
o Registered Members: Registered Members are defined as visitors to
www.sportsprize.com and volunteer information required for them to receive
a login and password for access to play in the SP game environment.
Page 15
<PAGE>
ShopSports.com - SportsPrize Online Store Development and Implementation Project
September 17, 1999
- --------------------------------------------------------------------------------
PROPOSAL AGREEMENT
SportsPrize Entertainment Inc. and ShopSports.com each hereby agree to the terms
set forth in this agreement and understand the fees and commitments associated
therewith. Project will commence within 1 business day of signing this
Agreement.
Submitted by: /s/ [Illegible] Date: 9-22-99
- --------------------------------
Helio Fialho, CEO
ShopSports.com
Accepted by: /s/ B.R. Cameron Date: 9/18/99
-----------------------
Name: Bruce R. Cameron
Title: President and CFO
SportsPrize Entertainment Inc.
Page 16
EXHIBIT 10.31
eOfficeSuites, Inc.
OFFICE LEASE
BASIC PROVISIONS
A. Parties. This Lease ("Lease"), dated for reference purposes only, September
27, 1999 is made by and between eOfficeSuites, Inc., a California
corporation (hereinafter "Landlord") and SportsPrize Entertainment, Inc., a
Nevada Corporation (hereinafter "Tenant"), (collectively the "Parties," or
individually a "Party").
B. Premises: That certain Suite commonly known by space number 131
(hereinafter "Premises") as shown on Exhibit "B" attached hereto and
located within an office building, and street address of 13101 Washington
Boulevard, in the City of Culver City, County of Los Angeles, State of
California ("Building").
C. Term. Two (2) months and Zero (0) days ("Original Term") commencing October
1, 1999 Commencement Date") and ending November 30, 1999 ("Ending Date").
RECURRING MONTHLY RENT
D. Base Rent. Monthly base rent payable on the first
day of each month of $4,000
Commencing October 1, 1999. A late fee will be charged of ten percent (10%)
of any amount due if more than five (5) days late.
E. Additional Rent.
(i) Telephone lines and voice mails 3 @ $125.00 = $375
(ii) Additional Telephone Line(s): @ $ 25.00 =
(iii) Additional Telephone Instrument(s): 4 @ $ 25.00 = $100
(iv) High Speed Internet Service: 6 @ $ 69.00 = $414
(v) E-Mail Boxe(s): @ $ 10.00 =
(vi) Additional Voice Mail: @ $ 10.00 =
(vii) Parking Space(s): 3 Tandem 6 @ $ 65.00 = $390
(viii) Storage Space(s): @ $ 50.00 =
(ix) Other: @ =
TOTAL RECURRING ADDITIONAL RENT $1,279
-----
TOTAL MONTHLY RENT (plus Monthly Variable Rent) see Paragraph 5B: $5,279
F. Monthly Variable Rent. Tenant's monthly credit limit for telephone usage,
overnight mail service, photocopying, and other related services shall not
exceed N/A in any single month, Paragraph 5B.
NON-RECURRING EXPENSE
G. Move In Fee. Tenant shall pay to Landlord a move in fee
in the amount of: $450
H. Internet. High speed internet service (T1 internet installation) of: $125
I. Telephone Installation. Amount for initial telephone installation of: $125
J. Pro Rata First Month Rent: N/A
K. (Payable ) N/A
L. Security Deposit. Security Deposit of $5,279
TOTAL NON-RECURRING EXPENSES $5,979
TOTAL AMOUNT DUE AT LEASE SIGNING $16,537
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L. Permitted Use: General Business Office Use: and limited to no more than 8
persons working from said Premises.
M. Parking Spaces. Tenant is granted 3 tandem reserved parking space(s).
N. Guarantor. The obligations of the Tenant under this Lease are to be
guaranteed by None("Guarantor"), Exhibit "B".
O. Addenda. N/A.
P. Furnishing. Landlord will provide office furniture to Tenant for use in the
Premises as more particularly described in Exhibit "C" attached hereto.
Q. SERVICES INCLUDED WITH BASE MONTHLY RENT
Voice mail; (ii) 15 hours free use of furnished conference room or office
for meetings per month (not cumulative). Additional hours of use will be
billed at the rate established in the Price Schedule; (iii) Company name
identification on suite door and on Building directory; (iv) Daily mail
sorting; (v) Telephone system, professional staff to answer phone; (vi)
Janitorial services and utilities (excluding telephone).
R. SERVICES NOT INCLUDED IN THE BASE MONTHLY RENT
(i) Word processing, facsimile, postage, photocopying and other support
services; (ii) High speed Internet access; (iii) E-Mail; (iv) Web Hosting
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GENERAL PROVISIONS
1. PARTIES. This Lease is made by and between eOfficeSuites, Inc. (hereinafter
called "Landlord") and Tenant as shown on the Basic Provisions, Page 1,
Section A.
2. PREMISES. Landlord agrees to lease to Tenant and Tenant agrees to lease
from Landlord the following portions of the Building located at 13101
Washington Boulevard, Los Angeles, California 90066 ("Building").
(a) An exclusive right to occupy Suite No(s) as identified on Basic
Provisions, Page 1, Section "B"; ("Premises") with all its
improvements and furnishings; and,
(b) A non-exclusive right in common with other Tenants of the Building to
use the Reception Room, Conference Room(s) and such other common areas
provided for Tenant use in the Building by Landlord. Tenant further
agrees to abide by the rules and regulations governing the use of said
common area facilities as set forth by Landlord from time to time.
3. TERM. The Term of this Lease shall be for the period as specified in the
Basic Provisions, Page 1, Section C.
4. POSSESSION. If Landlord, for any reason whatsoever, cannot deliver
possession of the said Premises to the Tenant at the commencement of the
Term hereof, this Lease shall not be void or voidable, nor shall Landlord
be liable to Tenant for any loss or damage resulting therefrom, nor shall
the expiration date of the above Term be in any way be extended, but in
that event, all rent shall be abated during the period between the
commencement of said Term, and the time when Landlord delivers possession.
Any occupancy prior to the commencement date hereof, shall be subject to
all of the provisions of this Lease. If Landlord cannot deliver possession
on the commencement date of this Lease, either Landlord or Tenant may
cancel this Agreement.
5. (A) RENT Tenant agrees to pay to Landlord as rent for the Premises being
the monthly sum as stated in the Base Provisions, Page 1 Section "D",
Additional Rent, (Section "E") and monthly Variable Rent, Section "F"
(and Paragraph 5B below) on or before the FIRST of each month, except
that the first month's rent shall be paid upon the execution hereof.
Rent for any period during the term hereof which is for less than one
(1) month shall be a prorated portion of the monthly rent herein,
based upon a thirty (30) day month. Tenant agrees to pay rent for the
entire term of the Lease. Said rent shall be paid to Landlord without
deduction or offset. Said payments shall be made payable to:
eOfficeSuites, Inc., 13101 Washington Boulevard, Suite 100, Los
Angeles, CA 90066 or to such other person or at such other place as
Landlord may, from time to time, designate in writing.
(B) Rent shall include, Base Rent, Additional Rent and Monthly Variable
Rent which includes but is not limited to, telephone charges,
photocopying, facsimile, overnight mail service, etc. provided by
Landlord to Tenant or any charges arising out of Tenant's use of the
Premises as provided for herein shall all be deemed Rent. Failure to
pay Rent, when due shall constitute an event of material default under
this Lease.
7. SECURITY DEPOSIT. Upon execution of this Lease by Tenant, Tenant will pay
Security Deposit in the amount of as shown on the Basic Provisions, Page 1,
Section "L" with payment made payable to Landlord. Said Security Deposit
will not be interest-bearing to Tenant. Said Security Deposit shall not be
applied as Rent by Landlord or Tenant except however, upon termination or
upon default of this Lease, Landlord may claim and retain such amount of
said Security Deposit as is reasonably necessary to remedy any default of
the Tenant in the payment of Rent, to damages to the Premises including
Landlord's furnishings caused by Tenant (excluding normal wear and tear) or
such other sums owed by Tenant to Landlord. Tenant acknowledges inspection
of the flooring, wall covering, ceiling and door(s)
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<PAGE>
and furnishing (described in Exhibit "C") hereto, by taking possession of
the Premises, Tenant acknowledges that the Premises and all its furnishings
are in good order and condition except as otherwise stated herein. In the
event Tenant has paid all of the Rent and leaves the Premises in good
condition and other sums due under this Lease, Landlord shall return to
Tenant said Security Deposit, less any offsets from above, within thirty
(30) days after Tenant vacates the Premises.
8. USE. Tenant shall use the Premises for general office purposes only and
shall not use or permit the Premises to be used for any other purpose
without the prior written consent of Landlord. Tenant shall not have more
than the number of persons as shown on the Basic Provisions, Page 1,
Section L, occupy the Premises on its behalf and only occupy the Premises
for the stated business purpose. Tenant shall not do or permit anything to
be done in or about the Premises which will in any way obstruct or
interfere with the rights of other tenants, occupants or use of the
Building, or which shall increase the fire insurance rate or the liability
insurance rate on the Building. In addition, Tenant shall not use or permit
anything to be done in or about the Premises which violates any law,
statute, ordinance or governmental rule or regulation now in force or which
may hereafter be enacted or promulgated. Tenant shall not use or store
items on the Premises or in the Building including possessing any hazardous
or toxic substances. Tenant shall be responsible for any and all costs of
said violations, and shall hold Landlord harmless from any such claims
against Landlord caused by Tenant's acts or actions.
9. ALTERATIONS, ADDITIONS AND REPAIRS. Landlord shall provide carpets, window
coverings and furnishings. Without exception, tenant shall not make any
alterations, additions or improvements to or of the Premises or any part
thereof without the prior written consent of Landlord. Any alterations or
improvements to or of said Premises, including but not limited to wall
coverings, paneling and built-in cabinet work, and private security alarms
shall, on the expiration of the term hereof, become a part of the realty
and belong to Landlord and shall be surrendered with the Premises. Damage
caused by the removal of any trade fixtures shall be the responsibility of
Tenant. In the event Landlord consents to the making of any alterations,
additions or improvements to the Premises by Tenant, the same shall be made
by Tenant at Tenant's sole cost and expense. Upon expiration or sooner
termination of the term hereof, Tenant shall, upon written demand by
Landlord, at Tenant's sole cost and expense, forthwith and with all due
diligence, remove any alterations, additions or improvements made by Tenant
designated by Landlord to be removed, and Tenant shall, forthwith and with
all due diligence at its sole costs and expense, repair any damage to the
Premises caused by such removal prior to Tenant's vacating Premises. It is
understood and agreed that Landlord is under no obligation to make any
repairs, alterations, replacements or improvements to the Premises. Tenant
may not make any penetration into the walls, ceilings, roof, floors, except
for hanging of no more than three (3) pictures per Premises. Tenant shall
be liable for any damage caused by any penetration.
Landlord shall repair and maintain, within a reasonable period of time, the
structural portions of the Building, including the basic plumbing, air
conditioning, heating and electrical systems, installed or furnished by
Landlord, unless such maintenance and repairs are caused in part or in
whole by the act, neglect, fault or omission of any duty by Tenant, its
agents, invitees or employees, in which case Tenant shall be responsible to
pay the reasonable cost of such maintenance and repairs.
Landlord may in the future remodel or refurbish portions of the Building.
Such remodeling and/or refurbishing may include Tenant's Premises. Tenant
further agrees that Tenant will not, through any act or omission on the
part of Tenant, in any way hinder, impede, or frustrate the efforts of the
Landlord in completing such remodeling or refurbishing in a timely fashion.
10. LIENS. Tenant shall keep the Premises and the Building free from any liens
arising out of any work performed or from any obligations incurred by
Tenant, or permit the use of the leased Premises by any person or persons
other than Tenant.
11. ASSIGNMENT AND SUBLETTING. Tenant shall not assign or sublet or permit the
use of the Premises by any person or persons other than Tenant without the
prior written approval of Landlord.
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<PAGE>
Any subletting or assignment of this Lease or the Premises which is not in
compliance with the provisions of this paragraph shall be void and shall,
at the option of Landlord, terminate this Lease. The consent by Landlord to
a subletting or an assignment shall not be construed as releasing Tenant
from any liability or obligation hereunder. In no event shall Tenant sublet
all or any part of the Premises for a rent greater than Tenant is paying to
Landlord. This includes no assignment or sublease by Tenant to any
corporation or entity in which more than twenty-five percent (25%) for
Tenant's Premises.
12. TELEPHONE SYSTEM. The exclusive telephone system for the Premises will be
provided by Landlord for which Tenant will be obligated to pay on at least
a monthly basis all charges and costs in connection therewith as part of
the monthly variable Rent as provided for in Page 1, Section "E" and
Paragraph 5B of this lease together with Tenant's payment of Monthly Base
Rent and Additional Rent. Tenant is not to use or have installed any other
telephone service onto the Premises other than provided by Landlord. Tenant
has been provided with a credit limit, see Basic Provisions, Page 1,
Section F of this Lease. If Tenant should exceed said credit during or at
the end of any monthly period, Tenant agrees that Landlord without notice
shall have the right to immediately disconnect Tenant's telephone services
and cease all other services under Basic Provision Section, E and paragraph
5 of this Lease including not answering Tenant's telephone by the
receptionist and all other additional rent services until paid in full.
13. INDEMNIFICATION. Tenant shall at all times mentioned herein (including
paragraph 20. Default) indemnify and hold Landlord harmless from any and
all costs, claims or liability of any kind including direct, indirect,
incidental, special or consequential damages arising out of: (a) Tenant's
use and occupancy of the Premises, (b) the conduct of Tenant's business or
any work, activity or other things allowed or permitted by Tenant to be
done in or on the Premises; (c) any breach or default in the performance of
any of Tenant's obligations under this Lease; (d) any misrepresentation or
breach of warranty by Tenant under this Lease; and/or (e) any other acts or
omissions of Tenant, its agents, employees or contractors; (f) loss of use
or change of any service provided by Landlord including telephone, internet
and others unauthorized access to or alteration of data, material sent or
received. As a material part of the consideration for Landlord's execution
of this Lease, Tenant hereby assumes all risk of damage to property or
injury to persons in, or about the Premises from any cause, and Tenant
hereby waives all claims in respect thereof against Landlord, except for
any claim arising out of Landlord's gross negligence or willful misconduct.
Tenant expressly agrees to waive, and agrees not to make any claim for
damages, direct or consequential, arising out of any failure to furnish any
service, error or omission with respect thereto, or any delay or
interruption of the same.
14. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in
force during the term of this Lease, a policy of comprehensive public
liability insurance with extended coverage insuring Landlord and Tenant
against fire, theft, or other insurable loss, any liability arising out of
the ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Tenant shall deliver to Landlord, prior to occupancy
of the Premises, copies of polices of liability insurance required herein
or certificates evidencing the existence and amounts of such insurance with
loss payable clauses satisfactory to Landlord and with Landlord being a
named insured. No policy shall be cancelable or subject to reduction or
coverage except after ten (10) days prior written notice to Landlord.
Tenant is urged to obtain business interruption insurance to cover any loss
caused by interruption of any Landlord services.
15. SERVICES AND UTILITIES. Throughout the term of this Lease, and all renewal
terms, Landlord, at its sole expense, shall furnish or cause to be
furnished to Tenant the following services and utilities:
(a) Electricity: Electric current in such quantities as Tenant may
reasonably require for ordinary lighting and light business machine
purposes;
(b) Air Systems: Heating, ventilation and air conditioning during regular
business hours as specified in the Rules and Regulations;
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<PAGE>
(c) Exterior Maintenance: Maintenance of exterior surfaces and grounds
surrounding the Building, including both garage levels;
(d) Telephone; telephone system;
(e) Janitorial Services: Janitorial services as provided by Landlord shall
include, but shall not be limited to, the following: emptying of refuse
baskets, vacuuming of carpets, damp mopping of floors, cleaning of
bathrooms, supplying normal bathroom supplies and interior and exterior
window cleaning.
To the extent that Landlord provides Tenant with individual thermostats to
control the temperature in the Premises, Tenant shall be solely responsible
for any damage or problems caused by Tenant's improper use of said
thermostats. Further, Tenant shall not use any apparatus or device in the
Premises which will in any way increase the amount of electricity usually
furnished or supplies for the use of the Premises as general office space;
nor connect with electrical current except through existing electrical
outlets in the Premises, any apparatus or device for the purpose of using
electric current. In the event Tenant has an excess demand for electricity,
as determined by Landlord, Tenant agrees to pay Landlord as reasonable
power surcharge as estimated by a utility company or electrical engineer.
16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the
rules and regulations that Landlord shall, from time to time, promulgate.
Landlord reserves the right, from time to time, to make all reasonable
modifications to said rules. The additions and modifications to those rules
shall be binding upon Tenant upon delivery of a copy of them to Tenant.
Landlord shall not be responsible to Tenant for the nonperformance of any
of said rules by any other tenants or occupants. Attached to and made a
part of this Lease is a list of rules and regulations which shall be signed
by Tenant and Landlord, and which shall be incorporated into the Lease.
17. HOLDING OVER. If Tenant remains in possession of the Premises or any part
thereof after the agreed upon Ending Date, such occupancy shall be a
tenancy from month-month at the normal monthly rental specified in "D" on
page 1, plus all other charges payable hereunder, and upon all the terms
hereof applicable to a month-to-month tenancy. Either Party may terminate a
month-to-month tenancy upon thirty (30) days written notice.
18. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times have
the right to enter the Premises, inspect the same, supply janitorial
service and any other service to be provided by Landlord to Tenant
hereunder, to submit said Premises to prospective purchasers or tenants, to
post notices of non-responsibility, and to alter, improve or repair the
Premises and any portion of the Building of which the Premises are a part
that Landlord may deem necessary without abatement of rent. Landlord shall
have at all times a key with which to unlock all of the doors to the
Premises, excluding files and safes, and Landlord shall have the right to
use any and all means which Landlord may deem proper to open said doors in
an emergency, without liability to Tenant except for any failure to
exercise due care for Tenant's property.
19. DAMAGE AND RECONSTRUCTION. In the event of damage greater than fifty
percent (50%) of the Premises, either Party shall have the right to
terminate this Lease.
20. DEFAULT. The occurrence of any of the following events shall constitute a
material default and breach of the Lease by Tenant, permitting Landlord to
immediately terminate this Lease and/or recover possession and damages from
Tenant:
(a) The failure by Tenant to make any payment of rent or any other payment
required to be made by Tenant hereunder including Additional Rent, as
and when due, where such failure continues for a period of five (5)
days after written notice hereof from Landlord to Tenant.
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(1) If Tenant has not paid the Rent in full, by the fifth (5th) day of
the month, said amount is deemed delinquent and Tenant shall pay a
late charge equal to ten percent (10%) of such installment. If the
rent is not paid in full by the tenth (10th) of the month, Landlord
may disconnect Tenant's telephone services, without further notice,
and discontinue all other variable services until the Rent and all
charges are paid in full, in which event the rent still accrues and
Tenant waives any and all claims for damages against Landlord by
reason of the termination of said service. Landlord shall not be
liable for any loss of business or damages of any sort occurring
through, or in connection with, or incidental to the furnishing of any
variable services, or failure to furnish, telephone or reception
service, or for authorizing or permitting the telephone vendor to
disconnect Tenant's telephone service if Tenant has not paid its rent
and variable expenses in full.
(2) If two or more checks are dishonored by Tenant's bank in a
twelve-month period, Landlord may require, during the balance of
Tenant's tenancy, payment by cashier's check or money order. Tenant's
failure to comply therewith will constitute a material breach and
permit Landlord to terminate this Lease. Tenant hereby agrees to pay
the sum of Twenty Dollars ($20.00) for each dishonored check.
(b) The failure by Tenant to observe or perform any of the provisions of
this Lease to be observed or performed by Tenant, other than described
in paragraphs (a) and (b) above, where such failure shall continue for
a period of ten (10) days after written notice thereof from Landlord
to Tenant. In the event any such default, in addition to the remedies
specified above, Landlord may exercise any rights or remedies
available to Landlord under the laws or judicial decision of the State
of California.
21. SUCCESSORS AND ASSIGNS. The covenants and conditions herein contained,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of the Parties hereto.
22. NOTICES. Any notice to Landlord shall be sent, in writing, to:
eOfficeSuites, Inc. 13101 Washington Boulevard, #100, Los Angeles, CA
90066, and any notice to Tenant shall be sent or hand delivered, in
writing, to Tenant's Premises in the Building. Either Party may provide for
a different address by notifying the other Party, in writing, of said
change as provided for herein.
23. ENTIRE AGREEMENT, MERGER AND WAIVER. This Lease Agreement and its Exhibits
expresses and contains the entire agreement of the Parties hereto and there
are no warranties, representations, or agreements between them, except as
herein contained. This Lease supersedes any prior agreement, and may not be
modified, amended or supplemented except in writing signed by both Landlord
and Tenant. No consent given or waiver made by Landlord of any breach by
Tenant of any provision of this Lease shall operate or be construed in any
manner as waiver of any subsequent breach of the same or of any other
provision.
24. HIRING LANDLORD'S EMPLOYEES. Tenant agrees in the event that Tenant hires
Landlord's employees during the term of the Lease, extension or renewal of
this Lease, or within sixty (60) days after Tenant moves out of the
Building, Tenant shall be liable to Landlord for damages payable upon
demand, in the sum of twenty-five percent (25%) of the annual compensation
of each employee involved. It being mutually agreed by Tenant and Landlord
that this provision for liquidated damages is reasonable and that the
actual damage which would be sustained by Landlord as the result of failure
to keep the agreement would be, from the nature of this case, impractical
or extremely difficult to fix. This compensation for liquidated damages is
in addition to Landlord's right to immediately terminate this Lease for
breach thereof and to obtain a restraining order against tenant.
25. EXEMPTION OF LANDLORD FROM LIABILITY; WAIVER. Landlord shall not be liable
for any damage or injury either directly, indirectly, incidental, special
or consequential damages to the
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person, business (or any loss of income therefrom), goods, wares,
merchandise or other property of Tenant, Tenant's employees, invitees,
customers or any other person in or about the Premises, whether such damage
or injury is caused by or results from: (a) fire, steam electricity, water,
gas or rain; (b) the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, pluming, air conditioning or lighting
fixture or any other case; electricity, telephone or Internet access or
disruption to Tenant's business; (c) conditions arising in or about the
Premises or upon other portions of any Building of which the Premises is a
part, or from other sources or places; or (d) any act or omission of any
other Tenant of which the Premises is a part. Landlord shall not be liable
for any such damage or injury even though the cause of or the means or
repairing such damage or injury are not accessible to Tenant. Tenant, as a
material part of the consideration to be rendered to Landlord, hereby
waives all claims against Landlord for the foregoing damages from any cause
arising at any time. The provisions of this Section shall not, however,
exempt Landlord from liability for Landlord's gross negligence or willful
misconduct. It is recommended that Tenant maintain a back up modem in the
event there is any interruption in Landlord's high speed internet access.
Tenant acknowledges that there is no alarm system servicing the Premises or
Building. Any security devices including camera, window, contacts are for
different purposes and not to be relied upon by Tenant. Tenant shall not
hold Landlord responsible or liable for absence of security. Landlord shall
not be liable for any damages, theft of any vehicle on or near the
Premises.
26. SUITE KEYS. Tenant shall receive six (6) suite keys for the suite leased.
In the event Tenant loses this key, or any other keys issued by Landlord to
Tenant, Tenant shall be charged and pay the sum of Twenty Five Dollars
($25.00) for each key.
27. BROKERS. Tenant warrants that it has had no dealings with any real estate
broker or agents in connection with the negotiation of this Lease, and it
knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.
28. SEVERABILITY. A determination by a court of competent jurisdiction that any
provision of this Lease or any part thereof is illegal or unenforceable
shall not cancel or invalidate the remainder of such provision or this
Lease, which shall remain in full force and effect.
29. JOINT AND SEVERAL LIABILITY. All Parties signing this Lease as Tenant shall
be jointly and severally liable for all obligations of Tenant.
30. NO OPTION. The submission of this Lease for examination does not constitute
a reservation of or option to lease the Premises and this Lease becomes
effective only upon execution and delivery thereof by Landlord and Tenant.
31. ESTOPPEL CERTIFICATES. Within ten (10) days after delivery to Tenant by
Landlord or its representative, Tenant shall execute acknowledge and
deliver to Landlord an Estoppel Certificate in the form provided by
Landlord certifying (a) that this Lease is unmodified and in full force and
if there have been modifications, that this Lease is in full force, as
modified together with the date and nature of each modification; (b) the
amount of Base Rent, most recent, and the date to which the rent has been
paid; (c) that there are no defaults under the Lease claimed by Tenant; and
(d) other matters as may be reasonably requested by Landlord.
32. ATTORNEY FEES. In the event any legal action arises as a result of any
breach of this lease or its interpretation, the prevailing Party shall be
entitled to its' reasonable attorney fees and costs associated with such
enforcement including its expenses prior to the bringing of any lawsuit.
-8-
<PAGE>
33. TIME IS OF THE ESSENCE. Time is of the essence in the Lease and all of its
provisions.
35. FORCE MAJEURE. If Landlord shall be delayed or prevented from the
performance of any act required under this Lease by reason of acts of God,
strikes, lockouts, labor trouble, restrictive governmental laws or
regulations, or other causes without fault and beyond the control of the
Landlord, performance of said act(s) shall be excused for the period of the
delay, except nothing in this Section excuses Tenant from prompt payment of
any rent or other changes as required elsewhere in this Lease.
The Parties hereto have executed this Lease on the date above, and agree to be
bound by its terms.
By:
"LANDLORD: "TENANT"
eOfficeSuites, Inc.,
A California Corporation
By: /s/ [Illegible] By: /s/ B.R. Cameron
------------------------------ SportsPrize Entertainment, Inc.
President and CFO
DATED: 9/27/99 DATED: 9/27/99
<PAGE>
-9-
<PAGE>
eOfficeSuites, Inc.
13101 Washington Boulevard
Los Angeles, CA 90066
PRICE SCHEDULE
--------------
Additional Services Available on a
"Pay as Needed" Basis
COMMUNICATIONS
--------------
A. T1 Internet service $ 69.00/month
Internet installation $125.00
e-mail service $ 10.00/month
web hosting service per schedule
B. Postal Services:
Postage Plus 20%
C. FedEx, UPS and Messenger Service available.
Contact Communications Dept. for pricing and delivery options
D. Fax Services:
Incoming (per page) $1.50
Outgoing
Domestic (first page) $1.50
Domestic (each additional page) $1.50
International (first page) $5.00
International (each additional page) $1.50
E. Conference Facilities:
Garden & 2nd Floor Conference Rooms (one hour min.) $25.00/hour
$125.00/day
Lobby & Executive Conference Rooms (one hour min.) $45.00/hour
Coffee set-up (includes coffee, tea & water, cups,
sugar, etc.) - for Conference Room reservations only $15.00/pot
F. Administrative Assistance - (clerical duties to include
collating, sorting, mailing, mail forwarding, etc.) $15.00/hr
-10-
<PAGE>
COPYING
Copies $ 10/each
Copier Card replacement $15.00
TELEPHONE & VOICE MAIL
A. 2 Telephone lines, 1 fax line & 1 telephone instrument 125.00/month
B. Telephone installation (3 lines) $125.00
C. Additional telephone instrument $25.00/month
D. Additional telephone line $25.00/month
E. Additional voice mail $10.00/month
STORAGE
Small locker $60.00/month
Large locker $100.00/month
PARKING
Reserved - per space $65.00/month
Unreserved - per space $40.00/month
Garage remote replacement $35.00
SIGNAGE (Included in move in fee)
Door sign $25.00
Building Directory Listing $25.00
SUITE KEYS
Additional key $5.00/each
Lost Key (includes one new suite key) $25.00
Change of Suite Lock $100.00
INCIDENTAL LABOR
One hour minimum, 48 hour notice require $35.00/hour
RETURNED CHECK FEE $20.00
MOVE IN FEE or INTERNAL MOVE $150.00
MOVE IN CREDIT CHECK $35.00
-11-
<PAGE>
eOfficeSuites, Inc.
13101 Washington Boulevard
Los Angeles, CA 90066
Rules and Regulations
---------------------
1) Tenant advertisement, name or notice shall not be inscribed, displayed,
printed or affixed on or to any part of the Building premise without the
written consent of the Landlord.
2) Passages in the common areas, shall not be obstructed by the tenants or
tenants' possession.
3) Tenant shall not alter locks or add locks.
4) Restrooms shall be used only for purpose in which it was constructed.
5) Tenant shall not overload the floor of the Premises (50 lbs. per square
foot) place in the Premises or install refrigerators, fish tanks, water
filled devices, or deface the premises.
6) NO furniture, appliance, freight or equipment of any kind shall be brought
into the Building without prior written approval from the Landlord.
7) Tenant shall not keep or use foul or noxious gases or substances on the
Premises.
8) Tenant shall not cook, wash, lodge or perform any improper, objectionable,
unlawful or immoral activity.
9) Tenant shall not use or keep flammable/combustible substances in the
Building.
10) Tenant shall not use any method of heating or air conditioning other than
that supplied by Landlord.
11) Tenants and guests shall not smoke in any part of the Building including
the atrium area.
12) Tenant shall not introduce electrical/telegraphic or any other wiring to
the Premises without written consent of Landlord.
13) Tenant shall not introduce telephonic equipment to the Premises.
14) Landlord at its sole expense shall furnish heating, ventilation and
air-conditioning during the hours of 8:30 a.m. to 5:30 p.m., Monday through
Friday except holidays.
15) NO vending machines or appliances of any description shall be installed by
Tenant without written consent of Landlord.
16) Access to business support services consisting of: reception area, waiting
area, administrative room, phone answering, word-processing, postal and
conference room usage is limited to normal business hours of 8:30 a.m. to
5:30 p.m., Monday through Friday except holidays.
-12
<PAGE>
17) Landlord reserves the right to exclude or expel from the Building any
persons who in any manner, act in violation of this Lease and any of the
rules and regulations of the Building including excess noise.
18) Tenant shall not disturb, solicit, or canvass any occupant of the Building
and shall cooperate to prevent same.
19) Tenant shall not use the name of the Building in connection with or in
promoting or advertising the business of Tenant except as Tenant's address
without written consent of Landlord.
20) Landlord has right to control the public portions, facilities, heating and
air conditioning as well as facilities furnished for the common use of the
Tenants as it deems best for the benefit of the Tenants generally.
21) Tenant doors and doors opening to public corridors on the Building shall be
kept closed.
22) Tenant must use at desk area a chair mat for the carpet.
23) Tenant shall not warehouse, store and/or stock items in the Premises or
about the Premises including goods, boxes, records and supplies.
24) Tenant shall not do anything which will cause any usual wear and tear to
Landlord's furnishings.
25) No pets allowed. Pets are defined as any living being other than plants and
humans.
26) Tenant accepts responsibility for the actions and behavior of its visitors
(adult or child). Should the visitor in the judgment of the Landlord create
a problem, the Tenant agrees to control or remove, if necessary, said
visitor from the premise and pay for any damages.
27) It is the Tenant's responsibility to review additional "move-in-package"
for general information and suggestions.
28) Tenant shall not have a private security alarm.
29) Tenant parking is available on a reserved basis only at Landlord's
prevailing rates. Parking spaces may be reserved on an availabilit basis.
Tenants may only park in the spaces designated by Landlord. Violators will
be towed at Tenant's expense. Parking spaces are for passenger vehicles
only no trucks or oversized vehicles are permitted. All vehicles are to be
properly maintained to prevent the loss of fluids, oil, petroleum products
or liquids on the parking surface. Visitors parked in reserved spaces will
be towed, at their expense. All Tenants shall be responsible for alerting
their visitors about the towing policy.
30) Tenant may move-in or move-out of the Building during the days and hours as
expressly prescribed by the Landlord and may only use those areas,
corridors, hallways, stairways, elevators, entrances and exits as specified
by the Landlord. Tenant shall be fully responsible for any damages it may
causes to the Building by Tenant's moving.
-13-
<PAGE>
31) Tenant's internet connection provided by Landlord will not be used to
violate any laws, interfere or disrupt other Tenants' use, connection, or
transmissions or enjoyment of similar services.
32) In order that the air conditioning and heating, system ("System") may
efficiently operate, no windows shall be opened during normal business
hours or while the System is operational. If Tenant should be in violation
after a written warning, Tenant shall be charged $100.00 for each violation
thereafter. A new violation shall be if the window is not completely closed
within a reasonable time after delivery of said written notice of
violation. The Tenant agrees this charge is reasonable because it would be
impractical or extremely difficult to fix the exact amount of costs.
33) Landlord to include the use of 3 computer gateway computers and 1 fax
machine for the term of the lease and 1 hour of technical support time.
Tenant has read and understands and agrees to be bound by the above Rules and
Regulations
Tenant
Date: 9/27/99 /s/ B.R. Cameron
-----------------------------------
President and CFO
SportsPrize Entertainment
-14-
<PAGE>
Floor Plan of the Suite Identifying Suite(s)
(Premises)
----------
Exhibit "B"
-15-
<PAGE>
List of Furniture
-----------------
Exhibit "C"
Tenant: Suite 131 To be Provided
Furniture Inventory
Acknowledgement
<TABLE>
Suite No. Large Round Black File Roller Chair Back Desk Phone Other
Desk Table Cabinet Drawers Board Pads [Illegible]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
131 6 1 6 10 3 7 7 1
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Totals:
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Acknowledged by: -----------------------
Dated: -------------------------------
-16-
<PAGE>
ALLIANCE BANK WIRE TRANSFER INSTRUCTIONS
- ----------------------------------------
SPECIFY NAME AND ADDRESS OF BANK FUNDS ARE BEING DEPOSITED TO:
ALLIANCE BANK
100 CORPORATE POINT
CULVER CITY, CA 90230
ROUTING NUMBER (ALLIANCE BANK):
122237997
DEPOSITED TO ACCOUNT:
EOFFICESUITES, INC.
01 043 293 (Alliance Bank #1)
01 043 234 (Alliance Bank #2)
310 410 9281 - Main Branch)
<PAGE>
Floor Plan of Suite Identifying Suite(s)
(Premises)
----------
Exhibit "B"
Suite 131
Suite to include new paint and carpet comparable to other new suites in the
building.
EXHIBIT 10.32
Kaleidoscope
David P. Bagliebter
General Counsel &
Senior Vice President,
Business Affairs
September 10, 1999
J.D. Paquin Law Corporation
Barrister & Solicitor
World Trade Centre
555-999 Canada Place
Vancouver, BC V6C 3E1
Dear Jeff,
As we discussed today, Kaleidoscope, in an effort to give Sportsprize.com "a
little more breathing room" has agreed to allow Sportsprize to pay the remaining
$40,000 (which is due per our agreement in two equal installments on September
15th and October 15th) at the rate of $10,000 per month through December of this
year.
Although this is not a tremendous amount of time, we did want to help
Sportsprize in whatever way we can. Therefore, stretching the payments out a
little, we hope, is helpful to you and The Company.
I trust this is agreeable to you.
Best regards.
Yours sincerely,
/s/ David Bagliebter
P.S. I have called Mike Wiedder and left a message for him to call. I will speak
to him about Dave Winfield.
Kaleidoscope Sports & Entertainment, LLC
136 Madison Avenue, New York, NY 10016
phone (212) 779-6600 fax (212) 685-0797
EXHIBIT 10.33
TRIDIAN DESIGN AND DEVELOPMENT
Phase 1 - Site Design
Phase 1 includes the redesign and restructuring of the Sportsprize.com web site.
The goal of phase one is to create a web design with a strong visual, mechanical
and conceptual consistency, reflecting a look and feel that is functional and
engaging. The core web project includes HTML programming, JavaScript development
and all necessary image preparation, illustration, design and layout work. Phase
one will focus on creating all the necessary graphic elements for sportsprize
static web interfaces as well as the modular graphic components needed to
generate the customized and dynamically generated areas of the player's pages
and gaming rooms. Tridian will be responsible for creating Sportprize.com's
online image, utilizing custom design elements and color compositions that
create a web experience that is visually engaging and intuitive. Phase 1 will
include design work and image generation for approximately 60 to 80
sportsprize.com web pages including but not limited to the following categories:
sportsprize.com home page | registration | tour | login screens | links to
online auctions, and retailers | player's main pages | sports categories
(undefined number) | results pages | winners store
Image Preparation/Design/Layout ($75.00/hr.)...............140 hours = $10,050
HTML and JavaScript Programming ($75.00/hr.)................30 hours = $ 2,250
Total = $12,300
Phase 2 - Design and Page [illegible]
Phase 2 main objective will be to establish a working link between the standard
HTML browser interface of the newly design web site with Sportsprize.com server
side web applications. The goal of phase two is create a seamless and fluid
visual and mechanical experience for each user. Throughout phase 1, Tridian's
design teams will work closely with the Sportsprize.com programming team to
ensure complete compatibility between the user interface and the server
applications. This should minimize any serious compatibility issues in phase 2
and eliminate the need for any major redesigns. Any additional consulting or
HTML programming time needed to complete Phase 2 will be billed at Tridian's
standard rate of $75.00/hour. Although the scope of phase 2 is still unknown,
Tridian's development team is confident that with solid communication with
Sportsprize.com programmers and adequate preparation in phase 1, time
requirements will be modest and Tridian and Sportsprize.com will be able to
establish a working link between the web interface and the server side
applications.
The prices quoted in "Phase 1" and Phase 2" are estimates. The prices are
designed to give our clients a base line dollar figure to work from. Actual
hours depend upon the volume of content delivered to Tridian.
-1-
<PAGE>
- --------------------------------------------------------------------------------
ACCEPTANCE OF PROPOSAL
- --------------------------------------------------------------------------------
The above prices, specifications and conditions are hereby agreed upon and
accepted by Sportsprize Entertainment Inc. Tridian is authorized to do the work
as specified above. A 25% deposit of this quote is required by Tridian to begin
work on this project.
Project Coordinator: Michael Wiedder
Date of Proposal: 8/2/99 Signature: /s/ Michael Wiedder
-------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 10.34
CONFIDENTIALITY AGREEMENT
In consideration for and as a result of the disclosure to
you-_________________, of _____________________________ by Sportsprize
Entertainment Inc. referred to herein as the ("Sportsprize") of certain
confidential and proprietary information relating to Software/Programs and
concept (collectively the "Property") you acknowledge the confidential and
proprietary nature of such information and agree with the Discloser to hold and
keep the same confidential as provided in this letter agreement.
As used herein, the term "Evaluation Material" refers to all information
that has been or may hereafter be provided to you by the Discloser concerning
the Property, including without limitation financial, business plan,
engineering, technical, design, title, evaluation, manufacturing, equipment,
supplier, customer, and other information, irrespective of the form of the
communication.
You agree with the Discloser to exercise all reasonable steps to safeguard
the confidentiality of the Evaluation Material and not to disclose any part of
it or any information derived therefrom to any third person except to such
limited number of your employees and advisors as (i) may require access to the
Evaluation Material for the sole purpose of assisting you in evaluating a
possible transaction with the Discloser concerning the Property and (ii) agree
in writing with the Discloser to preserve the confidentiality of such Evaluation
Material and to observe the other provisions hereof to the same extent as you
agree herein. You agree with the Discloser that you will not copy or permit any
of your outside agents, consultants or advisors to copy any of the Evaluation
material without the prior written approval of the Discloser. Promptly upon the
completion of your review of the information or upon the request of the
Discloser, but in no event later than 60 days from the date hereof, you will
return to the Discloser all Evaluation Material previously furnished to you,
together with all copies of any of the same made by you or any of your employees
or agents. Within such time period you will also destroy all notes, memoranda,
reports, and documents generated by you, your employees or agents
<PAGE>
2
related to the Evaluation material and/or any meetings or discussions concerning
same and confirm such destruction in writing to the Discloser.
You acknowledge that the Evaluation material is being furnished to you solely to
assist you in evaluating a possible transaction with the discloser related to
the Property, and you agree with the Discloser that you will not use that
Evaluation Material or any information derived therefrom for any other purpose.
the term "Evaluation Material" does not include any information, if any, which
(i) becomes generally available to the public other than as a result of a
disclosure by you or by other persons, including your employees and agents, to
whom you have disclosed such information; (ii) was available to you on a
non-confidential basis prior to its disclosure to you by the Discloser, provided
that such prior disclosure and its non-confidential status are evidenced in
writing; or (iii) becomes available to you on a non-confidential basis from a
person other than the Discloser, provided that, such person is lawfully in
possession of the information and it is obtained from that person not in
violation of any contractual, legal or fiduciary obligations to the Discloser.
You agree with the Discloser to be responsible for enforcing the confidentiality
of the Evaluation material and you agree to take such action as may be necessary
to prevent any disclosure by any of your agents or employees. You further
acknowledge that the Discloser shall be entitled to equitable relief by way of
injunction if you breach or threaten to breach any of the provisions of this
letter agreement. You agree to indemnify and save harmless the Discloser for any
and all loss, costs or damages which the Discloser may suffer as a result of a
breach by you of a term of this letter agreement.
You agree with the Discloser that neither you nor any of your employees or
agents, will, without the prior written consent of the Discloser, disclose to
any other person the fact that you are evaluating a possible transaction with
the Discloser relative to the Property.
You acknowledge and agree that neither this letter agreement nor the disclosure
of the Evaluation Material to you nor any discussions or negotiations with you
concerning the Property
<PAGE>
3
and your possible participation therein will prevent the Discloser from
negotiating with and entering into one or more agreements with others with
respect to the Property and that the Discloser shall be free to do so without
liability or obligation to you.
The Discloser makes no representation nor warranty as to the accuracy or
completeness of the Evaluation material and you agree that neither the Discloser
or any of its employees or agents shall have any liability to you or any of your
agents or employees resulting from your reliance on the accuracy or completeness
of the Evaluation Materials.
The letter agreement will enure to the benefit of and be binding upon the
Discloser and you and our respective successors, executors, legal
representatives and assigns. This letter agreement may not be assigned by you.
This letter agreement is governed by and construed in accordance with the laws
of the Province of British Columbia, Canada. You covenant and agree to enter
into such further agreements or transfer documents and to do such other things
as may be reasonably required in order to fully record and perfect the matters
provided for in this agreement.
If you are in agreement with the foregoing, please sign and return one copy of
this letter to the Discloser which will constitute your agreement with the
Disclosure with respect to the subject matter of this agreement.
Yours truly,
Jeffrey D Paquin, President
Sportsprize Entertainment Inc.
By: -----------------------------------
(Authorized Signatory)
Title: --------------------------------
BY: -----------------------------------
Title: --------------------------------
EXHIBIT 21.1
SportsPrize Inc. was incorporated in the State of Nevada on March 6, 1998 as
Beagle Ventures Resources Management Inc. with an authorized share capital of
25,000,000 shares of common stock with a par value of $0.001 per share, which
changed its name to SportsPrize Entertainment Inc. on March 1, 1999, and to
SportsPrize Inc. on May 14, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-1-1999
<PERIOD-END> AUG-31-1999
<CASH> 2,359,550
<SECURITIES> 12,966
<RECEIVABLES> 10,544
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,426,557
<PP&E> 0
<DEPRECIATION> (1,548)
<TOTAL-ASSETS> 2,804,149
<CURRENT-LIABILITIES> 88,141
<BONDS> 0
0
0
<COMMON> 19,480
<OTHER-SE> 5,861,807
<TOTAL-LIABILITY-AND-EQUITY> 2,804,149
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 3,463,486
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 395
<INCOME-PRETAX> (3,502,762)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,502,762)
<DISCONTINUED> (6,819)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,509,581)
<EPS-BASIC> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
